ECON201 - Exam 2

CH7-Q35: I'MABigCorp. produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the 7,000 can openers was

$2.43

CH7-Q60: At 100 units of output, total cost is $22,000 and total variable cost is $14,000. At 100 units of output, what is the value of average total cost, average variable cost, and average fixed cost, respectively?

$220; $140; $80

CH7-Q102: Refer to Exhibit 7-14. What is the MPP of the fourth unit of labor ​[blank (D)]?

15 units

CH9-Q34: The following table shows a monopolist's demand curve and cost information for the production of its good. What quantity will it produce? Quantity Price per Unit Total Cost 10 $10 $20 20 $8 $50 30 $6 $65 40 $4 $90 50 $2 $120

30

CH10-Q116: Refer to Exhibit 25-3. Which of the following points represents the profit-maximizing quantity and price of a monopolistic competitor?

A

ch8-q78: for a perfectly competitive firm, profit maximization (or loss minimization) occurs at the level of output at which

MR = MC

CH9-Q55: Which of the following is an example of a legal barrier to entry?

a and b a. a public franchise b. a patent

ch9-q55: which of the following is an example of a legal barrier to entry

a and b a. a public franchise b. a patent

CH10-Q113: The theory of oligopoly assumes

a and c a. a few sellers and many buyers. c. significant barriers to entry.

ch8-q67: if a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its

allocative efficiency

CH10-Q41: Perfect competition displays ____ because the social benefits of additional production, as measured by the price that people are willing to pay, are in balance with the ___ to society of that production.

allocative efficiency; marginal costs

CH9-Q22: The marginal revenue curve for a monopolist _ the market demand curve.

always lies beneath

CH9-Q69: Refer to Exhibit 24-1 The deadweight loss of the profit-maximizing monopoly is identified by what area?

area BCA

CH8-Q45: If the price that a firm charges is higher than its __________ cost of production for that quantity produced, then the firm will earn profits.

average

ch8-q45: if the price that a firm charges is higher than its _ cost of production for that quantity produced, then the firm will earn profits.

average

CH7-Q6: In order to determine, the firm's total costs must be divided by the quantity of its output.

average cost

CH9-Q65: In order for a monopolist to be earning a profit, price must be greater than

average cost

ch9-q65: in order for a monopolist to be earning a profit, price must be greater than

average cost

ch7-q93: Refer to exhibit 7-4. curve D is a(n) _ cost curve.

average fixed

CH7-Q91: Refer to Exhibit 7-4. Curve B is a(n) __ cost curve.

average total

CH8-Q93: For a price taker, market equilibrium price is $100. At 50 units, MR = MC, ATC = $80, and AVC = $70. This price taker will

earn $1,000 profits if it produces 50 units.

CH10-Q15: In a monopolistic competitive industry, firms can try to differentiate their products by

enhancing product's physical aspects and all of the above.

ch9-q28: once I'maPharmaCo. has received confirmation of the registration for its latest drug patent application, it will have created a monopoly for that product by restricting

entry into the market

CH8-Q59: In economics, labor demand is synonymous with

derived demand.

CH7-Q13: In microeconomics, the term ___ is synonymous with decreasing returns of scale.

diseconomies of scale

CH8-Q85: A constant-cost industry has a long-run (industry) supply curve that is

horizontal

ch7-q94: if the owner of a firm earns zero economic profit, he or she has earned total revenue equal to his or her

implicit costs plus explicit costs

CH7-Q12: The term "constant returns to scale" describes a situation where

expanding all inputs does not change the average cost of production

CH10-Q86: Compared to a monopolistic competitor, a monopolist produces a good with __ substitutes and so has a __ elastic demand curve.

fewer; less

CH10-Q57: How can parties who find themselves in a prisoner's dilemma situation avoid the undesired outcome and cooperate with each other?

find effective ways to penalize firms who do not cooperate

ch8-q90: the perfectly competitive firm will shut down in the short run if price is

less than the average variable cost

Ch9-Q83: Compared to the perfectly competitive firm, the monopolist faces a demand curve that is ___ elastic because there are __ substitutes for the product produced by the monopolist.

less; fewer

ch8-q16: in the _, the perfectly competitive firm will react to profits by _.

long run; increasing its production

CH7-Q11: In microeconomics, the term _ is synonymous with economies of scale.

increasing returns to scale

CH9-Q41: ____ law implies ownership over an idea or concept or image

intellectual property

Ch9-Q27: In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely

raise prices, cut production, and realize positive economic profits.

ch9-q4: government regulations specify that inventors will maintain exclusive legal rights to their respective inventions for_.

patent; a limited time

CH10-Q98: A concentration ratio indicates the

percentage of total sales accounted for by the (for example) four largest firms.

ch8-q17: Firms operating in a market situation that creates _, sell their product in a market with other firms who produce identical or extremely similar products.

perfect competition

CH10-Q101: If you were to rank the four market structures in terms of lowest concentration ratio to highest concentration ratio, which of the following rankings would be correct?

perfect competition, monopolistic competition, oligopoly, monopoly

CH8-Q88: If a firm is a price taker, its demand curve is

perfectly elastic.

