Micro Final Exam
5. A curve that shows the quantity of a good or service supplied at various prices after all long-run adjustments to a price change have been completed is a long-run: A) marginal revenue curve. B) marginal cost curve. C) industry supply curve. D) production curve.
C
6. A perfectly competitive industry is said to be efficient because the: A) marginal cost of production of the last unit of output is minimized. B) product is standardized across firms in the industry. C) average total cost of production of the industry's output is minimized. D) market price of the good is equal to economic profit for all firms in the industry.
C
6. Diminishing marginal returns is first evident in above table: a) second worker b) third worker c) fourth worker d) sixth worker e) eighth worker
C
8. If a perfectly competitive firm is producing a quantity where MC > MR, then profit: A) is maximized. B) can be increased by increasing production. C) can be increased by decreasing production. D) can be increased by decreasing the price.
C
5. If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is: A) $10. B) $20. C) $200. D) $220.
D
21. (Figure: Short-Run Monopoly) Look at the figure Short-Run Monopoly. The profit-maximizing price is price: A) N. B) O. C) P. D) Q.
A
7. If it produces, a perfectly competitive firm will maximize profits when the: A) marginal revenue equals marginal cost. B) marginal revenue is lower than average variable cost. C) price is lower than marginal cost. D) price is higher than marginal cost.
A
1. If firms are making positive economic profits in the short run, then in the long run: A) the short-run industry supply curve will shift leftward. B) firms will enter the industry. C) industry output will rise and the price will rise. D) firms will leave the industry.
B
1. the change in variable cost divided by the change in quantity is a) average variable cost b) marginal cost c) opportunity cost d) implicit cost e) explicit cost
B
18. A downward-sloping demand curve will ensure that: A) P = MR. B) P > MR. C) P < MR. D) P = MC.
B
24. (Figure: Monopoly Model) Look at the figure Monopoly Model. The profit-maximizing quantity is at point: A) W. B) J. C) K. D) L.
B
13. The total economic profit the above firm experiences is a. $6,200 b. $13,000 c. $11,000 d. $15,200 e. $0
C
4. Marginal utility is defined as the a) average amount of satisfaction gained from consuming a product b) total amount of satisfaction gained from consuming product c) additional satisfaction gained from consuming one more unit of a product d) total amount of satisfaction gained from consuming a product divided by the number of products consumed e) total amount of satisfaction gained from consuming a product times the amount of products consumed
C
Assume that pizzas and calzones are substitutes in production and the price of pizza decreases. What should happen to the equilibrium price and quantity of calzones? a) the equilibrium price rises and equilibrium quantity falls b) the equilibrium price falls and the equilibrium quantity falls c) the equilibrium price rises and the equilibrium quantity rises d) the equilibrium price falls and the equilibrium quantity rises
D
15. Melissa is a self-employed lawyer who chooses a higher-priced restaurant 2 miles from home over a cheaper restaurant 15 miles from home. Which of the following is the most likely explanation for her behavior? a) the opportunity cost of her time is very low b) she doesn't take travel time into consideration c) she doesn't like to cook or doesn't know how to d) the prices at the more expensive restaurant understate the opportunity cost of eating there e) the higher monetary cost of the more expensive restaurant is offset by the higher opportunity cost of the lower-priced restaurant
E
3. All of the following are true of a perfectly competitive firm in long-run equilibrium except one. Which is the exception? a. Its economic profit will be zero b. Its accounting profit may be positive c. It will be minimizing average total cost d. It will be charging a price equal to marginal cost e. Marginal cost is minimized
E
15. Assume that the above market is a monopoly. What areas represent the level of deadweight loss associated with monopoly pricing? a. A + B + D b. A + B + C c. D + E d. C + E e. B + D
D
2. Price-takers are individuals in a market who: A) select a price from a wide range of alternatives. B) select the lowest price available in a competitive market. C) select the average of prices available in a competitive market. D) have no ability to affect the price of a good in a market.
