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Sample Final Exam Student: ___________________________________________________________________________ Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market:

1. Refer to the above data. If the market price for the firm's product is $32, the competitive firm will produce: A. 10 units at an economic profit of $4. B. 6 units at an economic profit of $7.98. C. 7 units at an economic profit of $41.50. D. 8 units at an economic profit of $16.

2. Refer to the above diagram for a pure monopolist. Suppose a regulatory commission is created to determine a legal price for the monopoly. If the commission seeks to provide the monopolist with a "fair return," it will set price at: A. P3. B. P 4. C. P 2. D. P1.

3. Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a differentiated oligopolist in a highly concentrated industry? A. Ford Motor Company B. Kaiser Aluminum C. Subway Sandwiches D. Pittsburgh Plate Glass

4. If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing: A. price and minimum average variable cost. B. total revenue and total cost. C. total revenue and total fixed cost. D. marginal revenue and marginal cost.

5. Prices are likely to be least flexible: A. in monopolistic competition. B. in pure competition. C. in oligopoly. D. where product demand is inelastic.

6. If for a firm P = minimum ATC = MC, then: A. productive efficiency is being achieved, but allocative efficiency is not. B. allocative efficiency is being achieved, but productive efficiency is not. C. both allocative efficiency and productive efficiency are being achieved. D. neither allocative efficiency nor productive efficiency is being achieved.

Answer the question on the basis of the following cost data for a purely competitive seller:

7. Refer to the above data. If product price is $45, the firm will: A. produce 4 units and realize a $120 economic profit. B. produce 6 units and realize a $100 economic profit. C. produce 5 units and realize a $15 economic profit. D. shut down.

8. Refer to the above diagram. If this represents a typical firm in the industry and the firm is producing at the profit-maximizing level of output in the short run, then in the long run we would expect more firms to enter the market. True False

9. Under monopolistic competition entry to the industry is: A. blocked. B. more difficult than under pure monopoly. C. more difficult than under pure competition but not nearly as difficult as under pure monopoly. D. completely free of barriers.

Answer the question on the basis of the following cost data for a purely competitive seller:

10. Refer to the above data. The marginal cost of the fifth unit of output is: A. $20. B. $90. C. $50. D. $80.

11. Refer to the above diagram showing the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's economic profit: A. is $400. B. cannot be determined from the information provided. C. is $200. D. is zero.

12. Monopolistically competitive industries are inefficient because: A. monopolistically competitive industries are overpopulated with firms whose plants are underutilized. B. advertising costs retard technological advance and product development. C. they realize diseconomies of scale. D. monopolistically competitive sellers engage in misleading advertising.

13. Refer to the above diagram. At the profit-maximizing level of output, the firm will realize: A. an economic profit of ACGJ. B. an economic profit of ABHJ. C. a loss of JH per unit. D. a loss of GH per unit.

14. Refer to the above diagram for a monopolistically competitive firm. Long-run equilibrium output will be: A. E. B. greater than E. C. D. D. C.

15. (Consider This) The prisoner's dilemma is generally demonstrated through: A. game theory. B. a tightly knit cartel. C. the kinked-demand model. D. monopolistic competition.

16. The demand curve faced by a pure monopolist: A. has the same elasticity as that faced by a single purely competitive firm. B. is less elastic than that faced by a single purely competitive firm. C. may be either more or less elastic than that faced by a single purely competitive firm. D. is more elastic than that faced by a single purely competitive firm.

17. In 2008, advertising expenditures in the United States were: A. $1 to $2 billion. B. 10 to 12 percent of GDP. C. about $137 billion. D. about $490 billion.

18. Refer to the above profits-payoff table for a duopoly. If initially firm X's price was $6 and Y's price was $5: A. X would find it profitable to cut price, provided Y also cut price. B. Y would find it profitable to cut price, provided X also cut price. C. Y would find it profitable to raise price by $1, provided X would also raise price by $1. D. both firms would profit by simultaneously lowering their prices by $1.

19. Refer to the above profits-payoff table for a duopoly. If initially firms X and Y are charging $5 and $4 respectively: A. the two firms will be maximizing joint profits. B. Y will find it advantageous to raise its price if it was certain X would not alter its price. C. X will find it advantageous to raise its price if it was certain Y would not alter its price. D. both firms would find it advantageous to collude to raise their prices by $1 each.

20. Refer to the above diagram for a pure monopolist. Monopoly price will be: A. e. B. b. C. c. D. a.

21. Which of the following is an example of creative destruction? A. An economic recession forces firms out of business. B. Automobile production causes the wagon industry to shut down. C. Apple earns more economic profits than other manufacturers of MP3 players. D. Starbucks shuts down stores to create greater demand for its remaining outlets.

22. The short-run supply curve of a purely competitive producer is based primarily on its: A. ATC curve. B. AFC curve. C. AVC curve. D. MC curve.

23. Refer to the above long-run cost diagram for a firm. If the firm produces output Q2 at an average cost of ATC3, then the firm is: A. producing the profit-maximizing output, but is failing to minimize production costs. B. producing that output with the most efficient combination of inputs and is realizing all existing economies of scale. C. incurring X-inefficiency, but is realizing all existing economies of scale. D. incurring X-inefficiency and is failing to realize all existing economies of scale.

24. If the four-firm concentration ratio for industry X is 80: A. the four largest firms account for 80 percent of total sales. B. the four largest firms account for 20 percent of total sales. C. each of the four largest firms accounts for 20 percent of total sales. D. the industry is monopolistically competitive.

25. Refer to the above diagram. Line (1) reflects a situation where resource prices: A. increase as industry output expands. B. remain constant as industry output expands. C. decline as industry output expands. D. are unaffected by the level of output in the industry....