Microeconomics final exam study guide EXAM 3

Figure 15-5: If the monopoly firm perfectly price discriminates, then consumer surplus amounts to

$0

Figure 15-5: If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to

$1,000

Figure 8-6: Without a tax, the equilibrium price and quantity are

$10 and 600

Table 13-8: What is the average variable cost of producing 5 units of output?

$40

If a monopolist can sell 7 units when the price is $4 and 8 units when the price is $3, then marginal revenue of selling the eight unit is equal to

-$4

Table 14-14: At what quantity will Bob maximize his profit?

6 units

For a competitive firm,

average revenue equals marginal revenue

A benefit to society of the patent and copyright laws is that those laws

encourage creative activity

Which of the following represents the firm's long run condition for exiting a market?

exit if P>ATC

Suppose a profit maximizing firm in a competitive market produces rubber bands, When the market price for rubber bands falls below the minimum of its average total cost, but still lies above the minimum of average variable cost, in the short run the firm will

experience losses but will continue to produce rubber bands

For a firm in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal.

false, For a firm in a perfectly competitive industry, PRICE, marginal revenue, and average revenue are all equal.

a monopolist produces where P=MC=MR

false, a monopolist produces where P>MC=MR

the difference between accounting profit and economic profit is

implicit costs

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

lower its price

In the short run, a firm's supply curve is equal to the

marginal cost curve above its average variable cost curve

Profit maximizing firms in a competitive market produce an output level where

marginal cost equals marginal revenue

Which of the following formulas would correctly calculate a monopolist's profit?

profit=(price-average total cost) x quantity

A tax on a good

raises the price that buyers effectively pay and lowers the price that sellers effectively receive

Explicit costs

require an outlay of money by the firm

For a good that is taxed, the area on the relevant supply and demand graph that represents government's tax revenue is

smaller than the area that represents the loss of consumer surplus and producer surplus

Figure 15-7: What area represents the total surplus lost due to monopoly pricing?

the triangle 1/2[(F-D)x(B-A)]

Because taxes distort incentives, they cause markets to allocate resources inefficiently

true

During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which revenue equals marginal cost

true

a monopoly creates a deadweight loss to society because it produces less output than the socially efficient level

true

Figure 13-5: Curve A is always declining because

we are dividing fixed costs by higher and higher levels of output

Economic profit

will never exceed accounting profit

Table 14-13: What is Diana's economic profit at the profit maximizing point?

$278

Table 15-6: what is the marginal revenue from the sale of the 3rd unit?

$3

Figure 8-9: The producer surplus with the tax is

$3,000

Table 14-5: the price of the product is

$11

Figure 15-12: A profit maximizing monopolist would create a deadweight loss to society valued at

$12

Scenario 13-9: An economist would calculate the total profit for one photo frame to be

$15

Table 15-12: If the firm produces the profit maximizing level of output, it will earn profits of

$18

The wacky widget company has total fixed costs of $100,000 over year. The firm's average variable cost is $10 for 10,000 widgets. At the level of output, the firm's average total costs equal

$20

The total surplus without the tax is

$20,000

Scenario 15-5: How much additional profit can the airline earn by charging each customer their willingness to pay relative to charging a flat price of $300 per ticket?

$30,000

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $4,500. The marginal cost of producing the 101st unit of output is $300. What is the total cost of producing 101 units?

$4,800

Figure 8-2: The amount of the tax on each unit of the good is

$5

Table 14-10: The marginal cost for producing the 4th unit is

$8

Figure 8-7: As a result of the tax, consumer surplus decreases by

$80, producer surplus decreases by $80, tax revenue is $120, and deadweight loss is $40

Table 13-3: The marginal product of the fourth worker is

10 units

In the market for widgets, the supply curve is the typical upward sloping straight line, and the demand curve us the typical downward sloping straight line. The equilibrium quantity in the market for widgets is 250 per month when there is no tax. Then a tax of $6 per widget is imposed. As a result, the government is able to raise $750 per month in tax revenue. We can conclude that the after tax quantity of widgets is

125 per month

Figure 15-8: To maximize total surplus, a benevolent social planner would choose which of the following outcomes?

150 units of output and a price of $15 per unit

When a monopolist decreases the price of its good, consumers

buy more

When a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax

false, also deadweight loss

in the short run, if a firm produces nothing, total costs are zero

false, there will still be fixed costs

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $11. It follows that the

firm's profit maximizing level of output is less than 100 units