ECON REV 6,7,8

The figure below shows the revenue and cost curves for a profit-maximizing monopolist. Based on the figure, the monopolist will produce ______.

Q1 units of output

In short-run equilibrium in a perfectly competitive market, firms always make zero economic profits.

false

Patents tend to slow down research and development.

false

A firm produces 1,000 units of output at an average variable cost of production of 50 cents. The firm's total fixed costs equal $700. The total cost of producing 1,000 units of output equals:

$1,200.

The table below shows how total cost varies with output in a factory producing watches. Based on the table, if the total fixed cost is $20, the average variable cost of producing 5 units of output is _____.

$15

A firm receives $10 per unit at an equilibrium level of output of 80 units. The average total cost at 80 units of output is $8. The firm makes a total economic profit of:

$160

If Randy's fixed cost totals $800 and the variable cost per unit is $10 for 100 units, his average total cost equals _____.

$18.00

Which of the following is true of perfect competition?

Because perfectly competitive markets have many buyers and sellers, each firm is so small in relation to the industry that its production decisions have no impact on the market price.

The figure below shows the revenue and cost curves for a profit-maximizing monopolist. Based on the figure, welfare loss due to monopoly is indicated by the area _____.

DFH

Which of the following isnota potential barrier to entry into a product market?

The absence of economies of scale in the product market

Which of the following is true for a monopoly?

The marginal revenue curve lies below the demand curve and is steeper than the demand curve.

In long-run equilibrium, a perfectly competitive firms produces at the output level at which:

average total cost is minimized.

In the long run, firms can vary all inputs in the production process.

false

Monopolies tend to produce a greater quantity and charge higher prices than perfectly competitive industries.

false

Graphically, the short-run supply curve of a perfectly competitive firm is:

is identical to the portion of the marginal cost curve that lies above the minimum of the AVC curve.

If a firm's average total cost falls in the long run over a certain range of output, then:

it is subject to economies of scale over that range of output.

Show Stoppers is a monopoly provider of ticket services for concerts and sporting events, and their current service charge is $10.00. In order to attract one more customer, they have to lower their service charge to $9.50. Show Stoppers' marginal revenue from this additional customer is:

less than $9.50.

When there are diseconomies of scale in production, _____.

long-run average total cost declines as output expands

When there are economies of scale in production, _____.

long-run average total cost decreases as output expands

If a profit-maximizing firm finds that price exceeds average variable cost and marginal cost is greater than marginal revenue, it should:

reduce output but continue producing in the short run.

U.S. public utilities are often:

regulated natural monopolies.

The entry of new firms into an industry will:

shift the industry supply curve to the right.

The marginal revenue for a perfectly competitive firm equals:

the average revenue at all levels of output.

The figure below shows the cost curves faced by an industry. Based on the figure, B represents _____.

the average variable cost curve

An example of an implicit cost of production is:

the cost of space in someone's home that is used as his or her home office.

When a firm makes zero economic profit, it means that:

the firm is covering the total opportunity costs of its resources

A monopolist will shut down in the short run if:

total revenue is less than total variable cost.

A perfectly competitive firm faces a perfectly elastic demand curve.

true

In a perfectly competitive market, marginal revenue is the same as the market price.

true

Marginal cost refers to the change in total cost for a one-unit change in output and also to the change in total variable cost for a one-unit change in output.

true

One difficulty associated with the average cost pricing regulation of natural monopolies is that firms have little or no incentive to minimize production costs.

true

One would expect to observe a diminishing marginal product of labor when the office space is overcrowded.

true

The market demand curve in a perfectly competitive industry is downward sloping, while the demand curve faced by an individual perfectly competitive firm is horizontal.

true

If a perfectly competitive industry uses a large proportion of the available inputs in a resource market, then the long-run market supply curve for the industry will most likely be:

upward sloping.

A monopolist can sell 20 units a week at a price of $10 per unit. To sell 21 units a week, it would have to lower its price to $9 per unit. The marginal revenue of the 21stunit would be:

−$11.

The table below shows the quantity produced and the price set by a monopoly firm. Based on the table, the marginal revenue of the 28thunit of output is _____.

−$13.50

A monopolist never incurs a loss.

false

A profit-maximizing monopolist will choose to operate along the inelastic portion of its demand curve.

false

Diseconomies of scale are most likely at very low levels of output.

false

The table below shows the amount of output produced and the costs incurred by a firm. Based on the table, the average total cost incurred by the firm for 4 units of output is _____.

$30

The table below shows how total cost varies with output in a factory producing watches. Based on the table, the marginal cost of producing the third watch equals _____.

