Deck 6: Market Structures

Question 1

Which characteristic of competitive markets is mainly responsible for firms making zero economic profits in the long run?

A) many buyers
B) many sellers
C) similar goods
D) differentiated goods
E) easy entry into and exit from the market

Answer 1

easy entry into and exit from the market

Question 2

The University of California at Irvine (UCI)allows student organizations and private firms to sell items on campus to raise funds for various activities.Many of the organizations sell boba,a Taiwanese tea drink,because boba is popular with students.The market for boba on the UCI campus is very competitive.If legislation is passed to restrict the entry of private firms into the boba market at the UCI campus,the:

A) market would become less competitive.
B) market would become more competitive.
C) demand for boba would fall.
D) supply for boba would increase.
E) demand for boba would increase.

Answer 2

market would become less competitive.

Question 3

Firms will break even if the price they charge is:

A) less than their minimum average total cost (ATC).
B) less than their minimum marginal cost (MC).
C) greater than their minimum marginal cost (MC).
D) greater than their minimum average total cost (ATC).
E) equal to their minimum average total cost (ATC).

Answer 3

equal to their minimum average total cost (ATC).

Question 4

In a competitive market,if one firm raises its price relative to the other firms in the market,consumers are willing to go to another firm because:

A) the products are not similar.
B) the products are similar.
C) there are many sellers in the market selling different items.
D) consumers can get more producer surplus by going to a different firm.
E) consumers can set the price they want to pay.

Question 5

Total revenue minus total cost equals:

A) marginal revenue.
B) marginal cost.
C) change in profit.
D) profit.
E) quantity.

Question 6

Firms will always suffer a loss only if the price they charge is:

A) less than their minimum average total cost (ATC).
B) less than their minimum marginal cost (MC).
C) greater than their minimum marginal cost (MC).
D) greater than their minimum average total cost (ATC).
E) equal to their minimum average total cost (ATC).

Question 7

Which is an example of an almost perfectly competitive market?

A) Major League Baseball
B) restaurants
C) cruise liners
D) airlines
E) farmer's markets

Question 8

Competitive markets exist when:

A) there are so many buyers and sellers that each has only a small impact on the market price and the market output.
B) there are more buyers than sellers, giving the buyers market power.
C) there are more sellers than buyers, giving the sellers market power.
D) accounting profits become zero because of price wars.
E) prices are so low that everyone who wants the good or service gets the good or service.

Question 9

The market for hot dogs on the streets of New York City can be considered close to a perfectly competitive market.Because there are so many individuals buying and selling hot dogs:

A) there is a shortage of hot dogs.
B) there is a surplus of hot dogs.
C) market forces set the price in the market.
D) firms are able to make large economic profits.
E) their accountants tell them that they cannot make positive profits.

Question 10

The presence of many buyers and sellers is an important characteristic of competitive markets because it allows:

A) sellers in the market to have influence over the market price.
B) buyers in the market to have influence over the market price.
C) sellers in the market to have influence over the market quantity.
D) buyers in the market to have influence over the market quantity.
E) the price and quantity in the market to be determined by market forces.

Question 11

A farmer's market is close to being a perfectly competitive market.Which characteristic of a perfectly competitive market do most farmer's markets violate?

A) many buyers
B) many sellers
C) free entry into the market
D) free exit from the market
E) similar goods produced

Question 12

A firm characterized as a price-taker:

A) has control over the price it pays, or receives, in the market.
B) sets the price for the market.
C) has no control over the price it pays, or receives, in the market.
D) is not a characteristic of a competitive market.
E) takes the price that is determined from the lowest price consumers are willing to pay for an item.

Question 13

Which of the following lists the three main characteristics of a competitive market?

