AP Microeconomics Q3 Quiz 1
According to the information in the table above, the twelfth worker would increase the hourly profit by
$1.30
Given the production information in the table above, how many workers would be employed if the wage rate were $20.00 per day and if sandwiches sold for $0.50?
4
Which of the following is most likely to increase the supply of soldiers for an all-volunteer army?
A decrease in the average wage rate in civilian employment
The concept of derived demand is described by which of the following?
A decrease in the demand for theater tickets will decrease the demand for actresses and actors.
Which of the following tends to increase the gap in earnings between skilled and unskilled workers over time?
A decrease in the demand for unskilled workers relative to skilled workers
The profit-maximizing output level produced by an unregulated monopoly is
less than the socially optimal level, since the price paid by consumers exceeds the firm's marginal cost
A firm's demand curve for labor is equal to a segment of its
marginal revenue product curve
An industry consists of 100 small firms, and the largest firm accounts for only 2 percent of sales. Brand names are considered a signal of quality. The industry described is best classified as
monopolistically competitive
Interdependence among firms is a characteristic primarily associated with
oligopoly
A factor of production will NOT earn economic rent when its supply is
perfectly elastic
Monopolistically competitive firms are inefficient because they
produce a lower level of output at a higher average cost than do perfectly competitive firms
ABC Limited, Inc., sells its product in a perfectly competitive market for a price of $15 per unit and hires workers at a daily wage of $75. Labor is the only factor cost, and the firm is currently earning profits. If ABC hires one more worker and output increases by 5 units per day, the firm's profits will
remain unchanged
Compared with firms in a perfectly competitive industry, firms in a monopolistically competitive industry are inefficient because they
restrict their output level to maximize profits
From the point of view of economic efficiency, a monopolist produces
too little of a good and charges too high a price
The price of an airline ticket is typically lower if a traveler buys the ticket several weeks before the flight's departure date rather than on the day of departure. This pricing strategy is based on the assumption that
travelers' demand becomes less elastic as the departure date approaches
A perfectly competitive profit-maximizing firm will continue to hire additional units of an input as long as the
value of the marginal product of the input exceeds the price of the input
Assume that a monopolist is producing in the inelastic portion of its demand curve. Which of the following will occur if the monopolist decreases its price?
Both total revenue and profits will decrease.
The payoff matrix above shows the profits associated with the strategic decisions of two oligopoly firms, Bright Company and Sparkle Company. The first entries in each cell show the profits to Bright and the second the profits to Sparkle. What are the dominant strategies for Bright and Sparkle, respectively?
Bright: No dominant strategy - Sparkle:Strategy 1
An increase in the demand for automobiles will cause the demand for skilled automobile workers and the wage rate of skilled automobile workers to change in which of the following ways?
Demand For Workers:Increase - Wage Rate:Increase
Which of the following is true if a monopolist's marginal revenue is negative at the current level of output?
Demand for its product is price inelastic.
Which of the following best explains why it is difficult to maintain lasting collusive agreements?
Each firm realizes that its profits would increase if it were the only firm to violate the collusive agreement by increasing its production slightly.
Which of the following statements is true for both a monopolistically competitive firm and a perfectly competitive firm in long-run profit-maximizing equilibrium?
Economic profits equal zero, and marginal revenue equals marginal cost.
The following questions are based on the following matrix. The payoff matrix below gives the profits associated with the strategic choices of two firms in an oligopolistic industry. The first entry in each cell is the profit to Firm A and the second to Firm B. If each firm simultaneously chooses its pricing strategy without collusion, Firm A's and Firm B's profits would be which of the following?
Firm A's Profit:$50 - Firm B's Profit:$50
The following questions are based on the following matrix. The payoff matrix below gives the profits associated with the strategic choices of two firms in an oligopolistic industry. The first entry in each cell is the profit to Firm A and the second to Firm B. If the two firms collude, Firm A's and Firm B's profits would be which of the following?
