MICRO 7-11
Suppose that hiring one, two, three, or four workers at a glass factory generates a total output of 200, 350, 450, and 500 fancy glasses, respectively. The marginal product of the second worker is:
150.
(Table: Optimal Choice of Yogurt and Cheese) Use Table: Optimal Choice of Yogurt and Cheese. The price of yogurt is $2 per unit, and the price of cheese is $4 per pound. Hailey's income is $16. If she buys 2 pounds cheese and 4 yogurts, her total utility will be:
188.=total utility 4 yogurts= 104 2 cheese=84
(Table: Consumer Equilibrium in the Market for Pens and Pencils) Use Table: Consumer Equilibrium in the Market for Pens and Pencils. Assume that the price of pens is $5 each , that the price of pencils is $1 each , and that you have $10 to spend on both goods. To maximize utility, you would consume _____ pen(s) and _____ pencil(s)s .
1; 5 pen: $5 pencil: $1 total=$10 1 (5) + 5(1)=10
(Table: Marginal Utility per Dollar of Twix) Use Table: Marginal Utility per Dollar of Twix. The price of Twix is $2 per bar. The marginal utility per dollar of the second bar of Twix is:
2. 10-6=4/$2 =2
(Table: Optimal Choice of Yogurt and Cheese) Use Table: Optimal Choice of Yogurt and Cheese. The price of yogurt is $2 per unit, and the price of cheese is $4 per pound. Hailey's income is $16. Assuming that Hailey spends all of her income on cheese and yogurt, the combination of yogurt and cheese that will maximize her total utility is _____ pounds of cheese and _____ yogurt(s).
2; 4 literally just divide by 8 for each section and but find Marginal for all, find matching till add up to $16
(Table: Labor and Output for Cappuccinos) Use Table: Labor and Output for Cappuccinos. The marginal product of the sixth worker is:
3 (simply subtract)
(Figure: The Regional Monopolist) Use Figure: The Regional Monopolist. Assume a regional monopolist has no fixed costs. If the firm profit-maximizes, it will produce _____ units and charge a price of _____. Its profit will be _____, the consumer surplus will be _____, and the deadweight loss is _____.
35; $65; $1,225; $612.50; $612.5
(Figure: Marginal Product of Labor for Quinoa Production) Use Figure: Marginal Product of Labor for Quinoa Production. The total product, given two workers, is _____ bushels.
36 (19+17)
(Figure: Cost Curves for Buckwheat Producers) Use Figure: Cost Curves for Buckwheat Producers. The market for buckwheat is perfectly competitive. If the price of a bushel of buckwheat is $10, then in the short run, the farmer will produce _____ bushels of buckwheat and take an economic loss equal to _____.
3; total fixed costs
(Figure: Cost Curves for Buckwheat Producers) Use Figure: Cost Curves for Buckwheat Producers. The market for buckwheat is perfectly competitive. If the price of a bushel of buckwheat is $14, then in the short run, the farmer will produce _____ of buckwheat and earn an economic _____ equal to _____.
4 bushels; profit; $0
(Table: Consumer Equilibrium in the Market for Pens and Pencils) Use Table: Consumer Equilibrium in the Market for Pens and Pencils. Assume that pens and pencils both cost $1 each and you have $7 to spend on both goods. To maximize utility, you would consume _____ pen(s) and _____ pencil(s) .
4 pens; 3 pencils MU=MU 8=8
Sophia buys a Gatorade and an ice cream cone. Her marginal utility from Gatorade is 40, and the price of a Gatorade is $1. Her marginal utility from an ice cream cone is 80. Assume Sophia is successfully maximizing his utility. The price of an ice cream cone is:
40/1=80/p 80/40p p=$2
(Figure: Marginal Product of Labor for Quinoa Production) Use Figure: Marginal Product of Labor for Quinoa Production. The total product, given three workers, is _____ bushels.
51
Nikos' lawn-mowing service is a profit-maximizing, competitive firm. If Nikos mows ten lawns per day at a price of $27 per lawn and has a total cost of $280, of which $30 is a fixed cost, what should Nikos do in the long run?
