Econ exam 3

When a profit-maximizing firm's fixed costs are considered sunk in the short run, then the firm a. must set price below average total cost. b. can safely ignore fixed costs when deciding how much output to produce. c. can set price above marginal cost. d. will never show losses.

b. can safely ignore fixed costs when deciding how much output to produce.

Implicit costs a. are also known as variable costs. b. do not require an outlay of money by the firm. c. are not part of an economist's measurement of opportunity cost. d. do not enter into the economist's measurement of a firm's profit.

b. do not require an outlay of money by the firm.

When new firms have an incentive to enter a competitive market, their entry will a. shift the market supply curve to the left. b. drive down profits of existing firms in the market. c. increase demand for the product. d. increase the price of the product.

b. drive down profits of existing firms in the market.

Refer to Table 14-1. If the firm doubles its output from 3 to 6 units, total revenue will a. increase by less than $15. b. increase by exactly $15. c. increase by more than $15. d. Total revenue cannot be determined from the information provided.

b. increase by exactly $15

Firms that operate in perfectly competitive markets try to a. maximize revenues. b. maximize profits. c. equate marginal revenue with average total cost. d. All of the above are correct.

b. maximize profits.

When a local grocery store offers discount coupons in the Sunday paper it is most likely trying to a. encourage literacy. b. price discriminate. c. encourage arbitrage. d. reduce prices for all customers

b. price discriminate

If there is an increase in market demand in a perfectly competitive market, then in the short run prices will a. remain unchanged at the minimum of marginal cost. b. rise. c. remain unchanged at the minimum of average total cost. d. fall.

b. rise.

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing a. to produce the quantity at which average fixed cost is minimized. b. the quantity at which market price is equal to Mr. McDonald's marginal cost of production. c. the quantity at which market price exceeds Mr. McDonald's marginal cost of production by the greatest amount. d. to produce the quantity at which average variable cost is minimized.

b. the quantity at which market price is equal to Mr. McDonald's marginal cost of production.

When price is greater than marginal cost for a firm in a competitive market, a. the firm should decrease output to maximize profit. b. there are opportunities to increase profit by increasing production. c. marginal cost must be falling. d. the firm must be minimizing its losses.

b. there are opportunities to increase profit by increasing production.

A sunk cost is one that a. has the most impact on profit-making decisions. b. was paid in the past and will not change regardless of the present decision. c. should determine the rational course of action in the future. d. changes as the level of output changes in the short run.

b. was paid in the past and will not change regardless of the present decision.

Refer to Table 13-9. The average total cost of producing 240 units is a. $0.19. b. $0.13. c. $0.80. d. $0.32.

d. $0.32.

Refer to Table 13-9. The average total cost of producing 240 units is a. $0.19. b. $0.13. c. $0.80. d. $0.32.

d. $0.32.

Scenario 13-19 Doreen's Dairy produces and sells Swiss cheese. Last year, it produced 7,000 pounds and sold each pound for $6. In producing the 7,000 pounds, the dairy incurred variable costs of $28,000 and a total cost of $40,000. Refer to Scenario 13-19. In producing the 7,000 pounds of cheese, the firm's average fixed cost was a. $2,00. b. $6.00. c. $0.29. d. $1.71.

d. $1.71.

Refer to Table 14-15. What is the lowest price at which this firm would operate in the short run? a. $6. b. $4. c. $5. d. $3.

d. $3.

