Midterm 2 microeconomics

OutputMarginal RevenueMarginal Cost0----1$ 16$ 102169316134161751621 Refer to the data in the accompanying table. If the firm's minimum average variable cost is $10, and total fixed costs equal zero, the firm's economic profit (or loss) is

$16.

Answer the question on the basis of the demand and cost data for a pure monopolist. The profit-maximizing price for the monopolist will be

$2.25.

Based on the accompanying table, this nondiscriminating pure monopolist should set its price at

$200

Refer to the demand and cost data for a pure monopolist given in the table. An unregulated, nondiscriminating monopolist would earn maximum profits of

$250

OutputTotal RevenueTotal Cost0$ 0$ 501407428094312011741601425200172 The table gives data for a purely competitive, profit-maximizing firm. Based on this information, in the short run how much is this firm earning in economic profit (or losing, as reflected by negative numbers)?

$28.

The accompanying table applies to a purely competitive industry composed of 100 identical firms. The equilibrium price in this purely competitive market is

$3

Quantity DemandedPriceQuantity Supplied400,000$ 5800,000500,0004700,000600,0003600,000700,0002500,000800,0001400,000 The accompanying table applies to a purely competitive industry composed of 100 identical firms. For each of the 100 firms in this industry, marginal revenue and total revenue will be

$3 and $18,000, respectively.

Total ProductAverage Fixed CostAverage Variable CostAverage Total CostMarginal Cost1$ 100.00$ 17.00$ 117.00$ 17250.0016.0066.0015333.3315.0048.3313425.0014.2539.2512520.0014.0034.0013616.6714.0030.6714714.2915.7130.0026812.5017.5030.0030911.1119.4430.55351010.0021.6031.6041119.0924.0033.0948128.3326.6735.0056 The accompanying table gives cost data for a firm that is selling in a purely competitive market. If there were 1,000 identical firms in this industry and total, or market, demand is as shown in the second table, equilibrium price will be PriceQuantity Demanded$ 50-3,000 42-6,000 36-9,000 32-11,000 20-14,000 13-19,500 Multiple Choice

$36.

A purely competitive firm currently producing 30 units of output earns marginal revenues of $12 from each extra unit of output it sells. If it sells 30 units, then its total revenues would be

$360

OutputTotal RevenueTotal Cost0$ 0$ 501407428094312011741601425200172 The table gives data for a purely competitive firm. The market price of the product in the short run is

$40.

Refer to the demand and cost data for a pure monopolist given in the table. If the monopolist perfectly price-discriminated and sold each unit of the product at the maximum price the buyer of that unit would be willing to pay, and if the monopolist maximized profits, then the total profit received would be

$400.

Answer the question on the basis of the following demand and cost data for a specific firm. If columns 1 and 3 are this firm's demand schedule, maximum economic profit will be

$90.

Refer to the demand and cost data for a pure monopolist given in the table. If the monopolist perfectly price-discriminated and sold each unit of the product at the maximum price the buyer of that unit would be willing to pay, and if the monopolist sold 4 units, then total revenue would be

$900.

Total ProductAverage Fixed CostAverage Variable CostAverage Total CostMarginal Cost1$ 150.00$ 25.00$ 175.00$ 25.00275.0023.0098.0021.00350.0020.0070.0014.00437.5021.0058.5024.00530.0023.0053.0031.00625.0025.0050.0035.00721.4328.0049.4346.01818.7533.0051.7668.07916.6739.0055.6786.951015.0048.00 63.00 128.97 The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $15, it will produce

0 units at a loss of $150.

Refer to the accompanying diagram. At the profit-maximizing output, total revenue will be

0AHE.

Refer to the diagram. At the profit-maximizing level of output, total cost will be

0BHE.

The graphs represent the demand for use of a local golf course for which there is no significant competition. (It has a local monopoly.) P denotes the price of a round of golf, and Q is the quantity of rounds "sold" each day. If the left graph represents the demand during weekdays and the right graph the weekend demand, then over the course of a full seven-day week, this price-discriminating, profit-maximizing golf course should sell a total of

1,200 rounds.

