Economics WPR 2

Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane's economic profit from her first year in her own practice is...

-$39,000

Profit-maximizing firms enter a competitive market when existing firms in that market have...

average total costs that are less than market price.

Which of the following is a characteristic of a monopoly?

barriers to entry

Refer to the Table: What is the value of K?

$110

For the following table, what is the value of G?

$270

Refer to the graph: Given that Bearclaws chooses the profit-maximizing price and quantity, what profit will it obtain?

$280

For the following table, what is the value of A?

$50

Refer to the graph: What price will the monopolistically competitive firm charge in this market?

$800

Refer to the figure: What area measure the deadweight loss?

0.5[(B-F)*(L-K)]

Which of the following are features of a perfectly competitive market: 1. Free entry and exit 2. There are many buyers and sellers, each alone with negligible impact on the market price 3. Differentiated Products

1 and 2

Which of the following policy tools could potentially help increase efficiency in a monopoly market? 1. Heightened Anit-Trust Enforcement 2. Forcing the Monopolist to price at a marginal cost 3. Price ceilings 4. Public ownership of the monopoly

1,2,3, and 4

Suppose a certain firm is able to produce 125 units of output per day when 19 workers are hired. The firm is able to produce 137 units of output per day when 20 workers are hired, holding other inputs fixed. The marginal product of the 20th worker is...

12 units of output.

Which of the following examples illustrates an oligopoly market?

A city with two firms who are licensed to sell school uniforms for the local schools.

Flu shots provide a positive externality. When the market reaches equilibrium and without government intervention, which of the following statements is correct?

At the market equilibrium not enough vaccines are distributed.

The fundamental source of monopoly power is...

Barriers to entry.

If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would...

Be horizontal

Suppose that two coal mining companies - Allied and Barclay - own adjacent land suitable for excavating coal mines. The profits that each firm earns depends on both the number of mines it excavates and the number of mines excavated by the other firm. The table below lists each firm's individual profits. What is the Nash Equilibrium of this game?

Both Allied and Barclay choose to Excavate two mines.

Refer to the figure: The efficient scale of production occurs at which quantity?

C

Refer to the figure for a monopolistically competitive firm: If the ATC = 40 at the profit-maximizing level of output, which of the following will occur in the long run in this industry?

Firms will exit this industry

Hannah and Alicia are two college roommates who both prefer a clean common space in their dorm room. but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The following table shows the payoffs for this situation, where the higher a player's payoff number, the better off that player is. What is the Nash Equilibrium in this dorm cleaning game?

Hanna: Don't Clean, Alicia: Don't Clean

One way in which monopolistic competition differs from oligopoly is that...

In oligopoly markets there are only a few sellers.

Which of these types of firms can earn a positive economic profit in the long run?

Monopolies, but not competitive firms or monopolistically competitive firms.

In which of the following market structures can firms earn economic profits in the long run?

Monopoly only

Refer to the figure of a firm operating in a competitive market: Firms would be encouraged to enter this market for all prices that exceed...

P4

As the number of identical firms increases from 1 in a monopoly to few in an (cournot) oligopoly and to many in perfect competition, what happens to the price, quantity, and deadweight loss in the market?

Price decreases, Quantity increases, Deadweight Loss decreases.

A monopolist maximizes profit by...

Producing an output level where marginal revenue equals marginal cost

Refer to the figure: What is the monopolist's profit maximizing price and quantity?

Quantity = K, Price = B

A membership at a gym that always has space in classes and on machines is an example of the type of good represented by...

Rival in Consumption: No, Excludable: Yes

Fish in an unregulated, small lake in a populous suburb is an example of the type of good represented by...

Rival in consumption: Yes, Excludable: No

According to the Coase theorem, private parties can solve the problem of externalities if...

The cost of bargaining is small/there are no transactional cost/property rights are clearly defined

When a Monopoly is able to perfectly price discriminate...

The market reaches an efficient outcome.

The graph represents a market in which...

There is a positive externality

Refer to the figure for a monopolistically competitive firm: If the ATC = 36 at the profit-maximizing level of output, which of the following statements is correct?

This industry is at its long-run equilibrium

A firm in a monopolistically competitive market can earn short-run profits but not long-term profits.

True

Monopolistic competition is characterized by many buyers and seller, product differentiation, and free entry.

True

Which of the following is NOT a typical solution to the "Tragedy of the Commons?"

Turning the common resource into a club good.

If Farmer Brown plants no seed on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only costs. Farmer Brown's production function exhibits...

diminishing marginal product.

Suppose that a firm's long-run average total costs of producing smart phones increases as it produces between 50,000 and 60,000 smart phones. For this range of output, the firm is experiencing...

diseconomies of scale

Private goods are both...

excludable and rival in consumption

The equilibrium quantity in markets characterized by oligopoly is...

higher than in monopoly markets and lower than in perfectly competitive markets.

Bubba is a shrimp fisherman who could earn $5,000 as a fishing guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's...

implicit costs.

According to the graph, in order to reach the social optimum, the government could...

impose a tax of $12 per unit on plastics.

Refer to the graph: The firm in this figure is monopolistically competitive and maximizing profit. This firm...

is earning a short-run economic profit.

For a monopolist, marginal revenue is...

less than price, whereas marginal revenue is equal to price for a perfectly competitive firm.

Refer to the figure of a firm operating in a competitive market: In the short run, if the market price is below P1, individual firms in a competitive industry will earn...

losses and will shut down

According to the graph, if 325 units of plastics are produced and consumed, then the...

market equilibrium has been reached.

The following figure depicts a...

market with a negative externality.

Public goods are both...

nonexcludable and nonrival in consumption

The U.S. military defends a resident in Georgetown from foreign conflict. The fact that this resident enjoys this protection does not detract from other Americans' enjoyment of it. For this reason, we say that national defense is...

not rival in consumption.

Refer to the figure of a firm operating in a competitive market: In the short run, if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn...

positive profit

Because of the free-rider problem,

private markets tend to undersupply public goods

When price is above marginal cost, a firm in a competitive market should:

produce more goods

The Tragedy of the Commons results when a good is...

rival in consumption and not excludable.

When positive externalities are present in the market...

social benefits will be greater than private benefits.

According to the graph, if 250 units of plastics are produced and consumed, then the...

social optimum has been reached.

This market...

would be more efficient with a tax on the product.