ECN 104

Prof Eric Kam, Ry

A price ceiling set above equilibrium price results in:

a) surpluses
b) an increase in demand
c) the equilibrium price
d) shortages

c) the equilibrium price

Rent controls

a) subsidize only low-income tenants
b) give landlords the upper hand over tenants
c) are justified capitalist principles
d) take from the poor and give to the rich

b) give landlords the upper hand over tenants

At a government rent ceiling, there will be

a) more construction of rental housing
b) a subsidy to all tenants
c) frustrated landlords who can no longer find tenants
d) a reduction in the supply of rental housing

d) a reduction in the supply of rental housing

Tine wants to be a rock​ 'n' roll singer. She cashed in all of her bank accounts that were paying her ​2% interest. She took this ​$4,000 and spent it to produce a CD. Tina did not quit her day job at Abercrombie. After one year her CD sales had earned ​$1,200 in accounting profits.​ Tina's economic profits are

a) $80
b) $1,280
c) $-2,800
d) $1,120

d) $1,120

(economic profits = accounting profits - hidden opportunity costs)

( EP = 1,200 - (2% of 4,000))

A business owner should enter an industry when:

\
a) expected benefits are less than expected costs

b) economic profits are negative

c) economic profits are zero

d) revenues are greater than all opportunity costs

d) revenues are greater than all opportunity costs

A business has $500 in *explicit* costs and sells the resulting outputs for $750. The average profits in other industries are 30% of explicit costs. Which of the following statements is *true?*

\
a) implicit costs are $150

b) normal profits are $225

c) economic profits are greater than accounting profits

d) economic profits are $250

a) implicit costs are $150

Barriers to entry

\
a) are a limit to business profits

b) allow monopolists to charge as high a price as they want

c) are a waiver to monopolies

d) enable monopolists to earn economic profits in the long run

d) enable monopolists to earn economic profits in the long run

Which market structure has no barriers to entry, many sellers of the product and no pricing power?

\
a) perfect competition

b) monopoly

c) oligopoly

d) monopolistic competition

a) perfect competition

Business competition

\
a) is an active attempt to gain the market power of perfect competition

b) requires a license

c) includes erecting barriers to entry

d) results in profits

c) includes erecting barriers to entry

Which of the following statements is

*true*?

a) Elasticity of demand for monopoly is higher than for perfect competition

b) Monopolistic competition elasticity of demand is closer to monopoly than to perfect competition

c) Economies of scale usually exist in monopolistic competition

d) Elasticity of demand for oligopoly is lower than for monopolistic competition

d) Elasticity of demand for oligopoly is lower than for monopolistic competition

When a firm is a price maker​,

\
a) the firm will sell less when it raises the price

b) the firm will sell more when it doesn’t change the price

c) the firm will sell more if it doesn’t change the marginal revenue

d) the firm will sell more if it raises the price

a) the firm will sell less when it raises the price

Businesses practice price discrimination in order to:

\
a) increase a business’s total profits

b) separate customers into groups according to demand elasticities

c) sell all units of the product or service

d) increase the total cost

a) increase a business’s total profits

Many businesses face increasing marginal costs because:

\
a) when the price falls, output increases

b) most businesses aren’t near capacity

c) in order to increase outputs, you have to purchase more inputs

d) a business may have to shift to more expensive sources of inputs in order to increase outputs

d) a business may have to shift to more expensive sources of inputs in order to increase outputs

A​ price-discriminating business will charge a higher price in the market where the

\
a) output is higher

b) customers can’t be separated

c) demand for the product is less elastic

d) demand for the product is more elastic

c) demand for product is less elastic

If a firm in perfect competition earns positive ​profits,

\
a) total revenue is greater than total variable cost

b) the price is greater than average total cost

c) the price is greater than marginal cost

d) the price is less than marginal cost

b) the price is greater than average total cost

Which statement on price discrimination is​ true?

\
a) as a result of price​ discrimination, revenues decrease from both the high and low-elasticity groups

b) price discrimination involves dropping the price to customers with inelastic demand

c) when a business practices price discrimination, revenues increase from both the high and low-elasticity groups

d) When a business practises price​ discrimination, revenues from the low elasticity group offset the decline in revenue from the high elasticity group.

c) when a business practices price​ discrimination, revenues increase from both the high and low elasticity groups

The quantity decision is to produce all quantities for which

\
a) marginal cost is greater than marginal profit

b) marginal revenue is greater than total cost

c) marginal cost is less than marginal revenue

d) total cost is greater than total revenue

c) marginal cost is less than marginal revenue

For a one−price ​monopolist, lowering the price will *always*

\
a) decrease marginal revenues

b) increase total revenues

c) increase marginal revenues

d) increase marginal costs

a) decrease marginal revenues

A firm in pure competition will maximize its profits by producing a volume of output where

\n a) P > ATC

b) MR > AC

c) ATC = P

d) MR = P

d) MR = P

Suppose the firms in a perfectly competitive industry are earning positive economic profit.

In this​ case, this is:

\
a) not a long-run equilibrium since for each firm MR = MC = P = ATC

b) a long-run equilibrium since for each firm MR = MC = P = ATC

c) a long-run equilibrium since for each firm MR = MC = P > ATC

d) not a long-run equilibrium since for each firm MR = MC = P > ATC

d) not a long-run equilibrium since for each firm MR = MC = P > ATC