Refer to the data. The Herfindahl index for the industry is

1,800

Refer to the data. If all the firms in the industry merged into a single firm, the Herfindahl index would become

10,000.

Refer to the data. The Herfindahl index for this industry is

2950

Based on the accompanying table, how many units would the given profit-maximizing nondiscriminating pure monopolist produce?

3

Refer to the short-run data in the accompanying graph. The profit-maximizing output for this firm is

320 units

If the profit-maximizing pure monopolist whose information is in the accompanying table is able to price discriminate, charging each customer the price associated with each given level of output, how many units will the firm produce?

4

If columns 1 and 3 are this firm's demand schedule, the profit-maximizing level of output will be

4 units.

Refer to the data for a nondiscriminating monopolist. This firm will maximize its profit by producing

4 units.

If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing level of output will be

8 units.

Refer to the data. Suppose that firms A and F merged into a single firm. The four-firm concentration ratio and the Herfindahl index would be

90 percent and 2,200, respectively.

Refer to the short-run data in the accompanying graph. Which of the following is correct?

Any level of output between 100 and 440 units will yield an economic profit.

Which of the diagrams correctly portrays a nondiscriminating pure monopolist's demand (D) and marginal revenue (MR) curves?

B

Balin's Burger Barn operates in a perfectly competitive market. Balin's is currently earning economic profits of $20,000 per year. Based on this information, we can conclude that

Balin's is operating in the short run, but not the long run.

Let us suppose Harry's, a local supplier of chili and pizza, has the revenue and cost structure shown here.

Harry's should stay open in the short run.

The diagram shows the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's economic profit

IS ZERO

Refer to the accompanying diagram. The firm's supply curve is the segment of the

MC curve above its intersection with the AVC curve.

Refer to the diagram for a non-collusive oligopolist. We assume that the firm is initially in equilibrium at point E, where the equilibrium price and quantity are P and Q. If the firm's rivals will ignore any price increase but match any price reduction, the firm's marginal revenue curve will be (moving from left to right)

MR2abMR1.

Refer to the diagram for a pure monopolist. If a regulatory commission seeks to achieve the socially optimal allocation of resources to this line of production, it will set a price of

P2

Refer to the diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is

P2

If the industry depicted in the graph comprises only one seller, the profit-maximizing price and quantity will be

P3 and Q3.

Which characteristic would best be associated with pure competition?

PRICE takers

In which market model are the conditions of entry the most difficult?

PURE MONOPOLY

Total ProductAverage Fixed CostAverage Variable CostAverage Total CostMarginal Cost1$ 100.00$ 17.00$ 117.00$ 17250.0016.0066.0015333.3315.0048.3313425.0014.2539.2512520.0014.0034.0013616.6714.0030.6714714.2915.7130.0026812.5017.5030.0030911.1119.4430.55351010.0021.6031.6041119.0924.0033.0948128.3326.6735.0056 The accompanying table gives cost data for a firm that is selling in a purely competitive market. Which of the following tables gives the firm's short-run supply schedule?

PriceQs$ 50-11 42-10 36-9 32-8 20-6 13-0

PriceQuantityTFCTVC$ 55$ 25$ 10510252051525505202560 Given the data in the table, at what quantity would a purely competitive firm cover all of its costs and earn only normal profits?

Q = 15

The accompanying table gives cost data for a firm that is selling in a purely competitive market. The data are for

THE SHORT RUN

A purely competitive seller is

a "price taker."

Line (2) in the accompanying diagram reflects the long-run supply curve for

a constant-cost industry.

Quantity (number of units)Total Cost100$ 100150150200200250250300300 Suppose the table above represents the long-run cost structure for a firm in a perfectly competitive industry. Based on this information we can conclude that this firm operates in

a constant-cost industry.

All of the following are long-run changes, except

a firm producing more output by acquiring more raw materials for its existing factory.

One feature of pure monopoly is that the firm is

a price maker.

Refer to the two diagrams for individual firms. Figure 1 pertains to __________, while Figure 2 refers to ________.

a purely competitive firm; an imperfectly competitive firm

Refer to the diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. The predicted long-run adjustments in this industry might be offset by

a technological improvement in production methods.

