Econ Test

A monopolist earning economic profit in the short run determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit?

Raise price and lower output.

In Exhibit 7-15, suppose the market price of mowing lawns falls to $10 per lawn. In this situation, E-Z-Care will:

continue to mow lawns in the short run despite its economic losses.

In Exhibit 11-3, the total wage cost of hiring 6 employees is:

$108 per hour.

Consider a firm with the following cost information: ATC = $15, AVC = $12, and MC = $14. If we know that this firm has decided to produce Q = 20 by following the rule to maximize profits or minimize losses, then the price of the output is:

$14

Cartel members have an incentive to cheat on the cartel because:

each member's MR is not equal to the cartel's MC

In the short run, a firm should shut down its operation if:

its losses are greater than TFC at the MR = MC point.

If the wage rate is fixed at a certain level, the:

labor supply curve is horizontal.

Which of the following is the best example of an investment in human capital?

on-the-job training received by an apprentice electrician

Alcoa had a monopoly in the U.S. aluminum market from the late nineteenth century until the end of World War II. Which barrier to entry was the source of Alcoa's monopoly power?

ownership of a vital resource

In the short run, a firm will stay in business as long as:

price exceeds average variable cost

If a firm is currently equating MR and MC and product price = $24, AVC = $22, and ATC = $26, then in the long run this firm:

will go out of business.

Currently, union membership in the United States is about what percentage of civilian employees?

10 percent

If the firm represented in Exhibit 6-15 is operating with a plant whose size corresponds to short-run average total cost curve A, the level of output that would minimize its short-run average total cost is:

500 units per week.

As shown in Exhibit 7-19, assume that a perfectly competitive industry is in long-run equilibrium at point A and the demand curve shifts from D1 to D2. The result is a long-run supply curve drawn from point:

A to point C.

Which of the following is true under natural monopoly?

Economies of scale exist

Which of the following offers the best explanation of why "marginal revenue equals marginal cost" is the rule that indicates the profit-maximizing output level?

If output were increased from the profit-maximizing level, then the firm would be gaining marginal revenue that is less than the marginal cost incurred in producing this additional unit, and thus reducing the level of profit.

Which statement about the total variable cost curve is true?

It begins at the origin and is always increasing.

If a firm in a competitive industry is making zero economic profit but still producing, it must be the case that:

MC = MR = ATC.

Suppose product price is fixed at $24; MR = MC at Q = 200; AFC = $6; AVC = $16. What do you advise this firm to do?

Stay at the current output; the firm is earning a profit of $400.

Which of the following is characteristic of a monopolistically competitive firm?

The firm produces a differentiated product.