Chapter 6, ECON HOMEWORK 8 MIDTERM TEST, CHAPTER 5

Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units at $1.75 per unit. The monopolist will produce and sell the fifth unit if its marginal cost is:

$0.75 or less

In the short run, a purely competitive firm will always make an economic profit if:

P > ATC.

Which of the following is characteristic of a purely competitive seller's demand curve?

Price and marginal revenue are equal at all levels of output.

profits were zero and its economic losses were $500,000.

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting:

total cost is $270.

Suppose that, when producing 10 units of output, a firm's AVC is $22, its AFC is $5, and its MC is $30. This firm's:

What do economies of scale, the ownership of essential raw materials, and patents have in common?

They are all barriers to entry

does not change as total output increases or decreases

Total fixed cost (TFC):

positive and increasing.

When total product is increasing at an increasing rate, marginal product is:

As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra or marginal output will decline.

Which of the following best expresses the law of diminishing returns?

When AP is rising AVC is falling, and when AP is falling AVC is rising.

Which of the following holds true?

Where total product is at a maximum, average product is also at a maximum.

Which of the following is NOT correct?

A local bakery hires two additional bakers.

Which of the following is a short-run adjustment?

Forgone rent from the building owned and used by Company X.

Which of the following is most likely to be an implicit cost for Company X?

AP continues to rise so long as TP is rising.

Which of the following statements concerning the relationships between total product (TP), average product (AP), and marginal product (MP) is not correct?

A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing:

an economic profit that could be increased by producing more output

The MR=MC rule:

applies both to pure monopoly and pure competition

The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.

downsloping; perfectly elastic

The pure monopolist's demand curve is relatively elastic:

in the price range where marginal revenue is postive

A pure monopolist should never produce in the:

inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price

Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation:

is realizing an economic profit of $40.

The non-discriminating pure monopolist's demand curve

is the industry demand curve

If a purely competitive firm is maximizing economic profit:

it may or may not be maximizing per-unit profit

If a purely competitive firm shuts down in the short run:

it will realize a loss equal to its total fixed costs.

If a pure monopolist is producing at that output where P = ATC, then:

its economic profits will be zero

A natural monopoly occurs when

long-run average costs decline continuously through the range of demand

In the short run, the individual competitive firm's supply curve is that segment of the:

marginal cost curve lying above the average variable cost curve.

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating:

marginal revenue and marginal cost.

If a purely competitive firm is producing at some level less than the profit-maximizing output, then:

marginal revenue exceeds marginal cost.

Assume for a competitive firm that MC = AVC at $12, MC = ATC at $20, and MC = MR at $16. This firm will:

minimize its losses by producing in the short run.

The marginal revenue curve for a monopolist becomes _________when output increases beyond some particular level

negative

Pure monopolists may obtain economic profits in the long-run because:

of barriers to entry

An industry comprised of four firms, each with about 25 percent of the total market for a product, is an example of:

oligopoly.

A pure monopolist is selling six units at a price of $12. If the marginal revenue of the seventh unit is $5 then the:

price of the seventh unit is $11

Which of the following is NOT a characteristic of pure competition?

price strategies by firms

A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should:

produce because the resulting loss is less than its TFC.

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50 it will increase its profits by:

reducing output and raising price

A firm reaches a break-even point (normal profit position) where:

total revenue and total cost are equal.

An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are:

under-allocated because price exceeds marginal cost.

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:

will also be $5.

A pure monopolist

will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output

total explicit costs

Accounting profits equal total revenue minus:

$5,000.

Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and has average variable costs of $150. The firm's total fixed costs are:

change in total cost that results from producing one more unit of output.

Marginal cost is the:

The supply curve of a pure monopolist:

does not exist because prices are not "given" to a monopolist.

MC.

If a firm wanted to know how much it would save by producing one less unit of output, it would look to:

marginal product could be either increasing or decreasing.

If in the short run a firm's total product is increasing, then its:

rising, then average total cost could be either falling or rising.

If marginal cost is:

the average variable cost of 9 units is $10.

If the total variable cost of 9 units of output is $90 and the total variable cost of 10 units of output is $120, then:

are $1,250.

In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs:

Total cost will exceed variable cost.

In the short run, which of the following statements is correct?

TVC will increase for a time at a diminishing rate, but then beyond some point will increase at an increasing rate.

In the short run:

Price: Quantity Demanded $7 1 6 2 5 3 4 4 3 5 Refer to the data. The marginal revenue obtained from selling the third unit of output is:

$5