Leave the industry, since he is not covering his fixed costs 280/10=28 ATC 270/10= 27 price can't cover is fixed costs
Elizabeth spends all of her income on high-tech gadgets and cappuccinos. She knows that she is maximizing her utility because she is on her budget constraint and:
MU gadgets / P gadgets = MU cappuccinos / P cappuccinos . MU gadgets = MU cappuccinos .
Which statement is TRUE?
Monopolies produce too little and charge too much, from the standpoint of efficiency.
______ exist when the value of a good or service to an individual increases as the number of other people using the same good or service increases.
N etwork externalities
(Figure: Short-Run Monopoly in the Market for Electricity) Use Figure: Short-Run Monopoly in the Market for Electricity. The profit-maximizing price is:
N. demand line once again profit maxing
8. ( Figure: Optimal Selection of Cola (c) and Sushi Rolls (t)) Use Figure: Optimal Selection of Cola (c) and Sushi Rolls (t). If the consumer is at point C, what should the consumer do to maximize utility?
Nothing, since utility is already maximized.
(Table: Quinoa Cost) Use Table: Quinoa Cost. If the market price of a bushel of quinoa is $15, what will be the farmer's short-run profit at the optimal level of production?
OPTIMAL LEVEL find the MC so subtract 6 is where is equal at the highest 6*15 (MC)- 84(TC) =$6
(Figure: Computing Monopoly Profits for Exxon Mobile Gas) Use Figure: Computing Monopoly Profits for Exxon Mobile Gas. At the profit-maximizing output, total cost is:
P 2 0 QF. you have to find MC=MR but got to ATC
For a monopolist, a downward-sloping demand curve ensures that _____.
P > MR
If a firm faces a downward-sloping demand curve
P > MR it must reduce its price to sell more units
Under monopoly, the firm produces the output where _____, and in perfect competition, the firm produces the output where _____.
P > MR = MC ; P = MR = MC
(Figure: Payoff Matrix for Red River and Yellow Sun) Use Figure: Payoff Matrix for Red River and Yellow Sun. The figure shows the potential profits of two producers of bottled water. Each has two strategies available to it: a high price and a low price. The Nash equilibrium is:
Red River charges a low price, Yellow Sun charges a high price.
(Figure: Monopoly Model in the Market for Electricity) Use Figure: Monopoly Model in the Market for Electricity. When the firm is in equilibrium—maximizing economic profit—its profit is represented by:
SPDB. PROFIT IS UPP UP UPP
(Table: Cupcakes at Dessert Delight) Use Table: Cupcakes at Dessert Delight. Pamela is opening a pastry shop in which she will make and sell special birthday cupcakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs, if she purchases 1, 2, or 3 mixers, are shown in the table. Assume that average variable costs do not vary with output. If Pamela purchases 1 mixer and bakes 100 cupcakes per day, what is her average total cost?
$20 ATC= AFC + AVC =1,000/100 + $10 (given) =$20
(Figure: The Average Total Cost Curve for Shoes) Use Figure: The Average Total Cost Curve for Shoes. The total cost of producing three pairs of shoes is approximately:
$216.
Pamela sells 10 bottles of olive oil per week at $5 per bottle. She can sell 11 bottles per week if she lowers the price to $4.50 per bottle. The quantity effect would be:
$4.50.
(Figure: The Average Total Cost Curve for Shoes) Use Figure: The Average Total Cost Curve for Shoes. The total cost of producing five pairs of shoes is approximately:
$408. (use graph and multiply)
(Table: Workers and Output at the Pottery Store) Use Table: Workers and Output at the Pottery Store. After graduation, you achieve your dream of opening a pottery shop that specializes in making clay sculptures. You pay $10 per day on a loan from your uncle, regardless of how much you produce. You also pay $10 per day to each worker you hire to make the clay sculptures. The total cost of producing 48 sculptures is:
$60. ASKING FOR TOTAL COST (5*10) + 10=60
Suppose the average total cost of producing 9 surgical masks is $5, while the average total cost of producing 10 surgical masks is $5.20. What is the marginal cost of producing the 10th surgical mask?
