1. Firms may be able to produce more efficiently than households because:
a. firms can reduce transaction costs
b. team production may be more productive than individual production
c. Both of the above
d. Neither of the above

2. Transaction costs:
a. are the costs of bringing buyers and sellers together for exchanges
b. are always minimized when consumers purchase directly from producers
c. Both of the above
d. Neither of the above

3. In terms of sales, the most important type of business firm is the:
a. proprietorship
b. partnership
c. corporation
d. nonprofit firm

4. The chief goal of all business firms is assumed to be:
a. market share maximization
b. profit-maximization
c. sales maximization
d. maximum cost efficiency

5. In a competitive market, the goal of profit-maximization will compel a business firm to:
a. use its resources to produce in response to consumer demand
b. use its resources so as to ensure maximum job security for its employees
c. Both of the above
d. Neither of the above

6. The most common legal type of business firm is the:
a. corporation
b. partnership
c. proprietorship
d. nonprofit firm

7. A firm owned and operated by two or more co-owners is a:
a. corporation
b. partnership
c. proprietorship
d. nonprofit firm

8. A corporate share of stock:
a. is the same as a corporate bond
b. is an ownership interest in the corporation
c. Both of the above
d. Neither of the above

9. A corporate bond:
a. is an ownership interest in the corporation
b. is a debt obligation of the corporation
c. Both of the above
d. Neither of the above

10. According to Adam Smith, the greatest improvement in the productivity of labor is caused by:
a. public education
b. the division of labor
c. the internet
d. None of the above

11. A sunk cost:
a. is a past cost that cannot be changed by current decisions
b. should not influence current decisions
c. Both of the above
d. Neither of the above

12. A period in which at least one input is fixed is:
a. the short run
b. the long run
c. the planning run
d. the Pamplona run

13. The change in output with one additional unit of input is:
a. marginal revenue product
b. marginal cost
c. marginal physical product
d. marginal input output

14. The law of diminishing marginal returns:
a. applies eventually when larger amounts of a variable input are combined with fixed inputs
b. causes an increase in the marginal cost of production
c. Both of the above
d. Neither of the above

15. Fixed costs:
a. are costs that vary with output
b. are costs that do not vary with output
c. are the costs associated with the fixed inputs
d. Both b. and c. above

16. Concerning the cost curves:
a. the AFC curve always slopes downward
b. the AVC and ATC curves eventually slope upward due to the law of diminishing marginal returns
c. Both of the above
d. Neither of the above

17. If marginal cost is equal to ATC:
a. ATC must be decreasing
b. ATC must be increasing
c. ATC must be at its lowest point
d. All of the above are possible

18. If marginal cost is greater than ATC:
a. ATC must be decreasing
b. ATC must be increasing
c. ATC must be at its lowest point
d. All of the above are possible

Refer to the graph below to answer questions 19 through 22:

19. Which curve is the average variable cost curve?
a. A
b. B
c. C
d. D

20. Which curve is the average fixed cost curve?
a. A
b. B
c. C
d. D
21. Which curve is the marginal cost curve?
a. A
b. B
c. C
d. D

22. Which curve is the average total cost curve?
a. A
b. B
c. C
d. D

23. A perfect competitor:
a. is one of many sellers in a market
b. can increase market price by decreasing its output
c. Both of the above
d. Neither of the above

24. Market power:
a. is the ability of a seller or a buyer to affect market price
b. is the same in the different market structures
c. Both of the above
d. Neither of the above

25. The demand curve faced by a perfect competitor will be:
a. upward sloping
b. horizontal
c. downward sloping
d. All of the above are possible

26. In order to maximize profits, a perfect competitor will produce the quantity of output:
a. where total revenue is maximized
b. where total cost is minimized
c. where marginal revenue equals marginal cost
d. where marginal revenue exceeds marginal cost by the maximum amount

27. The change in total revenue from selling an additional unit of output is:
a. marginal revenue
b. marginal cost
c. marginal physical product
d. marginal output

