Econ 102 (quiz & hw)

its production is too small to affect the market

The perfectly competitive firm cannot influence the market price because... it has market power its production is too small to affect the market the government determines a legal price its costs are too high

25

A single-price monopolist can sell 4 units at price of $50 per unit and 5 units at a price of $45 per unit. The marginal revenue of the 5th unit is $____

lower the price of the good

Advertising by monopolistically competitive firms can do all of the following EXCEPT... lower the price of the good help differentiate a firm's product give the consumer information about the firms products result in increased profits for the advertising firm

diseconomies of scale over all ranges of output

All of the following are characteristics of an oligopoly EXCEPT diseconomies of scale over all ranges of output small number of firms high barriers to entry interdependence

7.

Consider a perfectly competitive market with demand and supply given as: Qd 260 - 8P Qs = -20 + 2P Suppose a single firm in this perfectly competitive market has the marginal cost function of MC %3D = 4Q. How many units of output will the single firm produce?

the difference between the total amount that consumers would have been willing to pay for an item and the total amount that they actually pay

Consumer surplus is... the difference between the price the consumers pay for a good and the firm's cost of producing the good the difference between the total costs firms incur in producing an item and the utility consumers derive from purchasing the item the difference between the total amount that consumers would have been willing to pay for an item and the total amount that they actually pay the difference betweenthe utility consumers derive from purchasing an item and the total costs firms incurin producing the item

price is greater than marginal revenue at all levels of output

For a monopolistically competitive firm, price equals marginal revenue at all levels of output price is less than marginal revenue at all levels of output price is greater than marginal revenue at all levels of output the demand curve is perfectly inelastic and marginal revenue is zero

positive

If total revenue increases when a firm sells more units, then marginal revenue is... positive negative zero

P- ATC, and ATC is not at its minimum value

In a long-run monopolistically competitive equilibrium... P- ATC, and ATC is not at its minimum value P= ATC, and ATC is at its minimum value P> ATC, and ATC is at its minimum value P> ATC, and ATC is not at its minimum value

restricts output and charges a relatively higher price than a purely competitive industry

One problem associated with a monopoly firm is that... it produces too little output but also charges a low price produces too much output and charges too low a price restricts output and charges a relatively higher price than a purely competitive industry is just as good as a purely competitive firm in terms of output and price but leaves consumers with fewer choices

Recipients of gifts place a value on the gift that is less thàn the price the giver paid for the gift

Read Don't Exchange Gifts at Christmas from the Devil's Advocate Economics book. According to the reading, why does giving gifts often result in deadweight loss and economic inefficiency? People don't give enough gifts People are giving gifts that have too low of a price Recipients of gifts place a value on the gift that is less thàn the price the giver paid for the gift Recipients of gifts may resell gifts but will receive a lower price than what the original buyer paid People often have limited information about the gift preferences of others:

If two new workers at a firm earn different salaries, there are likely non-discriminatory explanations for the difference

Read Equal Pay for Equal Work from the Devil's Advocate Economics book. Which of the following is true, according to the reading? If two new workers at a firm earn different salaries, there are likely non-discriminatory explanations for the difference Enforcing equal pay laws will likely increase most workers' salaries within a firm Firms generally don't consider previous work experience when determining the salary of new hire If laws are passed that prevent firms from asking about the previous salary of a potential hire, the firm will have to pay all new workers more, benefiting employees

Q1 units of output and a price of P1

See Graph 1 above, which illustrates a monopoly. The profit-maximizing price and quantity chosen by the monopolist are... Q1 units of output and a price of P5 Q3 units of output and a price of P3 Q1 units of output and a price of P1 Q4 units of output and a price of P4 Q1units of output and a price of P2

P1 A B P2

See Graph 1 above. The total profit earned by the monopolist is shown by rectangle... P1AQ1 P1AB P2 P1AC P5 P3 FQ20

63

Suppose that at this same firm's profit-maximizing level of output, average costs are ATC = $19. What are the firm's total profits earned?

390

Suppose the (inverse) demand function for a single-price monopoly is P = 520 - 2Q. This means that the marginal revenue function for the monopolist is MR = 520 - 4Q. Assume the marginal cost function is given by MC = 4Q. Find the price that the monopolist will charge. Hint: You'll first have to find the quantity and then plug this into the demand function to find the price.

100

Suppose the (inverse) demand function for a single-price monopoly is P=800- 3Q. This means that the marginal revenue function for the monopolist is MR = 800 - 6Q. Assume the marginal cost function is given by MC= 2Q. These functions are pictured above in Graph 2. Find the Q that the monopoly will produce. Hint: Q* is found be setting MR = MC.

MR = 300 - 4Q

Suppose the inverse demand function for a monopoly is given by P = 300 - 2Q. What is the firm's marginal revenue function? MR = 300 - 4Q MR = 600 - 4Q MR = 300 - Q MR = 600 - Q

firms can enter and leave the industry without serious impediments

When considering perfect competition, the absence of entry barriers implies that... no firm can enter the industry it costs $0 to start a new business in perfectly competitive markets all firms will earn economic profit firms can enter and leave the industry without serious impediments

MR = MC

Which of the following conditions hold true for both the perfectly competitive firm and the monopoly at the profit-maximizing output level? MR = P MC - ATC MC = P MR = MC

Firms in all four market structures can practice different kinds of price discrimination

Which of the following is FALSE about price discrimination? Different college students paying in-state vs. out-of-state tuition is considered price discrimination Price discrimination leads to higher profits compared to a firm charging a single price For price discrimination to be successful, there must not be an opportunity for consumers to arbitrage

The products made by a perfectly competitive firm have no close substitutes

Which of the following statements about the perfect competitor is INCORRECT? The perfectly competitive firm is always a price taker The perfect competitor sells a homogeneous commodity If an individual firm raises price, it will lose business The products made by a perfectly competitive firm have no close substitutes