$7.00
(Figure: Prices, Cost Curves, and Profits for Brianna's Best Brie) Use Figure: Prices, Cost Curves, and Profits for Brianna's Best Brie. Brianna owns Brianna's Best Brie, a perfectly competitive firm that produces artisanal cheeses. If the price of brie is P 2 , and the firm is profit-maximizing, then the firm's profit is:
( de ) × Q 2
Which value of the Herfindahl-Hirschman index is MOST likely to indicate a perfectly competitive market?
100 HHI>1,800
(Table: Output and Cost Curves for Buckwheat Farm) Use Table: Output and Cost Curves for Buckwheat Farm. At what price will the firm exit?
14 LOOK AT THE MC 14 is the minimum
Which cost concept is CORRECTLY defined?
ATC = AVC + AFC
Which characteristic is NOT shared by both perfect competition and monopolistic competition?
production occurs at minimum ATC in the long run
The Mile End Deli serves traditional delicatessen food in Brooklyn, New York. Which decision is most likely to be made over the long run at the deli?
renovate the adjacent space to increase the size of the dining room
(Table: The Utility of California Rolls) Use Table: The Utility of California Rolls. Marginal utility begins to diminish with the _____ roll.
second
The _____ is a time period over which at least one input is fixed.
short run
If some firms in a perfectly competitive industry are incurring economic losses, then in the long run, the:
short-run industry supply curve will shift to the left.
A monopolistically competitive industry, such as potato chips, and a perfectly competitive industry, like corn farming, are alike in that:
there are many firms in each industry.
Willy consumes post-it notes and paper and is maximizing his utility in his consumption of the two goods. The price of post-it notes rises. After the change in price, Willy should purchase_____ post-it notes and _____ paper.
fewer; more
The assumptions of perfect competition imply that:
firms in the market accept the market price as given.
If some firms in a perfectly competitive industry are incurring economic losses, then in the long run, the:
number of firms in the industry will decrease.
The market structure characterized by a few interdependent firms and barriers to entry is called:
oligopoly.
For an industry to be considered an oligopoly, it must have:
a small number of interdependent firms.
Addison's farm can produce 1,000 bushels of quinoa per year with two workers, 1,300 bushels of quinoa per year with three workers, and 1,500 bushels of quinoa per year with four workers. The marginal product of the fifth worker is _____ bushels.
less than 200 subtract, draw
Lenore operates a perfectly competitive tool rental firm and will incur an economic loss in the short run when she produces the profit-maximizing quantity of output and the price is:
less than average total cost.
A perfectly competitive firm will not produce any output in the short run and will shut down if the price is:
less than average variable cost.
A duopoly is an industry that consists of:
two firms.
Gabriella's company produces wet suits for scuba divers. The long-run average total cost of producing 100 wet suits is $4, and the long-run average total cost of producing 110 wet suits is also $4. These numbers suggest that between output levels of 100 and 110 wet suits, Gabriella is experiencing:
constant returns to scale.
Suppose the GoLogos logo monopoly is broken up. and the logo industry becomes perfectly competitive. We would expect _____ surplus to increase and _____ surplus to decrease after the breakup.
consumer and total; producer
The sources of product differentiation do NOT include:
consumers' dislike of having options.
If you were the sole provider of the rarest coffee in the world, your monopoly would result from:
control of a scarce resource or input.
The total cost curve becomes steeper as output increases because of:
decreasing returns to the variable input.
17. (Table: Quinoa Cost) Use Table: Quinoa Cost. What is the shut-down price for this farmer?
$10 shut down price -subtract 12 from everything for VC then find AVC so divide by quantity VC/Q find min AVC= $10
(Table: Quinoa Cost) Use Table: Quinoa Cost. What is the break-even price for this farmer?
