ECON 102 - Exam 3 (Final) part 1
Refer to the graph. What point represents the price and output level combination that a monopoly will choose?
(move up from MCxMR to demand)
Refer to the table below. When do diminishing returns in the production of pizzas start?
(when Q of pizza and marginal product of labor plateau/drop) when the third worker is hired
The Department of Justice and the FTC consider markets as highly concentrated if the postmerger HHI for a proposed horizontal merger is
above 2,500
The voting paradox refers to the ....... of majority voting to always result in...........
failure.....consistent outcomes
A monopoly is a market structure that is characterized by
a single seller of a good or service that does not have a close substitute.
What is the definition of market power? Market power is the
ability of a firm to charge a price greater than marginal cost.
Refer to the graph. In order to maximize profit, what price should the firm charge? (see photo 8)
$15 (MRxMC, move up to demand, find price)
Refer to the table below. What is the marginal cost of producing the 200th pizza? (total cost of 200 minus total cost of 0 divided by 200)
$3.25
Refer to the graph. Which level of output in the graph below represents the minimum efficient scale?
(See photo 1) 20,000
Which of the graphs below represents a typical cost curve?
(U Shaped)
What is the value of the Herfindahl-Hirschman Index (HHI) when there are four firms in an industry and each firm has an equal market share?
2,500
Which area(s) in the graph show the reduction in consumer surplus that results from this industry being a monopoly rather than being perfectly competitive? (see photo 9)
Area A+B
All of the following cost measures reach their minimum points when they are equal to the value of marginal cost, except one. Which cost measure is the exception?
Average fixed cost
What cost measure is equal to AFC +AVC?
Average total cost
Which of the following are effects of monopolu
Causes reduction in economic efficiency and consumer surplus but an increase in producer surplus
An increase in the price of cappuccino will increase the quantity of cappuccinos demanded.
False
When a firm's demand curve slopes downward and the firm decides to cut price, which of the following happens?
It sells more units but receives lower revenue per unit.
A monopolistically competitive firm in a long-run equilibrium produces where
Its demand curve is tangent to its average total cost curve
When a firm advertises a product, it is trying to shift the demand curve for the product to the ________ and make it more ________.
Right, inelastic
Refer to the graph of the costs for a perfectly competitive firm. Which of the following best represents profit per unit of output? (see photo 4)
The distance between points A and B (Height of profit rectangle)
If the market demand curve shifts to the right, how will a competitive firm's level of output change? (see photo 7)
The firm will increase its output, and its profits will increase
Refer to the table below. Which of the following costs are implicit costs?
The forgone salary and interest (NOT payments for paper, wages, electricity, or lease)
Which of the following best represents total profit? (see photo 4)
The shaded rectangle
The monopolistically competitive firm sells _________ product and faces _________ demand curve.
a differentiated; a downward-sloping
What trade-offs do consumers face when buying a product from a monopolistically competitive firm?
consumers pay a price greater tan the marginal cost, but they also have choices more suited to their tastes
When the marginal product of labor is greater than the average product of labor, then the average product of labor must be
increasing
The increase in total revenue that results from selling one more unit of output is
marginal revenue
The GPA you earn in a particular semester is your ________ GPA, and your cumulative GPA for all completed semesters is your ________ GPA.
marginal.....average
The more cell phones in use, the more valuable they become to consumers. This is an example of
network externalities
A monopolistically competitive firm produces where _________, while a perfectly competitive firm produces where _________.
price is greater than marginal cost; price is equal to marginal cost
The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs is called the
production function
As output increases, the vertical distance between average total cost and average variable cost curves gets _______ and equals _______.
smaller........average fixed cost
According to Joseph Schumpeter, what does economic progress depend on?
technological change in the form of new products
Which of the following rights is given to the holder of a patent?
the exclusive right to a new product for a limited period
One way for a firm to become a monopoly is by controlling a key resource.
true
Refer to the table. What level of output should this firm produce in order to maximize profit? (see photo 8)
5 units, where TR starts to drop
Based on the numbers in the table, how many bushels should this farmer produce in order to maximize profit? (see photo 5)
6 bushels
Refer to the graph, which shows the marginal cost and marginal revenue curves for a farmer in the perfectly competitive market for wheat. What is the profit-maximizing level of output if the farmer can produce only whole units of output? (see photo 5)
6 bushels
Which size bookstore is more likely to experience diseconomies of scale?
A bookstore selling 80,000 books per month
A buyer or seller that is unable to affect the market price is called
A price taker
Refer to the graphs. What do you expect to happen in this market as it approaches long-run equilibrium? (see photo 7)
A shift to the right of the market supply curve as new firms enter
Which of the following are sometimes called accounting costs
explicit costs
Assume that an industry that began as a perfectly competitive industry becomes a monopoly. Compared to when the industry was perfectly competitive, the monopolist will
Charge a higher price and produce less output
Which of the following is an example of logrolling?
