Question 1. Economists' models of the behavior of business firms assume that firms try to maximize __________________.

total revenue

marginal revenue

profit

market share

Question 2. In a(n) ___________________ market structure, a few firms produce either a standardized or differentiated product, and entry is possible but not easy.

perfect competition

monopolistic competition

oligopoly

monopoly

Question 3. If the revenue a firm receives is more than the firm's direct costs, but is less than the firm's total costs including all opportunity costs, the firm is experiencing

positive economic profit

zero economic profit

negative economic profit

negative accounting profit

Question 4. The difference between accounting costs and economic costs is

accountants include the opportunity costs of the owner's capital used in the business and economists don't

economists include the opportunity costs of the owner's capital used in the business and accountants don't

accountants include the implicit costs and economists don't

economists include debt and accountants don't

Question 5. Economic efficiency exists when

Allocative efficiency exists.

Productive efficiency exists.

Neither allocative nor productive efficiency exist

Both allocative and productive efficiency exist.

Question 6. Which of the following is NOT one of the characteristics of perfect competition?

Economic profits.

Many sellers.

Ease of entry.

Market knowledge.

Question 7. In order to continue producing in the short run, the firm must earn sufficient revenue to pay their

Total costs.

Variable costs.

Fixed costs

Economic costs.

Question 8. A firm's long-run supply curve is its _____ curve above the minimum point of the _____ curve.

AVC; ATC

MC; ATC

MC; AVC

TC; TR

Question 9. Setting a higher price on goods sold domestically than on goods sold in foreign markets is called:

Price discrimination.

Dumping.

Aggressive deadweighting

X-inefficiency.

Question 10. Monopolies are created by

Economies of scale.

Actions by firms to bar competitors.

Government

All of the above.

Question 11. For a monopolist, profit is maximized by

Producing quantity where MR=MC.

Charging the highest possible price.

Producing very little quantity.

All of the above.

Question 12. For price discrimination to occur the firm must

Have some market power.

Be able to separate customers according to price elasticities.

Be able to prevent resale.

All of the above.

Question 13. The Sarbanes-Oxley Act requires _______ and ______ be provided by different firms.

Pricing; social regulation

Economic regulation; social regulation.

Cost-benefit analysis; WTO review.

Auditing; consulting.

Question 14. The major problem in using the Herfindahl index is

Gathering data.

Gaining acceptance from industry leaders.

Defining the market.

Spelling the name correctly.

Question 15. Which of the following entities does NOT initiate allegations of antitrust violations?
FTC

Justice Department

Private plaintiffs

President of the United States.

Question 16. Often, when large firms announce a merger agreement it is stated, "subject to government approval." This infers subject to compliance with government _________.
Social policy

Antitrust policy.

WTO policy

Sarbanes-Oxley policy.

Question 17. Market failure occurs

when governments levy taxes on business firms

when markets produce an income distribution that is not equitable

when perfectly competitive markets do not achieve economic efficiency

whenever governments intervene in the decision-making processes of perfectly competitive markets

Question 18. Externalities occur when

someone outside a business makes decisions that affect the business

an activity creates costs or benefits that are borne by parties not directly involved in the activity

taxes affect the amount of a good produced

private benefits equal social benefits

Question 19. When a firm is forced to internalize a negative externality

Price rises and quantity demanded declines

Price declines and quantity demanded increases.

Both price and quantity demanded rise

Both price and quantity demanded decline.

Question 20. A pollution tax would cause

Price to rise and equilibrium quantity to rise.

Price to decline and equilibrium quantity to decline.

Price to rise and equilibrium quantity to decline.

Price to decline and equilibrium quantity to rise.