HW 5

1. Refer to Table 15-9. What is the marginal revenue of the 3rd unit? a. $4 b. $12 c. $20 d. $28

b. $12

1. Refer to Table 15-9. What is the marginal cost of the 4th unit? a. $4 b. $14 c. $31 d. $62

b. $14

1. A profit-maximizing monopolist charges a price of $12. The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. Average total cost for 10 units of output is $5. What is the monopolist's profit? a. $60 b. $70 c. $100 d. $120

b. $70

1. Refer to Figure 14-7. In the long run, the firm will exit the market if the price of the good is a. $75. b. $85. c. $95. d. All of the above are correct.

d. All of the above are correct.

1. Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average total cost of production equal to $5, and is earning $240 economic profit in the short run. What is the current market price? a. $9 b. $10 c. $11 d. $12

c. $11

1. Refer to Table 14-3. For this firm, the marginal revenue is a. $39. b. $26. c. $13. d. $0.

c. $13.

1. Refer to Table 14-3. For this firm, the price is a. $39. b. $26. c. $13. d. $0.

c. $13.

1. Refer to Table 15-9. What price should the monopoly charge to maximize profit? a. $16 b. $20 c. $24 d. $28

c. $24

1. Refer to Figure 14-7. When the price of the good is $175, the firm's maximum profit is a. $16,500. b. $20,375. c. $25,750. d. $90,125.

c. $25,750.

1. Refer to Table 13-6. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is$20 per day regardless of the number of chairs produced. What is the total daily cost of producing at a rate of 55 chairs per hour if the factory operates 8 hours per day? a. $480 b. $576 c. $520 d. $616

c. $520

1. Anya has decided to start her own hair-styling salon. To purchase the necessary equipment, Anya withdrew $10,000 from her savings account, which was earning 3% interest, and borrowed an additional $5,000 from the bank at an interest rate of 8%. What is Anya's annual opportunity cost of the financial capital that has been invested in the business? a. $300 b. $400 c. $700 d. $1,650

c. $700

1. Refer to Figure 15-6. What area measures the monopolist's profit? a. (K-C)*W b. (L-A)*T c. (K-B)*W d. 0.5[(K-C)*(Z-T)]

c. (K-B)*W

1. Refer to Table 14-9. If the firm's marginal cost is $11, it should a. increase production to maximize profit. b. increase the price of the product to maximize profit. c. advertise to attract additional buyers to maximize profit. d. reduce production to increase profit.

d. reduce production to increase profit.

1. Marcus sells 300 candy bars at $0.50 each. His total costs are $125. His profits are a. $25. b. $124.50. c. $125. d. $150.

a. $25.

1. Refer to Figure 14-7. The firm will shut down in the short run if the price of the good is a. $75. b. $85. c. $95. d. All of the above are correct.

a. $75.

1. Compared to the monopoly outcome with a single price, imperfect price discrimination (i) sometimes raises total surplus. (ii) sometimes lowers total surplus. (iii) always leads to a lower quantity of output. a. (i) and (ii) only b. (ii) and (iii) only c. (i) and (iii) only d. (i), (ii), and (iii)

a. (i) and (ii) only

1. Which of the following are necessary characteristics of a monopoly? (i) The firm is the sole seller of its product. (ii) The firm's product does not have close substitutes. (iii) The firm generates a large economic profit. (iv) The firm is located in a small geographic market. a. (i) and (ii) only b. (i) and (iii) only c. (i), (ii), and (iii) only d. (i), (ii), (iii), and (iv)

a. (i) and (ii) only

1. A firm that produces and sells furniture gets to choose a. how many workers to hire in both the short run and the long run. b. the size of its factories in the short run but not in the long run. c. which short-run average-total-cost curve to use in both the short tun and the long run. d. All of the above are correct.

a. how many workers to hire in both the short run and the long run.

1. Refer to Table 13-6. Assume the Wooden Chair Factory currently employs 5 workers. What is the marginal product of labor when the factory adds a 6th worker? a. 5 chairs per hour b. 15 chairs per hour c. 25 chairs per hour d. 70 chairs per hour

b. 15 chairs per hour

1. Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 5, Q = 125) and (L = 6, Q = 152). Then the marginal product of the 6th worker is a. 25 units of output. b. 27 units of output. c. 37 units of output. d. 162 units of output.

b. 27 units of output.