Congressman Hacker votes in favor of funding for a national park in Congresswoman Sleet's district because Sleet has promised to vote in favor of funding for a new highway in Hacker's district.
How does the entry of new coffeehouses affect the profits of existing coffeehouses?
Entry will decrease the profits of existing coffeehouses by shifting each of their individual demand curves to the left and making the demand curves more elastic.
In a perfectly competitive industry with constant costs, the long-run supply curve will be
Horizontal
Which of the following is most likely to increase market power?
Horizontal mergers
Using the broader definition of monopoly, in which of the following cases could we argue that Microsoft has a monopoly in computer operating systems?
If Apple's computer operating system and the Linux operating system were not considered close substitutes for Windows.
The median voter theorem states that the outcome of a majority vote is likely to represent the preferences of the voter who is
In the political middle
When a positive technological change occurs,
More output can be produced from the same inputs AND the same output can be produced with fewer inputs
What does the shaded area in the second graph represent for a perfectly competitive firm that produces at output level Q? (see photo 3)
Negative economic profit
Which type of efficiency does a monopolistically competitive firm achieve in the long run?
Neither allocative nor productive efficiency
Is zero economic profit inevitable in the long run for a monopolistically competitive firm?
No, a firm could try to continue making a profit in the long run by reducing production costs and improving its products
What price will ensure that the owners of the utility will break even on their investment? (see photo 10)
P2
Refer to the graph of an electric utility that has a natural monopoly. If regulators want to achieve economic efficiency, what price would regulators require the utility to charge? (see photo 10)
P3
What is the relationship between price, average revenue, and marginal revenue for a firm in a perfectly competitive market?
Price is equal to both average and marginal revenue
Refer to the graph of the demand curve facing a firm in the perfectly competitive market for wheat. The fact that the demand curve is horizontal implies which of the following?
The firm can sell any amount of output as long as it accepts the market price of $7.00
If a perfectly competitive firm is producing at point A (MC=ATC), in the graph, which of the following is true?
The firm earns zero economic proit
If marginal revenue slopes downward, which of the following is true?
The firm must decrease its price to sell a larger quantity
Which of the graphs above best depicts an industry in which the typical firm's average costs decrease as the industry expands production? (one neg slope, one pos slope)
The graph on the left
Which demand curve in the graph is associated with the shutdown point for this perfectly competitive firm?
The horizontal curve that hits where MC=AVC
Which of the following terms refers to the lowest cost at which a firm is able to produce a given level of output in the long run, when no inputs are fixed?
The long-run average cost curve
Refer to the graphs. Suppose the Graph A represents a typical firm's supply curve in a perfectly competitive industry, and there are 100 identical firms in the industry. What does graph B represent? (see photo 6)
The market supply curve
Refer to the graph. For a certain output range (or quantity of pizzas produced per day) marginal cost is greater than average cost. What is this output range? (see image 2)
The output range greater than about 525 pizzas per day (when red line crosses and surpasses orange)
Economies of scale happen when the firm's long run average total cost ________ as output increases.
decreases
When marginal cost is less than average total cost, average total cost must be
decreasing
A natural monopoly occurs when
economies of scale are large enough so that one firm can supply the entire market at a lower average total cost than can two or more firms.
The government can block the entry to a market through
granting a patent, public franchise, or copyright
What is a merger between firms in the same industry called?
horizontal merger
The law of diminishing returns applies
in the short run
The Arrow impossibility theorem states that ........... can be devised so that it will consistently .............. the underlying preferences of voters
no system of voting................... represent
One way in which the government intervenes in the economy is by establishing a regulatory agency or commission that has authority over a particular industry or product. Because the firms that are regulated have an incentive to influence those actions, regulation may lead to
regulatory capture
Refer to the graph. Suppose initially one firm supplies 30 billion kilowatt-hours of electricity. If a second firm enters the market and each firm now supplies 15 billion kilowatt-hours of electricity, then the average total cost of electricity
rises from $0.04-$0.06 (price on ATC according to quantity)
A perfectly competitive firm is losing money in the short run, and its price is less than its average variable cost. In order to minimize its losses in the short run, this firm should (see photo 7)
shut down
In the United States, the loss in economic efficiency due to market power is
small
The costs of federal regulations are estimated to be several thousand dollars per taxpayer
true
In a perfectly competitive industry with increasing average costs, the long-run supply curve will be
upward sloping
Which costs are affected by the level of output produced?
variable costs
In perfect competition, long-run equilibrium occurs when the economic profit is
zero
In the long run, the monopolist can earn
zero or positive economic profit