Econ 101- Problem Set #6 MC

Compared to the social optimum, a monopoly firm chooses a. a quantity that is too low and a price that is too high. b. a quantity that is too high and a price that is too low. c. a quantity and a price that are both too high. d. a quantity and a price that are both too low.

a. a quantity that is too low and a price that is too high

If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will a. keep producing in the short run but exit the market in the long run. b. shut down in the short run but return to production in the long run. c. shut down in the short run and exit the market in the long run. d. keep producing both in the short run and in the long run.

a. keep producing in the short run but exit the market in the long run

Bob's lawn-mowing service is a profit-maximizing, competitive firm. Bob mows lawns for $27 each. His total cost each day is $280, of which $30 is a fixed cost. He mows 10 lawns a day. In the short run, Bob should ______ . In the long run, Bob should _____ the industry. a. not shut down; exit b. shut down; exit c. not shut down; not exit d. shut down; not exit

a. not shut down; exit

For a profit-maximizing monopoly that charges the same price to all consumers, what is the relationship between price P, marginal revenue MR, and marginal cost MC? a. P = MR and MR = MC b. P > MR and MR = MC c. P = MR and MR > MC d. P > MR and MR > MC

b. P > MR and MR = MC

The deadweight loss from monopoly arises because a. the monopoly firm makes higher profits than a competitive firm would. b. some potential consumers who forgo buying the good value at more than its marginal cost. c. consumers who buy the good have to pay more than marginal cost, reducing their consumer surplus. d. the monopoly firm chooses a quantity that fails to equate price and average revenue.

b. some potential consumers who forgo buying the good value at more than its marginal cost

When a monopolist switches from charging a single price to perfect price discrimination, it reduces a. the quantity produced. b. the firm's profit. c. consumer surplus. d. total surplus.

c. consumer surplus

How does this policy affect the number of pretzels consumed in the short run and the long run? a. down in the short run, no change in the long run b. up in the short run, no change in the long run c. no change in the short run, down in the long run d. no change in the short run, up in the long run

c. no change in the short run, down in the long run

In the long-run equilibrium of a competitive market with identical firms, what is the relationship between price P, marginal cost MC, and average total cost AVC? a. P > MC and P > ATC b. P > MC and P = ATC c. P = MC and P > ATC d. P = MC and P = ATC

d. P = MC = ATC

A competitive firm's short-run supply curve is its ________ cost curve above its ________ cost curve. a. average total, marginal b. average variable, marginal c. marginal, average total d. marginal, average variable

d. marginal, average variable