ECO 550 Final Exam Part 1


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Evidence from empirical studies of long-run cost-output relationships lends support to the: Theoretically, in a long-run cost function: Which of the following is not an assumption of the linear breakeven model: 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. Break-even analysis usually assumes all of the following except: 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: A “search good” is: All of the following are mechanisms which reduce the adverse selection problem except ____. In the long-run, firms in a monopolistically competitive industry will The main difference between perfect competition and monopolistic competition is: A firm in pure competition would shut down when: Long distance telephone service has become a competitive market. The average cost per call is $0.05 a minute, and it’s declining.  The likely reason for the declining price for long distance service is: In the purely competitive case, marginal revenue (MR) is equal to: Regulatory agencies engage in all of the following activities except _______. Declining cost industries When the cross elasticity of demand between one product and all other products is low, one is generally referring to a(n) ____ situation. 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. ____ 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. 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: Some industries that have rigid prices.  In those industries, we tend to Some market conditions make cartels MORE likely to succeed in collusion.  Which of the following will make collusion more successful? If a cartel seeks to maximize profits, the market share (or quota) for each firm should be set at a level such that the ____ of all firms is identical. In a kinked demand market, whenever one firm decides to lower its price, Which of the following is an example of an oligopolistic market structure? Barometric price leadership exists when