Microeconomics HW (ch 12, 13, 14)

If a firm in a perfectly competitive market faces a market price of $5, and it decides to produce 400 units, the firm's total revenue will be:

$2,000

Imagine Tom's annual salary as an assistant store manager is $30,000, he owns a building that rents for $10,000 yearly, and his financial assets generate $1,000 per year in interest. One day, after deciding to be his own boss, he quits his job, evicts his tenants, and uses his financial assets to establish a bicycle repair shop. To run the business, he outlays $15,000 in cash to cover all the costs involved with running the business, and earns revenues of $50,000. What are Tom's accounting profits?

$35,000

Using the information in the table shown, the marginal revenue for the 3rd unit is:

$600

Suppose Winston's annual salary as an accountant is $60,000, and his financial assets generate $4,000 per year in interest. One day, after deciding to be his own boss, he quits his job and uses his financial assets to establish a consulting business, which he runs out of his home. To run the business, he outlays $8,000 in cash to cover all the costs involved with running the business, and earns revenues of $150,000. What are Winston's implicit costs?

$64,000

Suppose an industry consists of 100 firms with identical cost structures (represented by the "typical individual firm" in the figure below). The price is $18. The firm output quantity at the equilibrium price is ____ units The market output quantity at the equilibrium price is ____ units.

24 +/- 2% 2400 +/- 2%

A hair salon offers three services: haircuts, color treatment, and styling. The salon charges $40 for a cut, $65 for color, and $30 for styling. Last month, the salon sold 68 haircuts, 34 color treatments, and 22 styling sessions. If the salon's costs for the month totaled $2,843, what was its profit?

2747 +/- 2%

Economists consider:

ALL OF THESE ARE TRUE

For firms that sell one product in a perfectly competitive market, average revenue:

ALL OF THESE ARE TRUE

If firms are producing at a profit-maximizing level of output where the price exceeds the average total cost:

ALL OF THESE ARE TRUE

One reason a government might choose to protect monopoly rights in an industry is:

ALL OF THESE ARE TRUE

A natural monopolist that sets prices equal to marginal cost will:

ALL OF THESE STATEMENTS ARE TRUE

In general, with a monopolist's outcome:

ALL OF THESE STATEMENTS ARE TRUE

One way the government can introduce competition into a monopoly industry is to:

ALL OF THESE STATEMENTS ARE TRUE

The existence of a monopoly:

ALL OF THESE STATEMENTS ARE TRUE

The monopolist chooses to produce:

ALL OF THESE STATEMENTS ARE TRUE

A college student is thinking about running an ice-cream truck over the summer. Which of the following would likely be included in the total cost of the business?

ALL OF THESE WOULD BE INCLUDED IN TOTAL COST

In the short run, a firm that finds itself earning a loss should compare the market price to which cost in order to determine how to minimize its losses?

Average variable costs

Suppose the market for bottled water and the market for soft drinks both have large numbers of buyers and sellers. Which of these markets is likely to be more competitive?

Bottled water

The United States Postal Service maintains a monopoly on mail delivery in part through its exclusive right to access customer mailboxes. Which barrier to entry best describes this situation?

Government intervention

Suppose Bev's Bags makes two kinds of handbags—large and small. Bev rents an industrial space where she keeps the fabric, the industrial sewing machine, her measuring board and cutting shears, extra needles, thread and buttons, and labels. If Bev were to produce no bags, what would her variable cost include?

Her variable cost would be zero if she produced zero bags

How long is the long run?

However long it would take a firm to vary all of its costs

Curling is a sport that involves sliding a granite stone over a patch of ice. The Winter Olympics has generated a lot of excitement about the fascinating sport of curling. As a result, demand for curling stones has increased. Curling stones are made from blue Trefor granite. There are limited deposits of blue Trefor, and other types of granite are poor substitutes. If the increase in demand for curling stones persists, do you expect the long-run equilibrium price to increase, decrease, or stay the same?

Increase

Because firms in perfectly competitive markets can sell any quantity without driving down prices, they should:

NONE OF THESE ARE TRUE

In a perfectly competitive market, MR =

Price Average Revenue Change in total revenue/ change in quantity

According to the graph shown, if this were a perfectly competitive market, the outcome would be:

Q2, P2

Due to arduous certification requirements, Nature's Crunch is currently the only certified organic produce grower in a region that produces lots of non-organic produce alternatives. From a profit-maximizing perspective, would it be better for Nature's Crunch to lobby the government to relax organic certification requirements or to require grocery stores to clearly label its produce as organic?

Require grocery store to clearly label its produce as organic

As the equilibrium price falls in a perfectly competitive market, so do firms':

Revenue and so do their profits

A sandwich shop has six months left on its lease to its storefront and equipment and currently employs three workers who work on an on-call basis, with no contract. Ingredients are bought daily. How long is the long run for the sandwich shop?

Six months, after which all inputs listed became variable

The government has used the Sherman Act to break up monopolies in which of the following industries?

Tobacco

In the pet industry, would you expect the long run to be longer for a pet store or a veterinary clinic?