CH7-Q24: Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it?

physical space for the gallery

CH8-Q6: When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is

preparing to exit operations.

CH8-Q12: If a perfectly competitive firm is a price taker, then

pressure from competing firms will force acceptance of the prevailing market price.

CH8-Q1: The term __________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.

price taker

CH7-Q64: The marginal product (MP) of a variable input is

the change in total output that results from changing the variable input by one unit.

CH9-Q82: Marginal revenue is equal to __ divided by __.

the change in total revenue; the change in quantity of output

CH10-Q19: What role can advertising play with respect to differentiated products?

shapes consumers intangible preferences

CH7-42: Fixed costs are important because, at least in the ___, the firm ___.

short run; cannot alter them

CH8-Q96: Equilibrium price is $10 in a perfectly competitive market. For a perfectly competitive firm, MR = MC at 1,200 units of output. At 1,200 units, ATC is $23, and AVC is $18. The best policy for this firm is to __________ in the short run. Also, this firm earns __________ of __________ if it produces and sells 1,200 units.

shut down; losses; $15,600

CH8-Q3: If a firm's revenues do not cover its average variable costs, then that firm has reached its __________.

shutdown point

CH7-Q45: Which of the following should typically be ignored because spending has already been made and cannot be changed?

sunk costs

CH8-Q39: Refer to the diagram above. In this instance, point e shown on the graph indicates

the point where profits will increase by reducing output

CH8-Q77: If MR > MC, then

the firm can increase its profits (or minimize its losses) by increasing output.

CH10-Q33: If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then,

the firm should keep expanding production.

CH8-Q28: Refer to the diagram above. Which of the following explains the slope of the total revenue curve illustrated in this graph?

the slope of the total revenue curve is explained by both a and b above.

CH8-Q29: Refer to the diagram above. In this instance, at the range of output represented at point b,

total costs exceed total revenues.

CH7-Q41: Whatever the firm's quantity of production, _ must exceed total costs if it is to earn a profit.

total revenue

CH8-Q22: In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice?

what quantity to produce

CH10-Q91: The excess capacity theorem states that a monopolistic competitor

will produce an output level smaller than the one that would minimize its unit costs.

CH9-Q74: Refer to Exhibit 24-2. The profit-maximizing monopolist produces Q0 units and charges a price of

P3

ch8-q41: Refer to the diagram above. Based on the information illustrated in this graph, which of the following is an accurate statement?

profits will be reduce by production in the zone where MC exceeds MR

CH9-Q10: A firm that holds a monopoly position in the market place is

a price maker

CH9-Q18: Which one of the following is the most accurate description of a monopolist?

a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry

CH9-Q56: A natural monopoly exists when

economies of scale are so large that only one firm can survive and achieve low unit costs.

CH7-Q37: I'MaGadgetCo. produces and sells widgets. Last year, it produced 9,000 widgets and sold each one for $8. To produce 9,000 widgets, the company incurred variable costs of $27,000 and a total cost of $36,000. The average fixed cost to produce 9,000 widgets was

$1.00

ch7-q74: Refer to Exhibit 7-2. The dollar amounts that go in blanks (c) and (d), respectively, are

$1.00 and $1.50

CH7-Q75: Refer to Exhibit 7-2. What is the average total cost of producing 140 units of output?

$1.79

CH10-Q70: A monopolistic competitor has the following information about cost and demand.What will the firm's profits equal in the short run?

$102

ch9-q35: the table belwo shows a monopolist's demand curve and the cost of information for the production of its good. what will their profits equal

$1200

CH8-Q53: In order to produce 100 oatmeal cookies, GoodieCookieCo incurs an average total cost of $0.25 per cookie. The company's marginal cost is constant at $0.10 for all oatmeal cookies produced. The total cost to produce 50 oatmeal cookies is

$20

CH8-Q100: Refer to Exhibit 23-10. What price does this firm charge for its product?

$25

ch8-q35: Given the data provided in the table below, what will the marginal cost equal for production at quantity (Q) level 4?

