MICRO 14, 15, 16, 18

Matius sells 500 candy bars at $0.50 each. His total costs are $125. His profits are

$125

Refer to Table 14-7. What is the value of L?

$135

Suppose that in a competitive market the equilibrium price is $2.50. What is themarginal revenue for the last unit sold by the typical firm in this market?

Exactly $2.50

Economic profit is greater than or equal to accounting profit.

False

For a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal.

False

Profit equals total revenue minus total cost.

true

Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold?

$10 and 100 units

Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business?

$170

Refer to Table 14-10. What is the marginal cost of creating the tenth instructional module in a given month?

$2,500

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 the average total cost when 5 units of output are produced is $30, and the marginal cost of the sixth unit of output is $60. What is the average total cost when six units are produced?

$35

Refer to Figure 15-2. If the market price is $10, what is the firm's total revenue?

$50

Refer to Table 14-7. What is the value of A?

$50

The Three Amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $15. Each dog bed can be sold for a price of $65. The Three Amigo's total costs are

$7,500

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

16 units of output

Refer to Table 14-3. At which number of workers does diminishing marginal product begin?

2

Refer to Table 14-1. What is the total output when 2 workers are hired?

75

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 130). Then the marginal product of the 13th worker is

8 units of output

Refer to Table 14-3. The marginal product of the second worker is

80 units

Refer to Figure 14-2. Which of the curves is most likely to represent average fixed cost?

A

Which of the following is not an example of a barrier to entry?

An entrepreneur opens a popular new restaurant.

Refer to Figure 14-2. Curve D intersects curve C

At the efficient scale

Refer to Figure 14-2. Curve A represents which type of cost curve?

Average Fixed Cost

Refer to Table 15-5. If the firm is currently producing 14 units, what would you advise the owners?

Continue to operate at 14 units

Refer to Figure 16-8. What is the socially efficient price and quantity for this natural monopolist?

H and L

Refer to Figure 16-6. What is the socially efficient price and quantity?

Price = B; quantity = Y

Refer to Figure 14-1. The graph illustrates a typical

Production Function

The intersection of a firm's marginal revenue and marginal cost curves determines thelevel of output at which

Profit is maximized

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?

The cost of the steel that is used in producing automobiles

Which of the following is a necessary characteristic of a monopoly?

The firm is the sole seller of its product.

Bob's Butcher Shop is the only place within 100 miles that sells bison burgers.Assuming that Bob is a monopolist and maximizing his profit, which of the followingstatements is true?

The price of Bob's bison burgers will exceed Bob's marginal cost.

Firms operating in perfectly competitive markets try to maximize profits.

True

The fundamental cause of monopolies is barriers to entry.

True

Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's costs.

Tyler says his costs are $25,900, and Greg says his costs are $66,500.

If a firm produces nothing, which of the following costs will be zero?

Variable Cost

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

a one-unit decrease in output will increase the firm's profit.

Granting a pharmaceutical company a patent for a new medicine will lead to

a product that is priced higher than it would be without the exclusive rights.

The average fixed cost curve

always declines with increased levels of output.

A firm produces 400 units of output at a total cost of $1,200. If total variable costs are $1,000,

average fixed cost is 50 cents

The fundamental source of monopoly power is

barriers to entry.

When firms are said to be price takers, it implies that if a firm raises its price,

buyers will go elsewhere.

A monopoly can earn positive profits because it

can maintain a price such that total revenues will exceed total costs.

Price discrimination

can maximize profits if the seller can prevent the resale of goods between customers.

Monopoly firms face

downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.

In the long run,

inputs that were fixed in the short run become variable.

When a factory is operating in the short run,

it cannot adjust the quantity of fixed inputs.

Refer to Figure 15-1. The firm should shut down if the market price is

less than $6

When a firm experiences diseconomies of scale,

long-run average total cost increases as output increases.

When a firm experiences constant returns to scale,

long-run average total cost is unchanged, even when output increases.

In order to sell more of its product, a monopolist must

lower its price

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

marginal revenue is less than the price of the product.

For a monopolist, when the price effect is greater than the output effect, an increase in output sold causes marginal revenue to be

neagtive

Refer to Figure 15-1. If the market price is $10, the firm will earn

negative economic profits in the short run but remain in business.

Free entry means that

no legal barriers prevent a firm from entering an industry.

For a monopoly, the socially efficient level of output occurs where

price equals marginal cost.

Total revenue equals

price × quantity

A key characteristic of a competitive market is that

producers sell nearly identical products.

If there is an increase in market demand in a perfectly competitive market, then in the short run

profits will rise

Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to

remain unchanged

Price discrimination is the business practice of

selling the same good at different prices to different customers.

A government-created monopoly arises when

the government gives a firm the exclusive right to sell some good or service.

A natural monopoly occurs when

there are economies of scale over the relevant range of output.