ECO 550 Final Exam

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 Question 1

4 out of 4 points

   
  Break-even analysis usually assumes all of the following except:      
  Selected Answer: in the short run, there is no distinction between variable and fixed costs.Correct Answer: in the short run, there is no distinction between variable and fixed costs.      

 Question 2

4 out of 4 points

   
  The short-run cost function is:      
  Selected Answer: relevant to decisions in which one or more inputs to the production process are fixedCorrect Answer: relevant to decisions in which one or more inputs to the production process are fixed      

 Question 3

4 out of 4 points

   
  George Webb Restaurant collects on the average $5 per customer at its breakfast & lunch diner. Its variable cost per customer averages $3, and its annual fixed cost is $40,000.  If George Webb wants to make a profit of $20,000 per year at the diner, it will have to serve__________ customers per year.      
  Selected Answer: 30,000 customersCorrect Answer: 30,000 customers      

 Question 4

4 out of 4 points

   
  In the linear breakeven model, the difference between selling price per unit and variable cost per unit is referred to as:      
  Selected Answer: contribution margin per unitCorrect Answer: contribution margin per unit      

 Question 5

4 out of 4 points

   
  In a study of banking by asset size over time, we can find which asset sizes are tending to become more prominent.  The size that is becoming more predominant is presumed to be least cost. This is called:      
  Selected Answer: survivorship analysis.Correct Answer: survivorship analysis.      

 Question 6

4 out of 4 points

   
  Which of the following is not an assumption of the linear breakeven model:      
  Selected Answer: decreasing variable cost per unitCorrect Answer: decreasing variable cost per unit      

 Question 7

4 out of 4 points

   
  What is the profit maximization point for a firm in a purely competitive environment?      
  Selected Answer: The output where P = MCCorrect Answer: The output where P = MC      

 Question 8

4 out of 4 points

   
  If price exceeds average costs under pure competition, ____ firms will enter the industry, supply will ____, and price will be driven ____.      
  Selected Answer: more; increase; downCorrect Answer: more; increase; down      

 Question 9

4 out of 4 points

   
  In the purely competitive case, marginal revenue (MR) is equal to:      
  Selected Answer: priceCorrect Answer: price      

 Question 10

4 out of 4 points

   
  Under asymmetric information,      
  Selected Answer: at best you get what you pay forCorrect Answer: at best you get what you pay for      

 Question 11

4 out of 4 points

   
  Buyers anticipate that the temporary warehouse seller of unbranded computer equipment will      
  Selected Answer: produce only one qualityCorrect Answer: produce only one quality      

 Question 12

4 out of 4 points

   
  Experience goods are products or services      
  Selected Answer: whose quality is undetectable when purchasedCorrect Answer: whose quality is undetectable when purchased      

 Question 13

4 out of 4 points

   
  A firm in pure competition would shut down when:      
  Selected Answer: price is less than average variable costCorrect Answer: price is less than average variable cost      

 Question 14

4 out of 4 points

   
  In the electric power industry, residential customers have relatively ____ demand for electricity compared with large industrial users.  But contrary to price discrimination, large industrial users generally are charged ____ rates.      
  Selected Answer: inelastic, higherCorrect Answer: inelastic, higher      

 Question 15

4 out of 4 points

   
  In natural monopoly, AC continuously declines due to economies in distribution or in production, which tends to found in industries which face increasing returns to scale.  If price were set equal to marginal cost, then:      
  Selected Answer: price would be below average cost.Correct Answer: price would be below average cost.      

 Question 16

4 out of 4 points

   
  ____ as practiced by public utilities is designed to encourage greater usage and therefore spread the fixed costs of the utility’s plant over a larger number of units of output.      
  Selected Answer: Block pricingCorrect Answer: Block pricing      

 Question 17

4 out of 4 points

   
  Of the following, which is not an economic rationale for public utility regulation?      
  Selected Answer: constant cost industryCorrect Answer: constant cost industry      

 Question 18

4 out of 4 points

   
  When the cross elasticity of demand between one product and all other products is low, one is generally referring to a(n) ____ situation.      
  Selected Answer: monopolyCorrect Answer: monopoly      

 Question 19

4 out of 4 points

   
  Declining cost industries      
  Selected Answer: have marginal cost curves below their average cost curve.Correct Answer: have marginal cost curves below their average cost curve.      

 Question 20

4 out of 4 points

   
  Some market conditions make cartels MORE likely to succeed in collusion.  Which of the following will make collusion more successful?      
  Selected Answer: The orders are small and frequentCorrect Answer: The orders are small and frequent      

 Question 21

4 out of 4 points

   
  In a kinked demand market, whenever one firm decides to lower its price,      
  Selected Answer: other firms will automatically follow.Correct Answer: other firms will automatically follow.      

 Question 22

4 out of 4 points

   
  In the Cournot duopoly model, each of the two firms, in determining its profit-maximizing price-output level, assumes that the other firm’s ____ will not change.      
  Selected Answer: outputCorrect Answer: output      

 Question 23

4 out of 4 points

   
  A(n) ____ is characterized by a relatively small number of firms producing a product.      
  Selected Answer: oligopolyCorrect Answer: oligopoly      

 Question 24

4 out of 4 points

   
  A cartel is a situation where firms in the industry      
  Selected Answer: have an agreement to restrict output.Correct Answer: have an agreement to restrict output.      

 Question 25

4 out of 4 points

   
  “Conscious parallelism of action” among oligopolistic firms is an example of ____.      
  Selected Answer: informal, or tacit, cooperationCorrect Answer: informal, or tacit, cooperation      



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