$13.50 find atc min
(Table: Cupcakes at Dessert Delight) Use Table: Cupcakes at Dessert Delight. Pamela is opening a pastry shop in which she will make and sell special birthday cupcakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs, if she purchases 1, 2, or 3 mixers, are shown in the table. Assume that average variable costs do not vary with output. If Pamela purchases 1 mixer and bakes 200 cupcakes per day, what is her average total cost?
$15
Suppose the average total cost of producing 9 surgical masks is $6, while the average total cost of producing 10 surgical masks is $7. What is the marginal cost of producing the 10th surgical mask?
$16.00
(Table: Marginal Utility per Dollar of Twix) Use Table: Marginal Utility per Dollar of Twix. The price of Twix is $2 per bar. The marginal utility per dollar of the third bar of Twix is:
1.5. 13-10=3 3/$2=1.5
(Table: Eva's Orange Grove) Use Table: Eva's Orange Grove. Eva is the price-taking owner of an orange grove. Her farm has fixed costs of $30. If the price of a bushel of oranges is $25, how many bushels will Eva produce to maximize profit?
0 add 30 to everything for the TOTAL COST but basically find the AVC so divide everything by min AVC IS 0
(Figure: Monopoly Model in the Market for Electricity) Use Figure: Monopoly Model in the Market for Electricity. When the firm is in equilibrium—maximizing economic profit—its total revenue is represented by:
0 PDJ. go up to the demand curve (total revenue)
(Figure: Monopoly Model in the Market for Electricity) Use Figure: Monopoly Model in the Market for Electricity. When the firm is in equilibrium—maximizing economic profit—its total cost is represented by:
0 SBJ.
(Figure: Cost Curves for Buckwheat Producers) Use Figure: Cost Curves for Buckwheat Producers. The market for buckwheat is perfectly competitive. If the price of a bushel of buckwheat is $4, then in the short run, the farmer will produce _____ bushels of buckwheat and earn an economic _____ equal to _____.
0; loss; total fixed costs
(Table: Optimal Choice of Yogurt and Cheese) Use Table: Optimal Choice of Yogurt and Cheese. The price of yogurt is $2 per unit, and the price of cheese is $4 per pound. Hailey's income is $16. Assuming that Hailey spends all of her income on cheese and yogurt, if she buys 1 pound of cheese, she can buy _____ yogurt(s), and her total utility will be _____.
1 lb cheese * 4+ (yogurt)($2)=$16 16-4=12 12/2=6 yogurts (132) +44 (cheese& =176
Which statement about the differences between monopoly and perfect competition is INCORRECT?
A monopoly can earn economic profits in the long run because it produces more and charges a higher price than a perfect competitor does.
An industry that is dominated by a few firms that recognize their interdependence is:
an oligopoly.
( Figure: Optimal Selection of Cola (c) and Sushi Rolls (t)) Use Figure: Optimal Selection of Cola (c) and Sushi Rolls (t). If the consumer is at point A, what should the consumer do to maximize utility?
Consume more rolls and less cola.
( Figure: Optimal Selection of Cola (c) and Sushi Rolls (r)) Use Figure: Optimal Selection of Cola (c) and Sushi Rolls (r). If the consumer is at point B, what should the consumer do to maximize utility?
Consuming fewer rolls and more cola.
(Figure: The Market for Designer Boots in Monopolistic Competition IV) Use Figure: The Market for Designer Boots in Monopolistic Competition. A positive economic profit will be earned if the profit-maximizing price is _____ in panel _____.
F(A)
(Figure: Computing Monopoly Profits for Exxon Mobile Gas) Use Figure: Computing Monopoly Profits for Exxon Mobile Gas. To maximize profit, the monopoly should produce the output determined by point:
G.
A useful indicator of the market structure of an industry is the _____, which is the sum of the squared market shares of each firm in an industry.
Herfindahl-Hirschman index
Suppose Ignacio's income suddenly decreases. Which of the following will NOT occur? Correct!
His budget line will shift away from the origin.
(Figure: The Market for Designer Boots in Monopolistic Competition IV) Use Figure: The Market for Designer Boots in Monopolistic Competition. A negative economic profit (or an economic loss) will be earned at the profit-maximizing price _____ in panel _____.
