Microeconomics Final

An industry consists of 100 small firms, and the largest firm accounts for only 2 percent of sales. Brand names are considered a signal of quality. The industry described is best classified as:

• monopolistically competitive

• monopoly

• perfectly competitive

• oligopolistic

• monopsonistic

One justification for government regulation of a monopoly is that the unregulated monopoly:

• pays its workers a lower wage than if the market were competitive

• sells too much of the product

• has a very elastic demand curve

• charges a price higher than a competitive market price

• earns a normal profit

Which of the following would create a positive externality?

• Water pollution

• Congestion on city highways

• Flu vaccination

• The greenhouse effect and global warming

• A neighbor's loud music that wakes you up

Which of the following is true for a price-discriminating firm?

• The firm pays more per unit of capital than it pays per unit of labor

• The firm charges different prices to different consumers for the same product

• The firm charges different prices for different products

• The firm pays more per unit of labor than it pays per unit of capital

A profit-maximizing firm will continue to hire workers until the _______________.

• marginal factor cost of labor is equal to the marginal revenue product of labor

• marginal product of labor is equal to the price of labor

• marginal product of labor is equal to the marginal factor cost of labor

• marginal product of labor is equal to the marginal revenue product of labor

A well-known fast-food franchise substantially increases the price of its hamburgers, and loses only some of its customers. Which of the following best explains why the franchise has not lost all of its customers?

• Its hamburgers are a perfect substitute for other types of fast food.

• The barriers to entry are very low for entrepreneurs trying to enter the fast-food business.

• Its hamburgers are differentiated.

• The other competitive fast-food restaurants decrease the price for their hamburgers.

• The demand for its hamburgers is perfectly elastic.

The demand curve for labor for a monopolist that faces a perfectly competitive factor market is called the __________.

• value of the average product curve

• marginal revenue curve

• marginal revenue product curve

• average product curve

• marginal product curve

Which of the following statements is true?

• The advantage of allowing free and open access to fishing is to limit the harm from a negative externality where too few fish are currently caught.

• With the availability of fish for all consumers, there is a positive externality; therefore, governments need to encourage greater use of the common areas with more production and increased consumption.

• The waters of a country are a rare example of a resource that is not scarce. Therefore, standard economic analysis does not apply.

• Over time, fishing operations will voluntarily leave the market as a result of increased competition.

• There will be a tendency for fishing operations to overfish, reduce the stock of fish, and limit the future availability of fish for succeeding generations.

A public good is considered a good because it is __________.

• nonrival and nonexcludable

• rival and excludable

• nonrival and excludable

• free and provided at zero cost

• rival and nonexcludable

A profit-maximizing firm should hire an input up to the point at which __________.

• marginal revenue product equals marginal revenue

• marginal revenue product equals marginal factor cost

• marginal revenue equals marginal factor cost