Econ Exam 2
I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom, sausage and spinach pizzas and sold each one for $8. To produce these 8,000 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo's average fixed cost to produce 8,000 specialty pizzas was
$2.00
Pita Pan produces delicious pita sandwiches. Last month, it produced 1000 sandwiches and sold each one for $5. To produce these 1000 sandwiches, the company incurred variable costs of $2000 and a fixed cost of $1000. Pita Pan's total revenue was ______
$5000
Refer to Table 11.1. If Russia cooperates, what is Saudi Arabia's preferred strategy and revenue?
Cheat, $1000
Refer to Table 11.1. If Russia cheats, what is Saudi Arabia's preferred strategy and revenue?
Cheat, $600
A cartel is a group of firms that try to act ____________.
as if they were a monopoly
If the price that a firm charges is higher than its _________ cost of production for that quantity produced, then the firm will earn profits.
average
In order to determine ______, the firm's total costs must be divided by the quantity of its output
average cost
In a monopolistic competitive industry, firms can try to differentiate their products by __________________.
enhancing product's physical aspects and all of the above
Once I'MaPharmaCo. has received confirmation of the registration for its latest drug patent application, it will have created a monopoly for that product by restricting ________________.
entry into the market
If the North American newsprint paper market has barriers to entry, then ____________.
entry will be blocked even if firms are earning high profits
Refer to Figure 8.3. The marginal cost curve slopes upwards at larger quantities because of ___________.
diminishing returns
Refer to Figure 9.1. The total revenue for a monopoly firm begins to decline at larger quantities because _________________.
high quantity pushes down the market price
Lebron James giving up his salary playing professional basketball to open up a taco stand is an example of an_______
implicit cost
The term "constant returns to scale" describes a situation where
expanding all inputs does not change the average cost of production
Which of the following is most likely to be a monopoly?
local electricity distributor
In the _________, the perfectly competitive firm will react to profits by ________________.
long run; increasing its production
When a natural monopoly exists in a given industry, the per-unit costs of production will be _________________.
lowest when a single firm generates the entire output of the industry
The economies-of-sclae curve is a long-run average cost curve, because
it allows all factors of production to change
The single most common form of competition in the U.S. is __________________.
monopolistic competition among firms with differentiated products
The largest cattle rancher in a given region will be unable to have a __________ when sufficient numbers of smaller cattle ranchers provide sources of competition.
monopoly
In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely _____________________.
raise prices, cut production, and realize positive economic profits
Refer to Figure 9.2. Economic profit for this monopoly firm is equal to _________________.
rectangle CBEF
In monopolistic competition, the end result of entry and exist is that firms end up with a price that lies ____________________.
on the downward-sloping portion of the average cost curve
Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?
output will be too small and its price too high
Government __________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for __________.
patent; a limited time
Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it?
physical space for the gallery
If a perfectly competitive firm is a price taker, then
pressure from competing firms will force acceptance of the prevailing market price
If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers?
price of competing products
Refer to Figure 8.1. What will profit be for quantities greater than 100?
negative
Refer to Figure 8.3. Based on the information illustrated in this graph, what is the economic profit for this perfectly competitive firm?
negative
The term __________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.
price taker
In the _________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _______________.
short run; losses are smallest
A monopolistically competitive firm may earn abnormally high profits in the ______________________.
short term, but the process of entry will drive those profits to zero in the long run
Which of the following should typically be ignored because spending has already been made and cannot be changed?
sunk costs
For a perfectly competitive firm, the marginal cost curve is identical to the firm's _________.
supply curve
The perceived demand for a monopolistic competitor _____________.
takes competitors into account
Accounting profit is ______
revenue minus explicit costs
Cartels can reach the outcome that maximizes total profits when ______________.
the government regulates the cartel
Refer to Figure 8.1. Which of the following explains the slope of the total revenue curve illustrated in this graph?
the slope of the total revenue curve is explained by both a and b above
Refer to Figure 9.1. The profit-maximizing level of output for this monopoly firm is where _________________.
total revenue is most above total cost
In the business world, a ___________ is recognized as a legally acceptable way for any business to keep knowledge of its particular methods of production from being known by competing firms.
trade secret
If a paper mill shuts down its operations for three months so that it produces nothing, its ______ will be reduced to zero?
variable costs
Given the data provided in Table 8.1, the profit for production at quantity (Q) level 7 equals ______.
-$10.00
If a monopoly or a monopolistic competitor raises their prices, then _______________.
decline in quantity demanded will be larger for the monopolistic competitor
A ____________ is an oligopoly with only two firms.
duopoly
The demand curve perceived by a perfectly competitive firm _______________.
is horizontal
Refer to Figure 8.2. Based on the information illustrated in this graph, which of the following is an accurate statement?
profits will be reduced by production in the zone where MC exceeds MR
A firm that holds a monopoly position in the market place is ______________.
a price maker
Which one of the following is the most accurate description of a monopolist?
a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry
Intellectual property law is a body of law that includes _________________.
copyright legislation, as well as all of the above
_____ occur when the marginal gain in output diminishes as each additional unit of input is added
Diminishing marginal returns
The table below shows a monopolist's demand curve and the cost information for the production of its good. What will their profits equal?
$1,200
Given the data provided in Table 8.1, the total revenue (TR) for production at quantity (Q) level 4 equals ______.
$20.00
The following table shows a monopolist's demand curve and cost information for the production of its good. What price will it charge?
$25
Given the data provided in Table 8.1, the marginal cost (MC) for production at quantity (Q) level 4 equals ______.
$4.00
Given the data provided in Table 8.1, the marginal revenue (MR) for production at quantity (Q) level 4 equals ______.