Firm A:$100 - Firm B:$100
A perfectly competitive producer of steel rods and steel beams employs 100 workers with identical skills. If steel rods and steel beams sell for the same price, which of the following rules should the producer always follow to use the 100 workers efficiently? I. Allocate workers so that the average cost of producing beams equals the average cost of producing rods. II. Allocate workers so that the marginal product of labor is the same in both rod production and beam production. III. Allocate half the workers to rod production and half the workers to beam production.
II only
Pam and Tara run two competing lemonade stands in a town. In the payoff matrix above, the first entry in each cell shows the profits to Pam, and the second entry in each cell shows the profits to Tara. According to the information, which of the following is true?
If Pam sets the high price, Tara will do best by charging the low price.
A collusive agreement to fix prices among firms in an oligopolistic industry is most likely to be broken under which of the following conditions?
It is easy for new firms to enter into the industry.
A well-known fast-food franchise substantially increases the price of its hamburgers, and loses only some of its customers. Which of the following best explains why the franchise has not lost all of its customers
Its hamburgers are differentiated.
Which of the following statements about the firm whose cost and revenue curves are shown above is correct?
Its profit-maximizing output level is 200 units.
Which of the following is NOT a characteristic of monopolistically competitive markets?
Long-run economic profits
Assume a firm uses only two inputs, capital (K) and labor (L), to produce its output. Let the marginal product of capital be MPK , the marginal product of labor be MPL , the price of capital be PK , and the price of labor be PL . The least-cost combination of capital and labor needed to produce a given level of output is given by which of the following?
MPL /PL = MPK /PK
For a firm hiring labor in a perfectly competitive labor market, the marginal revenue product curve slopes downward after some point because as more of a factor is employed, which of the following declines?
Marginal product
Which of the following is true of a monopolistically competitive firm in long-run equilibrium?
Marginal revenue is equal to marginal cost, and price is equal to average total cost.
Suppose that a large number of unskilled workers enter a nation's labor market. If the labor market is competitive, the number of unskilled workers hired and the wage rate will most likely change in which of the following ways?
Number of Unskilled Workers Hired:Increase - Wage Rate:Decrease
The graph above shows a monopsony labor market. In the absence of any regulations, which of the following represents the number of workers the firm will hire and the wage rate it will offer to those workers?
Number of Workers:20 - Wage Rate:$20
In which of the following market structures is it sometimes assumed that rival firms will match price decreases but not match price increases?
Oligopoly
The graph above depicts cost and revenue curves for a typical firm in a monopolistically competitive industry. Suppose that the firm is producing 0M units of output. To maximize profits, it should do which of the following to output and price?
Output:Decrease - Price:Increase
Which of the following statements is true for a monopolist at the profit-maximizing output level?
Price exceeds marginal revenue.
Which of the following is necessarily true of the profit-maximizing equilibrium of a monopolist who sets a single price?
Price is greater than marginal cost.
For a certain firm, the marginal revenue product for the last unit of labor is $60, and the marginal revenue product for the last unit of capital is $100. Which of the following combinations of factor prices would be necessary for the firm to maximize profits?
Price of Labor:$60 - Capital:$100
A monopolist produces two unrelated goods, X and Y. The demand for X is currently price elastic and the demand for Y is currently price inelastic. To increase its total revenue, the firm should change the price of X and Y in which of the following ways?
Price of X:Increase - Price of Y:Increase
If this were a perfectly competitive industry with the same costs as shown on the graph, the equilibrium price and output would be which of the following?
Price:0T - Output:Q3
If the marginal cost curve of a monopolist shifts up, which of the following will occur to the monopolist's price and output?
Price:Increase - Output:Decrease
If a perfectly competitive industry were monopolized without any changes in cost conditions, the price and quantity produced would change in which of the following ways?
Price:Increase - Quantity:Decrease
What are the profit- and revenue-maximizing quantities for the monopolist whose revenue and cost conditions are described by the graph above?