A) many buyers and sellers, similar products, easy entry into the market
B) many buyers and few sellers, similar products, easy entry into the market
C) many buyers and sellers, differentiated products, easy entry into the market
D) many buyers and sellers, similar products, barriers to entry into the market
E) many buyers and few sellers, unique products, barriers to entry into the market

Question 14

Many economists believe that the market for wheat in the United States is an almost perfectly competitive market.If one firm discovers a technology that makes its wheat taste better and have fewer calories than all other wheat offered in the market,the wheat market would become less competitive because:

A) there would no longer be many buyers and many sellers of wheat.
B) it would no longer be easy to enter and exit the existing wheat market.
C) the products would no longer be similar in the wheat market.
D) the government would want to intervene.
E) individuals would not want to switch products.

Question 15

Because of market forces,firms have ________ over the price that they can charge and they make ________ profit(s)when competition is widespread.

A) control; little or no
B) control; positive
C) little or no control; negative
D) little or no control; little or no
E) little or no control, extreme

Question 16

In competitive markets:

A) the products sold are different depending on the firm selling the product.
B) buyers can expect to find consistently low prices and wide availability of the good that they want.
C) producers can expect to be able to set the price at the level they choose.
D) it is hard for a seller to enter the market due to barriers to entry.
E) firms will leave the market if they are making economic profits.

Question 17

Real-life examples of competitive markets:

A) are more common than any other market structure.
B) are usually far short of perfection.
C) include the fast-food industry and soda industry.
D) are difficult to break into as an entrepreneur.
E) do not benefit society.

Question 18

Which characteristic of competitive markets is mainly responsible for ensuring that prices will be kept low?

A) many buyers
B) many sellers
C) similar goods
D) easy entry into and exit from the market
E) differentiated goods

Question 19

In competitive markets:

A) firms set the prices for their products with little concern for the consumer.
B) firms control the prices they charge.
C) market forces are much stronger than individual firms.
D) individual firms are much stronger than the market forces.
E) market forces set the quantity in the market but not the prices.

Question 20

Jim and Lisa own a dog-grooming business in Champlain,New York,called JL Groomers.There are many buyers and many sellers in the dog-grooming service market.JL Groomers experiences normal cost curves,with the marginal cost (MC)curve minimized at $14 and crosses average total cost (ATC)curve at $22.JL Groomers will make positive economic profits if the market price is:

A) $14.
B) between $14 and $22.
C) below $14.
D) $22.
E) above $22.

Question 21

Signals:

A) have no importance in economics.
B) convey information about the profitability of various markets.
C) are only a characteristic of competitive markets.
D) lead to less competition in markets.
E) result in less information in a market.

Question 22

According to the accompanying figure,if the price is $5,the firm is making:

A) a loss and will exit the market.
B) a profit and will exit the market.
C) a loss and more firms will enter the market.
D) a profit and more firms will enter the market.
E) zero profits and the market is at long-run equilibrium.

Question 23

Chuck Diesel Burger is a food truck in Houston,Texas.Imagine that Chuck Diesel Burger's minimum average total cost (ATC)is $3.75 and that its minimum marginal cost (MC)is $2.50.Assume there are no barriers to entry into or exit from the food-truck market.Chuck Diesel Burger will break even if the price is equal to:

A) $4.00.
B) $3.75.
C) $3.00.
D) $2.50.
E) $2.00.

Question 24

If Nicole's Knick-Knacks is a perfectly competitive firm and is making zero economic profits:

A) firms will enter the market.
B) firms will exit the market.
C) Nicole's Knick-Knacks will stay in the market.
D) the market supply curve will shift to the left.
E) the market supply curve will shift to the right.

Question 25

If the price is $3,the firm is making:

A) a loss and will exit the market.
B) a profit and will exit the market.
C) a loss and more firms will enter the market.
D) a profit and more firms will enter the market.
E) zero profits and the market is at long-run equilibrium.

Question 26

You can tell a firm is operating in a market that is in long-run competitive equilibrium if:

A) economic profits are positive.
B) economic profits are negative.
C) your accountant tells you profits are negative.
D) your accountant tells you profits are zero.
E) economic profits are zero.

