Unit 4 Practice Test Key

8/16/2019 Unit 4 Practice Test Key

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UNIT 4 PRACTCE TEST

Directions: Do this test quickly and skip the questions you do not kno the ansers

to! This ill allo you to isolate the topics that you need to de"ote the #ost ti#e to

studyin$ and $i"e us #ore ti#e in class to re"ie the#!

1. In which of the following industry structures is the entry of new rms the most dicult?

A. pure monopoly B. oligopoly C. monopolistic competition D. pure

competition

2. An industry comprised of a ery large num!er of sellers producing a standardi"ed product is

#nown as$

A. monopolistic competition. B. oligopoly. C. pure monopoly. D. pure

competition.

%. &hich of the following is not a characteristic of pure competition?

A. price strategies !y rms B. a standardi"ed productC. no !arriers to entry D. a larger

num!er of sellers

'. &hich of the following is not a !asic characteristic of pure competition?

A. considera!le nonprice competition B. no !arriers to the entry or e(odus of

rms

C. a standardi"ed or homogeneous product D. a large num!er of !uyers and

sellers In anserin$ the ne%t question&s'( assu#e a $raph in hich dollars are #easured on

the "ertical a%is and output on the hori)ontal a%is!

). *efer to the a!oe information. +or a purely competitie rm, total reenue$

A. graphs as a straight, upsloping line. B. is a straight line, parallel to the

ertical a(is.

C. is a straight line, parallel to the hori"ontal a(is. D. graphs as a straight, downsloping

line.

-. *efer to the a!oe information. +or a purely competitie rm, marginal reenue$

A. graphs as a straight, upsloping line. B. is a straight line, parallel to the

ertical a(is.C. is a straight line, parallel to the hori"ontal a(is. D. graphs as a straight, downsloping

line.

. *efer to the a!oe information. +or a purely competitie rm$

A. marginal reenue will graph as an upsloping line.

B. the demand cure will lie a!oe the marginal reenue cure.

C. the marginal reenue cure will lie a!oe the demand cure.

D. the demand and marginal reenue cures will coincide.

/. 0rice is constant or gien to the indiidual rm selling in a purely competitie mar#et

!ecause$

A. the rms demand cure is downsloping. B. of product dierentiation reinforced !y

e(tensie adertising.

C. each seller supplies a negligi!le fraction of total supply.D. there are no good su!stitutes for its

product.

3. +or a purely competitie seller, price e4uals$

A. aerage reenue. B. marginal reenue. C. total reenue diided !y

output. D. all of these.



15. A perfectly elastic demand cure implies that the rm$

A. must lower price to sell more output.

B. can sell as much output as it chooses at the e(isting price.

C. reali"es an increase in total reenue which is less than product price when it sells an e(tra

unit.

D. is selling a dierentiated 6heterogeneous7 product.

11. A purely competitie rm should produce in the short run if its total reenue is sucient to

coer its$

A. total aria!le costs.

B. total costs.

C. total (ed costs.

D. marginal costs.

12. If a rm is confronted with economic losses in the short run, it will decide whether or not to

produce !y comparing$

A. marginal reenue and marginal cost. B. price and minimum aerage

aria!le cost.

C. total reenue and total cost. D. total reenue and total (ed cost.

1%. Cure 617 in the a!oe diagram is a purely competitie rms$

A. total cost cure. B. total reenue cure.

C. marginal reenue cure. D. total economic prot cure.

1'. Cure 627 in the a!oe diagram is a purely competitie rms$


C. marginal reenue cure. D. total economic prot cure.

1). Cure 6%7 in the a!oe diagram is a purely competitie rms$


C. marginal reenue cure. D. total economic prot cure.1-. Cure 6'7 in the a!oe diagram is a purely competitie rms$


C. marginal reenue cure. D. total prot cure.





Anser the ne%t questions on the *asis o+ the +olloin$ cost data +or a ,r# sellin$ in

a purely co#petiti"e #arket:

22. *efer to the a!oe data. If the mar#et price for the rms product is =12, the competitie

rm will produce$A. ' units at a loss of =153.

B. ' units at an economic prot of =%1.).

C. / units at a loss of ='/./5.

D. "ero units at a loss of =155.

2%. *efer to the a!oe data. If the mar#et price for the rms product is =%2, the competitie rm

will produce$

A. / units at an economic prot of =1-.

B. ) units at a loss of =15.

C. / units at a loss e4ual to the rms total (ed cost.

D. units at an economic prot of ='1.)5.

2'. *efer to the a!oe data. If the mar#et price for the rms product is =2/, the competitie rm

will$

A. produce ' units at a loss of =1.'5.

B. produce units at a loss of =1'.55.

C. close down in the short run.

D. produce - units at a loss of =2%./5.



2). *efer to the a!oe diagram. >his rm will earn only a normal prot if product price is$

A. P1. B. P2. C. P%. D. P'.

2-. *efer to the a!oe diagram. >he rm will reali"e an economic prot if price is$

A. P1. B. P2. C. P%. D. P'.

2. *efer to the a!oe diagram. >he rm will produce at a loss if price is$

A. less than P1. B. P2. C. P%. D. P'.

2/. *efer to the a!oe diagram. >he rm will shut down at any price less than$

A. P1. B. P2. C. P%. D. P'.

23. *efer to the a!oe diagram. >he rms supply cure is the segment of the$

A. :C cure a!oe its intersection with the A<C cure. B. :C cure a!oe its

intersection with the A>C cure.

C. A<C cure a!oe its intersection with the :C cure. D. A>C cure a!oe its

intersection with the :C cure.

