Micro 13,14,15

A certain firm produces and sells staplers. Last year, it produced 7,000 staplers and sold each stapler for $6. In producing the 7,000 staplers, it incurred variable costs of $28,000 and a total cost of $45,000. suppose the owner of the business had an offer to work for another firm for $25,000. The firm's economic profit for the year was

$-28,000

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, the average revenue of the 200th unit will be

$12

Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500. Ellie's annual economic costs will equal

$135.700

As part of an estate settlement Mary received $1 million. She decided to use the money to purchase a small business in Anywhere, USA. Her business operates in a perfectly competitive industry. If Mary would have invested the $1 million in a risk -free bond fund she could have made $100,000 each year. She also quit her job with Lucky.Com Inc. to devote all of her time to her new business; her salary at Lucky.Com Inc. was $75,000 per year. How large would Mary's accounting profits need to be to allow her to attain zero economic profit?

$175,000

Suppose that a firm in a competitive market is currently maximizing its short-run profit at an output of 50 units. If the current price is $9, the marginal cost of the 50th unit is $9, and the average total cost of producing 50 units is $4, what is the firm's profit?

$250

Suppose a certain firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20 At Q=499, the firm's profits equal

$3,997 **7

Tony is a wheat farmer, but he also spends part of his day teaching guitar lessons. Due to the popularity of his local country western band, Farmer Tony has more students requesting lessons than he has time for if he is to also maintain his farming business. Farmer Tony charges $25 an hour for his guitar lessons. One spring day, he spends 10 hours in his fields planting $130 worth of seeds on his farm. He expects that the seeds he planted will yield $300 worth of wheat. An economist would calculate Tony's total cost to equal

$380

Abdul opens a coffee shop. He receives a loan from a bank for $100,000. He withdraws $50,000 from his personal savings account. The interest rate on the loan is 8% and the interest rate on his savings account is 2%. Abdul's explicit cost of capital is

$8,000

Total profit for a firm is calculated as

(price minus average cost) times quantity of output.

Grace is a self-employed artist. She can make 20 pieces of pottery per week. She is considering hiring her sister Kate to work for her. Both she and Kate can make 35 pieces of pottery per week. What is Kate's marginal product?

15 pieces of pottery

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. What is the AVERAGE TOTAL COST of production when the firm hires 7 workers?

81 cents

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. What is the AVERAGE VARIABLE COST of production when the firm hires 7 workers?

81 cents

The profit maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost. ** average revenue

Which of the following would be most likely to have monopoly power?

A local electrical cooperative

Which of the following statement is true of a monopoly

A monopoly has the ability to set the price of its products at whatever level it desires

Competitive firms differ from monopolies in which of the following ways?

Competitive firms do not have to worry about the price effects lowering their total revenue. Marginal revenue for a competitive firm equals price, while marginal revenue for a monopoly is less than the price it is able to charge. Monopolies must lower their price in order to sell more of their product, while competitive firms do not.

Which of the following is not a reason for the existence of a monopoly

Diseconomies of scale

When new firms enter a perfectly competitive market,

Existing firms may see their costs rise if more firms compete for limited resources

Which of the following statements best express a firm's profit-maximizing decision rule?

If marginal revenue is greater than marginal cost, the firm should increase its output. **greater

Which field of economics studies how the number of firms affects the prices in a market and the efficiency of market outcomes?

Industrial Organization

Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total revenues from the sales are $500. Which statements are correct

Marginal revenue equals $5. Average revenue equals $5. Price equals $5. d. all 3

Which of the following statements about monopolies is not correct

Monopolists typically produce larger quantities of output than the competitve firms

Which type of cost can be ignored when an individual or a firm is making decisions?

Sunk costs

When a firm is maximizing profit-maximizing production decision, which principle of economics is likely to be most important to the firm's decision?

The cost of something is what you give up to get it

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers. **5,600 is important

Which of the following are necessary characteristics of a monopoly

The firm is the sole seller of its product. The firm's products does not have close substitutions.

Which of the following characteristics of competitive markets is necessary for firms to be price takers?

There are many sellers. Goods offered for sale are largely the same.