Compared to the monopoly outcome with a single price, imperfect price discrimination (i)sometimes raises total surplus. (ii)sometimes lowers total surplus. (iii)always leads to a lower quantity of output. a. (ii) and (iii) only b. (i), (ii), and (iii) c. (i) and (iii) only d. (i) and (ii) only

d. (i) and (ii) only

Which of the following statements is (are) true of a monopoly? (i)A monopoly has the ability to set the price of its product at whatever level it desires. (ii)A monopoly's total revenue will always increase when it increases the price of its product. (iii)The more a monopoly increases output, the higher the profits. a. (ii) and (iii) only b. (i) and (ii) only c. (ii) only d. (i) only

d. (i) only

Refer to Table 13-10. What is the marginal product of the fourth worker? a. 20 units b. 80 units c. 60 units d. 40 units

d. 40 units

Bubba is a shrimp fisherman who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business? a. 1,000 pounds b. 3,000 pounds c. 3,500 pounds d. 7,000 pounds

d. 7,000 pounds

A firm that is a natural monopoly a. is not likely to be concerned about new entrants eroding its monopoly power. b. is taking advantage of economies of scale. c. would experience a higher average total cost if more firms entered the market. d. All of the above are correct.

d. All of the above are correct.

Suppose Jan started up a small lemonade stand business last month. Variable costs for Jan's lemonade stand now include the cost of a. lemons and sugar. b. paper cups. c. the wages paid to her hourly workers. d. All of the above are correct.

d. All of the above are correct.

Which of the following is an example of price discrimination? a. Nabisco provides cents-off coupons for its products. b. Amtrak offers a lower price for weekend travel compared to weekday rates on the same routes. c. Hotel rates for AAA members are lower than for nonmembers. d. All of the above are correct.

d. All of the above are correct.

Which of the following statements best expresses a firm's profit-maximizing decision rule? a. If marginal revenue is greater than marginal cost, the firm should increase its output. b. If marginal revenue is less than marginal cost, the firm should decrease its output. c. If marginal revenue equals marginal cost, the firm should continue producing its current level of output. d. All of the above are correct.

d. All of the above are correct.

Refer to Figure 13-5. Which curve is most likely to represent marginal cost? a. A b. B c. C d. D

d. D

Which of the following statements best reflects a price-taking firm? a. The firm has an incentive to charge less than the market price to earn higher revenue. b. The firm can sell only a limited amount of output at the market price before the market price will fall. c. Price-taking firms maximize profits by charging a price above marginal cost. d. If the firm were to charge more than the going price, it would sell none of its goods.

d. If the firm were to charge more than the going price, it would sell none of its goods.

Which of the following statements is not correct about competitive firms? a. In the short run, the number of firms in an industry may be fixed. b. In a long-run equilibrium, firms must be operating at their efficient scale. c. In the long run, the number of firms can adjust to changing market conditions. d. In the short run, firms must be operating at a level of output where price equals average variable cost.

d. In the short run, firms must be operating at a level of output where price equals average variable cost.

Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is a. $80 at Q = 270. b. $100 at Q = 322. c. $175 at Q = 515. d. None of the above are correct.

d. None of the above are correct

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist? a. The monopolist is not currently maximizing its profits; it should produce more units and charge a lower price to maximize profit. b. The monopolist is not currently maximizing its profits; it should produce fewer units and charger a higher price to maximize profit. c. The monopolist is currently maximizing profits, and its total profits are $200. d. The monopolist is currently maximizing profits, and its total profits are $250.

d. The monopolist is currently maximizing profits, and its total profits are $250.

Mrs. Smith operates a business in a competitive market. The current market price is $8.50. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should a. shut down in both the short run and long run. b. shut down her business in the short run but continue to operate in the long run. c. continue to operate in the short run but shut down in the long run. d. continue to operate in both the short run and long run.

d. continue to operate in both the short run and long run.

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters a. increasing marginal product. b. economies of scale. c. diseconomies of scale. d. diminishing marginal product.

d. diminishing marginal product.

Which of these assumptions is often realistic for a firm in the short run? a. The firm can vary both the size of its factory and the number of workers it employs. b. The firm can vary neither the size of its factory nor the number of workers it employs. c. The firm can vary the number of workers it employs but not the size of its factory. d. The firm can vary the size of its factory but not the number of workers it employs.

c. The firm can vary the number of workers it employs but not the size of its factory.

