MICRO Final Exam Review

Look at figure 2 Given that Bearclaws chooses the profit maximizing price and quantity, what profit level will it obtain? a. $700. b. $980. c. $490. d. $280.

$280

Look at figure 1 The firm's manager suggests that the firm's goal should be to maximize average profit. If the firm does this, what is the amount of profit that it will earn? A) $6,600 B) $6,750 C) $12,150 D) $36,000

$6,600

In the long-run equilibrium of a competitive market with identical firms, what is the relationship between price P, marginal cost MC, and average total cost ATC? a. P > MC and P > ATC. b. P > MC and P = ATC c. P = MC and P > ATC. d. P = MC and P = ATC.

P = MC and P = ATC

A firm is a natural monopoly if it exhibits the following as its output increases: a. decreasing marginal revenue b. increasing marginal cost c. decreasing average revenue d. decreasing average total cost

decreasing average total cost

If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will a) keep producing in the short run but exit the market in the long run. b) shut down in the short run but return to production in the long run. c) shut down in the short run and exit the market in the long run. d) keep producing both in the short run and in the long run.

keep producing in the short run but exit the market in the long run

If a monopoly's fixed costs increase, its price will _________ and its profit will _________. a. increase, decrease b. decrease, increase c. increase, stay the same d. stay the same, decrease

stay the same, decrease

Look at figure 2 Based upon the information shown, what price will Bearclaws charge to maximize profits? a. $7. b. $10.50. c. $14. d. $12.

$14

Look at figure 1 If the market price is $20, what is the average profit at the profit-maximizing quantity? A) $5 B) $6 C) $9 D) $20

$5

Look at figure 1 What is the minimum price the firm requires to produce output? A) $20 B) $14 C) $5 D) It cannot be determined

$5

Look at figure 1 What is the amount of the firm's fixed cost of production? A) $5,400 B) $6,750 C) $8,100 D) It cannot be determined.

$5,400

Look at figure 1 If the market price is $20, what is the amount of the firm's profit? A) $5,400 B) $6,750 C) $8,100 D) $16,200

$6,750

Look at figure 2 Based upon the information shown, what are total costs for Bearclaws, given that it maximizes profits? a. $700. b. $980. c. $490. d. $784.

$700

Look at figure 2 Based upon the information shown, what is total revenue for Bearclaws, given that it maximizes profits? a. $900. b. $980. c. $490. d. $1080.

$980

Look at Figure 1. If the market price is $20, what is the firm's profit-maximizing output? A) 750 units B) 1,100 units C) 1,350 units D) 1,800 units

1,350 units

Look at figure 2 Based upon the information shown, how many units will Bearclaws produce to maximize profits? a. 70. b. 90. c. 105. d. 130.

70

____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added. A. Diminishing variable product B. Diminishing average product C. Diminishing marginal product D. Diminishing marginal costs

Diminishing marginal product

Look at figure 1 The figure shows the cost structure of a firm in a perfectly competitive market. If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what happens to its profitmaximizing output level? A) It increases. B) It decreases. C) It remains the same. D) It could increase, decrease, or remain constant, depending on whether the firm is able to cut costs somewhere else.

It remains the same

________________________ arises where many firms are competing in a market to sell similar but differentiated products. (SKIPPED) a) Oligopolistic competition b) Perfect competition c) Monopolistic competition d) Monogopolised competition

Monopolistic competition

Look at figure 1 If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what happens in the diagram above? A) All the cost curves shift upward. B) Only the average variable cost and average total cost curves shift upward; marginal cost is not affected. C) Only the average total cost curve shifts upward; the marginal cost and average variable cost curves are not affected. D) None of the curves shifts; only the fixed cost curve, which is not shown here, is affected.