D
2. The demand for a product is the amount that a) buyers purchase in the market b) buyers are willing to purchase at a given price c) sellers are willing to sell at a particular price d) buyers are willing and able to purchase at alternative prices e) buyers are able to purchase at a specific price
D
10. The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as: A) product differentiation. B) barrier to entry. C) market power. D) patents and copyrights.
C
11. (Figure: Perfectly Competitive Firm) Look at the figure The Perfectly Competitive Firm. The figure shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit. If the market price is $3, the firm will produce ________ units of output per day. A) 100 B) 250 C) 300 D) 400
C
11. A natural monopoly results when a firm has a. a patent b. official approval to produce a product c. decreasing average costs over the range of market demand d. exclusive use of a natural resource.
C
12. A natural monopoly exists whenever a single firm: A) is owned and operated by the federal or local government. B) is investor owned but has been granted the exclusive right by the government to operate in a market. C) has economies of scale over the entire range of production that is relevant to its market. D) has gained control over a strategic input of an important production process.
C
1. Assuming all of the firms are identical in the above exhibit, how many firms are in the industry before and after demand shifts? a. Fifty firms are in the industry before and after demand shifts b. Fifty firms are in the industry before demand shifts; after the shift, the amount cannot be determined c. Fifty firms are in the industry after demand shifts; before the shift, the amount cannot be determined d. The number of individual firms cannot be determined from the information given
A
10. if the demand curve has a price elasticity of demand of 1.0 everywhere, than a 30 percent decrease in price will a) cause a 30 percent increase in quantity demanded b) cause a 30 percent decrease in quantity demanded c) cause quaintly demanded to remain constant d) none of the above
A
11. A local restaurant offers an "all you can eat" ribs special. You pay $11.95 and then you eat as many servings as you desire at no additional cost. it would follow that you will stop eating when a) your marginal utility derived from eating another serving is zero or less b) your total utility derived from eating all of the servings just equals $11.95 c) your marginal utility derived from another serving equals $11.95 d) it is physically impossible for you to eat any more
A
11. Compared to a perfectly competitive market, a monopolist will produce ________ and charge a ________ price. A) less; higher B) less; lower C) more; higher D) more; lower
A
12. The short-run industry supply curve: A) shows the total quantity supplied by all firms in an industry for each possible price when the number of producers is given. B) is drawn on the assumption that the number of firms in the industry doesn't increase, but it allows for a decrease in the number of firms due to bankrupt firms leaving the industry. C) is a meaningful concept only if all firms in the industry are identical. D) is of limited usefulness, since it is not relevant when markets are perfectly competitive.
A
13. Situations in which the more users of a product there are, the more useful the product becomes are: A) network effects. B) monopolies. C) conglomerates. D) exclusive franchises.
A
14. A profit-maximizing monopolist produces an output level that is an inefficient because a. there are mutually beneficial exchanges that go unexploited b. all mutually beneficial exchanges have been exploited c. marginal revenue is greater than marginal cost d. marginal revenue is less than marginal cost e. consumers wish to purchase all that is produced
A
15. Because monopoly firms are price-setters: A) they can sell more only by lowering price. B) they sell more at higher prices than at lower prices. C) they take the market-determined price as given and sell all they can at that price. D) they charge the highest possible price.
A
16. Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to sell six, she can charge only $20,000 each. The quantity effect of selling the sixth motor home is: A) $20,000. B) $10,000. C) $15,000. D) $21,000.
A
17. suppose we observe an increase in the price of oranges. Which of the following is not a possible cause. A) a decrease in the price of apples, a substitute b) a scientific discovery that organs will cure the common cold c) an increase in consumer income, assuming oranges are a normal good d) a breeze in florida
A
18. suppose that oranges and tangerines are substitutes in consumption. How will an increase in the price of oranges impact the market for tangerines? a) lead to a higher equilibrium price and higher equilibrium quantity b) lead to a higher equilibrium price and a lower equilibrium price and a lower equilibrium quantity c) lead to a lower equilibrium price and a higher equilibrium quantity d) lead to a lower equilibrium price and a lower equilibrium quantity
A
19. A monopoly is producing at the output level where average total cost equals $30, marginal revenue is $40, and the price is $50. If ATC is at its minimum level and the ATC curve is U-shaped, in order to maximize profits this firm should: A) increase output. B) reduce output. C) do nothing; it is already maximizing profits. D) shut down.