J ; (C)
A fixed cost:
a cost that does not change, no matter how much of a good is produced is positive, even if the firm doesn't produce any output in the short run.
Suppose Ignacio's income suddenly increases. Which of the following will NOT occur?
The slope of the budget line will change.
(Figure: Payoff Matrix for Red River and Yellow Sun) Use Figure: Payoff Matrix for Red River and Yellow Sun. The figure shows the potential profits of two producers of bottled water. Each has two strategies available to it: a high price and a low price. The dominant strategy for Yellow Sun is to:
Yellow Sun does not have a dominant strategy.
S omething that prevents other firms from entering the industry would be called:
a barrier to entry.
James is one of two producers of doodads in the city of Hooville. Because the industry consists of two firms, he is operating in:
a duopoly.
(Figure: Prices, Cost Curves, and Profits for Brianna's Best Brie) Use Figure: Prices, Cost Curves, and Profits for Brianna's Best Brie. Brianna owns Brianna's Best Brie, a perfectly competitive firm that produces artisanal cheeses. If the price of brie is P 1 , and Brianna produces an output of Q 1 , then she earns:
a loss equal to ( ca ) × Q 1
The total product curve indicates the relationship between _____ when all other inputs are fixed.
a variable input and output
In the short run:
at least one input is fixed
(Table: Output and Cost Curves for Buckwheat Farm) Use Table: Output and Cost Curves for Buckwheat Farm. At what quantity of production is the farm earning zero profit?
at quantity 8 look at minimum ATC
When marginal cost is rising:
both average variable cost and average total cost may be rising or falling.
(Figure: Oligopoly Pricing Strategy in Wireless TV Market II) Use Figure: Oligopoly Pricing Strategy in Wireless TV Market II. The noncooperative equilibrium in the cable TV market occurs when:
both firms set a low price, and each earns $90,000. non-cooperative (Nash equilibrium) a Nash equilibrium is reached when boundary spanners know what their counterparts will do and can make the best responses to achieve maximum joint payoffs.' concept within game theory where the optimal outcome of a game is where there is no incentive to deviate from the initial strategy. The Nash equilibrium does not always mean that the most optimal
If Penelope, a monopolist, is producing a quantity where MC = P , then profit:
can be increased by decreasing production.
If Penelope, a monopolist, is producing a quantity where MC > MR , then profit:
can be increased by decreasing production.
(Figure: The Marginal Decision Rule for Apple Farmers) Use Figure: The Marginal Decision Rule for Apple Farmers. Economic profit:
cannot be determined from the information provided.
An oligopoly in which firms collude to raise joint profits is known as a:
cartel. collude (collaborator to raise profits)
(Figure: Payoff Matrix for Red River and Yellow Sun) Use Figure: Payoff Matrix for Red River and Yellow Sun. The figure shows the potential profits of two producers of bottled water. Each has two strategies available to it: a high price and a low price. The dominant strategy for Red River is to:
charge a low price.
When two firms in an industry agree to fix the price of a product at a given level, it is called: Correct!
collusion.
The idea of diminishing returns to an input in production suggests that, if a local university adds more service workers (for maintenance), the marginal product of labor for the service staff will:
decrease
The term diminishing returns refers to a:
decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.
Marginal cost _____ over the range of increasing marginal returns and _____ over the range of diminishing marginal returns.
decreases; increases
Which of the following items would NOT give rise to a monopoly market.
decreasing returns to scale
Figure: The Marginal Decision Rule for Apple Farmers) Use Figure: The Marginal Decision Rule for Apple Farmers. Given the market price P 1 , B is the _____ curve.
demand
Ashley Furniture expects its marginal cost curve to eventually slope upward because, as with most production processes, furniture manufacturing has:
diminishing marginal returns.
