Micro Quiz Review
Use the figure on the right to answer this question. If the firm is maximizing profit, it will produce___ units and make an economic profit of____.
1200; $3600 (intersection of marginal cost and marginal revenue (MR revenue subtracted by the line right below for the price)
The above tables give some production and cost information for Flaming Fernando's a restaurant that sells Fiery Frijoles. What is the average variable cost of producing 1000 frijole?
$2
The marginal cost curve intersects the _____ curves at their _____ points
average total cost and average variable cost; minimum
The market demand curve in a perfectly competitive market is______ and the demand curve for a perfectly competitive firm's output is _____.
downward sloping, horizontal
If Henry, a perfectly competitive lime grower in Southern California, can sell his limes at a price greater than his average total cost, Henry will
earn an economic profit
In the long run, if 1000 units are produced at a cost of $8000 and 1200 units at a cost of $9200, then over this range of output there are
economies of scale
A perfectly competitive firm will maximize profit when the quantity produced is such that
firm's marginal revenue is equal to its marginal cost
Which of the following is false?
fixed costs increase in the long run
For a single- price monopoly, price is
greater than marginal revenue
If new firms enter a perfectly competitive industry, the market supply
increases
As output increases, average total cost decreases
initially and then starts to increase
If a perfectly competitive firm finds that the price exceeds its ATC, then the firm
is earning an economic profit
A monopoly
is not protected by barriers to entry AND faces a downward-sloping demand curve
If perfectly competitive firms are maximizing their profit and are making an economic profit, the market _____ in a short-run equilibrium and ____ in a long-run equilibrium
is; is not
To produce more output in the short run, a firm must employ more of
its variable resources
In the short run, a perfectly competitive firm________ earn an economic profit and ________ incur an economic loss.
might; might
If a monopoly wants to sell a larger quantity, it must
set a lower price
The main source of economies of scale are
specialization of resources such as labor and capital
A single price monopoly has marginal revenue and marginal cost equal to $19 and 15 units of output where the price on the demand curve is $38. What is the firm's total revenue?
$570, (price x quantity)
To produce 10 shirts, the total cost is $80; to produce 11 shirts, the total cost is $99. The average total cost of the 11th shirt is equal to
$9
Use the figure above to answer the question. Consider a perfectly competitive firm in a short run equilibrium. Figure______ shows a firm in bad times because the firm makes a(n)_____.
C; economic loss of $3 per unit (the graph shows the ATC way above the MR and connecting with the MC above the MR
Monopolies are inefficient because, at the profit- maximizing output level
MB does not equal MC
To maximize its profit, a perfectly competitive firm produces so that ____ and a single-price monopoly produces so that ____.
MR=MC; MR=MC
Which of the following is always true for a single-price monopolist?
P>MR
Average total cost is equal to
average fixed cost + average variable cost AND total cost/ quantity
A single price monopoly has marginal cost of $23 and marginal revenue of $28. Which of the following is definitely correct?
To increase profit, it should produce more
What is a monopoly?
a firm that is the only seller of a good or service that does not have a close substitute
Which of the following firms is most likely to be a monopoly>
a local distributer natural gas
A firm that is a price taker faces
a perfectly elastic demand curve
Herb's Inc has a large share of its market and is tempted to collude with the few firms that are in its market. Herb's operates in
an oligopoly
Which of the following describes a barrier to entry?
anything that protects a firm from the arrival of new competitors
Patents
are a legal barrier to entry
A group of firms acting together to limit output, raise price, and increase economic profit is called a
cartel
A single price monopoly transfers
consumer surplus to producers
If a perfectly competitive seller is maximizing profit and is making zero economic profit, which of the following will this seller do?
continue at the current output, making zero economic output
A perfectly competitive firm is producing at the quantity where marginal cost is $6 and average total cost is $4. The price of the good is $5. To maximize its profit, this firm should
decrease its output
As a typical firm increases its output, its marginal cost
decreases at first then increases
Assume someone organizes all farms in the nation into a monopoly. Which of the following occurs? i. Consumer surplus decreases ii. economic profit increases iii. a deadweight loss is created
i, ii and iii
If a perfectly competitive firm is maximizing its profit and is earning an economic profit, which of the following is correct? i. price = marginal revenue ii. marginal revenue equals marginal cost iii. price is greater than average total cost
i, ii and iii
Collusion results when a group of firms i. act separately to limit, output, lower prices, and decrease economic profits ii. act together to limit output, raise prices, and increase economic profits iii. in the United States legally fix prices
ii only
Compared to a perfectly competitive industry, a single-price monopoly produces
less output
The long run is a time period that is
long enough to change the size of the firm's plant and all other inputs
If firms in a perfectly competitive industry are earning an economic profit, then in the _____ firms will _____ the industry.
long run, enter
The above figure shows three possible average total cost curves. If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC, each produce 30 units, and the market price of the good is $16 per unit, then the firms
make zero economic profit and firms neither enter nor exit the industry
Diseconomies of scale can occur as a result of which of the following?
management difficulties as the firm increases its size
A firm maximizes its profit by producing the amount of output such that
marginal revenue equals marginal cost
Suppose that each of 8,000 firms in a perfectly competitive industry produces 1,000 units of a good and maximizes profits when the price of the good is $10. If there is a permanent increase in demand, in the short run each firm produces ________ 1,000 units and in the long run the number of firms is ________ 8,000.
more than; more than
A single-price monopoly is producing an output level where marginal revenue is $15, marginal cost is $13, and price is $20. The monopoly is
not maximizing its profit and should increase output to increase its profit
Which of the following is found ONLY in oligopoly?
one firms actions affect another firm's profit
A monopoly is a market with
one supplier
The short-run average total cost, average variable cost, and marginal cost curves are all U-shaped because of i. constant total fixed cost ii. increasing and then decreasing marginal returns as more labor is hired iii. economics and diseconomics of scale as the plant size increases
only ii
If firms in a perfectly competitive industry are earning an economic profit and new firms enter the industry, then
the existing firms' economic profit decreases
If firms in an oligopolistic industry successfully collude and form a cartel, what price and output will result?
the monopoly price and output
The price charged by a perfectly competitive firm is
the same as the market price
The market supply in the short run for the perfectly competitive industry is
the sum of the supply schedules of all firms
An increase in the price of labor (a variable resource) shifts
the variable cost curves upward but leaves the fixed cost curves unchanged
Chuck owns a factory that produces leather footballs. His total fixed cost equaled $86,000 last year. His total equaled $286,000 last year. Hence Chuck's
total variable cost equaled $200,000
If a firm does not produce any output its
total variable cost must be zero
The graph shows long-run costs for a firm. The firm experiences economies of scale
up until 1000 units are produced (the section of the graph on a downward slope)
Because the amount of labor a firm employs can be changed, the cost of labor is known as
variable cost
If firm in a perfectly competitive market faces an equilibrium, price of $5, its marginal revenue
will also be $5