Which of the following statements is not correct? a. The competitive firm produces where P = MC. b. The monopolist produces where MR = MC. c. The monopolist produces where P = MC. d. The competitive firm produces where MR = MC.

c. The monopolist produces where P = MC.

Refer to Figure 15-5. At the profit-maximizing level of output, a. average total cost is equal to P6. b. marginal cost is equal to P3. c. average revenue is equal to P2. d. marginal revenue is equal to P3.

c. average revenue is equal to P2.

The fundamental source of monopoly power is a. many buyers and sellers. b. low fixed costs. c. barriers to entry. d. rising average total costs.

c. barriers to entry.

A monopolist's average revenue is always a. equal to marginal revenue. b. less than the price of its product. c. equal to the price of its product. d. greater than the price of its product.

c. equal to the price of its product.

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market? a. more than $2.50 b. The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm. c. exactly $2.50 d. less than $2.50

c. exactly $2.50

Scenario 13-20 Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker regardless of the current output level. a. constant. b. rising at all points. c. falling at all points. d. U-shaped.

c. falling at all points.

The marginal product of any input is the a. change in total output associated with a $1.00 increase in total cost. b. increase in total cost associated with a one-unit increase in production. c. increase in total output obtained from one additional unit of that input. d. increase in total cost resulting from the hiring of an additional worker

c. increase in total output obtained from one additional unit of that input.

Scenario 13-8 Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each. Refer to Scenario 13-8. What are Wanda's explicit costs per glass? a. $0.10 b. $0.02 c. $0.08 d. $0.18

c. $0.08

Scenario 13-11 Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each. Refer to Scenario 13-11. An economist would calculate the total profit for one birdhouse to be a. $15. b. $12. c. $11. d. $7.

c. $11.

Ariana withdrew $400,000 out of her personal savings account and used it to start her new Internet cafe. The savings account pays 3 percent interest per year. During the first year of her business, Ariana sold 2,000 cups of coffee for $2.50 per cup and 4,000 hours of Internet time, also at $2.50 per hour. During the first year, the business made monetary outlays of $9,000. You may assume that there is no opportunity cost to Ariana's time. Refer to Scenario 13-12. Ariana's accounting profit for the year was a. $-6,000. b. $-394,000. c. $6,000. d. $12,000.

c. $6,000.

Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 181 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is a. 10 units of output. b. 11 units of output. c. 16 units of output. d. 181 units of output.

c. 16 units of output.

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the average total cost of production when the firm hires 7 workers? a. 70 cents b. $9.64 c. 81 cents d. $10.06

c. 81 cents

Which of the following statements about costs is correct? a. When marginal cost is less than average total cost, average total cost is rising. b. The total cost curve is U-shaped. c. As the quantity of output increases, marginal cost eventually rises. d. All of the above are correct.

c. As the quantity of output increases, marginal cost eventually rises.

Refer to Figure 15-4. The demand curve for a monopoly firm is depicted by curve a. D. b. A. c. B. d. C.

c. B.

Which of the following is an example of price discrimination? a. An online bookstore charges more for overnight shipping than standard shipping when customers buy books from it. b. Airline tickets are more expensive for first-class seats than for coach. c. Hotel rates for AAA members are lower than for nonmembers. d. All of the above are correct

c. Hotel rates for AAA members are lower than for nonmembers.

Exclusive ownership of a key resource a. is the most common cause of a monopoly. b. explains why a single firm distributes water to a community. c. is a potential but rare cause of a monopoly. d. explains the monopoly ownership of the US Postal Service.

c. is a potential but rare cause of a monopoly.

When marginal revenue equals marginal cost, the firm a. must be generating positive economic profits. b. should increase the level of production to maximize its profit. c. may be minimizing its losses rather than maximizing its profit. d. must be generating positive accounting profits.

c. may be minimizing its losses rather than maximizing its profit.

