Test 3 Econ 2100

t/f Bilateral monopoly refers to a market in which two giant sellers compete, such as Coke and Pepsi.

False

In the short run, if a firm shuts down, its total revenue is a. $0 b. equal to its fixed costs c. greater than its variable costs d. less than its variable costs e. both a and d are true

a. $0

A movie theatre can increase its profits through price discrimination by changing a higher price to adults and a lower price to children if it: a. can prevent children from reselling the low priced tickets to the adults. b. can prevent children from coming to the to evening showings c. can prevent children from making too much noise during the movie d. all of above

a. can prevent children from selling the low priced tickets to the adults

A profit maximizing perfectly competitive from would never operate at an output level where: a. it would not cover all of its total variable costs b. it was not earning a positive economic profit c. it was not earning a zero economic profit d. it was not earning an accounting profit

a. it would never cover all of its total variable costs

As long as MR > MC, the marginal profit is ____________ and the total profit will be ____________ a. positive, increasing b. postive, decreasing c. negative, increasing d. negative, decreasing e. postitive, maximized

a. positive, increasing

Say that a monopolist is currently operating on the inelastic region of its demand curve. To maximize its profits, it should: a. raise its prices b. lower its prices c. maintain its current price d. either raise or lower its prices, depending on how its marginal cost curve is.

a. raises its prices

if a profit- maximizing firms finds that total revenue exceeds total variable cost, total revenue is less than cost, and marginal cost is greater than marginal revenue, it should: a. reduce output, but continue producing in the short run b. increase output c. shut down d. not alter its production level since it is earning a profit

a. reduce output, but continue producing in the short run

Darlene runs a fruit and vegetable stand in a medium-sized community where there are many such stands. Her weekly total revenue equals $2,000. Her weekly total cost of running the stand equals $3,500, consisting of $2,500 of variable costs and $1,000 of fixed costs. An economist would likely advise Darlene to: a. shut down as quickly as possible in order to minimize her losses b. keep the stand open because it is generating an comic profit c. keep the stand open for a while longer because she is covering all of he variable costs and some of her fixed costs d. keep the stand open for a while longer because she is covering all of her fixed costs and some of her variable costs

a. shut down as quickly as possible in order to minimize her losses

diminishing marginal product of labor occurs when: a. total product increases at a decreasing rate b. the marginal product of labor beings to rise c. total product decreases d. adding a worker causes output to fall e. none of the above

a. total product increases at a decreasing rate

Under monopsony conditions a. an individual buyer is unable to influence the price b. an individual buyer is able to drive the price down c. an individual seller is able to drive the price up d. all market participants are price takers

b. an individual buyer is able to drive the price down

Price discrimination refers to: a. charging different prices to different groups on the basis of production cost differences b. charging different prices to different groups without a basis for doing so because of differences in production costs c. the ability of a firm to charge a price in excess of marginal cost d. consumer bargain hunting

b. charging different prices to different groups without a basis for doing so beaches of differences in production costs

Monopoly arises because: a. firms are greedy b. entry to an industry is blocked c. of diseconomies of scale d. of elastic demand

b. entry to an industry is blocked

A price-discirinating monopolist will tend to charge a higher price to senior citizens if it believes that senior citizens: a. have a lower willingness to pay than other demanders b. have a greater willingness to pay than other demanders c. have very elastic demand curves d. have horizontal demand curves

b. have a greater willingness to pay than other demanders

If a business firm finds that its marginal profit is decreasing on additional units sold, the firm should should: a. reduce output until marginal profit is maximized b. increase output until marginal profit is zero c. reduce output d. shut down immediately e. continue to produce if total fixed cost are less than total revenue

b. increase output until marginal profit is zero

If a perfectly competitive firm has correctly made the decision to produce, but its marginal revenue is less than its marginal cost, a. it would raise its price in order to increase its profits. b. it would contract its output but not raise its price in order to increase its profit c. it is currently earning total economic losses d. both a, and c, are true e. both b, and c, are true

b. it would contracts its output but not raise it price in order to increase its profit

Suppose that most people come to regard emeralds and sapphire as close substitutes for diamonds. Then DeBeers has a. less incentive to advertise than it otherwise would have b. less market power than it would otherwise have c. more control over the prices of diamonds than it would otherwise have d. higher profits than it would otherwise have

b. less market power than is would otherwise have

which of the following accurately describes a major difference between a monopoly firm and firms in perfectly competitive markets? a. the monopolist maximizes profit; firms in perfectly competitive market b. the monopolist may earn long-run economic profit because of barriers to entry; firms in perfectly competitive market cannot c. The monopolist is a price taker; firms in perfectly competitive markets are price makers d. The monopolists may earn short-run profit; firms in perfectly competitive markets cannot

b. the monopolist may earn long-run economic profit because of barriers to entry; firm in perfectly competitive market cannot

A perfectly competitive from cannot make economic profits in the long run because: a. it is a price taker b. there are no barriers to entry into the industry c. it faces a perfectly elastic demand curve d. its advertising costs will rise to eliminate any economic profits

b. there are no barriers to entry into the industry

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

c. 3

A business firm is making an operating profit if: a. TR > TC b. TR> TFC c. TR> TVC d. MR> MC e. AFC is declining

c. TR>TVC

Cold Duck Arlines flies between Tacoma and Portland. The company leases plans on a year-long contract at a cost that averages $600 per flight. Other costs (full, flight attendants, etc.) amount to $550 per flight. Currently, Cold Ducks revenues are $1,00 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profits, Cold Duck Airlines should: a.drop the flight immediately b. continue the flight c. continue flying until the lease expires and then drop the run d. drop the flight now but renew the lease if conditions improve