1. Refer to Table 14-9. At which quantity of output is marginal revenue equal to marginal cost? a. 3 units b. 5 units c. 7 units d. 9 units

b. 5 units

1. Which of the following is not a characteristic of a perfectly competitive market? a. Firms are price takers. b. Firms have difficulty entering the market. c. There are many sellers in the market. d. Goods offered for sale are largely the same.

b. Firms have difficulty entering the market.

1. Foregone investment opportunities are an example of a. an explicit cost. b. an implicit cost. c. revenues. d. profits.

b. an implicit cost.

1. In the long run a company that produces and sells kayaks incurs total costs of $15,000 when output is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits a. diseconomies of scale because total cost is rising as output rises. b. constant returns to scale because average total cost is constant as output rises. c. diseconomies of scale because average total cost is rising as output rises. d. economies of scale because average total cost is falling as output rises.

b. constant returns to scale because average total cost is constant as output rises.

1. Which of the following is not a reason for the existence of a monopoly? a. patents b. marginal-cost pricing c. economies of scale d. trademarks

b. marginal-cost pricing

1. When a monopoly increases its output and sales, a. both the output effect and the price effect work to increase total revenue. b. the output effect works to increase total revenue, and the price effect works to decrease total revenue. c. the output effect works to decrease total revenue, and the price effect works to increase total revenue. d. both the output effect and the price effect work to decrease total revenue.

b. the output effect works to increase total revenue, and the price effect works to decrease total revenue.

1. Refer to Table 14-9. If the firm produces 3 units of output, a. marginal cost is $4. b. total revenue is greater than variable cost. c. marginal revenue is less than marginal cost. d. the firm is maximizing profit.

b. total revenue is greater than variable cost.

1. Refer to Figure 15-6. What price will the monopolist charge? a. A b. C c. K d. L

c. K

1. Which of the following statements is not correct? a. Monopolistic competition is similar to monopoly because in each market structure the firm can charge a price above marginal costs. b. Monopolistic competition is similar to perfect competition because both market structures are characterized by free entry. c. Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry. d. Monopolistic competition is similar to perfect competition because both market structures are characterized by many sellers.

c. Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry.

1. Refer to Figure 15-6. How much output will the monopolist produce? a. O b. T c. W d. Z

c. W

1. A monopoly a. can set the price it charges for its output and earn unlimited profits. b. takes the market price as given and earns small but positive profits. c. can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits. d. can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits.

c. can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.

1. Mrs. Smith operates a business in a competitive market. The current market price is $8.50. At her profit- maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should a. shut down her business in the short run but continue to operate in the long run. b. continue to operate in the short run but shut down in the long run. c. continue to operate in both the short run and long run. d. shut down in both the short run and long run.

c. continue to operate in both the short run and long run.

1. The socially efficient level of production occurs where the marginal cost curve intersects a. average variable cost. b. average total cost. c. demand. d. marginal revenue.

c. demand.

1. Refer to Table 15-9. At the profit-maximizing price, how much profit will the monopoly earn? a. $8 b. $10 c. $12 d. $14

d. $14

1. Refer to Figure 14-7. Suppose AVC = $113 when the firm produces 515 units of output. Then the firm's fixed cost amounts to a. $5,500, and its profit amounts to $20,375. b. $5,750, and its profit amounts to $20,375 c. $5,980, and its profit amounts to $25,750. d. $6,180, and its profit amounts to $25,750.

d. $6,180, and its profit amounts to $25,750.

1. Refer to Table 13-1. What is total output when 3 workers are hired? a. 15 b. 60 c. 105 d. 135

d. 135

1. Industrial organization is the study of a. how labor unions organize workers in industries. b. which managers are the most successful. c. how industries organize for political advantage. d. how firms' decisions regarding prices and quantities depend on the market conditions they face.

d. how firms' decisions regarding prices and quantities depend on the market conditions they face.