A
19. Alex's furniture mart produces and sells dining room tables in a perfectly competitive market. When Alex's furniture mart produces and sells 250 dining room tables per month, its marginal cost is equal to 200. if the market price of dining room tables is equal to 150, Alex's Furniture mart should:
A
2. If economic profits exist in perfect competition, then firms will enter in the long run because of easy entry, the ________ curve will shift to the right, and ________ in the market will ________. A) supply; output; increase B) demand; supply; fall C) supply; demand; also shift to the right D) demand; price; increase
A
4. In perfect competition, the assumption of easy entry and exit implies that: A) in the long run all firms in the industry will earn zero economic profits. B) in the short run all firms in the industry will earn positive economic profits. C) in the short run all firms in the industry will earn zero economic profits. D) in the long run all firms in the industry will earn positive economic profits.
A
6. Suppose a perfectly competitive constant-cost industry is in long-run equilibrium when the market demand suddenly increases. What probably will happen to a firm in the long run? a. It will experience no change from the original equilibrium b. It would experience a higher equilibrium price c. It would experience a lower equilibrium price d. It would experience the same equilibrium price but would reduce its output e. It would experience higher average total costs and reduce its output
A
8. (Figure: The Perfectly Competitive Firm) Look at the figure The Perfectly Competitive Firm. The figure shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit. The firm's economic profit in the long run will be: A) $0. B) $250. C) $275. D) $300.
A
8. The Toys-R-Us Toy company can produce 500 water pistols for a total costs of $1400. If the variable cost of producing 500 water pistols is $1300, then a) fixed cost must be $100 b) marginal cost must be $1300 c) marginal cost must be increasing d) average variable cost must be decreasing
A
9. A perfectly competitive market is efficient because a. all mutually beneficial transactions are exploited b. it maximizes producer surplus c. consumer surplus would be larger if price were lower d. production occurs at the lowest average total cost
A
12. Which of the following is true of marginal revenue for a monopolist that charges a single price? a. P = MR because there are no close substitutes for the monopolist's product b. P > MR because the monopolist must decrease price on all units sold in order to sell an additional unit c. P < MR because the monopolist must decrease price on all units sold in order to sell an additional unit d. P = MR only at the profit-maximizing quantity
B
13. The supply curve found by summing up the short-run supply curves of all of the firms in a perfectly competitive industry is called the: A) firm's marginal cost curve. B) short-run market supply curve. C) interim market supply curve. D) competitive curve.
B
14. The demand curve for a monopoly is: A) the sum of the supply curves of all of the firms in the monopoly's industry. B) the industry demand curve. C) horizontal because no one can enter. D) perfectly elastic.
B
16. Suppose that computer games are a normal good. If the incomes of computer game players increase, you predict that in the market for computer games a) both equilibrium price and quantity fall b) both equilibrium price and quantity will rise c) equilibrium price will increase and quantity will decrease d) Equilibrium price will fall but quantity will increase
B
2. The movement along curve S from E to E' in the right panel in above exhibit represents a. an increase in the number of firms in the industry only b. an increase in output by each of a fixed number of firms in the industry c. both an increase in the number of firms in the industry and an increase in each firm's output d. the response of consumers to an increase in supply that lowers the market price
B
20. (Figure: Short-Run Monopoly) Look at the figure Short-Run Monopoly. The profit-maximizing quantity of output is quantity: A) Q. B) R. C) S. D) T.