c. continue flying until the lease expires and the drop the run

If the total variable cost curve get steeper as output increases, the firm is experiencing a. diseconomies of scale b. economies of scale c. diminishing marginal product d. increasing marginal product

c. diminishing marginal product

When adding another unit of labor leads to an increase in output that is smaller than the increase in output that resulted from adding the previous units of labor, the firm is experiencing: a. diminishing labor b. diminishing output c. diminishing marginal product d. negative marginal product

c. diminishing marginal product

A profit-maximizing from that is operating in the short run will sell an additional unit of output as long as: a. as doing so reduces the firm's per-unit costs b. doing so reduces the firm's marginal costs c. doing so adds more to revenue than it adds to cost d. there is additional plant capacity with which to produce

c. doing so adds more to revenue than it adds to cost

When the patent expires, the price of the patented good or service usually: a. stays the same b. moves up substantially c. falls substantially d. increases by a small margin

c. falls substantially

A market structure in which one one firm survives because of economies of scale (cost advantage of large scale production): a. is called a legal resource monopoly b. is called a patent monopoly. c. is called a natural monopoly. d. is called a government franchise monopoly.

c. is called a natural monopoly

If a firm produces in the short run ,the output where marginal revenue _________ is where profits are maximized. a. is less than marginal cost b. exceeds marginal cost by the greatest amount c. is equal to marginal cost d. is at its maximum

c. is equal to marginal cost

Suppose that a price discriminating monopolist divides its market into two segments. If the firm sells it product for a price of $42 in the market segment where demand is more inelastic, then the price in the market segment where consumer demand is more elastic will be: a. $42 b. greater than $42 c. less than $42 d. less than marginal revenue in that segment.

c. less than $42

Marginal revenue is: a. the additional cost incurred from producing once more unit of the output b. the addition to total profit from selling one more unit of output c. the addition to total revenue from selling one more unit of output d. the addition to total output from hiring one more unit of labor

c. the addition to total revenue from selling one more unit of output

An output level can maximize profit only if marginal profit at that output level is a. negative b. postive c. zero d. the largest marginal profit possible e. less than total cost

c. zero

As Bubba's Bubbles Gum Company add 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 a. economies of scale b. diseconomies of scale c. increasing marginal product d. diminishing marginal product

d. diminishing marginal product

For a certain firm, the 100th unit of output that the firm produces has a magical revenue of $10 and a marginal cost of $7. It follows that the: A. Production of the 100th unit of output increases the firm's profit by $3. B. Production of the 100th unit of output increases the firm's average total cost by $7. C. Firm's profit-maximizing level of output is less than 100 units. D.Production of the 99th unit of output must increase the firm's profit by less then $3.

A. Production of the 100th unit of output increases the firm's profit by $3.

Assume that a firm's total revenue is less than its total cost for the level of output it is producing. In run , this firm should: A. Expand output B. Contract Output C. Maintain is current level of output D. Shutdown E. There is not enough information to answer the question.

E. There is not enough info to answer the question

Number of workers: Total Output: Marginal Product: 0 0 - 1 200 2 450 3 600 4 650 What is the marginal product of the first worker? a. 250 units b. 200 units c. 150 units d. 50 units

b. 200 units

Which of the following is the worst-case scenario for a consumer? a. Perfect competition among sellers b. Perfect price discrimination by a monopolist c. Single-price pricing by a monopolist d. Having monopsony power

b. Perfect price discrimination by a monopolist

Perfect competition is the term used to describe: a. an industry in which a few price-taking firms produce identical products b. an industry in which numerous price-taking firms produce identical products c. an industry in which firms are price takers and compete for market share by differentiating products d. an industry in which numerous firms are price makers and produce identical products

b. an industry in which numerous price-taking firms produce identical products

The DeBeers Diamond Company, which owns most of South African diamond production, has market power over the diamond trade. This market power was obtained through: a. illegal means b. control of a scarce resource c. patent protection d. government licensing

b. control of a scarce resource

The following represents a portion of the demand schedule faced by a monopoly firm. Price Quantity $12 1 $11 2 $10 3 $9 4 The marginal revenue of the third unit of output equals: a. $12 b. $10 c. $8 d. $1

c. $8

Why can't a firm in a perfectly competitive industry charge a price above the market equilibrium price? a. Government-imposed price ceilings prevent prices from being raised b. Firms in a perfectly competitive from are price searchers c. Perfectly competitive firms are price searches d. Numerous competitors produce the same product and charge the market price

d. Numerous competitors produce the same product and charge the market price

the u.s. postal service has a monopoly over first-class mail delivery a. because of economies of scale b. because of control of essential resources c. because of control of key patens d. because of government imposed barriers to entry e. because of very low fixed costs

d. because of goverment imposed barriers to entry

which of the following is NOT potentially a barrier to entry into a product market? a. patent protection on the design of the product b. cost advantages to large scale production (economies of scales) c. government franchising of the production of the product d. the control of a crucial resource necessary to produce the product e. all of the above are potentially barriers to entry into a product market

e. all of the above are potentially barriers to entry into a product market

Economies of scale: a. are the result of a diminishing marginal product b. pertain to the long run only c. refer to the increase in output that results from adding more workers to the factory d. imply that average total cost will fall as output increases in the long run e. both b and d above

e. both b and d above

the total revenue curve for a perfectly competitive firm: a. is horizontal b. is vertical c. is u-shaped d. is shaped like a hill e. is a straight line from the origin with a positive slope equal to the price

e. is a straight line from the origin with a positive slope equal to the price

t/f A monopolist earns higher profits by charging one price than by practicing price discriminations.

false

t/f for a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal.

false

t/f for a monopoly, marginal revenue is often greater than the price is charges for its good

false

t/f in competitive markets, firms that raise their prices are typically rewarded with larger profits

false

t/f the goal of a business firm is to make a profit

false