ECON 2106 Test 2

Eddie's Electronics sells laptop computers for $400. At this price, the store sells 325 laptops. Eddie's Electronics incurs a $343 cost for each laptop it sells. Assume that this is the store's only cost. Round your answers to the nearest dollars. What is Eddie's Electronics' revenue? What is Eddie's Electronics' profit?

$130,000 / $18,525

Sea Bass Inc. sells sea bass in a perfectly competitive market. Sea Bass Inc. is able to sell sea bass for $600 per unit. In this market, there are 2,000 firms competing with one another. Last year, Sea Bass Inc. was able to earn an economic profit of $1,000,000. The firm has purchased a permit to fish this season, insurance in case one of their workers gets hurt on the job, and a boat. Together, these items represent all of the firm's fixed costs and sum to $100,000. Last year, Sea Bass Inc.'s total revenue was $1,300,000. What is the marginal revenue per unit for this firm?

$600

Copyright

A legal rule that prohibits copying of material in order to protect the rights of those responsible for the creation of the good

A monopoly is characterized by which of the following?

A single firm producing a product with no close substitutes and control over the market price

Trademark

A word, name, symbol, or device that shows the creator of the good and can only be used by that firm

If market price exceeds BLANK profit will be BLANK

Average Cost; Positive

Ronald Coase's ideas on property rights have helped economists and policymakers better understand environmental problems. From the list below, identify the true statement regarding Coase and property rights.

Coase argued that the assignment of property rights to someone is essential.

The long run is best defined as a time period

During which all inputs can be varied

Margaret owns a stuffed animal shop. At first, it is just she and her daughter Allison hand-sewing stuffed bears, stuffed sharks, and stuffed giraffes in the spare bedroom. Over time, Margaret decides to rent a larger shop and hire more workers to help out, increasing to a staff of 20 people. Everything is still hand sewn. She notices, however, that her stuffed animal output increased much more than tenfold despite her work force increasing by that amount. However, any more than 20 workers slows down production. This is an example of

Economies of Scale

Economic profit is typically BLANK. This stems from the difference in how costs are calculated. Accountants will include BLANK while economists include BLANK.

Lower than Accounting Profit; Only Explicit Costs; Both Explicit and Implicit Costs

A perfectly competitive industry is characterized by the following

Many firms producing identical products with no control over the market price

Which of the following is the best description of a price-taker as it pertains to perfect competition?

Mary Beth grows cotton. She finds that she can always sell her entire crop at the market price, but if she asks a price that is even slightly higher, she cannot sell any of her cotton.

A bumper crop results in a much higher supply of corn this year.

Price Decreases

Clark's wife wants him to build them a new house. She argues that raising the price of his corn just a few cents a bushel would pay for it in no time.

Price Does Not Change

Higher taxes, fuel prices, and wages are driving costs up for all corn farmers.

Price Increase

Suppose that the price of corn, a crop produced in a perfectly (or purely) competitive industry, increased 208% last year as demand for corn based ethanol fuel increased. What do you expect to happen in the long run for the corn industry given this recent success?

Profits will be equal to zero

Suppose the firms in the market for bacon, also a perfectly (or purely) competitive industry, experienced losses last quarter due to people becoming increasingly concerned about their houses smelling like fat and grease all the time. What do you expect to happen in the long run for the bacon industry?

Profits will be equal to zero

Patent

Rulers created by governments that allow for exclusivity in sales, use, and production of an invention for a limited period

Marginal cost is defined as

The change in total costs from producing one more unit of output

One thing that distinguishes the short run and the long run is

The existence of at least one fixed input

The marginal cost curve often decreases at first and then starts to increase. This is explained by

The law of diminishing returns

For firms in perfectly (purely) competitive markets, long run economic profits are BLANK because firms will BLANK this market if profits are less than that and BLANK this market if profits are greater than that.

Zero; Exit; Enter