Question 27

Refer to the accompanying figure.A firm would produce in the long run only if the market price is:

A) above $20.
B) above $15.
C) between $15 and $20.
D) above $8.
E) between $8 and $15.

Question 28

Kimberly owns a cupcake shop in Newport Beach,California.The market for cupcakes is very competitive.At Kimberly's current production level,her marginal cost is $25 and her marginal revenue is $29.To maximize profits,Kimberly should:

A) decrease production.
B) keep production the same.
C) increase the price.
D) decease the price.
E) increase production.

Question 29

In the long run,if a firm is making a loss,it will:

A) continue to operate no matter what.
B) continue to operate if it covers its fixed costs.
C) increase production in order to increase profits.
D) decrease production in order to increase profits.
E) stop producing and exit the market.

Question 30

If firms in a competitive market are incurring economic losses,you would expect firms to:

A) leave the market, causing the demand curve to shift to the right.
B) enter the market, causing the demand curve to shift to the left.
C) leave the market, causing the supply curve to shift to the right.
D) enter the market, causing the supply curve to shift to the left.
E) leave the market, causing the supply curve to shift to the left.

Question 31

Refer to the accompanying set of graphs to answer the questions that follow.





Which graph would result in firms entering a perfectly competitive market in the long run?

A) A
B) B
C) C
D) D
E) E

Question 32

Firms in every market structure:

A) make long-run economic profits.
B) are in competition with many other firms.
C) leave the market as soon as they experience loss of profits.
D) will attempt to maximize profits.
E) face a horizontal demand curve.

Question 33

Holding all else constant,a decrease in the market demand for a product in a competitive market would cause:

A) the average total cost (ATC) curve of the firms to decrease.
B) an increase in the price a firm could charge for the product.
C) the marginal cost (MC) curve of the firms to decrease.
D) the marginal revenue (MR) curve of the firms to shift downward/leftward.
E) an increase in profits for the firm.

Question 34

If firms in a competitive market are making positive economic profits,you would expect firms to:

A) enter the market, causing the demand curve to shift to the right.
B) enter the market, causing the demand curve to shift to the left.
C) enter the market, causing the market supply curve to shift to the right.
D) enter the market, causing the market supply curve to shift to the left.
E) leave the market, causing the market supply curve to shift to the left.

Question 35

Refer to the accompanying set of graphs to answer the questions that follow.





Which graph would result in firms exiting a perfectly competitive market in the long run?

A) A
B) B
C) C
D) D
E) E

Question 36

Holding all else constant,an increase in the market demand for a product in a competitive market would cause:

A) the average total cost (ATC) curve of the firms to increase.
B) a decrease in the price a firm could charge for the product.
C) the marginal revenue (MR) curve of the firms to shift upward/rightward.
D) the marginal cost (MC) curve of the firms to increase.
E) a decrease in profits for the firm.

Question 37

Refer to the accompanying set of graphs to answer the questions that follow.





Which graph would result in no firms entering or exiting the perfectly competitive market?

A) A
B) B
C) C
D) D
E) E

Question 38

All firms,no matter the type of firm structure in which they are producing,make their production decisions based on the point where their:

A) total revenue equals total cost.
B) marginal revenue equals marginal costs.
C) profits are equal to zero.
D) marginal revenue equals price.
E) average total cost is minimized.

Question 39

A firm will shut down in the long run if the:

A) price is above the minimum average total cost (ATC).
B) price is equal to the minimum average total cost (ATC).
C) price is anywhere above the minimum average variable cost (AVC).
D) price is anywhere below the minimum average total cost (ATC).
E) firm is making zero economic profits.

Question 40

Jim and Lisa own a dog-grooming business in Champlain,New York,called JL Groomers.There are many buyers and many sellers in the dog-grooming service market.JL Groomers experiences normal cost curves,with the marginal cost (MC)curve minimized at $14 and crosses the average total cost (ATC)curve at $22.JL Groomers will make zero economic profits if the market price is:

A) $14.
B) between $14 and $22.
C) below $14.
D) $22.
E) above $14.

