MICROECONOMICS - TEST #3

Refer to Figure 12-3. What is the profit-maximizing output level?

22 cases

Erin and Deidre, two residents in Ithaca, New York, are planning a trip to Boston. Erin, the sales manager for a large retailer, has to attend a business meeting. Deidre, a college student on vacation, is planning a leisurely trip to visit friends and relatives. Which of the following statements is true?

An airline that price discriminates will charge Erin a higher price.

Refer to Figure 13-4. Which of the following is true?

Power Fuel's dominant strategy is to select a low price.

Zero economic profits occur when

Price=ATC

A perfectly competitive firm's short-run curve is

Upward sloping and is the portion of the marginal cost curve that lies above the average variable cots curve

Second degree price discrimination is discrimination

based on quantity demanded.

Arbitrage refers to the act of

buying a product in one market at a low price and reslling in another market at a higher price.

Price discrimination is the practice of

charging different prices for the same good when the price difference are not due to differences in cost.

An agreements among firms to charge the same price or to otherwise not compete is called

collusion.

The merge of two firms producing personal computers is a

horizontal merger

In a market with significant barriers to entry, the profit-maximizing oligopolist produces where

marginal revenue equals marginal costs.

Is zero economic profit inevitable in the ling run for monopolistically competitive firms? In the long run, monopolistically competitive firms

may continue to earn profit by convincing consumers their products are different.

In which type of markets can firms earn economic profit in the long run?

monopoly and oilgopoly

Refer to Figure 12-3. Based on the diagram, one can conclude that

new firms will enter the market

If firms in a monopolistically competitive industry are making profits in the short run,

new firms will enter the market.

A market structure in which there are a few interdependent firms selling differentiated or homogeneous products is called

oligopoly.

In which market structure is it not possible to practice price discrimination?

perfect competition

This market structure is characterized by many buyers and sellers, all of whom are selling identical products, with no barriers to new firms entering the market.

perfect competition

The entry and exit of firms in a monopolistically competitive market guarantees that

price equals average costs in the long run.

Which of the following is the best example of a perfectly competitive producer?

the average corn farm in Illinois

The four-firm concentration ratio measures

the extent to which production is concentrated among a few large firms.

Which of the following is not a source of product differentiation?

the price of a product

Which of the following is not a barrier to entry?

the price of a product.

Which of the following is not a characteristic of monopoly?

there are only a few sellers each selling a unique product.

Why might a producer practice price discrimination?

to maximize profits

A merge between a cigarette manufacturer and a tobacco grower would be a

vertical merge

Firms in perfect competition have no control over

what price to charge.

Refer to Figure 11-5. At the profit-maximizing output level, the firm experiences

zero economic profit.

A price maker is

a firm that has the ability to control to some degree the price of the product it sells.

A monopolistically competitive market is best described as one in which there are

a large number of firms producing differentiated products.

The study of how people make decisions in situations where attaining goals depends on their interaction with other is called

game theory.

The profit-maximizing rule for a monopolisitcally competitive firm is to select the quantity at which

marginal revenue equals marginal cost.

Refer to Narrative 1. What is the farmers economic profit?

$15,000

Refer to Figure 12-3. What is the profit maximizing price that the firm will charge?

$16

Refer to Figure 11-5. The perfectly competitive firms faces price equals to __________ and produces __________.

$20; 300 units.

Refer to narrative 1. What is the farmer's total explicit cost?

$220,000

Refer to Figure 11-5. The total cost at the profit-maximizing output level equals

$3,300

A __________ is an exclusive right to produce a product or service for 20 years.

Patent

Narrative 1. Suppose a farmer in the Rio Grande Valley begins to grow grape fruits. She uses $1,000,000 in savings to purchase the land, she rents equipment for $80,000 a year, and she pays workers $140,000 in wages. In return, she produces 100,000 boxes of grape fruits per year, which sell for $3.00 each. Suppose the interest rate on savings is 4 percent and that the farmer could otherwise have earned $25,000 as an insurance saleswoman. What is the farmer's total revenue?

$300,000

Refer to Figure 12-1. What is the marginal revenue of the sixth unit of output?

$4

Refer to Figure 11-5. The total revenue at the profit maximizing level of output is

$6,000

Refer to narrative 1. What is the farmer's total implicit cost?

$65,000

Refer to Narrative 1. What is the farmer's accounting profit?

$80,000

Total profit equals

(P-ATC)x Q

Refer to Figure 13-4. If the firms collude, what price will they select?

Both firms will select a high price.

Refer to Figure 13-4. If the firms act our individual self interest, what price will they select?

Both firms will select a low price.

Refer to Figure 14-1. If the monopolist is charging price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should

Continue to produce because price is greater than average variable cost.

A situation in which each firm chooses the best strategy given its rival's stratagy is called a

Nash equilibrium

Refer to Figure 14-2. The profit-maximizing output and price for the monopolist are

Output=62; price=$24

Refer to Figure 12-4. Which of the graphs in the figure depicts a monopolisitically competitive firm that is economic profits?

Panel A

Refer to Figure 12-4. Which of the graphs in the figure depicts a monopolisitically competitive firm that is minimizing losses?

Panel C

Why do single firms in perfectly competitive markets face horizontal demand curve?

With many firms selling an identical product, single firms have no effect on market price.

Because the monopolistically competitive firm faces a __________ demand curve for its product, it __________ output price.

downward-sloping; can influence

Firms in perfect competition are price takers because

each firm is too small relative to the market to be able to influence price.

Refer to Figure 12-3. At the profit maximizing output level, the firm

earns a profit of $88

Network externalities

exists when the usefulness of a product increases with the number of consumers who use it.

Which of the following is not a characteristic of monopolistic competition?

inability to influence price

A perfectly competitive firm's marginal revenue

is equal to price.