Refer to Figure 13-8. Quantity B represents the output level where the firm a. produces at the efficient scale. b. maximizes profits. c. minimizes average variable costs. d. minimizes marginal costs.

c. minimizes average variable costs.

Profit is defined as total revenue a. times total cost. b. plus total cost. c. minus total cost. d. divided by total cost.

c. minus total cost.

When a monopolist reduces the quantity of output it produces and sells, the a. price of its output remains constant. b. profits for the firm always decrease. c. price of its output increases. d. price of its output decreases.

c. price of its output increases.

An example of an opportunity cost that is also an implicit cost is. a. a lease payment. b. the cost of raw materials. c. the value of the business owner's time. d. All of the above are correct.

c. the value of the business owner's time.

Sonia opened a yoga studio where she teaches classes and sells yoga clothing. Variable costs for Sonia's yoga studio include the cost of the (i)tank tops. (ii)wages paid to the other yoga instructors. (iii)lease on the studio space. (iv)insurance that the landlord requires Sonia to carry for the studio a. (i) only b. (i) and (ii) only c. (iii) and (iv) only d. (i), (ii), (iii), and (iv)

c. (iii) and (iv) only

Refer to Table 13-14. What is the average fixed cost of producing 8 units of output? a. $1.25 b. $3.13 c. $20.00 d. $24.37

a. $1.25

Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. Refer to Scenario 14-1. At Q = 999, the firm's total costs equal a. $10,985. b. $10,990. c. $10,995. d. $10,999.

a. $10,985.

Refer to Table 15-9. At the profit-maximizing price, how much profit will the monopoly earn? a. $14 b. $10 c. $8 d. $12

a. $14

Refer to Table 15-9. What is the marginal cost of the 4th unit? a. $31 b. $14 c. $4 d. $62

b. $14

Refer to Table 15-3. The maximum profit this monopolist can earn is a. $5. b. $16. c. $28. d. $15.

c. $28.

When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $10 it sells 60 units. The marginal revenue for the firm over this range is a. $22. b. $44. c. $33. d. $11.

a. $22.

Scenario 15-3 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. Refer to Scenario 15-3. At Q = 500, the firm's total revenue is a. $30,000. b. $15,000. c. $13,000. d. $17,000.

a. $30,000.

Refer to Table 13-13. One month, Teacher's Helper produced 18 instructional modules. What was the average fixed cost for that month? a. $60 b. $108 c. $811 d. It can't be determined from the information given.

a. $60

Refer to Table 14-12. What is the marginal revenue from selling the 5th unit? a. $80 b. $12 c. $480 d. $68

a. $80

Economists normally assume that the goal of a firm is to (i) sell as much of its product as possible. (ii)set the price of the product as high as possible. (iii)maximize profit. a. (iii) only b. (i), (ii), and (iii) c. (ii) and (iii) only d. (i) and (ii) only

a. (iii) only

Refer to Table 14-8. The firm should not produce an output level beyond a. 5 units. b. 7 units. c. 4 units. d. 6 units.

a. 5 units.

Which of the following is not an example of a barrier to entry? a. A college student starts a part-time tutoring business. b. A novelist obtains a copyright for her new book. c. A taxi cab driver in New York City obtains a license to legally provide transportation in New York City. d. Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world.

a. A college student starts a part-time tutoring business.

Refer to Figure 15-4. Profit will be maximized by charging a price equal to a. P5. b. P1. c. P4. d. P3.

a. P5.

Which of the following would be most likely to have monopoly power? a. a municipal water company b. a local restaurant c. an online bookstore d. a grocery store

a. a municipal water company

One of the defining characteristics of a perfectly competitive market is a. a similar product. b. a large number of buyers and a small number of sellers. c. a small number of sellers. d. significant advertising by firms to promote their products.

a. a similar product.

