Micro Test 2

A firm has market power if it can a. hire as many workers as it needs at the prevailing wage rate. b. influence the market price of the good it sells. c. minimize costs. d. maximize profits.

b. influence the market price of the good it sells.

Refer to Table 17-11. If ABC and XYZ operate to jointly maximize profits and agree to share the profit equally, then how much profit will each of them earn? a. $105 b. $125 c. $250 d. $450

b. $125

Refer to Figure 15-6. What area measures the monopolist's profit? a. (K-B)*W b. (K-C)*W c. (L-A)*T d. 0.5[(K-C)*(Z-T)]

a. (K-B)*W

Refer to Table 17-18. The Nash equilibrium for this game is a. 12 units of output for Firm A and 12 units of output for Firm B. b. 10 units of output for Firm A and 10 units of output for Firm B. c. 10 units of output for Firm A and 12 units of output for Firm B. d. 12 units of output for Firm A and 10 units of output for Firm B.

a. 12 units of output for Firm A and 12 units of output for Firm B.

Refer to Table 13-2. At which number of workers does diminishing marginal product begin? a. 2 b. 3 c. 4 d. 1

a. 2

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short-run and the long run? a. P > MC b. MC = ATC c. P < MR d. All of the above are correct.

a. P > MC

For a profit-maximizing monopolist, a. P > MR = MC. b. P > MR > MC. c. MR < MC < P. d. P = MR = MC.

a. P > MR = MC.

Refer to Figure 16-10. Efficient scale is reached a. at 154.92 units. b. at 100 units. c. at 133.33 units. d. between 133.33 units and 154.92 units.

a. at 154.92 units.

The fundamental source of monopoly power is a. barriers to entry. b. low fixed costs. c. many buyers and sellers. d. rising average total costs.

a. barriers to entry.

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not? a. corn and TV Streaming Services b. rice and soybeans c. electricity and natural gas d. restaurants and MP3 players

a. corn and TV Streaming Services

In a duopoly situation, the logic of self-interest results in a total output level that a. exceeds the monopoly level of output, but falls short of the competitive level of output. b. equals the output level that would prevail in a monopoly. c. equals the output level that would prevail in a competitive market. d. falls short of the monopoly level of output.

a. exceeds the monopoly level of output, but falls short of the competitive level of output.

Refer to Table 17-13. Pursuing its own best interest, Lopes will a. increase the size of its store and parking lot regardless of the decision made by HomeMax. b. increase the size of its store and parking lot only if HomeMax also increases the size of its store and parking lot. c. increase the size of its store and parking lot only if HomeMax does not increase the size of its store and parking lot. d. not increase the size of its store and parking lot regardless of the decision made by HomeMax.

a. increase the size of its store and parking lot regardless of the decision made by HomeMax.

The deadweight loss associated with a monopoly occurs because the monopolist a. produces an output level less than the socially optimal level. b. maximizes profits. c. produces an output level greater than the socially optimal level. d. equates marginal revenue with marginal cost.

a. produces an output level less than the socially optimal level.

Average total cost equals a. (fixed costs + variable costs) divided by change in quantity produced. b. (fixed costs + variable costs) divided by quantity produced. c. change in total costs divided by change in quantity produced. d. change in total costs divided by quantity produced.

b. (fixed costs + variable costs) divided by quantity produced.

A monopolistically competitive firm faces the following demand schedule for its product: Price ($) 30 27 24 21 18 15 12 9 6 3 Quantity 3 6 9 12 15 18 21 24 27 30 The firm has total fixed costs of $9 and a constant marginal cost of $3 per unit. The firm will maximize profit with a. 30 units of output. b. 15 units of output. c. 9 units of output. d. 21 units of output.

b. 15 units of output.

Which of the following is a characteristic of a competitive market? a. Firms sell differentiated products. b. Buyers and sellers are price takers. c. Many firms have market power because they own patents. d. There are many buyers but few sellers.

b. Buyers and sellers are price takers.

