Question 1. Economists' models of the behavior of business firms assume that firms try to maximize __________________.
total revenue
marginal revenue
profit
market share
Question 2. In a(n) ___________________ market structure, a few firms produce either a standardized or differentiated product, and entry is possible but not easy.
perfect competition
monopolistic competition
oligopoly
monopoly
Question 3. If the revenue a firm receives is more than the firm's direct costs, but is less than the firm's total costs including all opportunity costs, the firm is experiencing
positive economic profit
zero economic profit
negative economic profit
negative accounting profit
Question 4. The difference between accounting costs and economic costs is
accountants include the opportunity costs of the owner's capital used in the business and economists don't
economists include the opportunity costs of the owner's capital used in the business and accountants don't
accountants include the implicit costs and economists don't
economists include debt and accountants don't
Question 5. Economic efficiency exists when
Allocative efficiency exists.
Productive efficiency exists.
Neither allocative nor productive efficiency exist
Both allocative and productive efficiency exist.
Question 6. Which of the following is NOT one of the characteristics of perfect competition?
Economic profits.
Many sellers.
Ease of entry.
Market knowledge.
Question 7. In order to continue producing in the short run, the firm must earn sufficient revenue to pay their
Total costs.
Variable costs.
Fixed costs
Economic costs.
Question 8. A firm's long-run supply curve is its _____ curve above the minimum point of the _____ curve.
AVC; ATC
MC; ATC
MC; AVC
TC; TR
Question 9. Setting a higher price on goods sold domestically than on goods sold in foreign markets is called:
Price discrimination.
Dumping.
Aggressive deadweighting
X-inefficiency.
Question 10. Monopolies are created by
Economies of scale.
Actions by firms to bar competitors.
Government
All of the above.
Question 11. For a monopolist, profit is maximized by
Producing quantity where MR=MC.
Charging the highest possible price.
Producing very little quantity.
All of the above.
Question 12. For price discrimination to occur the firm must
Have some market power.
Be able to separate customers according to price elasticities.
Be able to prevent resale.
All of the above.
Question 13. The Sarbanes-Oxley Act requires _______ and ______ be provided by different firms.
Pricing; social regulation
Economic regulation; social regulation.
Cost-benefit analysis; WTO review.
Auditing; consulting.
Question 14. The major problem in using the Herfindahl index is
Gathering data.
Gaining acceptance from industry leaders.
Defining the market.
Spelling the name correctly.
Question 15. Which of the following entities does NOT initiate allegations of antitrust violations?
FTC
Justice Department
Private plaintiffs
President of the United States.
Question 16. Often, when large firms announce a merger agreement it is stated, "subject to government approval." This infers subject to compliance with government _________.
Social policy
Antitrust policy.
WTO policy
Sarbanes-Oxley policy.
Question 17. Market failure occurs
when governments levy taxes on business firms
when markets produce an income distribution that is not equitable
when perfectly competitive markets do not achieve economic efficiency
whenever governments intervene in the decision-making processes of perfectly competitive markets
Question 18. Externalities occur when
someone outside a business makes decisions that affect the business
an activity creates costs or benefits that are borne by parties not directly involved in the activity
taxes affect the amount of a good produced
private benefits equal social benefits
Question 19. When a firm is forced to internalize a negative externality
Price rises and quantity demanded declines
Price declines and quantity demanded increases.
Both price and quantity demanded rise
Both price and quantity demanded decline.
Question 20. A pollution tax would cause
Price to rise and equilibrium quantity to rise.
Price to decline and equilibrium quantity to decline.
Price to rise and equilibrium quantity to decline.
Price to decline and equilibrium quantity to rise.