Question 41

Control of resources,problems raising capital,and economies of scale are all examples of:

A) government-created barriers.
B) market structures.
C) patents and copyright laws.
D) price-makers.
E) natural barriers.

Question 42

Barriers to entry:

A) measure the ability of firms to set the price for a good.
B) do not exist for monopolies.
C) always lead to profits.
D) restrict the entry of new firms into the market.
E) exist for perfectly competitive firms.

Question 43

Control of resources is an example of:

A) a market force.
B) consumer surplus.
C) a government-created barrier.
D) a natural barrier.
E) rent seeking.

Question 44

Ash is the preferred wood to be used in the production of baseball bats.If a company were to buy the rights to harvesting the ash trees out of all the forests in North America,which of the following barriers of entry has this company created?

A) control of resources
B) problems raising capital
C) economies of scale
D) licensing
E) patents and copyright law

Question 45

Two conditions allow a single seller to become a monopolist.Those two conditions are that the firm must:

A) have something unique to sell and it must be able to estimate its demand curve.
B) have something unique to sell and it must have a way to prevent potential competitors from entering the market.
C) be able to estimate its demand curve and it must have a way to prevent potential competitors from entering the market.
D) be able to segregate its consumers and it must have a way to prevent potential competitors from entering the market.
E) have something unique to sell and it must be able to segregate its consumers.

Question 46

Market-created and government-created barriers:

A) are the same thing.
B) are regarded by all economists as bad.
C) increase competition in markets.
D) create monopolies.
E) are problems solved only by government intervention.

Question 47

The best way to limit competition is to:

A) lobby for a government-created barrier.
B) charge a low price.
C) produce a high quantity.
D) control a resource that is essential in the production process.
E) minimize costs.

Question 48

When talking about economic profits in a perfectly competitive market,the difference between the long run and the short run is that,in the short run,firms:

A) can earn positive economic profits, but in the long run, firms have zero economic profits.
B) can earn negative economic profits, but in the long run, firms have zero economic profits.
C) can earn positive or negative economic profits, but in the long run, firms have negative economic profits.
D) earn negative economic profits, but in the long run, firms have positive economic profits.
E) can earn positive or negative economic profits, but in the long run, firms have zero economic profits.

Question 49

Refer to the accompanying scenario to answer the following questions:
Dave's Batting Cages is located in Boston, Massachusetts. During the first year of operation, Dave's Batting Cages incurred many costs. In that year, Dave spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Dave took out a loan to open his business, in which he would have earned $1,500. His previous job, which he could get back at any time, paid him $50,000.
If Dave's Batting Cages received $80,000 in revenues,what was the profit that the accountant reported?

A) $20,500
B) $72,000
C) $51,500
D) $80,000
E) $50,000

Question 50

Refer to the accompanying scenario to answer the following questions:
Dave's Batting Cages is located in Boston, Massachusetts. During the first year of operation, Dave's Batting Cages incurred many costs. In that year, Dave spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Dave took out a loan to open his business, in which he would have earned $1,500. His previous job, which he could get back at any time, paid him $50,000.
If Dave's Batting Cages received $80,000 in revenues,what were the economics profits?

A) $20,500
B) $72,000
C) $51,500
D) $80,000
E) $50,000

Question 51

A monopoly:

A) always makes a profit.
B) can force consumers to purchase what it is selling.
C) is characterized by a single seller who produces a well-defined product for which there are no good substitutes.
D) always has naturally created barriers.
E) always has government-created barriers.

Question 52

When firms exit a market,the ________,causing individual firms' profits to ________.