$4

Brad worked as a contractor for a year, earned revenues of $120,000, and incurred an explicit cost of $70,000. If he could have earned $80,000 working for a computer company, his accounting profit as a contractor would be _____.

$50,000

There are two tables below. The first one shows a monopoly's costs of producing different units of canned iced coffee. The second table shows the demand schedule for canned coffee. Based on the table, at the profit-maximizing level of output, the firm's profits equal _____.

10.00

The figure below shows how the quantity of bicycles produced per week varies with the number of workers employed per week. Based on the figure, if the firm's goal is to maximize weekly output, the firm should employ _____.

4 WORKERS

There are two tables below. The first one shows a monopoly's costs of producing different units of canned iced coffee. The second table shows the demand schedule for canned coffee. Based on the table, the monopolist's profit-maximizing level of output will be _____.

5 cans of iced coffee

The figure below shows the revenue and cost curves of a profit-maximizing monopolist. Based on the figure, the monopolist will produce _____.

50 units of output

Which of the following statements is true?

A monopolist earns positive economic profits, while a perfectly competitive firm earns zero economic profits in the long run.

A perfectly competitive firm has no influence over price because:

A perfectly competitive firm has no influence over price because:

The figure below shows the revenue and cost curves for a profit-maximizing monopolist. Based on the figure, the welfare loss due to monopoly pricing and output practices is represented by the area _____.

ADB

Which of the following is true about the Sherman Act?

It prohibited price fixing and collusion.

Which of the following is consistent with a monopoly?

Marginal revenue that is less than the selling price

Figure 7-7 shows a firm in a perfectly competitive market. Which of the following is most likely to happen in the given market?

New firms would be likely to enter, decreasing the market price.

The figure below contains information on the cost and revenue curves facing a regulated monopoly. Based on the figure, if the government is able to regulate the monopolist using average cost pricing, the price and output combination will be _____.

P4 and Q3

It is relatively easy for firms to enter and exit a perfectly competitive market.

TRUE

Refer to Figure 7-1. Graphs A and B together demonstrate the effect that a change in market demand has on the demand curve faced by an individual firm. In this case, the firm is:

a price taker.

Firms will continue to enter a competitive industry until:

any economic profits have been competed away.

Economic profits are calculated after taking into account:

both implicit and explicit costs.

The figure below shows the revenue and cost curves for a profit-maximizing monopolist. Based on the figure, in a monopoly, deadweight loss is denoted by the area _____.

c + e

Figure 7-5 shows cost and revenue curves for a perfectly competitive firm. If P represents the market price for a price-taking firm, the best course of action in the short run for the firm is to:

continue operating because price exceeds average variable cost.

The figure below shows the revenue and cost curves for a profit-maximizing monopolist. Based on the figure, in perfect competition, producer surplus is indicated by the area denoted by _____.

d + e

Scarlett recently began running her husband's lumber mill. Last month, the mill made a revenue of $5,000 and paid $3,400 in out-of-pocket costs. The lumber mill made an economic profit of $1,600 last month.

false

Sunk costs are important for current business decisions.

false

The behavior of an individual perfectly competitive firm has a perceptible influence on the market price.

false

The demand curve faced by a perfectly competitive firm is vertical.

false

In the short run, all costs are variable.

false REMEBER : In the short run, all costs are fixed. In the long run, all inputs are variable

Setting the price charged by a natural monopoly equal to zero:

generates economic losses.

A price-discriminating monopolist will tend to charge a higher price to senior citizens if it believes that senior citizens:

have a more inelastic demand than other customers.

If a profit-maximizing monopolist finds that marginal cost is increasing and that it exceeds marginal revenue, it should:

increase price and decrease output.

Figure 7-4 shows the relationship between the various costs of a perfectly competitive firm. In the figure, when the market price equals $105 and the firm sells 675 units of output, the firm:

is earning positive economic profit.

The marginal product of capital:

is equal to the increase in output obtained from a one-unit increase in capital, holding other factors constant.

If the marginal revenue from the tenth unit of output equals $4 for a non-discriminating, profit-maximizing monopolist and the marginal revenue from the ninth unit equals $6, then the price for the tenth unit is:

is greater than $4.

A monopoly is characterized by:

large barriers to entry.

The figure below shows the long-run average cost curve for a firm. Based on the figure, the region x shows _____.

the level of output at which the firm attains economies of scale

Welfare loss occurs in a monopoly because:

the monopolist restricts output below the socially efficient level.

The production function describes

the relationship between the quantity of inputs utilized and the quantity of output produced.