Refer to the diagram. At the profit-maximizing level of output, the firm will realize

an economic profit of A-B-H-J.

Line (1) in the diagram reflects the long-run supply curve for

an increasing-cost industry.

The industry characterized by these data is

an oligopoly.

The horizontal axis is labeled Q. The vertical axis is labeled P. Points P 1, P 2, P 3, and P 4 are marked on the vertical axis from bottom to top. The graph shows 3 curves M C, A T C, and A V C. The curve labeled M C starts at a point that is slightly above P 2, goes down and to the right, reaches the minimum, goes up and to the right, and ends at the top right. The curve labeled A T C starts at the top left, goes down and to the right, reaches the minimum, goes up and to the right, and ends at the left-center. The curve labeled A V C is the same as A T C and is shown below A T C. A V C starts at P 3 and ends at a point that is slightly below the ending of the curve labeled A T C. Point of the intersection of M C and A V C is marked b and point of intersection of M C and A T C is marked c. The minimum point of M C is marked a and point d is marked near the end of the curve M C. Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices Multiple Choice

between P2 and P3.

In the payoff matrix shown,

both firms have a dominant strategy to price low.

Refer to the diagram. By producing at output level Q,

both productive and allocative efficiency are achieved.

A perfectly elastic demand curve implies that the firm

can sell as much output as it chooses at the existing price.

If the entry or exit of firms does not affect the resource prices in an industry, we refer to it as a

constant-cost industry.

Suppose that entry into the industry changes this firm's demand schedule from columns (1) and (3) to columns (2) and (3). Economic profit will

decline to zero.

If the competitive firm depicted in this diagram produces output Q, it will

earn a normal profit.

At its profit-maximizing output, the nondiscriminating pure monopolist whose information is in the accompanying table

earns an economic profit of $250.

A monopoly is most likely to emerge and be sustained when

economies of scale are large relative to market demand.

Refer to the diagrams. The demand for Firm B's product is

elastic for prices above $4 and inelastic for prices below $4.

When a pure monopolist is producing its profit-maximizing output, price will

equal neither MC nor MR.

Refer to the diagram for a monopolistically competitive producer. This firm is experiencing

excess capacity of DE.

If enforcement of antitrust laws caused the two largest firms in this table to be divided in half, with each half having equal market share, the industry's four-firm concentration ratio would ____ and its Herfindahl index would ____.

fall; fall

Refer to the diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. In the long run we should expect

firms to leave the industry, market supply to fall, and product price to rise.

Refer to the diagram for a nondiscriminating monopolist. Demand is elastic

for all levels of output less than q2.

Refer to the diagrams. The price will be _______ and the quantity will be _______ with the industry structure represented by diagram (B) compared to the one represented in (A).

higher; lower

Line (1) in the diagram reflects a situation where resource prices

increase as industry output expands.

Refer to the diagram for a monopolistically competitive producer. If this firm were to realize productive efficiency, it would

incur a loss.

Refer to the long-run cost curve for a firm. If the firm produces output Q1 at an average total cost of ATC1, then the firm is

incurring X-inefficiency and is failing to realize all existing economies of scale.

Refer to the long-run cost diagram for a firm. If the firm produces output Q2 at an average cost of ATC2, then the firm is

incurring X-inefficiency but is producing that output at which all existing economies of scale might be realized.

The diagram shows the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total cost

is $400.

The diagram shows the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total revenue

is $400.

Refer to the diagram. The monopolistically competitive firm shown

is realizing an economic profit.

In many large U.S. cities, taxicab companies operate as near monopolies because of

licenses.

The quantitative difference between areas Q1bcQ2 and P1P2ba in the diagram measures

marginal revenue.

The fast-food restaurant industry in a large city would be an example of which market model?

monopolistic competition

If you want to enjoy a Major League Baseball game at the stadium in St Louis, you must patronize the Cardinals. This makes the Cardinals organization a

monopoly firm in St Louis.

In the diagram, at output level Q1,

neither productive nor allocative efficiency is achieved.

Refer to the diagram for a nondiscriminating monopolist. The profit-seeking monopolist will

never produce an output larger than q2.