Which of the following firms is the closest to being a perfectly competitive firm? a. a wheat farmer in Kansas b. Apple, Inc. c. DeBeers diamond wholesalers d. the New York Yankees

a. a wheat farmer in Kansas

Suppose that for a particular business there are no implicit costs. Then a. accounting profit will be the same as economic profit. b. accounting profit will be less than economic profit. c. accounting profit will be greater than economic profit. d. the relationship between accounting profit and economic profit cannot be determined without more information.

a. accounting profit will be the same as economic profit.

In the long-run equilibrium of a competitive market, the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of a. average total cost of the marginal firm. b. average fixed cost for the marginal firm. c. marginal cost of the marginal firm. d. average variable cost of the marginal firm.

a. average total cost of the marginal firm.

In a competitive market, the actions of any single buyer or seller will a. have a negligible impact on the market price. b. affect marginal revenue and average revenue but not price. c. have little effect on market equilibrium quantity but will affect market equilibrium price. d. adversely affect the profitability of more than one firm in the market.

a. have a negligible impact on the market price.

As a general rule, when accountants calculate profit they account for explicit costs but usually ignore a. implicit costs. b. fixed costs. c. certain outlays of money by the firm. d. operating costs.

a. implicit costs.

Refer to Figure 13-5. Curve D represents which type of cost curve? a. marginal cost b. average fixed cost c. average total cost d. average variable cost

a. marginal cost

Refer to Table 14-11. If the firm is producing 3 units of output, it should produce a. more units of output because its marginal revenue is greater than its marginal cost. b. more units of output because its marginal revenue is less than its marginal cost. c. fewer units of output because its marginal revenue is less than its marginal cost. d. fewer units of output because its marginal revenue is greater than its marginal cost.

a. more units of output because its marginal revenue is greater than its marginal cost.

Financial aid to college students, quantity discounts, and senior citizen discounts are all examples of a. price discrimination. b. consumer surplus. c. nonprofit pricing strategies. d. deadweight loss.

a. price discrimination.

Shrimp Galore, a shrimp harvesting business in the Pacific Northwest, has a 30-year loan on its shrimp harvesting boat. The annual loan payment is $25,000 and the boat has a market (salvage) value that exceeds its outstanding loan balance. Prior to the 2010 shrimp harvesting season, Shrimp Galore's accountant predicted that at expected market prices for shrimp, Shrimp Galore would have a net loss of $75,000 dollars after paying all 2010 expenses (including the annual loan payment). In this case, Shrimp Galore should a. produce nothing and experience a loss of $25,000. b. produce nothing and experience a loss of $75,000. c. continue to operate because expected profits will rise in the future. d. continue to operate even though it predicts a loss of $75,000.

a. produce nothing and experience a loss of $25,000.

When price exceeds average variable cost in the short run, a competitive firm's marginal cost curve is regarded as its supply curve because a. the marginal cost curve determines the quantity of output the firm is willing to supply at any price. b. the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized. c. the position of the marginal cost curve determines the price for which the firm should sell its product. d. among the various cost curves, the marginal cost curve is the only one that slopes upward.

a. the marginal cost curve determines the quantity of output the firm is willing to supply at any price.

When existing firms in a competitive market are profitable, an incentive exists for a. new firms to enter the market, even without government subsidies. b. existing firms to raise prices. c. existing firms to increase production. d. new firms to seek government subsidies that would allow them to enter the market.

a.new firms to enter the market, even without government subsidies.

Which of the following is not a difference between monopolies and perfectly competitive markets? a. Monopolies face downward sloping demand curves while perfectly competitive firms face horizontal demand curves. b. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not. c. Monopolies can earn profits in the long run while perfectly competitive firms break even. d. Monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost.

b. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.

Scenario 13-6 Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce. Refer to Scenario 13-6. Ziva's economic profit from farming equals a. $-130. b. $-80. c. $130. d. $170.

b. $-80.