%5. If the price of product is =2) and its marginal cost is =1/$

A. is !eing produced with the least@cost com!ination of resources.

B. society will reali"e a net gain if less of is produced.

C. resources are !eing underallocated to .

D. resources are !eing oerallocated to .

%1. 0ure monopoly means$A. any mar#et in which the demand cure to the rm is downsloping.

B. a standardi"ed product !eing produced !y many rms.

C. a single rm producing a product for which there are no close su!stitutes.

D. a large num!er of rms producing a dierentiated product.

%2. *efer to the a!oe diagram. >his rm is selling in$

A. a mar#et in which there are an e(tremely large num!er of other rms producing the same

product.

B. an imperfectly competitie mar#et.

C. a mar#et in which demand is elastic at all prices.

D. a purely competitie mar#et.

%%. *efer to the a!oe diagram. Demand is relatiely elastic$

A. in the P2P1 price range. B. in the 5P1 price range. C. in the P2P' price range. D. only at price P2.

%'. *efer to the a!oe diagram. Demand is relatiely inelastic$

A. at price P%. B. at any price !elow P2. C. in the P2P' price range. D. in

the P2P% range.



%). *efer to the a!oe diagram. If this somehow was a costless product 6that is, the total cost of

any leel of output was "ero7, the rm would ma(imi"e prots !y$

A. selling the product at the highest possi!le price at which a positie 4uantity will !e demanded

B. producing Q1 units and charging a price of P1.

C. producing Q% units and charging a price of P%.

D. producing Q2 units and charging a price of P2.

%-. *efer to the a!oe diagram. >o ma(imi"e prots or minimi"e losses this rm should

produce$

A. E units and charge price C. B. E units and charge price A.

C. M units and charge price N. D. L units and charge price LK .

%. *efer to the a!oe diagram. At the prot@ma(imi"ing leel of output, total reenue will !e$

A. NM times 5M. B. 5 AJE. C. 5EGC. D. 5EHB.

%/. *efer to the a!oe diagram. At the prot@ma(imi"ing leel of output, total cost will !e$

A. NM times 5M. B. 5 AJE. C. 5CGC. D. 5BHE.%3. *efer to the a!oe diagram. At the prot@ma(imi"ing leel of output, the rm will reali"e$

A. an economic prot of ABHJ. B. an economic prot of ACGJ. C. a loss of GH per unit. D. a

loss of JH per unit.

'5. If prots are ma(imi"ed 6or losses minimi"ed7, which of the following conditions are common

to !oth unregulated monopoly and to pure competition?

A. :C ; P B. :C ; A>C C. :* ; :C D. P ; :*

'1. In which one of the following mar#et models is @ineciency most li#ely to !e the greatest?

A. pure competition

B. oligopoly

C. monopolistic competition

D. pure monopoly

'2. >he dilemma of regulation refers to the idea that$

A. the regulated price which achiees allocatie eciency is also li#ely to result in persistent

economic prots.

B. the regulated price which results in a fair return restricts output !y more than would

unregulated monopoly.

C. regulated pricing always conicts with the due process proision of the Constitution.

D. the regulated price which achiees allocatie eciency is also li#ely to result in losses.



'%. :onopolistic competition is characteri"ed !y a$

A. few dominant rms and low entry !arriers. B. large num!er of rms and

su!stantial entry !arriers.

C. large num!er of rms and low entry !arriers. D. few dominant rms and

su!stantial entry !arriers.

''. A signicant dierence !etween a monopolistically competitie rm and a purely competitie

rm is that the$

A. former does not see# to ma(imi"e prots.

B. latter recogni"es that price must !e reduced to sell more output.

C. former sells similar, although not identical, products.

D. formers demand cure is perfectly inelastic.

'). >he monopolistic competition model assumes that$

A. allocatie eciency will !e achieed. B. productie eciency will !e

achieed.

C. rms will engage in nonprice competition. D. rms will reali"e economic prots in

the long run.

'-. In the long run, new rms will enter a monopolistically competitie industry$

A. proided economies of scale are !eing reali"ed.

B. een though losses are incurred in the short run.C. until minimum aerage total cost is achieed.

D. until economic prots are "ero.

'. 8ther things e4ual, if more rms enter a monopolistically competitie industry$

A. the demand cures facing e(isting rms would shift to the right.

B. the demand cures facing e(isting rms would shift to the left.

C. the demand cures facing e(isting rms would !ecome less elastic.

D. losses would necessarily occur.

'/. In which of these continuums of degrees of competition 6highest to lowest7 is oligopoly

properly placed?

A. pure competition, oligopoly, pure monopoly, monopolistic competitionB. oligopoly, pure competition, monopolistic competition, pure monopoly

C. monopolistic competition, pure competition, pure monopoly, oligopoly

D. pure competition, monopolistic competition, oligopoly, pure monopoly

'3. 8ligopolistic industries are characteri"ed !y$

A. a few dominant rms and su!stantial entry !arriers.

B. a few dominant rms and no !arriers to entry.

C. a large num!er of rms and low entry !arriers.

D. a few dominant rms and low entry !arriers.

)5. Concentration ratios measure the$

A. geographic location of the largest corporations in each industry.

B. degree to which product price e(ceeds marginal cost in arious industries.

C. percentage of total sales accounted for !y the four largest rms in the industry.

D. num!er of rms in an industry.

)1. 8ligopolistic rms engage in collusion to$

A. minimi"e unit costs of production.

B. reali"e allocatie eciency, that is, the P ; :C leel of output.

C. earn greater prots.

D. increase production.



+ree response answers can !e found !y clic#ing here

http$apcentral.college!oard.comapcmem!erse(ame(amEinformation25

/'.html

and then going to the appropriate yearFs Gscoring guidelinesH

http://apcentral.collegeboard.com/apc/members/exam/exam_information/2084.html




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Unit 4 Practice Test Key