Microeconomics Final

Why doesn't the total cost curve begin at the origin (the point 0,0)?

Because fixed costs are positive when output is zero

The average total cost curve is...

U-shaped

Job A is hard, dull, and dangerous. Job B is easy, fun, and safe. All else equal, we would expect Job A to pay a. higher wages than Job B because the labor supplied for Job B will be greater. b. lower wages than Job B because the labor supplied for Job B will be greater. c. higher wages than Job B because the labor supplied for Job A will be greater. d. lower wages than Job B because the labor supplied for Job A will be greater.

a. higher wages than Job B because the labor supplied for Job B will be greater.

A firm that wants to achieve economies of scale could do so by a. hiring a larger number of workers to carry out specialized tasks. b. employing a smaller number of workers. c. producing a smaller quantity of output in the long run. d. producing an output level higher than the efficient scale in the short run

a. hiring a larger number of workers to carry out specialized tasks.

Refer to Figure 5. Assume that the market starts in equilibrium at point W in graph (b). An increase in demand from D0 to D1 will result in a. a new market equilibrium at point X. b. an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z. c. rising prices and falling profits for existing firms in the market. d. falling prices and falling profits for existing firms in the market.

b. an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z.

As a result of a fire, a small business owner loses some of her computers and other equipment. If the property of diminishing returns applies to all factors of production, she should expect to see a. an increase in the marginal productivity of her remaining capital and an increase in the marginal productivity of her labor. b. an increase in the marginal productivity of her remaining capital and a decrease in the marginal productivity of her labor. c. a decrease in the marginal productivity of her remaining capital and an increase in the marginal productivity of her labor. d. a decrease in the marginal productivity of her remaining capital and a decrease in the marginal productivity of her labor.

b. an increase in the marginal productivity of her remaining capital and a decrease in the marginal productivity of her labor.

Suppose a market is initially perfectly competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only one firm selling this same product. As a result, we would expect a. an increase in market output and an increase in the price of the product. b. an increase in market output and an decrease in the price of the product. c. a decrease in market output and an increase in the price of the product. d. a decrease in market output and a decrease in the price of the product.

c. a decrease in market output and an increase in the price of the product.

In the short run, a firm in a monopolistically competitive market operates much like a a. firm in a perfectly competitive market. b. firm in an oligopoly. c. monopolist. d. nonprofit firm.

c. monopolist

A firm is currently selling its product at $20 each. It estimates that its average total cost of production is $100 and its average fixed cost is $40. In the short run the firm should a. hire more employees b. buy more capital c. shut down d. continue production at a point where P = MC

c. shut down

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect a. new firms to enter the market. b. the market price to fall. c. its profits to fall. d. All of the above are correct.

d. All of the above are correct.

Which of the following can defeat the profit-maximizing strategy of price discrimination? a. Consumer surplus b. Deadweight loss c. Market power d. Arbitrage

d. Arbitrage

Which of the following statements about monopolistic competition is not correct? a. A monopolistically competitive market has many sellers. b. Each seller's product is differentiated from one another. c. Monopolistically competitive firms earn profit in the short run. d. Unlike monopolies, monopolistically competitive firm's prices do not exceed their marginal costs in the long run

d. Unlike monopolies, monopolistically competitive firm's prices do not exceed their marginal costs in the long run

A monopoly can earn positive profits over the long run because it a. can sell unlimited quantities at any price it chooses. b. takes the market price as given and can sell unlimited quantities. c. can set the price it charges for its output but faces a horizontal demand curve. d. can maintain a price such that total revenues will exceed total costs without attracting new entrants.

d. can maintain a price such that total revenues will exceed total costs without attracting new entrants.

A contrast between perfect competition and monopolistic competition is that a. perfect competition operates at excess capacity while monopolistic competition operates at the efficient scale. b. perfect competition operates where price is greater than marginal cost while monopolistic competition does not. c. perfect competition generates a deadweight loss while monopolistic competition does not. d. monopolistic competition generates a deadweight loss while perfect competition does not.

d. monopolistic competition generates a deadweight loss while perfect competition does not.

Suppose that a college physics experiment goes horribly wrong and releases an electronic pulse that renders all electronic equipment in the cities of Columbus, Cleveland and Cincinnati, Ohio permanently useless. No people are hurt, and no buildings are damaged. After the accident, the wages earned by Ohio workers will a. increase because the marginal productivities of Ohio workers will increase. b. decrease because the marginal productivities of Ohio workers will decrease. c. decrease because the marginal productivities of Ohio workers will increase. d. increase because the marginal productivities of Ohio workers will decrease

decrease because the marginal productivities of Ohio workers will decrease.