The soft drink and automobile industries would be examples of which market model?

oligopoly

Refer to the diagrams. The demand for Firm A's product is

perfectly elastic over all ranges of output.

If a firm is a price taker, then the demand curve for the firm's product is

perfectly elastic.

Refer to the diagram for a pure monopolist. If the monopolist is unregulated, it will maximize profits by charging

price P3 and producing output Q3.

With the demand schedule shown by columns (2) and (3), in long-run equilibrium

price will equal average total cost.

Refer to the long-run cost diagram for a firm. If the firm produces output Q2 at an average cost of ATC3, then the firm is

producing that output with the most efficient combination of inputs and is realizing all existing economies of scale.

Which idea is inconsistent with pure competition?

product differentiation

Refer to the diagrams. Firm A is a

pure competitor, and Firm B is a pure monopoly.

Refer to the diagram for a monopolistically competitive producer. The firm is

realizing a normal profit in the long run.

Line (2) in the diagram reflects a situation where resource prices

remain constant as industry output expands.

Refer to the diagram. At output level Q2,

resources are overallocated to this product and productive efficiency is not realized.

At output level Q1, in this diagram,

resources are underallocated to this product and productive efficiency is not realized.

Refer to the game theory matrix, where the numerical data show the profits resulting from alternative combinations of advertising strategies for Ajax and Acme. Ajax's profits are shown in the upper right part of each cell; Acme's profits are shown in the lower left. Without collusion, the outcome of the game

results in a prisoner's dilemma.

The horizontal axis is labeled output. Points h, k, and n are marked on the horizontal axis from left to right. The vertical axis is labeled dollars. Points g, f and e are marked on the vertical axis from bottom to top. The graph shows 3 curves M C, A T C, and A V C, and a horizontal line labeled M R. The horizontal line begins at point (0, e) and goes straight and to the right. The curve labeled M C begins at a point that is slightly above point f near the vertical axis, goes down and to the right, reaches the minimum, goes up and to the right, and ends at the top right. The curve labeled A V C begins at a point that is near the top-right of the starting point of the curve labeled M C, goes down and to the right with decreasing steepness, reaches the minimum, goes up and to the right, and ends at the top-right. The curve labeled A T C is the same as A V C and is shown above A V C. A vertical dashed line extends from the point of intersection of M C and A V C to point h. A vertical dashed line extends from the point of intersection of M C and A T C to point k. A vertical dashed line extends from the point of intersection of M C and M R to point n and this point is marked c. Point b is marked on A T C at (n, f). Point a is marked on A V C at (n, g). In the provided diagram, the short-run supply curve for this firm is the

segment of the MC curve lying to the right of output level h.

Answer the question on the basis of the accompanying table, which shows the demand schedule facing a nondiscriminating monopolist. PQd$ 10172533415 The profit-maximizing monopolist will sell at a price

that cannot be determined with the information provided.

Refer to the diagram for a purely competitive producer. The firm's short-run supply curve is

the bcd segment and above on the MC curve.

The diagram portrays

the equilibrium position of a competitive firm in the long run.

One defining characteristic of pure monopoly is that

the monopolist produces a product with no close substitutes.

The horizontal axis is labeled quantity. The vertical axis is labeled dollars. The axes have no numbers. The graph shows a downward-opening curve labeled 1, a concave upward curve labeled 4, a horizontal line labeled 2 and a rising line labeled 3. The horizontal line starts at a point on the vertical axis that is slightly above the origin. The concave upward curve starts from a point on the vertical axis that is slightly above the horizontal line, rises with increasing steepness, and ends at the top-right. The rising line starts from the origin, passes through a point on the horizontal line, intersects the concave upward curve at a point on the bottom left and top-right, and ends at a point that is at the bottom right to the ending point of the concave upward curve. The downward-opening curve begins at a point on the horizontal axis near the origin, goes up and intersects the horizontal line at a point, further goes up and to the right with decreasing steepness, reaches the maximum, goes down and to the right and again intersects the horizontal line at a point, further goes down and ends at a point near the right end of the horizontal axis. The firm represented by the diagram would maximize its profit where

the vertical distance between curves (3) and (4) is the greatest.