Multiple Choice Answers

Janet’s poodle grooming salon has a total cost curve expressed by the equation TC = 100 + 3Q2 where Q is the quantity of dogs groomed. Given this expression, if Janet grooms five dogs her total costs will be: (Points : 1)
$100.
$175.
$225.
$75.

A firm’s total fixed cost: (Points : 1)
stays constant in the short run.
falls as the firm produces more output in the short run.
falls as the firm produces more output in the long run.
increases as the firm produces more output.
The total product curve: (Points : 1)
shows the relation between output and the quantity of a variable input for varying levels of the fixed input.
will become flatter as output increases, if there are diminishing returns to the variable input.
will be downward-sloping, if there are diminishing returns to the variable input.
will become horizontal, when the marginal product of the variable input is constant.
When all of a firm’s inputs are doubled and this results in the firm’s level of production more than doubling, a firm will notice that it is operating: (Points : 1)
on the upward-sloping portion of its LRATC curve.
on the downward-sloping portion of its LRATC curve.
at the minimum of its LRATCcurve.
on the upward-sloping portion of its MC
curve.

Janet’s poodle grooming salon has a total cost curve expressed by the equation TC = 100 + 3Q2 where Q is the quantity of dogs groomed. Given this expression, one can determine that Janet is operating in the: (Points : 1)
long run.
short run and her fixed costs are equal to $100.
long run and her fixed costs are equal to $100.
short run and there are no fixed costs.
Hank operates a perfectly competitive firm in the long run. For several time periods, the market price has been $20 and he knows his break-even price is $22. Hank should: (Points : 1)
stay in the industry since he can cover his fixed costs.
exit the industry since he is making losses.
stay in the industry since he is a perfect competitor and must take the price as given.
wait for the short-run time period.

In the long run, each firm in a perfectly competitive industry will: (Points : 1)
earn a normal profit.
produce where MR is greater than MC.
differentiate its goods.
increase its price.
A perfectly competitive industry with constant costs is initially operating in long-run equilibrium. When demand increases, one will observe that in the long and short runs: (Points : 1)
positive economic profits will result for all firms.
higher prices will result.
output will increase.
negative economic profits will result for some firms.

In the long run, all firms in a perfectly competitive industry will: (Points : 1)

minimize losses.
earn a greater than zero economic profit.
exit the industry if price is greater than average total cost.
produce an output level at which price is greater than average total cost.
Firms will make a profit in the long run or short run if price is: (Points : 1)
equal to marginal revenue.
greater than ATC.
less than MC.
greater than AVC.
43. The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as: (Points : 1)
product differentiation.
barrier to entry.
market power.
patents and copyrights.
If a monopolist knows its price elasticity of demand is greater than one, then a(n): (Points : 1)

increase in price will increase total revenue.
decrease in price will increase total revenue.
decrease in price will decrease total revenue.
increase in price will have no impact on total revenue.
For a monopolist with a downward-sloping demand curve, the quantity effect dominates the price effect at: (Points : 1)
lower levels of production.
all levels of production.
higher levels of production.
only at those levels at which elasticity is unit-elastic.
Which of the following statements is correct regarding entry barriers? (Points : 1)

Entry barriers exist in all market structures.
Entry barriers exist in perfect competition and monopolistically competitive markets.
Entry barriers do not exist in any market structures, otherwise nothing would be produced.
Entry barriers exist in monopoly and oligopoly markets.
Compared to perfect competition: (Points : 1)
monopoly produces more at a lower price.
monopoly produces where MR> MC, and a perfectly competitively firm produces where P = MC.
monopoly may have economic profits in the long run, but in perfect competition in the
all of the above are true.