$5.00
Given the data provided in Table 8.1, what will be the fixed costs for production at quantity (Q) level 7?
$9.00
The table below shows a monopolist's demand curve and cost information for the production of its good. What quantity will it produce?
1,000
Neil's Bakery is famous for its giant cinnamon buns. The bakery has fixed costs of $100. Neil must pay each worker a wage of $10.00 per hour and each works an 8 hour shift. He earns $2 for each cinnamon bun that is sold. The following table shows how many cinnamon buns he can sell, depending on the number of workers he hires. Refer to the table below. To maximize his profits in this competitive market, how many workers should he hire?
3 workers
In economics, a firm that faces no competitors referred to as _____?
A monopoly
Refer to Figure 9.2. The profit-maximizing price for this monopoly firm is equal to _________________.
B dollars per unit
Refer to Figure 9.2. The profit-maximizing level of output for this monopoly firm is where quantity equals _________________.
H
___________ refers to the additional revenue gained from selling one more unit.
Marginal revenue
_______ arises where many firms are competing in a market to sell similar but differentiated products
Monopolistic competition
Brewed Awakening is a coffee shop selling extra-caffeinated coffee. Last month, it produced 10,000 cups of coffee and sold each one for $6. To produce these 10,000 cups of coffee, the company incurred variable costs of $40,000 and a fixed cost of $10,000. The owner of Brewed Awakening also is an expert at knitting blankets and could have made $20,000 last month selling blankets. Brewed Awakening's economic profits are _________.
Negative $10,000
Refer to Table 11.1. If each country follows its self-interest, what will be the outcome?
Saudi Arabia cheats, Russia cheats
Refer to Table 11.1. What combination of strategies would yield the highest revenue for the group?
Saudi Arabia cooperates, Russia cooperates
______ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price
Total revenue
_____ include all of the costs of production that increase with the quantity produced
Variable costs
Which of the following represents a difference in the process by which a monopolistic competitor and a monopolist make their respective decisions about quantity and price?
a monopolist need not fear entry and also selection b above
If monopolists are able to produce fewer goods and sell them at a higher price than they could under perfect competition, the result will be ________________.
abnormally high sustained profits
An ______________________ is calculated by subtracting the firm's costs from its total revenues, ______________________.
accounting profit; excluding opportunity cost
Through the process of exit, monopolistically competitive firms remaining in the market _____________.
are no longer earning losses
Oligopoly firms acting individually may seek to gain profits __________________.
by expanding levels of output and cutting prices
Temperatures have persisted below freezing levels in Florida throughout the months of December and January. As a result, demand for electricity sharply increased and the price of electricity rose sharply. The price of coal also rose. In these circumstances, any resulting shifts in the supply curves for coal miners and electricity producers ________________________.
can also be interpreted as shifts of their respective marginal cost curves
the form of legal protection intended to prevent reproduction of original works is referred to as _______ law
copyright
It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00, ___________________.
could likely result in a notable loss of sales to competitors
If a firm is experiencing ______, then as the quantity of output rises, the average cost of production rises
decreasing returns to scale
The demand curve as perceived by a monopolistic competitor is _____________.
downward-sloping
An agreement between cartel members to cooperate usually breaks down because ___________.
each firm wants a larger share of the market to capture more profit for itself
The term _______ describes a situation where the quantity of output rises, but the average cost of production falls
economies of scale
When ______ exist, doubling of all inputs will result in more than doubling output, which means ______
economies of scale; a smaller factory can produce at a lower average cost than a larger company
The cost of purchasing an oven for a pizza shop is an example of a ______
fixed cost
A firm's ____ consist of expenditures that must be made before production starts that typically, over the short run, _____ regardless of the level of production
fixed costs; do not change
The branch of mathematics that analyzes situations in which players must make decisions and then receive payoffs most often used by economists is _______________.
game theory
Economic profit can be derived from calculating total revenues minus all of the firm's costs, ______________.
including its opportunity costs
Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should ________________________________.
keep the business open in the short-run, but plan to go out of business in the long-run
The term ______ is used to describe the additional cost of producing one more unit
marginal cost
Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call ________________.
monopolistic competition
The use of sharp, temporary price cuts as a form of ______________ would enable traditional US automakers to discourage new competition from smaller electric car manufacturers.
predatory pricing
Brewed Awakening is a coffee shop selling extra-caffeinated coffee. Last month, it produced 10,000 cups of coffee and sold each one for $6. To produce these 10,000 cups of coffee, the company incurred variable costs of $40,000 and a fixed cost of $10,000. The owner of Brewed Awakening also is an expert at knitting blankets and could have made $20,000 last month selling blankets. Brewed Awakening's accounting profits are ______
positive $10,000
A monopolist is able to maximize its profits by ______________.
producing output where MR = MC and charging a price along the demand curve
Monopolistic competitors can make a ___________ in the short-run, but in the long run, ____________ will drive these firms toward ______________.
profit or loss; entry and exit; a zero-profit outcome
The typical slope of the demand curve as perceived by a monopolistic competitor will _________________.
reflect the firm's ability raise its price without losing all of its customers
Refer to Figure 8.2. In this instance, the marginal revenue curve
reflects each of the above
In order to determine the average variable cost, the firm's variable costs are divided by ______
the quantity of output
In cartels __________________.
the total profits for all members is highest when they cooperate
If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms,
they will be unable to earn higher-than-normal profits in the long run
The marginal cost curve is generally ______, because diminishing marginal returns implies that additional units are ______
upward-sloping; more costly to produce
If a monopoly or a monopolistic competitor raises their prices, the quantity demanded _______________.
will decline