A) long-run market supply curve shifts right; decrease
B) short-run market supply curve shifts left; decrease
C) short-run market supply curve shifts left; increase
D) short-run market supply curve shifts right; decrease
E) short-run market supply curve shifts right; increase

Question 53

Refer to the accompanying scenario to answer the following questions:
Dave's Batting Cages is located in Boston, Massachusetts. During the first year of operation, Dave's Batting Cages incurred many costs. In that year, Dave spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Dave took out a loan to open his business, in which he would have earned $1,500. His previous job, which he could get back at any time, paid him $50,000.
Dave's Batting Cages incurred ________ in implicit costs.

A) $9,500
B) $7,000
C) $51,500
D) $8,000
E) $50,000

Question 54

When firms enter a market,the ________,causing individual firms' profits to ________.

A) long-run market supply curve shifts right; decrease
B) short-run market supply curve shifts left; decrease
C) short-run market supply curve shifts left; increase
D) short-run market supply curve shifts right; decrease
E) short-run market supply curve shifts right; increase

Question 55

Refer to the accompanying scenario to answer the following questions:
Dave's Batting Cages is located in Boston, Massachusetts. During the first year of operation, Dave's Batting Cages incurred many costs. In that year, Dave spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Dave took out a loan to open his business, in which he would have earned $1,500. His previous job, which he could get back at any time, paid him $50,000.
Dave's Batting Cages incurred ________ in explicit costs.

A) $9,500
B) $7,000
C) $51,500
D) $8,000
E) $50,000

Question 56

If Firm A is making zero economic profits:

A) Firm A's accountant reports that it is making zero profits.
B) Firm A is breaking even when opportunity cost is taken into consideration.
C) other firms want to enter the market.
D) Firm A wants to leave the market.
E) Firm A wants to stop producing in the short run.

Question 57

Three natural barriers to entry are:

A) patents and copyright law, economies of scale, and licensing.
B) economies of scale, problems raising capital, and control of resources.
C) problems raising capital, patents and copyright law, and licensing.
D) control of resources, patents and copyright law, and economies of scale.
E) control of resources, economies of scale, and licensing.

Question 58

Monopolists:

A) enjoy market power for their specific products.
B) have no market power for their specific products.
C) will never experience a loss.
D) always experience economies of scale.
E) exist in all markets.

Question 59

One difference between implicit costs and explicit costs is that:

A) implicit costs are included in profits that accountants compute, whereas explicit costs are not.
B) implicit costs are included in economic profits, whereas explicit costs are not.
C) explicit costs are included in profits that accountants compute, whereas implicit costs are not.
D) explicit costs are included in economic profits, whereas implicit costs are not.
E) explicit costs involve opportunity costs, whereas implicit costs involve a monetary transaction.

Question 60

Holding all else constant,an increase in the price of hot dogs would cause:

A) the marginal revenue (MR) curve in the market for hot dog buns to increase.
B) the marginal revenue (MR) curve in the market for hot dogs to decrease.
C) the average total cost (ATC) curve in the market for hot dog buns to increase.
D) profits in the market for hot dog buns to increase.
E) the marginal revenue (MR) curve in the market for hot dog buns to shift left.

Question 61

Refer to the accompanying table, which represents the costs and production for a monopolist, to answer the questions that follow.

The profit-maximizing quantity for this firm is:

A) 0 (zero).
B) 1.
C) 3.
D) 4.
E) 5.

Question 62

A problem raising capital is an example of:

A) a natural barrier.
B) consumer surplus.
C) a government-created barrier.
D) an externality.
E) rent seeking.

Question 63

Refer to the accompanying table, which represents the costs and production for a monopolist, to answer the questions that follow.

As production increases,the price consumers are willing to pay for the good:

A) increases and then decreases.
B) decreases and then increases.
C) stays the same.
D) increases.
E) decreases.

Question 64

Which of the following is a characteristic of a monopoly but not a characteristic of a competitive market?

A) A monopoly contains many firms.
B) A monopoly produces an efficient level of output.
C) A monopoly may earn long-run economic profits.
D) A monopoly has no market power.
E) A monopoly is a price-taker.

