Economics Unit 3 Test Review Spina

If the total cost of 3 units is $40 and the total cost of 4 units is $50, the marginal cost of the fourth unit is:

D) $10.

Consider the following numbers at which a monopolist is producing, where MR = MC: Quantity = 20; Price = $9; Average Total Cost = $6. What is the total revenue and profit?

A) $180; $60

The Fish Shack is the only seafood restaurant in a remote village. It charges $15 for a bowl of fish soup and sells 10 bowls of it a day. In order to increase sales to 11 bowls a day, it must reduce the price to $14. What is the marginal revenue of the eleventh bowl?

A) $4

The value of "U" in the chart below is:

C) 12

Which of these is an example of a decreasing cost industry?

C) memory chips for tablets

In the graph, which shows a firm in a perfectly competitive market, calculate the total profit.

A) $80

Which statement is NOT a characteristic of a corporation?

A) Its investors face unlimited liability.

The graph represents a firm that produces the profit-maximizing quantity in the short run. What will happen in the long run?

A) Market supply will increase, pushing prices lower.

A firm in a perfectly competitive industry would exhibit which characteristic? I. An ability to produce as much output as the firm desires at the market price II. No economic profits in the short run but possible economic profits in the long run

A) Only I

Which of the inputs can be altered in the short run?

A) The number of hours that existing employees work.

Which statement is true regarding the total product and marginal product curves?

A) The total product curve reaches its peak when marginal product is zero.

Which of these is a characteristic of a natural monopoly?

A) high economies of scale

If the owner of a concert hall wishes to use third-degree price discrimination to price its tickets at $20, $15, and $10, it should price tickets lower for customers who are:

A) more elastic in their demand for tickets.

Compared to a competitive industry, a monopolist is likely to achieve _____ producer surplus while generating _____ deadweight loss.

A) more; more

Which market structure does not exhibit a downward-sloping demand curve for the firm?

A) perfect competition

Suppose there are six firms in a market, with market shares shown in the table. If Firms 3 and 4 merge, how would the Herfindahl-Hirschman Index (HHI) in this market change?

B) HHI increases by 240.

If the price of copper pipes is $70 in a perfectly competitive market, and a firm is producing a quantity at which the marginal cost is $65, is this firm maximizing profit?

B) No, this firm should be producing more to maximize profit.

If the total variable cost of producing three wickets is $30, while the average fixed cost of producing three wickets is $25, then the total cost of producing three wickets is:

B) $105.

AJ plans to attend a retreat on mindfulness. He paid a $500 nonrefundable registration fee, made a reservation at a hotel that costs $200, and budgeted $150 for gas and food. Two days before the retreat, he becomes ill. Assuming he is able to cancel the hotel without penalty, AJ's sunk cost equals:

B) $500

In the graph showing the revenue and cost curves for a monopolist, what is the profitmaximizing output and price?

B) 20; 10

David earns three hits in the first baseball game, one hit in the second game, and five hits in the third. What was his average number of hits based on these three games?

B) 3

The approximate value of deadweight loss created by this profit-maximizing monopolist is:

B) 7.5

If Glass Inc. produces 80 window panes per day at the market price of $60 in a perfectly competitive market, what would happen to price if Glass Inc. increases production to 120 window panes, all else equal?

B) The price would remain the same.

The difference between a natural monopoly and a monopoly is that:

B) a natural monopoly maximizes profit at a quantity where marginal cost is falling.

The long-run industry supply curve is _____ than the short-run industry supply curves because supply is _____ elastic in the long run.

B) flatter; more

When a firm uses price discrimination successfully, the result is that producer surplus _____ while deadweight loss _____ compared to a single-price monopoly.

B) rises; falls because output increases with price discrimination

When a theme park sells a 1-day adult pass for $110 and a 2-day adult pass for $180, and a 1-day child pass for $90 and a 2-day child pass for $150, the theme park is engaging in:

B) second- and third-degree price discrimination.