The larger the output, the more of the variable input is needed to produce additional units of output. Called the _____ effect, this leads to a _____ average variable cost as output rises.
diminishing returns; higher
(Figure: Prisoners' Dilemma for Thelma and Louise) Use Figure: Prisoners' Dilemma for Thelma and Louise. Thelma and Louise are arrested and jailed for bank robbery. Given the payoff matrix in the figure, Thelma and Louise would minimize their joint sentence if Thelma _____ and Louise ____.
does not confess; does not confess
A strategy that is the same, regardless of the action of the other player in a game, is a _____ strategy.
dominant
The demand curve facing a monopolist is:
downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm.
A dominant-strategy equilibrium occurs when:
each players' choice is always best for him or her, regardless of the choice of the other player.
Gabriella's company produces wet suits for scuba divers. The long-run average total cost of producing 250 wet suits is $56, while the long-run average total cost of producing 270 wet suits is $36. These numbers suggest that between output levels of 250 and 270 wet suits, Gabriella is experiencing: Correct!
economies of scale.
The demand for air travel in the tourism industry tends to be relatively ______. Thus, small _____ in air fares will result in relatively _____ in air travel.
elastic; reductions; large increases
In perfect competition, a change in fixed cost will:
encourage entry or exit in the long run, with price changing so as to leave firms earning zero profits.
Marginal revenue:
equals the market price in perfect competition.
economies of scale
factors that cause a producer's average cost per unit to fall as output rises
A cost that does NOT depend on the quantity of output produced is:
fixed.
The restaurant industry is monopolistically competitive. Thus:
food served at each restaurant tends to be differentiated among the many sellers serving the market.
What causes monopolistically competitive firms to earn zero profit in the long run?
free entry and exit
Lenore operates a perfectly competitive tool rental firm and will earn a profit in the short run when she produces the profit-maximizing quantity of output and the price is:
greater than average total cost.
If total utility is rising as more pasta is consumed, we can definitely say that marginal utility is
greater than zero.
(Figure: Payoff Matrix for Alex and Sybil) Use Figure: Payoff Matrix for Alex and Sybil. Alex and Sybil are the only producers of frozen yogurt in their town. Every week, each decides how much frozen yogurt to produce for the following week. The figure shows the profit per week earned by their two firms. In the game's Nash equilibrium, Alex produces _____ , and Sybil produces _____.
high; high
If American Airlines purchased all of its competitors to become a monopoly, all else equal, price will _____, and output will _____.
increase; fall
In a cartel, there is a strong incentive to cheat because an individual firm can raise its profit by:
increasing its output.
In a perfectly competitive market, the price producers and consumers face is generally determined by the:
interaction of supply and demand.
5. (Figure: Prices, Cost Curves, and Profits for Brianna's Best Brie) Use Figure: Prices, Cost Curves, and Profits for Brianna's Best Brie. Brianna owns Brianna's Best Brie, a perfectly competitive firm that produces artisanal cheeses. If the price of brie is P 2 and the firm is profit-maximizing, then the firm:
is earning economic profits. price is greater than ATC
For a perfectly competitive firm, marginal revenue:
is equal to price.
The equilibrium price of a cookbook is $40 in the perfectly competitive cookbook industry. Our firm produces 10,000 cookbooks at an average total cost of $48, marginal cost of $40, and average variable cost of $35. Our firm, in the short run, should:
keep output the same because marginal revenue equals marginal cost.
Electricity is an industry with sizeable fixed costs and substantial economies of scale. Thus, in the electricity industry:
large companies are more profitable than small companies.
The principle of diminishing marginal utility means that, when Justine eats tacos (which she loves), her satisfaction from the second taco is probably _____ that from the first.
less than
An individual gets 5 units of utility from one slice of pecan pie and 9 units of utility from two slices of pecan pie. The principle of diminishing marginal utility implies that the total utility from three slices of pecan pie will be _____ units of utility.
