Econ 301 Exam 2

The _______ elastic a firm's demand curve, the greater its ________. a. less; monopoly power b. more; monopoly power c. more; costs d. less; output

a. less; monopoly power

Which of the following inputs are variable in the long-run? a. Labor b. Capital and equipment c. Plant size d. All of these

d. All of these

Which of the following always declines as output increases? a. Average cost b. Marginal cost c. Fixed cost d. Average fixed cost E. Average variable cost

d. Average fixed cost

Every firm maximizes profit where: a. Average revenue equals average cost b. Average revenue equal average variable cost c. Total costs are minimized d. Marginal revenue equals marginal cost e. Marginal revenue exceeds marginal cost by the greatest amount

d. Marginal revenue equals marginal cost

The demand curve facing a perfectly competitive firm is: a. The same as the market demand curve b. Downward-sloping and less flat than the market demand curve c. Downward-sloping and more flat than the market demand curve d. Perfectly horizontal e. Perfectly vertical

d. Perfectly horizontal

Which always increase(s) as output increases? a. Marginal cost only b. Fixed cost only c. Total cost only d. Variable cost only e. Total cost and variable cost

e. Total cost and variable cost

As the manager of a firm you calculate that the marginal revenue is $152 and the marginal cost is $200. You should: a. expand output until marginal revenue equals zero b. expand output c. reduce output beyond the level where marginal revenue equals zero d. do nothing without information about your fixed costs e. reduce output until marginal revenue equals marginal cost

e. reduce output until marginal revenue equals marginal cost

The total cost of producing textbooks is given by: TC=25+10Q. What is the variable cost of producing textbooks? a. 10Q b. 25+10Q c. 25 d. 10 e. Q

a. 10Q

The total cost of producing computer softwear diskettes (Q) is given as: TC=200+5Q. What is the fixed cost, variable cost and marginal cost, in that order? a. 200, 5Q, 5 b. 5Q, 200, 5 c. 200+5Q, 5, 5Q d. 5, 5Q, 200 e. 200, 5, 5Q

a. 200, 5Q, 5

When the government intervenes in a competitive market by imposing an effective (or binding) price ceiling, we would expect the quantity supplied to ______ and the quantity demanded to _______. a. Fall; rise b. Fall; fall c. Rise; rise d. Rise; fall e. We need more information to answer this question

a. Fall; rise

You are the producer of stereo components. There are two markets, foreign and domestic. The two groups of consumers cannot trade with one another. You will charge the higher price in the market with the: a. Less elastic (or more inelastic) own price elasticity of demand b. More elastic own price elasticity of demand c. Larger teenage population d. Greater consumer incomes e. All of the above

a. Less elastic (or more inelastic) own price elasticity of demand

The amount of output that a firm decides to sell has no effect on the market price in a perfectly competitive industry because: a. The firm's output is a small fraction of the entire industry's output b. The market price is determined (through regulation) by the government c. The firm supplies a different good than its rivals d. The short-run market price is determined soley by the firm's technology e. The demand curve for the industry's output is downward sloping

a. The firm's output is a small fraction of the entire industry's output

Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a _____ price and sell a ________ quantity. a. higher; smaller b lower; larger c. higher; larger d. lower; smaller e. none of these

a. higher; smaller

Assume that a firm's production process is subject to increasing returns to scale over a broad range of outputs. Long run average costs over this output will tend to: a. Increase b. Decline c. Remain constant d. Fall to a minimum and then will rise e. (we need more information to answer this question)

b. Decline

Which factors determine the firm's elasticity of demand? a. Number of firms and the nature of the interaction among firms b. Elasticity of market demand, number of firms, and the nature of interaction among firms c. Elasticity of market demand and number of firms d. none of the above

b. Elasticity of market demand, number of firms, and the nature of interaction among firms

