Econ 240

A single-price monopoly can sell 2 units for $8.50 per unit. In order to sell 3 units, the price must fall to $8.00 per unit. The marginal revenue from selling the third unit is

$7.00.

Which of the following is FALSE?

Fixed costs increase in the long run.

Christy's Haircuts, the sole supplier of haircuts in a small town, faces the demand schedule shown in the table above. What is Christy's marginal revenue from the 2nd haircut?

$15.00

The above figure represents the demand, marginal revenue, and marginal cost curves for a single-price monopoly. In order to maximize profit, the monopoly produces ________ hamburgers per hour and sets a price of ________ per hamburger.

20; $3.00

Which of the following statements is true?

In the long run, all costs are variable costs.

In the long run, constant returns to scale necessarily occur when the firm increases its production and the firm's

average total cost does not change.

A perfectly competitive firm is initially earning an economic profit and then total fixed costs increase. Assuming the firm does not shut down, in the short run the firm will

continue producing the same quantity as before but will make less economic profit.

A perfectly competitive firm is producing at the quantity where marginal cost is $6 and average total cost is $4. The price of the good is $5. To maximize its profit, this firm should

decrease its output.

The main source of economies of scale is

greater specialization of both labor and capital.

For a single-price monopoly, price is

greater than marginal revenue.

As output increases, economies of scale occur when the

long-run average cost decreases.

A perfectly competitive firm will continue to operate in the short run when the market price is below its average total cost if the

price is greater than the minimum average variable cost.

For a syrup producer in central Vermont, profit is maximized at the level of output for which total

revenue exceeds total cost by the largest amount.

When new firms enter a perfectly competitive market, the market supply curve shifts ________ and the price ________.

rightward; falls

A perfectly competitive firm can

sell all of its output at the prevailing market price.

Suppose that marginal revenue for a perfectly competitive firm is $20. When the firm produces 10 units, its marginal cost is $20, its average total cost is $22, and its average variable cost is $17. Then to maximize its profit in the short run, the firm

should stay open and incur an economic loss of $20.

When firms in a perfectly competitive market are earning an economic loss, in the long run

some existing firms will exit the market.

To maximize its profit, in the short run a perfectly competitive firm decides

what quantity of output to produce.

The relationship between marginal revenue and elasticity is

when demand is elastic, marginal revenue is positive and when demand is inelastic, marginal revenue is negative.

The above figure shows a perfectly competitive firm. If the market price is more than $20 per unit, the firm

will stay open to produce and will make an economic profit.

The above figure shows a perfectly competitive firm. If the market price is $20 per unit, the firm

will stay open to produce and will make zero economic profit.

In the long run, a perfectly competitive firm makes

zero economic profit.