MICROECONOMICS FINAL EXAM 5/2

Suppose you bought a ticket to a football game for $30, and that you place a $35 value on seeing the game. If you lose the ticket, then what is the maximum price you should pay for another ticket? a. $5 b. $30 c. $35 d. $65

$35 (doesn't alter the value of the ticket if you lose it)

Tom quit his $65,000 a year corporate lawyer job to open up his own law practice. In Tom's first year in business his total revenue equaled $150,000. Tom's explicit cost during the year totaled $85,000. What is Tom's economic profit for his first year in business?

$0 total revenue - explicit costs- acc profit

Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%.

$2,000

if the current price is $9, the marginal cost of the 50th unit is $9, and the average total cost of producing 50 units is $4, what is the firms profit?

$250 (9x50)-(4x50)

A firms marginal cost has a maximum of $4, its average variable cost has a minimum value of $6, and its average total cost has a minimum value of $7. Then the firm will shut down in the short run once the price of its product falls below

$6

Suppose a firm operating in a perfectly completive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? (i) marginal revenue is $3 (ii) average revenue equals $300 (iii) Total revenue equals $300

(i) only

Frank owns a dog-grooming business. Which of the following costs would be implicit costs? (i) dog shampoo (ii) rent on the storefront (iii) wages Frank could earn as a substitute elementary-school teacher (iv) interest that Frank's money was earning before he spent his savings to set up the dog-grooming business

(iii) and (iv)

At which number of workers does diminishing marginal product begin? Number of workers Total output Marginal production 0. 0 - 1 300 2 500 3 600 4 650

2

The Carolina Christmas tree corporation grows and sells 500 Christmas trees. The average cost of production per tree is $50. each tree sells for a price of $65. The Carolina Christmas tree Corporation's total revenues are:

500 x 65= $32,000

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 Q2-Q1 (130-122)

For an individual firm operating in a competitive market, marginal revenue equals

Average revenue and the price for all levels of output.

Which of the following is not a characteristic of a completive market?

Entry is limited

Suppose a competitive market is comprised of firms that face identical cost curves and is in equilibrium. The market experiences an increase in demand that results in positive profits for the firms.

New firms will enter the market In the long run, all firms will be producing at their efficient scale

For a profit-maximizing monopolist,

P > MR = MC

For a firm, the production function represents the relationship between

Quantity of inputs and quantity of outputs

In a competitive market price is $5. The typical firm has ATC= $5.00 and AVC = $4.50

The firm will earn zero profits in both the short and long run.

One assumption that distinguishes short-run cost analysis from long run cost analysis for a profit- maximizing fir is that in the short run:

The size of the factory is fixed.

In the long run a company that produces and sells dog beds incurs total costs of $1200 when output is 30 beds and $1600 when output is 40 beds. Firm A exhibits:

constant returns to scale because average total cost is constant as output rises. 1200 / 30 =40 1600/40= 40

Which of the following is not an example of a barrier to entry? a.Mighty Mitch's mining company owns a unique plot of land in Tanzania under which lies the only large deposit of Tanzinte in the world. b. A pharmaceutical company obtains a patents for a specific high blood pressure medication c. a musician obtains a copyright for her original song d. an entrepreneur opens a popular new restaurant

d. an entrepreneur opens a popular new restaurant

a market might have an upward-sloping long-run supply curve if

firms have different costs

Kate is a professional opera singer who gives voice lessons. the vocal-music industry is competitive. Kate hires an economist to analyze her small business. The economist recommends that Kate give fewer voice lessons. The economist must have concluded that Kate's

marginal cost exceeds her marginal revenue

Economists normally assume that a goal of a firm is to

maximize the profit

Roger owns a small health store that sells vitamins in a perfectly competitive market. If vitamins sell for $12 per bottle and the average total cost per bottle is $12.50 at the profit-maximizing output level, then in the long run

some firms will leave the market