28. For a perfect competitor:
a. price and marginal revenue are the same
b. the marginal revenue curve runs parallel to and slightly below the demand curve
c. Both of the above
d. Neither of the above

29. If price is above ATC for a perfect competitor:
a. the firm will earn economic profit
b. the firm will maximize profits by producing where marginal revenue equals marginal cost
c. Both of the above
d. Neither of the above

30. If price is below ATC, but still above AVC for a perfect competitor:
a. the firm will earn economic profit
b. the firm will minimize its loss by producing where marginal revenue equals marginal cost
c. the firm should shutdown to minimize its loss
d. None of the above

31. If price is below AVC for a perfect competitor:
a. the firm will earn economic profit
b. the firm will minimize its loss by producing where marginal revenue equals marginal cost
c. the firm should shutdown to minimize its loss
d. None of the above

32. Perfect competition:
a. is the ideal market structure
b. results in maximum economic profits in the long run
c. Both of the above
d. Neither of the above

33. A firm that is the lone seller of a product with no close substitutes is a(n):
a. perfect competitor
b. oligopoly
c. monopoly
d. monopolistic competitor

34. Factors that block the entry of new firms into a market are:
a. firm blockers
b. entry blockers
c. barriers to entry
d. beta blockers

35. Which of the following is not an example of a legal barrier to entry?
a. patent
b. economies of scale
c. license
d. trade restrictions

36. Economies of scale:
a. occur when a firm's average total cost decreases as the scale of its operation increases
b. make it difficult for a new firm to break into a market
c. Both of the above
d. Neither of the above

37. A natural monopoly:
a. is an industry in which economies of scale are so important only one firm can survive
b. is the result of legal barriers to entry
c. Both of the above
d. Neither of the above

38. For a monopoly:
a. the demand curve is downward sloping
b. price is less than marginal revenue
c. demand and marginal revenue are the same
d. All of the above

39. In comparison to perfect competition, monopoly results in:
a. less output, at a lower price
b. less output, at a higher price
c. more output, at a higher price
d. more output, at a lower price

40. When people use resources to manipulate public policy in order to redistribute income to themselves from others:
a. this is rent seeking
b. this is socially beneficial
c. Both of the above
d. Neither of the above

41. Compared to more competitive firms, monopoly producers tend to be:
a. more responsive to consumer demand
b. more diligent to minimize costs of production
c. Both of the above
d. Neither of the above

42. When a seller charges different prices to different buyers for the same good, this:
a. is price discrimination
b. allows the firm to increase is profits by gaining some of the consumer's surplus
c. Both of the above
d. Neither of the above

43. The process of distinguishing a firm's product from similar products is:
a. product differentiation
b. important to perfect competitors
c. Both of the above
d. Neither of the above

44. A monopolistic competitor will maximize profits by producing the quantity of output where:
a. marginal revenue is equal to marginal cost
b. marginal revenue is maximized
c. total revenue is maximized
d. price is maximized

45. In comparison to perfect competition, monopolistic competition results in:
a. less output, at a lower price
b. less output, at a higher price
c. more output, at a higher price
d. more output, at a lower price

46. Compared to the economically efficient quantity of output, a monopolistic competitor:
a. underproduces
b. overproduces
c. produces the economically efficient quantity
d. cheese

47. An industry dominated by a few mutually interdependent firms is:
a. monopoly
b. oligopoly
c. monopolistic competition
d. monarchical oligarchy

48. In oligopoly, each firm's actions affect the other firms. This is called:
a. independence
b. mutual interdependence
c. mutual independence
d. monarchical oligarchy

49. The kinked demand curve theory assumes:
a. that other firms will match price increases, but not price decreases
b. that other firms will match price decreases, but not price increases
c. that other firms will match both price increases and price decreases
d. that other firms will not match either price increases or price decreases

50. An organization through which members jointly make decisions about prices and production is:
a. a cartel
b. perfect competition
c. a monarchical oligarchy
d. None of the above