Question

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1) Farmers can plant either corn or soybeans in their fields. Which of the following would cause the supply of soybeans to increase? A) an increase in the price of soybeans B) a decrease in the price of corn C) an increase in the demand for corn D) an increase in the price of soybean seeds E) an increase in the price of tomatoes
2) For a perfectly competitive firm, which of the following is not trueat profit maximization? A) Market price is greater than marginal cost. B) Marginal revenue equals marginal cost. C) Total revenue minus total cost is maximized. D) Price equals marginal cost. E) Marginal cost equals market price.
3) If a firm wanted to know whether the demand for its product was elastic, unit elastic, or inelastic, then the firm could A) survey competitors and ask them what they think demand elasticity is for the product. B) talk to its customers. C) not do anything as there is no way to find an elasticity value. D) change price a little bit and observe what happens to total revenue. E) make market researches

4) A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000. The price of each bushel is $50. Calculate the firm's short-run profit or loss. A) loss of $14,000 B) profit of $14,000 C) profit of $50,000 D) There is insufficient information to answer the question. E) loss of $5,000
5) If the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is A) $8. B) $20. C) $200. D) $40. E) $100.
6) A monopolistically competitive firm will A) charge the same price as its competitors do. B) always produce at the minimum efficient scale of production. C) have a few rivals. D) produce an output level that is productively and allocativelyefficient. E) have some control over its price because its product is differentiated

7) If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then A) marginal revenue is less than price. B) average total cost is at a minimum. C) total revenue equals total cost. D) price exceeds average total cost. E) average variable cost is less than average fixed cost.
8) An oligopolist differs from a perfect competitor in that A) there is cutthroat competition in perfect competition but little competition in oligopoly because firms have significant market power. B) firms in an oligopoly do not produce homogeneous products while firms in perfect competition do. C) the market demand curve for a perfectly competitive industry is perfectly elastic but it is downward-sloping in an oligopolistic industry. D) there are no entry barriers in perfect competition but there are entry barriers in oligopoly. E) there are natural monopolies in perfect competition.

9) Economies of scale can lead to an oligopolistic market structure because A) if larger firms have lower costs, new small entrants will not be able to produce at the low costs achieved by the big established firms. B) if economies of scale are insignificant, only a few firms are able to produce at the low costs achieved by the big established firms. C) a few firms can force rivals to produce at low levels of output. D) a few firms can use high profits to keep out new entrants. E) there are no R&D expenditures.
10) Economists use game theory to analyze oligopolies because A) real markets are too complicated to analyze without using games. B) it is more enjoyable for economists and students to learn by playing games. C) they like John Nash. D) game theory is useful in understanding the actions of firms that are price takers. E) game theory helps us to understand why interactions among firms are crucial in determining profitable business strategies.

Answer 1

1.B

Decrease in the price of corn. This would make farmers plant soybeans.

2 A, Profit maximization in perfectly competitive industry is when MC=MR. MR= Price.

3 D. Revenue test. If revenue increases if price is increased then demand is inelastic.

If revenue decreases if price is increased then demand is elastic.

If the increase in revenue is the same amount as increase in price, demand is unitary. We can find out the demand elasticity by looking at the change in revenue due to change in price.

4. Profti= Total revenue - total cost.

Total revenue= P x Q. Price of bushel =$50. Q= 1000 bushels.

Total revenue = $50. x1000 bushels.=$50,000.

Profit= $50,000 - $36,000=$14,000.

B.