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that marginal cost of the third worker hired is $40, and the average total cost when three workers are hired is $50. What is the total cost of production when three workers are hired? a. $50 b. $150 c. $90 d. $120

b. $150

Scenario 13-1 Korie wants to start her own business making custom furniture. She can purchase a factory that costs $400,000. Korie currently has $500,000 in the bank earning 3 percent interest per year. Refer to Scenario 13-1. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory? a. $6,000 b. $18,000 c. $15,000 d. $3,000

b. $18,000

Refer to Table 15-3. The maximum profit this monopolist can earn is a. $5. b. $28. c. $15. d. $1

b. $28.

sintah weaves traditional Navaho rugs. She weaves and sells 50 rugs. Her average cost of production per rug is $50. She sells each rug for a price of $65. Tsintah's total revenues are Answers: a. $750. b. $3,250. c. $5,750. d. $2,500.

b. $3,250.

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that when four units of output are produced, the total cost is $175, and the average variable cost is $33.75. What would the average fixed cost be if ten units were produced? a. $40 b. $4 c. $10 d. $135

b. $4

Refer to Table 15-18. The monopolist's total revenue from selling 4 units of output is a. $32. b. $48. c. $4. d. $16.

b. $48.

Refer to Figure 14-7. Suppose AVC = $113 when the firm produces 515 units of output. Then the firm's fixed cost amounts to a. $5,980, and its profit amounts to $25,750. b. $6,180, and its profit amounts to $25,750. c. $5,750, and its profit amounts to $20,375 d. $5,500, and its profit amounts to $20,375

b. $6,180, and its profit amounts to $25,750.

Refer to Table 14-11. The marginal revenue from producing the 5th unit equals (i) $6. (ii) the price. (iii) the marginal cost. a. (iii) only b. (i), (ii), and (iii) c. (i) only d. (i) and (ii) only

b. (i), (ii), and (iii)

If a monopolist can sell 7 units when the price is $4 and 8 units when the price is $3, then the marginal revenue of selling the eighth unit is equal to a. $24. b. -$4. c. $4. d. $3

b. -$4.

Refer to Table 13-2. At which number of workers does diminishing marginal product begin? a. 1 b. 2 c. 3 d. 4

b. 2

Refer to Table 13-5. The marginal product of the third worker is a. 5,000 units. b. 8,000 units. c. 7,000 units. d. 9,000 units.

b. 8,000 units.

Refer to Figure 15-4. The average total cost curve for a monopoly firm is depicted by curve a. D. b. C. c. A. d. B.

b. C.

Refer to Table 13-7. What is the value of P? a. $410 b. $140 c. $360 d. $50

b. 140

Authors are allowed to be monopolists in the sale of their books in order to a. satisfy literary advocacy groups that exercise their lobbying power. b. correct for the negative externalities that the Internet and television impose. c. promote a society in which people think for themselves and learn from whichever books they please. d. encourage authors to write more and better books

d. encourage authors to write more and better books

Competitive markets are characterized by a. the interdependence of firms. b. a small number of buyers and sellers. c. unique products. d. free entry and exit by firms.

d. free entry and exit by firms.

For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the a. marginal revenue curve. b. average total cost curve. c. average variable cost curve. d. marginal cost curve.

d. marginal cost curve.

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as a. average revenue is equal to marginal cost. b. marginal cost is greater than average total cost. c. average revenue is greater than average total cost. d. price is above or below marginal cost.

d. price is above or below marginal cost.

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will a. not rise in the short run because firms will enter to maintain the price. b. rise in the short run. Some firms will enter the industry. Price will then rise to reach the new long-run equilibrium. c. fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. d. rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium.

d. rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium.

Refer to Table 13-6. The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker? a. the third worker b. the fourth worker c. the fifth worker d. the sixth worker

d. the sixth worker

economic profit Answers: a. is always at least as large as accounting profit. b. is most often equal to accounting profit. c. is a less complete measure of profitability than accounting profit. d. will never exceed accounting profit.

d. will never exceed accounting profit.