Micro Final

Marcus sells 300 candy bars at $0.50 each. His total costs are $125. His profits are

$25.

In a duopoly with a collusive agreement, when is the industry-wide profit as large as possible?

When both firms comply with the collusive agreement.

The reason a competitive market might have an upward-sloping long-run supply curve is that:

firms have different costs.

Both perfect competition and monopolistic competition firms make zero economic profits in the long run due to:

free entry and exit

According to the HHI you got in question 2, the economics podcast industry is:

heavily concentrated.

A lot of times hospitals consolidate. This is because:

if larger firms have lower average costs, new small entrants will not be able to produce at the low costs achieved by the big established firms.

Average total cost is increasing whenever

marginal cost is greater than average total cost.

Mr. Rogers sells colored pencils. The colored-pencil industry is competitive. Mr. Rogers hires a business consultant to analyze his company's financial records. The consultant recommends that Mr. Rogers increase his production. The consultant must have concluded that Mr. Roger's

marginal revenue exceeds his marginal cost.

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

marginal revenue is less than the price of the product.

Suppose ABC Aluminum Inc. owns 80% of the world's bauxite, a mineral used in the production of aluminum. Which of the following reasons describes the fundamental barrier to entry for the aluminum industry?

monopoly resources

Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold?

$10 and 100 units

Consider a profit-maximizing monopoly pricing under the following conditions. The profit-maximizing quantity is 40 units, the profit-maximizing price is $160, and the marginal cost of the 40th unit is $120. If the good were produced in a perfectly competitive market, the equilibrium quantity would be 50, and the equilibrium price would be $150. The demand curve and marginal cost curves are linear. What is the value of the deadweight loss created by the monopolist?

$200

Jacqui decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business, she withdrew $20,000 from her savings, which earned 5 percent interest. She also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Jacqui's economic profit from running her own business?

$4,000

If TC=400+40Q2 what is an optimal wage for workers if TP= 500L and Q=1.

$40000

If the MR of the 20th unit sold in a perfectly competitive market is $30, and the total cost is 150, the profit the firm makes from selling 30 units is:

$750

Sonia opened a yoga studio where she teaches classes and sells yoga clothing. Fixed costs for Sonia's yoga studio include the cost of the (i) tank tops. (ii) wages paid to the other yoga instructors. (iii) lease on the studio space. (iv) insurance that the landlord requires Sonia to carry for the studio.

(i) and (ii) only

Price discrimination adds to social welfare in the form of (i) increased total surplus. (ii) reduced costs of production. (iii)increased consumer surplus.

(i) only

Frank owns a dog-grooming business. Which of the following costs would be implicit costs? (i) dog shampoo (ii) rent on the storefront (iii)wages Frank could earn as a substitute elementary-school teacher (iv) interest that Frank's money was earning before he spent his savings to set up the dog-grooming business

(iii) and (iv) only

When the fixed cost is $120, average total cost is $12, and the total cost is $900, then the Average fixed cost for this Q is:

1.6 ATC=TC/Q $12=$900/Q Q=75 AFC=FC/Q AFC=$120/75 AFC= $1.6

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=6,Q=147) and (L=7,Q=184). The marginal product of the seventh worker is

37 units of output.

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. William can arrange 18 bouquets per day. What would be the total daily output of Kate's firm if she hired her husband?

38 bouquets

Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Together, Eldin and Murphy can paint five houses per week. What is Murphy's marginal product?

5 houses.

If in the economics podcast market, there are 5 major content creators and their value of sales (due to promotions and ads) are as per following: A: $ 500,000 B: $ 400,000 C: $ 250,000 D: $ 150,000 E: $ 100,000 What are the HHI and CR2?

64% and 2575.74

At MR=MC,

A competitive firm might make a positive profit in the short run.

Which of the following is the closest example of a perfectly competitive firm?

A farm in Iowa

What is true about prisoner's dilemma?

A game where self interested behavior results in less than optimal outcomes.

Which of the following is not correct?

A monopolist can charge any price and sell any quantity that it chooses.

What is a mixed strategy?

A strategy that involves uncertainty.

Which of the following is a characteristic of a monopolistic competition?

All answers are correct. -Zero Profits in the long run. -Free entry and exit -Product differentiation

A seller in a competitive market

All of the above are correct. - can sell all he wants at the going price, so he has little reason to charge less. - will lose all his customers to other sellers if he raises his price. - considers the market price to be a "take it or leave it" price.

Which of the following is a characteristic of a natural monopoly?

All of the above are correct. -Average cost exceeds marginal cost over large regions of output. -Increasing the number of firms increases each firm's average total cost. -One firm can supply output at a lower cost than two firms.

In a long-run equilibrium, the marginal firm has

All of the above are correct. -price equal to average total cost. -total revenue equal to total cost. -economic profit equal to zero.

Firms operating in competitive markets produce output levels where marginal revenue equals

All of the above are correct. -price. -average revenue. -total revenue divided by output.

Which of the following statements is not correct?

Average fixed costs are constant.