Question 65

Two government-created barriers to entry are:

A) licensing and economies of scale.
B) economies of scale and patent system/copyright law.
C) licensing and patent system/copyright law.
D) economies of scale and control of resources.
E) licensing and control of resources.

Question 66

Patents and copyright law:

A) are natural barriers.
B) create more competition.
C) mean more varieties of goods and services at different price levels.
D) assure inventors that no one else will sell their ideas.
E) always result in zero economic profits.

Question 67

Economies of scale is an example of:

A) rent seeking.
B) consumer surplus.
C) a government-created barrier.
D) an external market.
E) a natural barrier.

Question 68

Apple and Google apply for hundreds of patents every year.These patents:

A) allow Apple and Google to produce goods with no risk of monetary loss.
B) provide incentives for Apple and Google to spend large amounts of money up front on research and development of new products.
C) create more competition among Apple, Google, and other tech firms than would occur without government intervention.
D) make it easy for Apple and Google products to be similar.
E) make it easy for other firms to compete with Apple and Google.

Question 69

Thomas has developed a new social media site that he feels can compete heavily with Facebook.Unfortunately,he cannot find someone to lend him enough money to market his product to consumers.Thomas is facing which kind of barrier to entry?

A) control of resources
B) problems raising capital
C) economies of scale
D) licensing
E) patents and copyright law

Question 70

Patents and copyrights can:

A) create strong incentives to develop new products.
B) provide heavy competition in markets.
C) never lead to deadweight loss.
D) assure firms that their products will make a profit.
E) be considered natural barriers.

Question 71

In the soda industry,production costs per unit continue to fall as the firm expands.In this type of industry,smaller rivals trying to enter the industry:

A) will easily be able to gain market power.
B) have lower average costs.
C) do not have high fixed costs.
D) will have much higher average costs.
E) experience a government-created barrier.

Question 72

In instances when having a single firm in the market makes sense,governments ________ to ensure a minimum level of market standard,such as safety.

A) will grant a patent or copyright
B) require licenses
C) deregulate industries
D) hand out subsidies
E) break down barriers to entry

Question 73

Economies of scale exist:

A) only for monopolists.
B) when long-run average total costs increase.
C) when long-run average total costs decrease.
D) when long-run average total costs are constant.
E) when governments create barriers to entry.

Question 74

Licensing:

A) is a natural barrier.
B) creates more competition.
C) causes more varieties of goods and services at different price levels.
D) creates an opportunity for corruption.
E) always results in zero economic profits.

Question 75

A price-maker:

A) is a characteristic held by a perfectly competitive firm.
B) must set the price at the market price.
C) has some control over the price it charges.
D) can sell its product at any price.
E) will always make economic profits.

Question 76

Which of the following can fall below the x axis when graphing price/cost against quantity?

A) demand curve
B) marginal cost curve
C) total cost curve
D) fixed cost curve
E) marginal revenue curve

Question 77

Raising capital to compete against an entrenched monopolist:

A) is very easy.
B) is unnecessary.
C) can be done only through private investors.
D) is very difficult.
E) can be done only through banks.

Question 78

After a patent on a product expires:

A) other firms must wait to mimic the product.
B) all negative and positive externalities are internalized.
C) rivals can start to mimic the product.
D) no other firms can mimic the product.
E) no further profits are able to be made by the original producer of the good.

Question 79

A natural monopoly:

A) exists when many sellers experience lower average total costs than potential
Competitors do.
B) exists when a firm has sole ownership of a natural resource.
C) is an example of a government-created barrier.
D) is needed to make a profit in the long run.
E) exists when a single seller experiences lower average total costs than any potential competitor.

Question 80

Both monopolies and competitive firms:

A) are price-takers.
B) are price-makers.
C) face barriers to entry.
D) make long-run economic profits.
E) try to maximize profits.