2. One goal of advertising is to make the: (Points : 2) demand for one\'s produc

Question

2. One goal of advertising is to make the: (Points : 2)
demand for one's product less inelastic.
demand for one's product more inelastic.
supply for one's product more elastic.
ATC rise.


3. The supply curve of a perfectly competitive firm is: (Points : 2)
the marginal cost curve only if price exceeds average variable cost.
the marginal cost curve only if price exceeds average total cost.
the average total cost curve only if price exceeds average variable cost.
nonexistent.


4. If marginal cost equals average total cost, then: (Points : 2)
average total cost is minimized.
marginal cost is minimized.
average variable cost is minimized.
average variable cost is falling.


5. Which of the following is not an assumption of the theory of monopolistic competition? (Points : 2)
There are high barriers to entry (i.e. no ease of entry or exit).
There are many sellers.
Each firm in the industry produces and sells a differentiated product.
The demand curve for the monopolistically competitive firm is downward-sloping.


6. According to contestable market theory: (Points : 2)
barriers to entry are much more important than market structure in determining the degree of price competition in an industry.
barriers to entry are much less important than market structure in determining the degree of price competition in an industry.
barriers to entry and market structure are both important in determining the degree of price competition in an industry.
neither barriers to entry nor market structure affect the degree of price competition in an industry.


7. The marginal cost curve is the competitive firm's supply curve; it shows how many units of output a firm will be willing to sell at different prices. (Points : 2)
True
False


8. If MR < MC, the monopolist should: (Points : 2)
decrease production.
increase production.
maintain the same level of production.
stop producing.


9. Monopolies that exist because economies of scale create a barrier to entry are called: (Points : 2)
normal monopolies.
natural monopolies.
price-discriminating monopolies.
government monopolies.
11. The effect that explains why workers tend to supply more hours when wages increase is called the: (Points : 2)
income effect.
social effect.
substitution effect.
work effect.


12. When a negative externality exists, (Points : 2)
external costs are not present.
social costs equal private costs.
social costs are less than private costs.
social costs are greater than private costs.

Explanation / Answer

2. ans--demand for one's product less inelastic. 3. ans--the marginal cost curve only if price exceeds average variable cost. 4. ans--average variable cost is falling. 5. ans--There are many sellers. 6. ans--barriers to entry are much more important than market structure in determining the degree of price competition in an industry. 7. ans--False 8. ans--stop producing. 9. ans--government monopolies. 11. ans--work effect. 12. ans-- social costs are greater than private costs.

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