A fast-food company spends millions of dollars to develop and promote a new hamburger on its menu only to find that consumers won’t buy it because they don’t like the taste. F

Question 26.26. (TCO 3) A fast-food company spends millions of dollars to develop and promote a new hamburger on its menu only to find that consumers won’t buy it because they don’t like the taste. From an economic perspective, the company should (Points : 3)
keep the hamburger on the menu because they’ve spent so much money and time developing and promoting the product.
spend more money to develop a more efficient way to cook the hamburger so it cooks in a shorter time.
pull the hamburger off the menu and treat the development and promotion expenditures as a sunk cost.
keep trying to sell the hamburger so that people who developed and promote it have a job with the company.
Question 1.1. (TCO 3) Mutual interdependence would tend to limit control over price in which market model? (Points : 3)
Monopolistic competition
Pure competition
Pure monopoly
Oligopoly
Question 2.2. (TCO 3) In which two market models would advertising be used most often? (Points : 3)
Pure competition and monopolistic competition
Pure competition and pure monopoly
Monopolistic competition and oligopoly
Pure monopoly and oligopoly
Question 3.3. (TCO 3) The fast-food restaurants would be an example of which market model? (Points : 3)
Monopolistic competition
Pure competition
Pure monopoly
Oligopoly
Question 4.4. (TCO 3) In pure competition, the demand for the product of a single firm is perfectly (Points : 3)
elastic because the firm produces a unique product.
inelastic because the firm produces a unique product.
elastic because many other firms produce the same product.
inelastic because many other firms produce the same product.
Question 5.5. (TCO 3) T-Shirt Enterprises is selling in a purely competitive market. It is producing 3,000 units, selling them for $2 each. At this level of output, the average total cost is $2.50 and the average variable cost is $2.20. Based on these data, the firm should (Points : 3)
a. shut down in the short run.
b. decrease output to 2,500 units.
c. ontinue to produce 3,000 units.
d. increase output to 3,500 units.
Question 6.6. (TCO 3) A firm should increase the quantity of output as long as its (Points : 3)
a. marginal revenue is greater than its marginal cost.
b. marginal cost is greater than its marginal revenue.
c. average revenue is greater than its average total cost.
d. average revenue is greater than its average variable cost.
Question 7.7. (TCO 3) In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is (Points : 3)
a. equal to the price.
b. less than the price.
c. greater than the price.
d. equal to the average cost.
Question 8.8. (TCO 3) The classic example of a private, unregulated monopoly is (Points : 3)
a. Xerox.
b. De Beers.
c. General Motors.
d. General Electric.
Question 9.9. (TCO 3) Natural monopolies result from (Points : 3)
a. patents and copyrights.
b. pricing strategies.
c. extensive economies of scale in production.
d. control over an essential natural resource.
Question 10.10. (TCO 3) The nondiscriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why (Points : 3)
there are barriers to entry in pure monopoly.
a monopoly has a perfectly elastic demand curve.
marginal revenue is less than average revenue.
total revenues are greater than total costs at the profit-maximizing level of output.
Question 11.11. (TCO 3) Which case below best represents a case of price discrimination? (Points : 3)
An insurance company offers discounts to safe drivers.
A major airline sells tickets to senior citizens at lower prices than to other passengers.
A professional baseball team pays two players with identical batting averages different salaries.
A utility company charges less for electricity used during “off-peak” hours, when it does not have to operate its less-efficient generating plants.
Question 12.12. (TCO 3) In which industry is monopolistic competition most likely to be found? (Points : 3)
Utilities
Agriculture
Retail trade
Mining
Question 13.13. (TCO 3) If monopolistically competitive firms in an industry are making an economic profit, then new firms will enter the industry and the product demand facing existing firms will (Points : 3)
increase.
become less elastic.
not be affected.
decrease.
Question 14.14. (TCO 3) In an oligopolistic market there are (Points : 3)
many buyers.
few buyers.
few sellers.
many sellers.
Question 15.15. (TCO 3) A low concentration ratio means that (Points : 3)
there is a low probability of entering the industry.
there is a low probability of success in the industry.
each firm accounts for a small market share of the industry.
each firm accounts for a large market share of the industry.
Question 16.16. (TCO 3) A major reason that firms form a cartel is to (Points : 3)
reduce the elasticity of demand for the product.
enlarge the market share for each producer.
minimize the costs of production.
maximize joint profits.
Question 17.17. (TCO 1) Which of the following is a land resource? (Points : 3)
A farmer
An oil-drilling rig
A machine for detecting earthquakes
Natural gas
Question 18.18. (TCO 1) Refer to the diagram which refers to the Circular Flow Model in Chapter 2. Arrows (1) and (3) are associated with
Graph Description
(Points : 3)
the money market.
the resource market.
the product market.
international trade.
Question 19.19. (TCO 2) Refer to the diagram. An increase in quantity demanded is depicted by a
Graph Description
(Points : 3)
move from Point x to Point y.
shift from D1 to D2.
shift from D2 to D1.
move from Point y to Point x.
Question 20.20. (TCO 2) Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the game
Price per Ticket
Quantity Demanded
$13
1,000
11
2,000
9
3,000
7
4,000
5
5,000
3
6,000
(Points : 3)
a. varies inversely with ticket prices.
b. varies directly with ticket prices.
c. is perfectly inelastic.
d. is perfectly elastic.
Question 21.21. (TCO 2) Which of the following goods (with their respective income-elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession? (Points : 3)
a. Dinner at a nice restaurant (+1.8)
b. Chicken purchased at the grocery store for preparation at home (+0.25)
c. Facial tissue (+0.6)
d. Plasma-screen and LCD TVs (+4.2)
Question 22.22. (TCO 3) The following cost data are for a firm in the short run:
Output Total Cost
0 $400
1 500
2 550
3 600
4 650
5 700
What is the firm’s average variable cost at an output of 5 units?
(Points : 3)
a. $30
b. $60
c. $120
d. $140
Question 23.23. (TCO 1) Refer to the diagram. If society is producing nine units of bicycles and four units of computers and it now decides to increase computer output to six, the cost
Graph Description
(Points : 3)
a. will be four units of bicycles.
b. will be two units of bicycles.
c. will be zero because unemployed resources are available.
d. of doing so cannot be determined from the information given.

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Question 24.24. (TCO 3) Any activity designed to transfer income or wealth to a particular individual or firm at society’s expense is called (Points : 3)
a. patent protection.
b. X-inefficiency.
c. price discrimination.
d. rent-seeking.
Question 25.25. (TCO 3) a.) What is the relationship between economies of scale and a natural monopoly? b.) Why is the level of output at which marginal revenue equals marginal cost the profit-maximizing output? (Points : 25)

Question 26.26. (TCO 2) Evaluate how the following situations will affect the demand curve for iPods.
(a) Income statistics show that income of 18–25-year-olds have increased by 10 percent over the last year.
(b) Efforts of music artists wanting greater protection of their music result in more stringent enforcement of copyrights and the shutdown of numerous illegal downloading sites.
(c) Believing that it has significant control of the market for portable digital music players, Apple decides to raise the price of iPods with the goal of increasing profits.
(d) The price of milk decreases.