$4.00

CH8-Q34: Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4?

$5.00

CH10-Q62: The table below shows the demand curve and cost information for a firm that is a monopoly. If they maximize their profits, what price will they charge?

$600

CH10-Q99: Total industry sales are $90 million. The top four firms (A, B, C, and D) account for sales of $15 million, $3.5 million, $1.3 million and $0.8 million, respectively. What is the four-firm concentration ratio?

0.23

ch10 - an industry is composed of 10 firms, all with equal sales. the four-firm concentration ratio in this industry is

0.40.

CH7-Q65: Refer to Exhibit 22-1. The numbers that go in blanks (A) and (B) are, respectively,

20 and 30.

CH9-Q15: In the United States, a pharmaceutical company's exclusive patent rights last for

20 years

Ch7-Q66: Refer to Exhibit 22-l. The numbers that go in blanks (c) and (d) are, respectively,

25 and 20

CH7-Q30: Mindy's company manufactures rubber balls used by elementary schools for playground activities. The table below sets out her firm's production cost information. Some values are missing. Which of the following statements is correct?

A = 20; E = 5

CH7-Q29: The table below sets out cost information for the production of volleyballs. Some values are missing. Which of the following statements is correct?

A = 42, E = 12

CH7-Q53: _ help to explain why every economy, as it develops, has an increasing proportion of its population living in urban areas.

Agglomeration factors

CH10-Q2: _ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.

An oligopoly

CH9-Q53: Monopolists are guaranteed to earn a positive economic profit because they are the only seller in their industry.

False

CH8-Q2: __________ refers to the additional revenue gained from selling one more unit.

Marginal revenue

CH8-Q79: Refer to Exhibit 23-2. What quantity of output does the profit-maximizing (or loss-minimizing) firm produce?

Q2, where marginal cost is equal to marginal revenue.

CH9-Q54: Which of the following is an assumption of the theory of monopoly?

There are extremely high barriers to entry.

CH8-Q68: For a perfectly competitive firm, the demand curve it faces is horizontal at the price determined in the market.

True

CH8-Q69: In long-run competitive equilibrium, no firm has an incentive to change its plant size.

True

CH8-Q71: A perfectly competitive firm is a price taker.

True

CH7-Q1: In economics, a firm that faces no competitors is referred to as _.

a monopoly

CH8-Q7: An __________ is calculated by subtracting the firm's costs from its total revenues, __________.

accounting profit; excluding opportunity cost

CH10-Q93: In long run equilibrium, the monopolistic competitor will most likely

be earning zero economic profit.

CH7-Q59: A fixed input is an input whose quantity

cannot be changed as output changes in the short run.

ch8-q81: consider the following data: equilibrium price = $10, quantity output produced = 100 units, average total cost = $13, and average variable cost = $7. what will the firm do and why?

continue to produce in the short run, because price is greater than the average variable cost

CH9-Q5: The form of legal protection intended to prevent reproduction of original works is referred to as _ law.

copyright

CH9-Q7: Intellectual property law is a body of law that includes

copyright legislation, as well as all of the above

CH7-Q19: According to the definition of profit, if a profit-maximizing firm will always attempt to produce its desired level of output at the lowest possible cost, then it will

do so regardless of what type of competition exists in a market.

CH8-Q73: A "price taker" is a firm that

does not have the ability to control the price of the product it sells.

ch8-q75: the market demand curve in a perfectly competitive market is

downward sloping

CH8-Q75: The market demand curve in a perfectly competitive market is

downward sloping.

CH10-Q28: The demand curve as perceived by a monopolistic competitor is ____.

downward-sloping

CH10-Q84: In a monopolistic competitive industry,

each firm in the industry produces a slightly differentiated product.

CH10-Q112: The monopolistic competitive firm will most likely earn a normal profit in the long run because of

easy entry and exit.

CH7-Q10: The term __ describes a situation where the quantity of output rises, but the average cost of production falls.

economies of scale

CH7-Q80: In the long run, if inputs are increased by 10 percent and output increases by 20 percent, then __ are said to exist.

economies of scale

ch7-q82: if the LRATC curve is falling, then

economies of scale are present

CH7-Q44: In order to calculate marginal cost, the change in __ is divided by the amount of change in quantity.

either total cost or variable cost

CH7-Q58: If a firm earns normal profit, then it has generated revenues

equal to the sum of implicit and explicit costs.

