EC 201 - Final Study Set

Scenario 15-9: Suppose executives at an art museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executives also know that 200 students are willing to pay $8 for admission on a weekday. The cost of operating the museum on a weekday is $2,000. Refer to Scenario 15-9. How much profit will the museum earn if it engages in price discrimination?

a. $800 b. $1,200 c. $1,600 d. $2, 800 answer: a. $800

Consider a monopolistically competitive firm in a market in long-run equilibrium. This firm is likely earning

a. a positive economic profit since it is charging a price above marginal cost. b. no economic profit since it is charging a price equal to its marginal cost. c. a positive economic profit since it is charging a price above its average total cost. d. no economic profit since it is charging a price equal to its average total cost. d. no economic profit since it is charging a price equal to its average total cost

Marginal revenue for a monopolist is computed as

a. average revenue divided by quantity sold. b. average revenue times quantity divided by price. c. total revenue divided by quantity sold. d. change in total revenue per one unit increase in quantity sold. answer: d. change in total revenue per one unit in quantity sold.

Which of the following is an example of a monopolistically competitive industry?

a. computer operating systems b. wheat c. movies d. cable television answer: c. movies

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. monopsonist answer: c. monopolist

Your company has recently requested that you travel to Dhaka, Bangladesh, to work on negotiations for a new factory to be located in one of the port cities. Your travel agent provides a list of several hundred local hotels and a Sheraton. In this case, the Sheraton brand-name is likely to be used as a signal of

a. perceived differences that are not likely to exist among your various options. b. quality when quality cannot be easily judged. c. inefficiency in markets characterized by recognizable brand names. d. the quality of general lodging accommodations in Dhaka. answer: b. quality when quality cannot be easily judged

When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost,

a. the firm must be earning a positive economic profit. b. the firm may be incurring economic losses c. there is a deadweight loss to society, but it is exactly offset by the benefit of excess capacity. d. new firms will enter the market in the long run. answer: b. the firm may be incurring economic losses