Marginal Econ Exam #2

You are the manager of a monopoly that faces a demand curve described by P = 230 − 20Q. Your costs are C = 5 + 30Q. Your firm's maximum profits are 415 480 495 475

495

You are a manager in a perfectly competitive market. The price in your market is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q2. What price should you charge in the short run? 16 14 12 18

14

Which of the following statements concerning monopoly is NOT true? There is some deadweight loss in a monopolistic market A monopoly is always undesirable A market may be monopolistic because there are some legal barriers A monopoly has market power

A monopoly is always undesirable

For the cost function C(Q) = 50 + 3Q + 2Q2, the total variable cost of producing 2 units of output is 12 4 14 116

14

For a cost function C = 50 + 3Q + 2Q2, the average fixed cost of producing 10 units of output is 5 10 1 110

5

You are the manager of a firm that sells its product in a competitive market at a price of $30. Your firm's cost function is C = 20 + 3Q2. The profit-maximizing output for your firm is 5 10 4/5 9

5

You are the manager of a monopoly that faces a demand curve described by P = 230 − 20Q. Your costs are C = 5 + 30Q. The profit-maximizing output for your firm is 5 4 7 6

5

Suppose the production function is given by Q = 6K + 5L. What is the marginal product of capital when 10 units of capital and 10 units of labor are employed? 4 6 11 45

6

What is the average product of labor, given that the level of labor equals 20, total output equals 1200, and the marginal product of labor equals 200? 20 60 6 2000

60

When there are economies of scope between two products which are separately produced by two firms, merging into a single firm can -accomplish a reduction in costs -accomplish an increase in sales -lead to an increase in cost -lead to a reduction in sales

-accomplish a reduction in costs

An industry is comprised of 40 firms, each with an equal market share. What is the four-firm concentration ratio of this industry? 0.2 0.6 0.4 0.1

0.1

The production function for a competitive firm is Q = K.5L.5. The firm sells its output at a price of $10, and can hire labor at a wage of $5. Capital is fixed at one unit. The profit-maximizing quantity of labor is 2/5 10 1 None of the answers are correct

1

Given the linear production function Q = 10K + 5L, if Q = 10,000 and K = 500, how much labor is utilized 600 units 800 units 500 units 1,000 units

1,000 units

In a competitive industry with identical firms, long-run equilibrium is characterized by P = AC MR = MC P = MC All of the statements associated with this question are correct

All of the statements associated with this question are correct

Which curve(s) does the marginal cost curve intersect at the (their) minimum point? Average total cost curve and average variable cost curve Average total cost curve Average fixed cost curve Average variable cost curve

Average total cost curve and average variable cost curve

The production function Q = L.5K.5 is called Cobb Douglas Leontief linear None of the answers are correct

Cobb Douglas

In perfect competition, which is NOT true? Every firm has a small but perceivable market power Firms produce homogenous goods There are a large number of firms Firms are price-takers

Every firm has a small but perceivable market power

Which of the following are measures of industry concentration? Four-firm concentration ratio and HHI index Four-firm concentration ratio alone Consumer surplus HHI index alone

Four-firm concentration ratio and HHI index

Consider a monopoly where the inverse demand for its product is given by P = 200 − 10Q. Based on this information, the marginal revenue function is MR(Q) = 400 − 5Q MR(Q) = 200 − 20Q MR(Q) = 400 − 20Q MR(Q) = 200 − 5Q

MR(Q) = 200 − 20Q

Which of the following market structures would you expect to yield the greatest product variety? Perfect competition Monopolistic competition Bertrand oligopoly Monopoly

Monopolistic competition

Which of the following is NOT a type of market structure? Monopolistic oligopoly Monopolistic competition Perfect competition Monopoly

Monopolistic oligopoly

Which of the following is true under monopoly? P = MR P = MC P > MC All of the choices are true for monopoly

P > MC

Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets? Firms produce homogeneous goods Long-run profits are zero There is free entry There is free entry and long-run profits are zero

There is free entry and long-run profits are zero

Economies of scale exist whenever average total costs increase as output increases. average total costs increase as output increases and average total costs are stationary as output increases average total costs decline as output increases. average total costs are stationary as output increases.

average total costs decline as output increases.

It is profitable to hire units of labor as long as the value of marginal product exceeds wage is less than wage exceeds average product equals price

exceeds wage

The combinations of inputs that produce a given level of output are depicted by indifference curves budget lines isoquants isocost curves

isoquants

Firm managers should use inputs at levels where the -marginal benefit equals marginal cost and value marginal product of labor equals wage -marginal benefit equals marginal cost -price equals marginal product -value marginal product of labor equals wage

marginal benefit equals marginal cost and value marginal product of labor equals wage

The absolute value of the slope of the isoquant is the marginal product of capital marginal rate of technical substitution marginal rate of substitution value marginal product of labor

marginal rate of technical substitution

A Herfindahl index (HHI) of 10,000 suggests oligopoly perfect competition monopolistic competition monopoly

monopoly

One of the sources of monopoly power for a monopoly may be free entry and exit differentiated products diseconomies of scale patents

patents

If a monopolistically competitive firm's marginal cost increases, then in order to maximize profits, the firm will reduce output and increase price increase output and decrease price increase both output and price reduce both output and price

reduce output and increase price

Changes in the price of labor cause slope changes in the isocost line isoquants to become steeper parallel shifts of the isocost lines changes in both the isoquants and isocosts of equal magnitude

slope changes in the isocost line

Costs that are forever lost after they have been paid are production costs fixed costs variable costs sunk costs

sunk costs

Costs that change as output changes are fixed costs sunk costs variable costs None of the preceding statements is correct.

variable costs

If the production function is Q = K.5L.5 and capital is fixed at 1 unit, then the average product of labor when L = 16 is 1/5 10 1/4 15

1/4

Suppose the production function is given by Q = max{K, L}. How much output is produced when 10 units of labor and 9 units of capital are employed? 10 0 4 13

10

For the cost function C(Q) = 50 + 3Q + 2Q2, the marginal cost of producing 2 units of output is 2 3 11 12

11

Suppose the production function is given by Q = 6K + 5L. What is the average product of capital when 10 units of capital and 10 units of labor are employed? 3 4 45 11

11

You are the manager of a monopoly that faces a demand curve described by P = 230 − 20Q. Your costs are C = 5 + 30Q. The profit-maximizing price is 130 150 110 90

130

You are the manager of a firm that sells its product in a competitive market at a price of $30. Your firm's cost function is C = 20 + 3Q2. Your firm's maximum profits are 65 75 95 150

65