Veterinary clinic

The monopolist faces:

a downward sloping demand curve

The relationship between the quantity of inputs and the quantity of outputs is called:

a production function

The industry in the figure below consists of many firms with identical cost structures, and the industry experiences constant returns to scale. Consider a change in demand from D1 to D2, which increases price from $20 to $30 in the short run. a. Draw the new supply line that occurs after the market adjustments take place. The new equilibrium price will be $____ and the new equilibrium quantity will be ____

a. 20 +/- 2%; 40 +/- 2%

a. What is the profit-maximizing quantity when price is $20? _____ units. b. What is the profit-maximizing quantity when price is $30? _______ units.

a. 26 +/- 1.02 b. 30 +/- 1.02

Last year, Jarod left a job that pays $60,000 to run his own bike-repair shop. Jarod's shop charges $65 for a repair, and last year the shop performed 3,000 repairs. Jarod's production costs for the year included rent, wages, and equipment. Jarod spent $50,000 on rent and $100,000 on wages for his employees. Jarod keeps whatever profit the shop earns, but does not pay himself an official wage. Jarod borrowed $20,000 for the shop's equipment at an annual interest rate of 5 percent. a. What is Jarod's accounting profit? b. What is Jarod's economic profit?

a. 44000 +/- 5.1 b. -16000 +/- 5.1

Consider a firm that increases its inputs by 15 percent. For each scenario, state whether the firm experiences economies of scale, diseconomies of scale, or constant returns to scale. a. Outputs increase 15 percent: b. Outputs increase by less than 15 percent: c. Outputs increase by greater than 15 percent:

a. Constant returns to scale b. Diseconomies of scale c. Economies of scale

The cost curves for an individual firm are given in the figure below. a. The firm's short run supply curve is given by: b. The firm's long run supply curve is given by:

a. Marginal costs equal-to or greater-than AVC b. The level of output at the minimum of ATC

The figure below presents the demand curve, marginal revenue, and marginal costs facing a monopolist producer. a. Under monopoly pricing, are profits positive, negative, or zero? b. If government regulates average total cost pricing (P = ATC), are profits positive, negative, or zero? c. If government regulates efficient pricing, are profits positive, negative, or zero? d. Is this a natural monopoly?

a. Positive b. Zero c. Negative d. Yes

Kat runs a cake shop. Her monthly expenses are listed below. For each cost, indicate whether the cost is a fixed cost or a variable cost of producing cakes in the short run. a. Ingredients (flour, butter, sugar): b. Bakers (cooks) paid hourly: c. Rent: d. Payments for equipment (ovens): e. Interest payments for borrowed capital:

a. Variable cost b. Variable cost c. Fixed cost d. Fixed cost e. Fixed cost

Suppose a monopolist discovers a way to perfectly price-discriminate. Under this scenario, consumer surplus is What are the efficiency costs (deadweight loss)?

a. Zero b. Zero

Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has reduced consumer discretionary incomes. Assume chocolate is a normal good, and the chocolate producers have identical cost structures. a. Demand will b. Profits for chocolate producers in the short run will c. Chocolate producers will ____ the market. d. The long-run supply curve will

a. shift left b. decrease c. exit d. not change

Economies of scale refers to returns that occur when:

an increase in the quantity of output decreases average total cost in the long run

At any price the monopolist sets, it can sell:

as many as demanders are willing to buy

Fixed costs are:

costs that don't depend on the quantity of output produced.

One way DeBeers managed to maintain control over the diamond industry was to:

create the illusion of no close substitutes through marketing

Average total cost:

decrease when output levels are low, then increases as output increases.

Returns that occur in the long run when an increase in the quantity of output increases average total cost are called:

diseconomies of scale

Mika's Manicures leases a space in the local mall for $4,500 a month. For this business, this expense would be considered an:

explicit cost of $4,500

Assume the table shown is for a hat factory, and shows the total production of hats given various numbers of employees. Diminishing marginal product sets in with the:

fourth worker

An essential characteristic of a perfectly competitive market is:

goods are standardized

Standardized goods are:

goods which are easily substitutable and not distinguishable.

A monopoly:

has no competition at all

The fixed cost curve:

is a constant, flat line

For a monopolist, marginal revenue for all units greater than 1:

is always less than price

Marginal cost:

is calculated by change in total cost divided by change in total output

In the short run, we assume that the number of firms in a perfectly competitive market:

is fixed

Using the information in the table shown, the marginal revenue:

is negative after the 6th unit

According to the graph shown, if Q2 units are being produced, this monopolist:

is not maximizing profits

Economists assume maximizing efficiency over other goals:

is not necessarily the best approach

As long as market price remains above the average total cost, and the firm chooses the profit-maximizing level of output, it will:

make profits

If the demand in a perfectly competitive market decreases, the supply curve will:

not change in the short run.

We assume that in the short run in a perfectly competitive market the:

number of firms is fixed

Total cost includes:

one-time expenses and ongoing expenses

In theory, the long-run supply curve for perfectly competitive market firms who are identical is:

perfectly elastic

The practice of charging customers different prices for the same good is called:

price discrimination

When demand increases in a perfectly competitive market, in the short run __________________, and in the long run __________________.

price increase; supply increases

A firm in a perfectly competitive market can maximize its profits by:

producing the level of output where marginal cost equals marginal revenue.

Government regulations:

sometimes protect monopoly power in certain industries

The most a monopolist can sell at any given price is:

the amount demanders are willing to buy at that price

One barrier to entry into a monopolist market is:

the ownership of a key resource or input

For a monopoly, when marginal revenue is zero:

total revenue is maximized

In reality, the long-run supply curve tends to be:

upward sloping

If adding an additional input does not produce additional output, the slope of the production function at this point is

zero