Which of the following would be most likely to have monopoly power

a local cable TV provider

A firm that is the sole seller of a product without close substitutes is

a monopolist

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is

an implicit cost

When marginal cost is less than average total cost,

average total cost is falling **falling

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

average total cost less than market price **less

Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible

average total cost of production **average

in the long-run equilibrium of a competitive market, the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of

average total cost of the marginal firm **total cost

If Franco's Pizza Parlor knows that the marginal cost of the 500th pizza is $3.50 and that the average total cost of making 499 pizzas is $3.30, then

average total costs are rising at Q=500 **rising

A monopoly market is characterized by

barriers to entry

The fundamental source of monopoly power is

barriers to entry

What is a characteristic of a monopoly

barriers to entry

When a monopolist decreases the price of its good, consumers

buy more

Monopolies use their market power to

charge a price that is higher than marginal cost

When a firm operates under conditions of monopoly, its price is

constrained by demand **demand

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

continue to operate in both the short run and long run **continue both

The exit of existing firms from a competitive market will

decrease market supply and increase market price

When a monopolist increases the amount of output that it produces and sells, the price of its output

decreases

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

decreasing output would increase the firm's profit

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue

does not change

The market demand curve for a monopolist is typically

downward sloping

Monopoly firms have

downward-sloping demand curves and they can sell only a limited quantity of output at each price.

A benefit of a monopoly is

greater creativity by authors who can copyright their novels

A production function describes

how a firm turns inputs into output

If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should

increase its output

The entry of new firms into a competitive market will

increase market supply and increase market price **increase both

Joan grows pumpkins. If Joan plants no seeds on her farm, she gets no harvest. If she plants 1 bag of seeds, she gets 500 pumpkins. If she plants 2 bags, she gets 800 pumpkins. If she plants 3 bags, she gets 900 pumpkins. A bag of seeds costs $100, and seeds are her only cost. Joan's total-cost curve is

increasing at an increasing rate

If marginal cost is below average total cost, then average total cost

is falling

Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has

less market power than it would otherwise have

In order to sell more of its product, a monopolist must

lower its prices

Marcia is a fashion designer who runs a small clothing business in a competitive industry. Marcia specializes in making designer dresses. Marcia sells 10 dresses per month. Her monthly total revenue is $5,000. The marginal cost of making a dress is $400. In order to maximize profits, Marcia should

make more than 10 dresses per month **more

A monopoly firm is a price

maker and has no supply curve

The amount by which total cost rises when the firm produces one additional unit of output is called

marginal cost

The average-total-cost curve intersects

marginal cost at the minimum of average total cost **average total cost

Diminishing marginal product suggests that

marginal cost is upward sloping

If firms are competitive and profit maximizing, the price of a good equals the

marginal cost of production

Which of the following is the best example of variable cost?

monthly wage payments for hired labor

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect

new firms to enter the market

What is not a characteristic of a monopoly

one buyer

The simplest way for a monopoly to arise is for a single firm to

own a key resource

Economists assume that monopolists behave as

profit maximizers

A benefit of a monopoly is..

profit that can be invested in research and development.

Explicit costs

require an outlay of money by the firm

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium. **price fall

When economists refer to a production cost that has already been committed and cannot be recovered, they use the term

sunk costs

Entry into a market by new firms will increase the

supply of the good

Harry's Hotdogs is a small street vendor business owned by Harry Huggins. Harry is trying to get a better understanding of his costs by categorizing them as fixed or variable. Which of the following costs are most likely to be considered fixed costs?

the cost of bookkeeping services

Pete owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements?

the cost of shoe polish

When managers of firms in a competitive market observe falling profits, they may infer that the market is experiencing,

the entry of new firms

Most markets are not monopolies in the real world because

there are reasonable substitutes for most goods

Average total cost is equal to

total cost/output

As the number of workers increases,

total output increases, but at a decreasing rate

When competitive firm doubles the quantity of output it sells, its

total revenue doubles

A certain firm manufactures and sells computer chips. Last year it sold 2 million chips at a price of $10 per chip. For last year, the firm's

total revenue was $20 million