B
22. (Figure: A Profit-Maximizing Monopoly Firm) Look at the figure A Profit-Maximizing Monopoly Firm. The firm in this figure will produce ________ units of output per week. A) 160 B) 220 C) 250 D) 300
B
25. (Figure: Monopoly Model) Look at the figure Monopoly Model. The profit-maximizing price is: A) Z. B) P. C) E. D) F.
B
3. If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a ________ share of the market, and consumers will consider her strawberries to be ________. Therefore, ________ advertising will take place in this market. A) large; standardized; no B) small; standardized; little, if any C) small; differentiated; no D) large; differentiated; extensive
B
4. If firms enter a perfectly competitive industry seeking economic profit and begin producing goods, which of the following will occur? a. The market supply curve will shift leftward with movement along a stationary demand curve b. The market supply curve will shift rightward with movement along a stationary demand curve c. The market demand and supply curves will both shift to the left d. The market demand and supply curves will both shift to the right e. There will be movement down and to the right along a fixed supply curve
B
6. Marginal revenue: A) is the slope of the average revenue curve. B) equals the market price in perfect competition. C) is the change in quantity divided by the change in total revenue. D) is the price divided by the change in quantity.
B
7. (Figure: The Perfectly Competitive Firm) Look at the figure The Perfectly Competitive Firm. The firm faces demand curve d, has the cost curves shown, and maximizes profit. In a long-run equilibrium, this firm will produce ________ units of output and sell its output at a price of ________. A) 100; $1.00 B) 250; $1.90 C) 300; $2.00 D) 400; $3.00
B
8. In the long-run, firms achieve efficiency in production because they a. strive to maximize revenue b. produce at a rate of output that minimizes average total cost c. produce at a rate of output that minimizes marginal cost d. producing the output consumers want most
B
9. (Figure: The Profit Maximizing Firm) Look at the figure The Profit Maximizing Firm. The figure shows cost curves for a firm operating in a perfectly competitive market. If the market price is P4, the firm will produce quantity ________ and ________ in the short run. A) q1; break even B) q3; make a profit C) q4; break even D) q5; lose fixed costs
B
1. If all firms in an industry are price-takers, then: A) each firm can sell at the price it wants to charge, provided it is not too different from the prices other firms are charging. B) each firm takes the market price as given for its current output level, recognizing that the price will change if it alters its output significantly. C) an individual firm cannot alter the market price even if it doubles its output. D) the market sets the price, and each firm can take it or leave it (by setting a different price).
C
10. (Figure: The Profit Maximizing Firm) Look at the figure The Profit Maximizing Firm. The figure shows cost curves for a firm operating in a perfectly competitive market. If the market price is P3, the firm will produce quantity ________ and ________ in the short run. A) q2; make a profit B) q1; break even C) q2; incur a loss D) q4; incur a loss
C
12. Suppose a lawyer leaves his $50,000 per year job and starts his own breeding pit bulls. In the first year, his accounting profits are $70,000. Based on this level of success, the lawyer should a) return to his old job because his economic profits are negative b) return to his old job because his economic profits are less than his old salary c) stay with his new firm because economic profits are positive d) stay with his new firm because accounting profits are positive
C
17. Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to sell six, she can only charge $20,000 each. The price effect of selling the sixth motor home is: A) $20,000. B) -$15,000. C) -$5,000. D) $25,000.
C
23. (Figure: A Profit-Maximizing Monopoly Firm) Look at the figure A Profit-Maximizing Monopoly Firm. This firm's price per unit is: A) $20. B) $26. C) $29. D) $35.
C
27. Suppose a perfectly competitive market is suddenly transformed into one that operates as a monopoly market. We would expect: A) price to rise, output to fall, consumer surplus to rise, producer surplus to rise, and deadweight loss to fall. B) price to rise, output to fall, consumer surplus to fall, producer surplus to fall, and deadweight loss to rise. C) price to rise, output to fall, consumer surplus to fall, producer surplus to rise, and deadweight loss to rise. D) price to fall, output to rise, consumer surplus to rise, producer surplus to fall, and deadweight loss to fall.