Profit-Maximizing:Q1 - Revenue-Maximizing:Q3
The economic profit of the profit-maximizing monopolist is given by the area
RULI
A change in which of the following will NOT cause a shift in the demand curve for a factor of production?
Supply of the factor
Motivated by lower import prices, United States manufacturers increase their imports of steel from other steel-producing countries. Which of the following best describes the impact of the increased steel imports on the labor market for steelworkers in the United States?
The demand for United States steelworkers will decline, putting downward pressure on steelworker wages.
If the price for a product produced in a competitive market increases, which of the following is most likely to occur in the labor market for workers who produce that product?
The demand for labor and the number of workers hired both increase.
Assume that a firm is hiring labor in a perfectly competitive labor market. If the marginal revenue product of labor is greater than the wage rate, which of the following will be true?
The firm should employ more workers.
The graph above shows the marginal revenue product curve and supply curve of labor for a firm. The introduction of new management techniques dramatically increases workers productivity. Which of the following changes is most likely to occur?
The marginal revenue product curve will shift to the right, increasing wage rate.
Which of the following will happen in the labor market if the price of the good produced by the workers decreases?
The marginal revenue product of labor will decrease.
A profit-maximizing firm that sells its output in a perfectly competitive market hires two additional workers, calculating that the contribution to total revenue of the last worker hired just equals the extra cost of hiring that worker. Six months later, the firm finds that the last worker's contribution to total revenue is less than the extra cost of hiring that worker. Which of the following may have occurred in the interim to explain this change?
The market demand for the firm's product decreased.
Assume that a profit-maximizing monopoly is charging a single price. If the monopoly can price discriminate and charge each consumer what he or she is willing to pay, which of the following will occur?
The quantity of output produced will increase.
When labor supply in a competitive labor market increases, the equilibrium wage rate and employment will change in which of the following ways?
Wage Rate: Decrease - Employment:Increase
In long-run equilibrium, at which of the following output levels will a monopolistically competitive firm operate?
Where price equals average total cost
If the only two firms in an industry successfully collude to maximize their joint profit, the price for the product will be
above the marginal cost of production
If the three largest widget producers control 85 percent of the total widget market, then these producers are operating in
an oligopoly
Marginal revenue product is defined as the
change in total revenue that occurs when one additional unit of an input is employed
The graph above shows a firm's cost and revenue curves. This profit-maximizing firm will
charge a higher price than that necessary to maximize revenues
Monopolies are inefficient compared to perfectly competitive firms because monopolies
charge a price greater than marginal cost
In the long run, a monopolistically competitive firm is allocatively inefficient because the firm will
charge a price greater than the marginal cost
Price discrimination occurs when
differences in a product's price do not reflect differences in costs of production
A monopoly is different from a perfectly competitive firm in that a monopoly
has a marginal revenue curve that lies below its demand curve
Assume that the last worker a firm hired produces 60 additional units of output per hour and the last machine rented produces 6,000 units of output per hour. A worker's hourly wage rate is $12, and the rental cost of a machine is $1,000 per hour. In order to minimize the cost of its current output, the firm should
increase the use of capital and decrease the use of labor
Game theory is a useful model to explain the behavior of firms in a market when the firms are
interdependent
A profit-maximizing firm will hire
labor until its wage rate equals its marginal revenue product
The wage rate is $10 per hour and the last worker hired by the firm increased output by 100 units. Computers rent for $100 per hour and the last computer rented by the firm increased output by 2,000 units. To minimize costs the firm should
lay off workers and rent more computers because computers produce more output per dollar of additional expenditure
Generally, monopolies are considered inefficient because they
lead to an underallocation of resources in the affected market
An individual's labor supply curve is derived from that person's preferences about the trade-off between income and
leisure
A single-price monopolist's marginal revenue is
less than its price
Which of the following is most likely to shift the demand for aircraft mechanics to the right?
An increase in the demand for air travel
In a perfectly competitive labor market for nurses, all of the following statements are true EXCEPT:
An increase in the supply of nurses will create unemployment and leave wages unchanged.