CH10-Q79: Cartels are easy to form and to maintain.

false

CH10-Q5: The branch of mathematics that analyzes situations in which players must make decisions and then receive payoffs most often used by economists is

game theory

CH9-Q61: In maximizing profits, a monopolist will charge a price that is

greater than marginal cost

ch9-q61: in maximizing profits, a monopolist will charge a price that is

greater than marginal cost

CH8-Q9: A perfectly competitive industry is a

hypothetical extreme.

ch8-q8: economic profit can be derived from calculating total revenues minus all of the firm's costs,

including its opportunity costs

CH8-Q50: Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should

keep the business open in the short-run, but plan to go out of business in the long-run.

CH7-Q8: The term _ is used to describe the additional cost of producing one more unit.

marginal cost

CH8-Q32: In economic terms, a practical approach to maximizing profits requires an examination of how changes in production affect __________ and __________.

marginal revenue; marginal cost

CH8-Q87: The price charged by a perfectly competitive firm is determined by

market demand and market supply, together.

CH7-Q2: arises where many firms are competing in a market to sell similar but differentiated products.

monopolistic competition

CH9-Q8: A ___ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve.

natural monopoly

ch8-q48: what happens in a perfectly competitive industry when economic profit is greater than zero?

new firms may enter the industry and all of the above

CH10-Q118: In which market structure can the good being produced be either homogeneous or differentiated?

oligopoly

CH9-Q80: Refer to Exhibit 24-3. The profit of the monopolist is

positive

CH9-Q9: The use of sharp, temporary price cuts as a form of ____ would enable traditional US automakers to discourage new competition from smaller electric car manufacturers.

predatory pricing

ch9-q17: a monopolist is able to maximize its profit by

producing output where MR = MC and charging a price along the demand curve

CH10-Q37: Monopolistic competitors can make a __ in the short-run, but in the long run, ___ will drive these firms toward ____.

profit or loss; entry and exit; a zero-profit outcome

CH7-Q33: If the firm produces 5 units that it sells for $39.00 each, what will its profits or losses equal?

profits equal $30

ch8-q30: Refer to the diagram above. In the instance, at the range of output represented at point c,

profits will be maximized

CH9-Q72: Individuals who spend resources to influence public policy in a way that will redistribute income to themselves are

rent seeking.

CH9-Q48: The following figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist. After maximizing profits, what does the firm's revenue equal?

the area of rectangle ADEH

ch9-q47: the following figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist. after maximizing profits what do the firms costs equal?

the area of rectangle ABGH

ch9-q46: the figure below shows the demand curve and the long run average cost curve for an electric company. this market is a natural monopoly because

the demand curve intersects the long run average cost curve at a point where the long run average cost curve is downward sloping

Ch7-Q63: As the marginal physical product curve rises,

the marginal cost curve falls

CH9-Q81: For the monopoly firm, its demand curve is

the market demand curve.

CH7-Q68: Refer to Exhibit 22-1. Diminishing marginal returns set in with the addition of which unit of the variable input?

the third

CH7-Q40: Refer to the diagram above. Based on the information illustrated in the graph, which of the following is correct?

the transition point between where MC is pulling down and pulling up AC always occurs at the minimum point of the AC curve

CH7-Q54: The graph above illustrates the electricity market. Consider market competition between firms where price is based on AR and select the most appropriate answer.

this market is imperfectly competitive with excess profits possible in the short-run

CH10-Q76: In long-run equilibrium, a monopolistic competitive firm will most likely produce a level of output for which price equals average total cost.

true

CH10-Q78: Concentration ratios are often used to determine the degree of oligopoly in an industry.

true

CH10-Q80: In the prisoner's dilemma, each prisoner would be better off if neither one confesses.

true

CH10-Q81: The profit-maximizing monopolistic competitive firm produces a level of output at which marginal revenue equals marginal cost.

true

CH9-Q52: The single-price monopolist produces the quantity of output at which marginal cost equals marginal revenue and charges a price that is greater than marginal revenue.

true

ch9-q52: the single-price monopolist produces the quantity of output at which marginal cost equals marginal revenue and charges a price that is greater than marginal revenue.

true

CH7-Q38: The marginal cost curve is generally __, because diminishing marginal returns implies that additional units are ____.

upward-sloping; more costly to produce

CH10-Q24: If a monopoly or a monopolistic competitor raises their prices, the quantity demanded ____.

will decline

CH10-Q30: If a monopolistic competitor raises its price, it ___ customers than a perfectlycompetitive firm, but ____ customers compared to the number that a monopolythat raised its prices would.

will lose fewer; it will lose more

CH10-Q27: Would raising the price for a product create a larger decline in quantity demanded for a monopolistic competitor's than it would for a monopoly?

yes; consumers will buy from competitors offering lower priced substitutes