less than 13
(Table: Workers and Output at the Pottery Store) Use Table: Workers and Output at the Pottery Store. After graduation, you achieve your dream of opening a pottery shop that specializes in making clay sculptures. You pay $10 per day on a loan from your uncle, regardless of how much you produce. You also pay $10 per day to each worker you hire to make the clay sculptures. The variable cost of producing 48 sculptures is:
look at table for 48 sculptures =5 employees * $10 pay -$50, variable cost (workers)
Erika is the price-taking owner of a cherry orchard. The price of cherries is high enough that Erika is earning positive economic profits. In the long run, Erika should expect _____ cherry prices due to the _____ firms.
lower; entry of new
The amount by which total utility changes when an additional unit of a good is consumed is called _____ utility.
marginal
Suppose that the Uncle Sam Cap Company is a profit-maximizing firm with a monopoly in the production of football caps. The firm sells its football caps for $25 each. From this information, we can assume that the Uncle Sam Cap Company produces a level of output at which: You Answered
marginal cost is less than $25.
When a firm has diminishing marginal returns, its:
marginal product is falling but is likely still positive.
(Figure: The Marginal Decision Rule for Apple Farmers) Use Figure: The Marginal Decision Rule for Apple Farmers. Given the market price P 1 , B is the _____ curve.
marginal revenue
The ability of a monopolist to raise the price of a product above the competitive level by reducing output is known as:
market power.
Many different types of jeans, seen by consumers as broadly similar but different in specifics, are sold in the retail jeans market. Also, the jeans market is characterized by easy entry and exit (you can start selling jeans out of your basement online if you would like). The jeans market is:
monopolistically competitive. because product differentiantion
Most large public transit systems charge lower rider fares to senior citizens, students, and children. If this pricing strategy increases the profits of the transit system, we can conclude that individuals in the reduced fare categories have a _____ demand for public transit service than other passengers have.
more elastic
Willy consumes paper and post-it notes and is maximizing his utility in his consumption of the two goods. The price of paper falls. After the change in price, Willy should purchase _____ paper and _____ post-it notes.
more; fewer
According to the law of diminishing marginal utility, we would expect the slope of the marginal utility curve to be: Correct!
negative.
(Figure: Oligopoly Pricing Strategy in Wireless TV Market I) Use Figure: Oligopoly Pricing Strategy in Wireless TV Market I. If the two firms in the cable TV market collude:
neither firm advertises, and each earns $150,000. (they earn the highest profit for not advertising)
Google is often cited as an example of a company that grew into a monopolist through:
network externalities.
For the Texas beef industry to be considered perfectly competitive, ranchers in Texas must have _____ on prices, and beef must be a _____ product.
no noticeable effect; standardized
Perfect competition is characterized by a ______ demand curve, whereas monopoly is characterized by a _____ demand curve.
perfectly elastic; downward-sloping
A doctor charges an insured patient $12,000 for a surgical procedure and an uninsured patient $5,000 for the same procedure. This is an example of
price discrimination
Abigail, a lawyer at Kirkland & Ellis LLP in Chicago, charges different prices to different clients for the same service without any corresponding differences in costs. Abigail thereby practices:
price discrimination.
Firms in a monopolistically competitive market differentiate themselves from their competition based on all of the following EXCEPT:
price. location, style, quality is all how they DO differentiate themselves
The equilibrium price of a cookbook is $35 in the perfectly competitive cookbook industry. Our firm produces 10,000 cookbooks at an average total cost of $38, marginal cost of $30, and average variable cost of $30. Our firm, in the short run, should:
produce more cookbooks because the next cookbook produced will increase profit by $5.
In the short run, if AVC < P < ATC, a perfectly competitive firm:
produces output and incurs an economic loss.
Google Chrome, Microsoft Edge, Firefox, and Opera are examples of:
product differentiation.
(Figure: The Marginal Decision Rule for Apple Farmers) Use Figure: The Marginal Decision Rule for Apple Farmers. As long as the price is above the minimum variable cost, this firm should produce quantity _____, where _____ equals _____ and economic profit is maximized.
q 2 ; price; MC
The effect of product differentiation is to:
reduce the intensity of competition among firms in an oligopoly.
The principle of diminishing marginal utility:
refers to the tendency of marginal utility to decline as the amount of consumption of a good or service increases.