The law of diminishing returns refers to diminishing: a. Total returns b. Marginal returns c. Average returns d. All of these

b. Marginal returns

In an unregulated, competitive market, consumer surplus exists because some: a. sellers are willing to take a lower price than the equilibrium price b. consumers are willing to pay more than the equilibrium price c. sellers will only sell at prices above equilibrium price (or actual price) d. consumers are willing to make purchases only if the price is below the equilibrium price e. none of the above

b. consumers are willing to pay more than the equilibrium price

Under perfect (or first-degree) price discrimination, consumer surplus: a. is less than zero b. equals zero c. is maximized e. cannot be determined

b. equals zero

In the Stacklberg model, there is an advantage: a. to waiting until your competitor has committed herself to a particular output level before deciding on your output level b. to being the first competitor to commit to an output level c. to the firm with a dominate strategy d. to producing an output level which is identical to a monopolist's output level e. to selecting your output simultaneously with your rival

b. to being the first competitor to commit to an output level

An isoquant: a. Must be linear b. Cannot have a negitive slope c. Is a curve that shows all the combinations of inputs that yield the same total output d. Is a curve that shows the maximum total outputs as a function of the level of labor input e. is a curve that shows all possible output levels that can be produced at the same cost

c. Is a curve that shows all the combinations of inputs that yield the same total output

A market with no entry barriers and with many firms that sell differentiated products is: a. Purely competitive b. A monopoly c. Monopolistically competitive d. Oligopolistic e. Duopolistic

c. Monopolistically competitive

Third-degree price discrimination involves: a. charging each consumer the same price b. charging lower prices the greater the quality demanded c. charging different prices to different groups based on differences in elasticity of demand d. charging an entry fee and a usage fee, such paying to enter an amusement park and paying for each ride taken

c. charging different prices to different groups based on differences in elasticity of demand

The short run is: a. Less than a year b. Three years c. However long it takes to produce the planned output d. A time period in which at least one input is fixed e. A time period in which at least one set of outputs has been decided upon

d. A time period in which at least one input is fixed

Monopoly power results from the ability to: a. Set price equal to marginal cost b. Equate marginal cost to marginal revenue c. Set price above average variable cost d. Set price above marginal cost

d. Set price above marginal cost

A country's government would like to raise the price of one of its most important agricultural crops, coffee beans. Which of the following government programs will result in higher prices for coffee beans? a. an import tariff on coffee beans b. an import quota on coffee beans c. an acreage limitation program which provide coffee bean farmers financial incentives to leave some of their acreage idle d. all of the above e. none of the above

d. all of the above

An isoquant: a. cannot have a negative slope b. is a curve that shows all possible output levels that can be produces at the same cost c. is a curve that shows the maximum total output as a function of the level of the level of labor input d. is a curve that shows all the combinations of inputs the yield the same total output e. must be linear

d. is a curve that shows all the combinations of inputs the yield the same total output

In 1994, the Walt Disney Corporation ran a special promotion on tickets to Disneyland. Residents of southern California were offered admission at the special price of $22. Other visitors to Disneyland were charged about $30. This practice is an example of: a. collusion b. tying c. bundling d. price discrimination e. monopsony

d. price discrimination

What happens in a perfectly competitive industry when economic profit is greater than zero? a. Existing firms may get larger b. New firms may enter the industry c. Firms may move along their LRAC curves to new outputs d. There may be pressure on prices to fall e. All of the above may occur

e. All of the above may occur

What happens in a perfectly competitive industry when economic profit is greater than zero? a. There may be pressure on prices to fall b. New firms may enter the industry c. Existing firms may get larger d. Firms may move along their LRAC curves to new outputs e. All of the above may occur

e. All of the above may occur

Which of the following is NOT true for a monopoly? a. The profit maximizing output is the one at which marginal revenue and marginal cost are equal b. Average revenue equals price c. The total profit maximizing output is the one at which the difference between total revenue and total cost is largest d. The monopolist's demand curve is the same as the market demand curve e. At the profit maximizing output, price equals marginal cost

e. At the profit maximizing output, price equals marginal cost

A straight-line, downward-sloping isoquant: a. Is impossible b. Would indicate that the firm could switch from one output to another costlessly c. Would indicate that the firm could not switch from one output to another d. Would indicate that capital and labor cannot be switched from each other in production e. Would indicate that capital and labor are perfect substitutes in production

e. Would indicate that capital and labor are perfect substitutes in production

When the movie "Jurassic Park" debuted in Westwood, California, the price of tickets were $7.50. After several months that ticket price had fallen to $4. This is an example of a. tying b. peak-load pricing c. second-degree price discrimination d. first-degree price discrimination e. intertemporal price discrimination

e. intertemporal price discrimination