A firm's total costs of production are equal to its

Both C and D c. explicit costs + implicit costs. d. fixed costs+variable costs

Which of the following is not an example of third-degree price discrimination?

Buy one get one discounts

Which of the following is not a feature of a contestable market?

Cartels.

A Nash equilibrium is always Pareto Optimal.

False

Which of the following is not an example of a barrier to entry?

John Jr. owns the best seafood restaurant in a popular resort area. He charges high prices because the quality of the food is so good.

Which of the following is a good example of a cartel?

OPEC

Which of the following would be a better example of oligopolies?

Oil and gas industry

Which of the following statements best reflects the production decision of a profit-maximizing firm in a competitive market when price falls below the minimum of average variable cost?

The firm will immediately stop production to minimize its losses.

Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is maximizing his profit, which of the following statements is true?

The price of Bob's bison burgers will exceed Bob's marginal cost.

One advantage of HHI over CR method is that HHI includes the share of sales of all firms, but CR only includes top firms in the industry.

True

In which of the following do you expect an increase in demand for labor?

all of the above. there is more capital available technology improves Price of the product increases

Patents, copyrights, and trademarks

are examples of government-created monopolies.

Consider the following information about baseball production at Bobby's Baseball Factory: Worker Marginal Product 1. 3 2. 5 3. 8 4. 10 5. 7 6. 4 7. 2 Bobby pays all his workers the same wage, and labor is his only variable cost. From this information we can conclude that Bobby's average variable cost decreases

as output rises from 0 to 26, but rises after that.

Suppose that the DeBeers company faces very little competition from other firms in the wholesale diamond market. Why isn't the price of wholesale diamonds $10,000 per carat?

because the company would sell so few diamonds that it would earn higher profits by selling at a lower price

Marginal revenue for a monopolist is computed as

change in total revenue per one unit increase in quantity sold.

Which one is not second degree price discrimination?

cheaper airline tickets for infants.

Mark had a steady income of $60,000 per year, but he quit his job to start his bike and run shop. Last year, he spent $30,000 of his savings to buy equipments for his shop. He also borrowed $20,000 from his bank at 10 percent interest, to buy bikes and shoes for his shop. For the past few months he has also spent $2,000 per month on wages he pays to his staff. Also for the past few months she has taken in $6,500 in monthly revenue. In the short run, Mark should:

continue to operate but exit in the long run

When the marginal product of an input declines as the quantity of that input increases, the production function exhibits

diminishing marginal product.

The reason that LRAC is U-shaped is due to

economies and diseconomies of scale

If a social planner were running a monopoly, that planner could achieve an efficient outcome by charging the price that is determined by the

intersection of the marginal cost curve and the demand curve.

David's firm experiences diminishing marginal product for all ranges of inputs. The marginal cost curve associated with David's firm

is always increasing

When a profit-maximizing firm in a competitive market has zero economic profit, accounting profit

is at least zero.

A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if

it has some degree of monopoly-pricing power.

Perfect price discrimination describes a situation in which the monopolist

knows the exact willingness to pay of each of its customers.

Suppose that Christine owns her own CPA firm. She uses only two inputs in her business: her hours worked (labor) and a computer (capital). In the short run, Christine most likely considers

labor to be variable and capital to be fixed.

Free entry means that

no legal barriers prevent a firm from entering an industry.

An example of an opportunity cost that is also an implicit cost for a business is:

only b and c are correct. b. the unearned revenue of an alternative business. c. the value of the business owner's time.

As the number of firms in an oligopoly decreases, the

price and quantity approach the monopoly levels.

In the long run, all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if

price is less than average total cost.

The deadweight loss associated with a monopoly occurs because the monopolist

produces an output level less than the socially optimal level.

Which of the following expressions is correct for a competitive firm?

profit = (quantity of output) x (MR - average total cost)

Which of the following in a monopolistic competition is not different from perfect competition?

profits in the long run

A total-cost curve shows the relationship between the

quantity of output produced and the total cost of production.

Because the goods offered for sale in a competitive market are largely the same,

sellers will have little reason to charge less than the going market price.

The short-run market supply curve in a perfectly competitive industry

shows the total quantity supplied by all firms at each possible price.

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm

sole ownership of the right to sell the drug for a limited number of years.

For a construction company that builds houses, which of the following costs would be a fixed cost?

the $30,000 per year salary paid to the company's bookkeeper

Thirsty Thelma owns and operates a small lemonade stand. When Thelma is producing a low quantity of lemonade she has few workers and her equipment is not being fully utilized. Because she can easily put her idle resources to use,

the marginal cost of one more glass of lemonade is smaller than if output were high.

When price is greater than marginal cost for a firm in a competitive market,

there are opportunities to increase profit by increasing production.

A sunk cost is one that

was paid in the past and will not change regardless of the present decision.

Tom produces commemorative t-shirts in a competitive market. If Tom decides to decrease his output, this will

​decrease his revenue, since his output has decreased and the price remains the same.

When a monopolist chooses the output that maximizes profits, we know that MR = MC and also that P > MR. This is inefficient because

​the monopolist fails to make transactions where the marginal benefit is greater than the marginal cost.