ECON-B 251 Exam #3 Study Guide

marginal, decreasing

As output increases increasing if marginal product is increasing, then _____ cost is _____.

price < average variable cost

At the profit maximizing level of output, firms shutdown when

many, many, identical, Buyers and sellers, neither buyers nor sellers

In a perfectly competitive market there are _____ buyers, _____ sellers producing _____ products. _____ have full information and _____ have market power.

cooperative

In a repeated game, punishments that result in heavy damages are an incentive for players to adopt the strategies that result in a _____ equilibrium.

zero, positive

In the long run, perfectly competitive firms earn _____ economic profit and _____ accounting profit.

Nash

In the prisoners' dilemma game, when each player takes the best possible action given the action of the other player, a _____ equilibrium is reached.

4, 12, 48

The table above shows the demand for a monopolist's output. If the pizzeria is a single-price monopoly and the marginal cost of a pizza is $6, then the firm's profit maximizing output is ___ pizzas. At that amount the firm charges a price of $___ and its total revenue is $___.

3, 3

The table above shows the payoff matrix for a prisoners' dilemma game. When both players behave in their own self-interest, the outcome is Player A receives ___ years in jail and Player B receives ___ years in jail.

Patents Ownership of a vital resource Public franchises

Which of the following are barriers to entry for a monopoly? Choose all that apply.

Economies of scale Price wars Ownership of a vital resource

Which of the following are barriers to entry for a oligopoly? Choose all that apply.

The firm determines the price to charge its buyers The firm's demand curve is downward sloping There are high barriers to entry or exit

Which of the following are characteristics of a monopoly? Choose all that apply.

Strategies Players Payoffs

Which of the following are features of game theory?

symmetric

Having equal amount of information is known as _____ information.

decreases, decreases

Compared to a similar perfectly competitive industry, a single-price monopoly _____ consumer surplus and _____ economic efficiency.

272, 391, -119

Consider the perfectly competitive firm in the above figure. At the profit maximizing level of output, the firm's total revenue is $___, total cost is $___, and economic profit is ___.

decrease production or exit the market, do not

Consider the perfectly competitive firm in the above figure. In the long run, existing firms _____ and new potential firms _____ enter the market.

17, 16

Consider the perfectly competitive firm in the above figure. The firm's profit maximizing level of output is ___ units at a price of $___.

zero-sum

A game in which any gains within the group are exactly offset by equal losses by the end of the game is called a _____ game.

price discrimination

Joe, a hair dresser, offers students a discount price on haircuts. This form of pricing is an example of

2.50

Patti's Pizza production function is shown in the above table. Patti rents three ovens for $30 a day each and hires workers at a wage rate of $20 a day. If Patti increases her production of pizzas from 10 to 18 pizzas per day, then her marginal cost is $___.

8.33

Patti's Pizza production function is shown in the above table. Patti rents three ovens for $30 a day each and hires workers at a wage rate of $20 a day. If Patti produces 18 pizzas per day, then her average total cost is $___.

efficient, total surplus, average total

Perfectly competitive markets are _____ because _____ is maximized and firms produce at the lowest possible _____ cost.

The profit maximizing output level occurs where marginal revenue is equal to marginal cost

Which of the following is true for BOTH a monopoly and a perfectly competitive firm?

marginal, 11, 14

Consider the perfectly competitive firm in the above figure. The firm's supply curve is its ___ cost curve beginning at a price of $___ and a quantity of ___.

increases, cost, increases, average total cost

Rent seeking by a monopolist _____ the social _____ of a monopoly and ______ its _____.

21,000

Sue quit her $40,000 per year job and opened a coffee shop that she calls Top Brew. In the first year, Top Brew earned $200,000 in revenue. For the same year, Top Brew paid $80,000 to employees in wages, spent $40,000 on ingredients such as coffee beans, $15,000 rent for the building to house Top Brew. Sue also used $50,000 of her personal savings to purchase equipment for Top Brew, which she was earning $4,000 in interest each year. Assuming no depreciation in the value of the equipment, Sue's economic profit from Top Brew for the year is $___.

3

The above table shows the total cost of producing pizzas. The market for pizzas is perfectly competitive. The equilibrium market price of a pizzas is $18.00. Given this information, the profit maximizing output is ___ pizzas.

4, 84, 70, 14

The above table shows the total cost of producing pizzas. The market for pizzas is perfectly competitive. The equilibrium market price of a pizzas is $21. Given this information, the profit maximizing output is ___ pizzas, total revenue is $___, total cost is $___, and the firm's economic profit is $___.

fourth

The above table shows the total product of producing pizzas. Diminishing returns begins when the pizzeria hires the _____ worker.

5

The above table shows the total product of producing pizzas. The marginal product of the 4th worker is equal to ___ pizzas.

a perfect substitute for corn from other farms

The demand for corn from Hoosier farms is perfectly elastic because corn from Hoosier farms is

600, 400, 200

The figure above shows the cost, demand, and marginal revenue curves for a monopoly. At the profit maximizing level of output, the firm's total revenue is $___, total cost is $___, and economic profit is $___.

20, 30

The figure above shows the cost, demand, and marginal revenue curves for a monopoly. The firm's profit maximizing level of output is ___ units at a price of $___.

larger, larger

The more perfectly a monopoly can price discriminate, the _____ its output and the _____ its profit.

principals and agents are more likely to have the same goals if the agent's pay is tied to satisfying the principal's goals

The principal-agent problem suggests

price = marginal cost

The profit maximizing level of output for the perfectly competitive firm occurs where

elastic

The profit maximizing single price monopolist produces along the _____ portion of its demand curve.

the quantity used of at least one factor of production is fixed

The short run is a period of time in which

10

The table above shows the demand for a monopolist's output. The marginal revenue of increasing production from 2 to 3 units is $___.

confess, confess

The table above shows the payoff matrix for a prisoners' dilemma game. The dominant strategy for Player A is to _____ and for Player B is to _____.

its long-run average cost curve

When a firm is producing a given output at the least possible​ cost, it is producing on

The firm determines the price to charge its buyers There are high barriers to entry or exit The firm produces a different goods or services The firm produces a identical goods or services

Which of the following are characteristics of a oligopoly? Choose all that apply.

The market demand curve is downward sloping There are no barriers to entry or exit Many sellers

Which of the following are characteristics of perfect competition? Choose all that apply.

The owner's time Interest forgone Depreciation

Which of the following are examples of implicit opportunity costs for the firm? Choose all that apply.