In the long run, a. monopolistically competitive firms earn a higher profit than perfectly competitive firms because monopolistically competitive firms have some monopoly power. b. both monopolistically competitive and perfectly competitive firms produce where P = ATC. c. both monopolistically competitive and perfectly competitive firms produce where P = MC. d. monopolistically competitive firms produce a higher output than perfectly competitive firms because competition drives the perfectly competitive firms' output down.

b. both monopolistically competitive and perfectly competitive firms produce where P = ATC.

In the long run, a. variable inputs are rarely used. b. inputs that were fixed in the short run become variable. c. inputs that were variable in the short run become fixed. d. inputs that were fixed in the short run remain fixed.

b. inputs that were fixed in the short run become variable.

Refer to Table 13-10. What is the marginal cost of producing 280 units of output? a. $40 b. $30 c. $0.75 d. $0.48

c. $0.75

Refer to Table 14-11. Marginal revenue equals marginal cost when the firm produces a. 3 units. b. 4 units. c. 5 units. d. 2 units.

c. 5 units.

The task of economic regulation is to a. create free markets. b. replace competition with government ownership. c. approximate the results of the competitive market. d. protect monopoly profits.

c. approximate the results of the competitive market.

The supply curve for the monopolist a. is vertical. b. is horizontal. c. does not exist. d. is upward sloping.

c. does not exist.

A firm has a fixed cost of $200 in its first year of operation. When the firm produces 99 units of output, its total costs are $4,000. The marginal cost of producing the 100th unit of output is $700. What is the total cost of producing 100 units? a. $4,900 b. $4,200 c. $900 d. $4,700

d. $4,700

Refer to Figure 15-9. The deadweight loss caused by a profit-maximizing monopoly amounts to a. $250. b. $1,000. c. $750. d. $500.

d. $500.

Firms operating in competitive markets produce output levels where marginal revenue equals a. price. b. average revenue. c. total revenue divided by output. d. All of the above are correct.

d. All of the above are correct.

In the long run, a firm will enter a competitive industry if a. total revenue exceeds total cost. b. the price exceeds average total cost. c. the firm can earn economic profits. d. All of the above are correct.

d. All of the above are correct.

The profit maximizing condition for a firm in monopolistic competition is a. MR < MC. b. MR = P. c. MC = P. d. MR = MC.

d. MR = MC.

Refer to Figure 14-5. Firms would be encouraged to enter this market for all prices that exceed a. P2. b. P3. c. P1. d. P4.

d. P4.

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm experience zero economic profit? a. perfect competition only b. perfect competition and monopolistic competition only c. perfect competition, monopolistic competition, and monopoly d. The answer cannot be determined without knowing whether the market is in the long run or short run.

d. The answer cannot be determined without knowing whether the market is in the long run or short run.

Refer to Figure 15-6. How much output will the monopolist produce? a. T b. Z c. O d. W

d. W

Refer to Figure 16-2. Suppose ATC = $36 when Q = 24. Then the a. best the firm can do is earn a profit of $96. b. best the firm can do is sustain a loss of $48. c. firm is in a long-run equilibrium when it produces 32 units of output. d. firm is in a long-run equilibrium when it produces 24 units of output.

d. firm is in a long-run equilibrium when it produces 24 units of output.

In the short-run, a firm's supply curve is equal to the a. average variable cost curve above its marginal cost curve. b. marginal cost curve above its average total cost curve. c. average total cost curve above its marginal cost curve. d. marginal cost curve above its average variable cost curve.

d. marginal cost curve above its average variable cost curve.

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its a. average revenue is less than marginal revenue. b. average revenue is less than the price of the product. c. marginal revenue is greater than the price of the product. d. marginal revenue is less than the price of the product.

d. marginal revenue is less than the price of the product.

In the short run, a firm incurs fixed costs a. only if it produces a positive quantity of output. b. only if it produces no output. c. only if it incurs variable costs. d. whether it produces output or not.

d. whether it produces output or not.

​If a monopoly market were to be transformed into a competitive market, the result would be that a. ​market output would increase. b. ​the market would be efficient, once the market reached the competitive output. c. ​the deadweight loss from the monopoly would be eliminated. d. ​All of the above would be true.

d. ​All of the above would be true.