Only the average total cost curve shifts upward; the marginal cost and average variable cost curves are not affected

For a profit-maximizing monopoly that charges the same price to all consumers, what is the relationship between price P, marginal revenue MR, and marginal cost MC? a. P = MR and MR = MC. b. P > MR and MR = MC. c. P = MR and MR > MC. d. P > MR and MR > MC

P > MR and MR = MC

Look at figure 1 The firm's manager suggests that the firm's goal should be to maximize average profit. In that case, what is the output level and what is the average profit that will achieve the manager's goal? A) Q = 1,350 units, average profit = $5 B) Q = 1,100 units, average profit = $6 C) Q = 1,350 units, average profit = $9 D) Q = 1,800 units, average profit = $20

Q = 1,100 units, average profit = $6

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price. A. Total revenue B. Total profits C. Average profit margin D. Total cost

Total revenue

. ______________ include all of the costs of production that increase with the quantity produced. A. Fixed costs B. Variable costs C. Average costs D. Average variable costs

Variable costs

"As a recent graduate from TAMIU, you have landed a job in production management for Universal Clones, Inc. You are responsible for the entire company on weekends. Your costs are shown below." Quantity Average Total Cost 500 200 501 201 Your current level of production is 500 units. All 500 units have been ordered by your regular customers. "The phone rings. It's a new customer who wants to buy one unit of your product. This means you would have to increase production to 501 units. Your new customer offers you $450 to produce the extra unit." Question: Should you accept this offer?

You should not accept the offer

In economics, a firm that faces no competitors is referred to as _________________. A. an oligopoly B. a monopoly C. a perfect competitor D. an oligopolizor

a monopoly

A firm that holds a monopoly position in the market place is A. a price maker B. a price taker C. monopolistically competitive D. subject to infinite market forces

a price maker

Compared to the social optimum, a monopoly firm chooses a) a quantity that is too low and a price that is too high. b) a quantity that is too high and a price that is too low. c) a quantity and a price that are both too high. d) a quantity and a price that are both too low.

a quantity that is too low and a price that is too high

The marginal revenue curve for a monopolist the market demand curve. A. always rises above B. always lies beneath C. always runs parallel D. always is the same

always lies beneath

If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises. A) decreasing returns to scale B) consent returns to scale C) economies of scale D) increasing returns to scale

decreasing returns to scale

The slope of the demand curve for a monopoly firm is A) horizontal, parallel to the x-axis B) vertical, parallel to the y-axis C) upward sloping D) downward sloping

downward sloping

When __________________ exist, doubling of all inputs will result in more than doubling output, which means __________________________________________. A) economies of scale; a larger factory can produce at a lower average cost than a smaller company. B) economies of scale; a smaller factory can produce at a lower average cost than a larger company. C) low labor inputs; larger scale of production leads to higher costs. D) labor inputs; economies-of-scale curve is U-shaped.

economies of scale; a larger factory can produce at a lower average cost than a smaller company

In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity. A) either total cost or average cost B) increasing marginal returns C) either total cost or variable cost D) decreasing marginal returns

either total cost or variable cost

A competitive firm maximizes profit by choosing the quantity at which a) average total cost is at its minimum. b) marginal cost equals the price. c) average total cost equals the price. d) marginal cost equals average total cost.

marginal cost equals the price

A competitive firm's short-run supply curve is its ___________ cost curve above its ___________ cost curve. a. average total, marginal b. average variable, marginal c. marginal, average total d. marginal, average variable

marginal, average variable

The shape of the perceived demand curve for a perfectly competitive firm reflects that firm's ability to A) sell any quantity it wishes at the prevailing market price. B) raise its price without losing all of its customers. C) choose any combination of price and quantity. D) lose fewer customers than a monopoly that raised its prices.

sell any quantity it wishes at the prevailing market price

Which of the following should typically be ignored because spending has already been made and cannot be changed? A. variable costs B. sunk costs C. marginal costs D. average marginal costs

sunk costs

A perfectly competitive firm a) chooses its price to maximize profits. b) sets its price to undercut other firms selling similar products. c) takes its price as given by market conditions. d) picks the price that yields the largest market share.

takes its price as given by market conditions