Question 1 

The key to the importance of the marginal cost curve of a company is that it is a company's:
supply curve of product to the marketplace. 
demand curve for its product to the marketplace. 
average cost of product in both the short and long run. 
fixed cost. 

Question 2 

In a purely competitive market, a company selling in the market views its demand curve as:
completely price insensitive. 
horizontal (flat). 
vertical. 
convex. 

Question 3 

The market for micro-computers (PCs) is fairly competitive, the products are somewhat homogeneous, and over time firms have entered looking to make profits on new configurations of the micro-computer. Over time, profits:
have risen dramatically. 
have stayed about the same for most firms. 
have become razor thin for many producers. 
are not important since this industry is in the nonprofit sector. 

Question 4 

For decision making for the firm with market power, fixed costs are:
a key element in the markup. 
irrelevant. 
the same as marginal costs. 
opportunity costs of production. 

Question 5 

Using cost plus pricing, what is the price if ATC = $14.50 and the target rate of return is 4 percent?
$15.10 
$49.34 
$14.5 
$22.10 

Question 6 

The shut down condition - the point at which the company finds it is no longer viable to produce and sell a product - for a competitive firm is where price is:
less than marginal revenue. 
less than short run average total cost. 
greater than marginal revenue. 
less than average variable cost. 

Question 7 

Economists tend to focus on one structural aspect of market organization that is more important than the others, which is:
the number of buyers and sellers. 
product homogeneity or differentiation. 
the quality of market information. 
entry and exit conditions. 

Question 8 

In a perfectly competitive market, the price that the firm faces from supply and demand is also equal to:
average variable cost. 
marginal revenue and average revenue. 
average revenue but never marginal revenue. 
long run average cost in the short run. 

Question 9 
A firm with market power in pricing faces a:
flat demand curve. 
vertical demand curve in all cases. 
price inelastic demand curve. 
downward sloping demand curve. 

Question 10 

Using the linear approximation system to estimate the profit maximizing price requires that the managers know the costs of production and:
the production function. 
one price and quantity of demand. 
two prices and quantities of demand. 
decision-making process of the marketplace. 

Question 11 

The simple case of pricing with market power assumes (a) all consumers are charged the same price, (b) the firm sells one product, (c) demand exists in one time period, and (d) competitors do not pursue pricing games. Economists insist on reviewing what happens as each assumption is relaxed one at a time. However, it is clear that in real world all four are relaxed simultaneously. Why does economic analysis insist on such an unrealistic analysis?

Question 12 

The market environment heavily influences corporate decision-making ability. Discuss the differences in executive decisions concerning pricing, product design, and advertising between a company that exists in a perfectly competitive market and a company that lives a monopolistically competitive market.