(Figure: Prices, Cost Curves, and Profits for Brianna's Best Brie) Use Figure: Prices, Cost Curves, and Profits for Brianna's Best Brie. Brianna owns Brianna's Best Brie, a perfectly competitive firm that produces artisanal cheeses. If the price of brie is P 1 , and the firm is profit-maximizing, then the firm:
should shut down.
(Table: The Utility of California Rolls) Use Table: The Utility of California Rolls. Marginal utility becomes negative for the _____ roll.
sixth
Oligopoly is a market structure characterized by a _____ number of _____ firms producing _____ products.
small; interdependent; identical or differentiated
The larger the output, the more output over which the fixed cost is distributed. Called the _____ effect, this leads to a _____ average fixed cost as output rises.
spreading; lower
The Herfindahl-Hirschman index is a measure of concentration in an industry found by:
squaring each firm's market share summed over the firms in the industry.
The Mile End Deli serves traditional delicatessen food in Brooklyn, New York. Which input is MOST likely fixed at the deli? Correct!
the chairs customers sit on
In general, the marginal revenue a monopolist receives from selling one more unit of a good is less than the price of that unit because:
the demand curve slopes downward.
At the optimal consumption bundle:
the marginal utility per dollar spent is equalized across all goods consumed.
Abby derives more utility from spending an additional dollar on shoes than on hats. We can assume that: Correct!
the marginal utility per dollar spent on shoes is greater than the marginal utility per dollar spent on hats.
The demand curve for a monopoly is:
the market demand curve.
constant returns to scale
the property whereby long-run average total cost stays the same as the quantity of output changes
Assume that Alexa is consuming the utility-maximizing quantities of fish and vegetables. We can conclude that:
the ratio of the marginal utility to price is the same for fish and for vegetables.
(Figure: Prisoners' Dilemma for Thelma and Louise) Use Figure: Prisoners' Dilemma for Thelma and Louise. Thelma and Louise are arrested and jailed for bank robbery. Given the payoff matrix in the figure, the Nash equilibrium behavior is for Thelma _____ and Louise _____.
to confess; to confess
The marginal utility of matcha tea consumption for Alannah is the change in _____ generated by consuming an additional cup of matcha tea.
total utility
Adam is an economist working at the Federal Reserve Bank of Boston. For Adam, the satisfaction an individual derives from the consumption of goods and services is BEST described as:
utility.
Economists describe the satisfaction consumers receive from consuming goods and services as:
utility.
The total product curve:
will become flatter as output increases if there are diminishing returns to the variable input.
Perfect competitors and monopolistic competitors both earn _____ economic profit in the long run, but perfect competitors produce _____ of the ATC curve, while monopolistic competitors produce _____ of the ATC curve.
zero; at the minimum point; on the downward-sloping portion
Nikos' lawn-mowing service is a profit-maximizing, competitive firm. If Nikos mows ten lawns per day at a price of $27 per lawn and has a total cost of $280, of which $30 is a fixed cost, what should Nikos do in the short run?
Continue operating, since he is covering part of his fixed costs and all his variable costs FIND VC 280-30=250 27*10 270>250 so continue
(Figure: Short-Run Monopoly in the Market for Electricity) Use Figure: Short-Run Monopoly in the Market for Electricity. The marginal cost of producing the profit-maximizing quantity is:
P. MARGINAL COST so where it meets MR
(Table: Eva's Orange Grove) Use Table: Eva's Orange Grove. Eva is the price-taking owner of an orange grove. Her farm has fixed costs of $30. If the price of a bushel of oranges is $35, at the profit maximizing point, her economic profit will be:
Price taking à Perfect competition FC $30, P = $35 - In Perfect Competition profit is maximized at: P =MR>=MC à MC<=35 Profit maximization output : Q= 3 Profit = Total Rev - Total Cost Total Rev = 3x $35= $105 Total Cost= $110 Profit = $105 -$110= -$5
At the quantity at which total utility is maximized, marginal utility is:
zero.