Consumers often seek bargains by purchasing goods in large quantities; for example, buying in bulk at Costco or buying larger boxes of cereal so the price per ounce is lower. These purchasing strategies result in which form of price discrimination?

B) second-degree price discrimination

The market price of pomegranates is $2, and JoAnne sells 25 pomegranates at the local farmer's market. The total revenue is _____ and the marginal revenue is _____.

C) $50.00; $2.00

A wedding planner determines that one waiter can serve 30 guests, two waiters can serve 70 guests, three waiters can serve 120 guests, four waiters can serve 160 guests, and five waiters can serve 180 guests. The marginal product of the third waiter is _____ guests.

C) 50

If the market price is $60, a firm's minimum average total cost is $70, and minimum average variable cost is $50, what should the firm do in this perfectly competitive market?

C) The firm should continue producing in the short run in order to minimize losses.

Which of these BEST represents a barrier to entry?

C) a research patent awarded to an inventor of a product

Justin owns a home entertainment installation company. One employee can complete two installations per month; two employees can complete 5 installations, three employees can complete 9 installations, four employees can complete 12 installations, and five employees can complete 11 installations. Diminishing marginal returns begin with the _____ worker.

C) fourth

Which sequence of market structures ranks the barriers to entry from the fewest to the most?

C) perfect competition; oligopoly; monopoly

Suppose that a monopoly in the market for an HIV drug turns competitive after another company discovers another cure. What is likely to happen to prices and quantity in this market?

C) prices would fall, but quantity would rise

A form of regulation that controls a firm's prices and profits based on its costs and capital investments is called:

C) rate of return regulation.

Dan's Car Wash produces $150,000 in revenues and incurs $120,000 in labor wages, materials, rent, and other explicit costs. Moreover, Dan gave up a $40,000-a-year job as a hotel valet to start his car wash business. Dan's economic profit is _____, and he _____ earning a normal profit.

D) -$10,000; is not

The following shows the costs associated with the number of pets groomed by Janee's Mobile Pet Grooming Service. What is the value of X?

D) 66

In the graph, which shows a firm in a perfectly competitive market, what is the profitmaximizing price and quantity?

D) Price = $12; Quantity = 14

If the average total cost is $10 and the price is $8 at the profit-maximizing quantity, what will happen in the long run in a perfectly competitive market?

D) Some firms will exit the market, pushing the market price higher

Which statement describes a situation in which negative returns to labor occur.

D) The marginal product of labor falls below zero.

A monopoly firm exhibits all of the following characteristics EXCEPT:

D) a marginal revenue curve that equals price at all quantities.

Which product is least likely to be produced in a perfectly competitive market?

D) airline jet fuel

Which strategy makes price discrimination more difficult for a firm?

D) allowing unwanted concert tickets to be sold on StubHub

In a perfectly competitive industry, short-run economic profits will lead firms to _____ the market, causing market price to _____.

D) enter; decrease

If the snowboard industry is dominated by four large firms, each with 20% of market share, and 2 small firms, each with 10% market share, what is the four-firm concentration ratio and what is the Herfindahl-Hirschman Index (HHI)?

D) four-firm concentration ratio = 80; HHI = 1,800

Which of these is NOT a potential benefit provided by monopolies?

D) increased consumer surplus as a result of a smaller scale of operations

Amy decides to open a bakery that will specialize in delicious gourmet brownies. Her explicit costs would include all of these EXCEPT the:

D) interest earnings Amy forgoes from selling her savings bonds to finance her store.

Walmart is able to order huge quantities of shovels and rakes at very low prices from many different factories in China as it opens more stores. This best represents:

D) long-run economies of scale.

The taxi industry in many cities has lobbied politicians to increase driver requirements for ride-sharing companies such as Uber in order for them to operate legally. The money spent by the taxi industry for this purpose is:

D) rent-seeking.