C
3. Economic profits in a perfectly competitive industry encourage firms to ________ the industry, and losses encourage firms to ________the industry. A) exit; enter B) enter; enter C) enter; exit D) exit; exit
C
3. The price elasticity of demand a) is an artificial term that describes how firms respond to changes in demand b) reflects the responsiveness of supply to a change in price c) reflects the responsiveness of quantity of demanded to a change in price d) reflects the responsiveness of quantity supplies to a change in price
C
9. In contrast with perfect competition, a monopolist: A) produces more at a lower price. B) produces where MR > MC, and a perfectly competitively firm produces where P = MC. C) may have economic profits in the long run. D) earns zero economic profits in the long run.
C
9. Elvis is willing to $5 for a gravy sandwich. If he buys one for $4 each, his consumer surplus is: a) 9 b) 1 c) 9.50 D) 12
b
13. maryann and don want to open their own dell. To do so, maryann must give up her job, at which she earns $20,000 per year, and Don must give up his part-time job, at which he earns $10,000per year. they must liquidate their money market fund, which earns $1000 interest annually. the rent on the building is $10,000 per year, and expenses for such necessities as utilities, corned beef, and pickles are $35,000 annually. if Mary Ann and don were making zero economic profits, what is the amount of total revenue they would be earning? a) $10,000 b) 35,000 c) 45,000 d) 31,000 e) 76,000
e
14. suppose you have purchased a non-refundable plane ticket and at the last moment, you cannot take the trip. You can, however, sell the ticket. If you paid $700 for the ticket, the cost of sending the ticket to someone through overnight mail is $20, and you spend $10 on a courier to get the ticket to the post office for overnight delivery, what is the minimum you should accept for the ticket? a) 700 because that is what the ticket cost b) 720 because that is the cost of the ticket and of getting it to the buyer c) 730 because that is the total cost of the ticket and getting it to the buyer d) more then 730, so that you can make a profit e) 30 because the 700 is a sunk cost
e
10. The main reason a monopolist can earn long-run economic profit, whereas a perfectly competitive firm cannot, is that a. monopolists operate under economies of scale b. perfectly competitive firms have opportunity costs c. demand for the monopolist's output is inelastic d. there are no barriers to entry in perfect competition
D
14. (Figure: Perfectly Competitive Firm) Look at the figure The Perfectly Competitive Firm. The figure shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit. If the firm faces a market price of $3, its total profit per day is: A) $0. B) $250. C) $275. D) $300.
D
26. (Figure: Monopoly Model) Look at the figure Monopoly Model. When the firm is in equilibrium (that is, maximizing its economic profit), its total cost is the area of rectangle: A) 0PDJ. B) 0IHJ. C) IPDH. D) 0SBJ.
D
4. The perfectly competitive model assumes all of the following except: A) a great number of buyers. B) easy entry into and easy exit from the market. C) complete information on the part of buyers and sellers. D) that firms attempt to maximize their total revenue.
D
5. The long-run supply curve for a constant-cost perfectly competitive industry is a. a ray from the origin at a 45-degree angle b. perfectly inelastic c. somewhat inelastic d. perfectly elastic e. declining
D
5. The opportunity costs of using resources provided by the firm's owners are called a) sunk costs b) fixed costs c) explicit costs d) implicit costs e) entrepreneurial costs
D
7. Suppose a perfectly competitive constant-cost industry is in long-run equilibrium when the market demand suddenly increases. What probably will happen to the industry in the long-run? a It will experience no change from the original equilibrium. b It will experience a higher equilibrium price and higher equilibrium output. c It will experience a higher equilibrium price but the output doesn't change. d It will experience the same equilibrium price but a higher equilibrium output. e It will experience a lower equilibrium price and output.
D
7. Suppose that the price of golf hats increases from $10.00 each to $20.00 each. At the same time that quantity of golf hats demanded decreases from 200 to 150. What is the price elasticity of demand? a) .5 b) 1.67 c) .6 d) .4
D