Micro Exam 3

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

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers

labor to be variable and capital to be fixed

Total revenue equals

price x quantity

A monopolist can sell 300 units of output for $50 per unit. Alternatively, it can sell 301 units output for $49.60 per unit. The marginal revenue of the 301st unit of output is

-$70.40

Which of the following is not an argument made by critics of advertising?

Advertising promotes economies of scale

Which of the following is true about a monopolistically competitive firm?

It can earn an economic profit in the short run, but not the long run

Which of the following statements is correct?

Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takes

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short run and the long run?

P>MC

Look at the figure below. What is the area of deadweight loss?

The triangle 1/2[X-Z) x (K-J)]

The fundamental source of monopoly power

barriers to entry

The product-variety externality is associated with the

consumer surplus that is generated from the introduction of a new product

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

diminishing marginal product

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

double

A firm's opportunity costs of production are equal to its

explicit costs + implicit costs

Competitive market are characterized by

free entry and exit by firms

Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's

implicit costs

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

A government-created monopoly arises when

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

A monopolistically competitive firm chooses

the quantity of output to produce, but the price of its output is determined by demand.

Ryzard decides to open his own business and earns $60,000 in accounting profit the first year. When deciding to open his own business, he withdrew $20,000 from his savings, which earned 6 percent interest. He also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Ryzard's economic profit from running his own business?

$13,800

Nathan make candles. If he charges $20 for each candle, his total revenue will be

$500 if he sells 25 candles

The figure below depicts a situation in a monopolistically competitive market. How much profit will the monopolistically competitive firm earn in this situation?

$600

Zaid's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $65 for 10,000 tents. At that level of output, the firm's average total costs equal

$95

In the following figure, graph (a) depicts the linear marginal cost (MC) of a firm in a competitive market, and graph (b) depicts the linear market supply curve for a market with a fixed number of identical firms. If there are 300 identical firms in this market, what level of output will be supplies to the market when price is $1.00?

30,000

Looking at the table above, what is the marginal product of the first worker [0,0; 1,300; 2,500; 3,600; 4,650]

300 units

The figure below corresponds to a firm operating in a competitive industry. If there were four identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve?

A only

Looking at the table below, over which range of output is average revenue equal to price?

Average revenues is equal to price over the entire range of output

Which of the following graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market

Graph (b)

In monopolistically competitive markets, free entry and exit suggest that

all firms earn zero economic profits in the long run

For a monopolistically competitive firm,

at the profit-maximizing quantity of output, marginal revenue equals marginal cost.

Monopoly firms face

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

When new firms enter a perfectly competitive market,

existing firms may see their costs rise if more firms compete for limited resources

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will

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

For any competitive market, the supply curve is closely related to the

firm's costs of production in that market

The long-run market supply curve in a competitive market will

typically be more elastic than the short-run supply curve