Econ 2302 Exam 2

(Exhibit: Costs of Producing Bagels) The average total cost of producing six bagels is:

$0.15.

(Exhibit: Costs of Producing Bagels) The marginal cost of producing the sixth bagel is:

$0.30.

(Exhibit: Costs of Producing Bagels) The total cost of producing six bagels is:

$0.90.

(Exhibit: Total Revenue and Cost) Total revenue at the most profitable level of output is given by point:

H.

(Exhibit: Total Revenue and Cost) Total cost at the most profitable level of output is given by point:

J.

Which of the following is (are) true?

MR=MC is a profit-maximizing rule for any firm.

The maximum amount of one good a consumer would be willing to give up in order to obtain an additional unit of another is called the:

marginal rate of substitution.

As you consume more of good A relative to another good B, the _____ of good A eventually decreases.

marginal utility.

(Exhibit: Short-Run Costs) Curve A is the _____ most curve.

marginal.

The amount by which total utility increases when an additional unit of a good is consumed is called _____ utility.

marginal.

Economists assume that consumers behave in a manner consistent with the _____ of utility.

maximization.

The power a firm has to set its own price is called:

monopoly power.

(Exhibit: Consumer Equilibrium 1) Assume that the price of both goods is $1 per unit, and you consume 3 units of good X and 3 units of good Y. To maximize utility, assuming that the goods are divisible, you would consumer:

more of X and less of Y.

The substitution and income effects reinforce each other for:

normal goods.

The short run is defined as a:

planning period in which some factors of production are considered to be fixed in quantity.

A firm that faces a downward-sloping demand curve is a:

price setter.

A monopoly is likely to _____ and _____ than otherwise equivalent competitive firms.

produce less; charge more.

The law of diminishing marginal utility:

refers to the tendency of marginal utility to decline beyond some level of consumption during a period.

If your farm has the only known source of a rare cocoa bean needed to make chocolate-covered peanuts, your monopoly would result from:

restricted ownership of inputs.

(Exhibit: Utility) The law of diminishing marginal utility is first observed at the _____ unit.

second.

(Exhibit: Profit Maximizing) The exhibit shows cost curves for a firm operating in a perfectly competitive market. If the market is less than P2, the firm will _____ in the short run.

shut down.

(Exhibit: Utility) Marginal utility first becomes negative at the _____ unit.

sixth.

(Exhibit: Supply: Short and Long Run) S1 is a short-run supply curve and is the _____ of individual firms' _____.

sum; marginal cost curves.

An expenditure that has already been made that cannot be recovered is a(n):

sunk cost.

Variable costs include:

the cost of raw materials.

The demand curve for a monopoly is:

the industry demand curve.

(Exhibit: Costs of Producing Bagels) Marginal cost reaches its minimum value for the _____ bagel.

third.

Average total cost is the ratio of:

total cost to the quantity of output.

Total revenue is a firm's:

total output times the price at which it sells that output.

The conceptual measure of the satisfaction a person obtains by consuming a given quantity of a good or service during a given time period is:

total utility.

Economists identify the satisfaction a person derives from the consumption of goods and services as:

utility.

A factor of production whose quantity can be changed during a particular period is a:

variable factor of production.

In long-run equilibrium, economic profits in a perfectly competitive industry are:

zero.

Which of the following is (are) correct?

All of the above are correct.

Which of the following is (are) true concerning monopoly?

All of the above are true.

(Exhibit: A Profit-Maximizing Monopoly Firm) This profit-maximizing monopoly firm's profit per unit is:

$13.

(Exhibit: Short-Run Costs) At 6 units of output, marginal cost is approximately:

$150.

(Exhibit: A Profit-Maximizing Monopoly Firm) The profit-maximizing monopoly firm's cost per unit at its profit-maximizing quantity is:

$16.

(Exhibit: Total Cost for a Perfectly Competitive Firm) If the market price is $4.50, profit at the profit-maximizing quantity of output is:

$2.00.

(Exhibit: Total Cost for a Perfectly Competitive Firm) The firm will stop production and shut down if the price is:

$2.50.

(Exhibit: A Profit-Maximizing Monopoly Firm) This profit-maximizing monopoly firm's price per unit is:

$29.

(Exhibit: Total Cost for a Perfectly Competitive Firm) The firm will produce, but at a loss in the short run if the price is:

$3.50.

(Exhibit: Total Cost for a Perfectly Competitive Firm) The firm will produce at a profit in the short run if the price is:

$4.50.

(Exhibit: Total Cost for a Perfectly Competitive Firm) If the market price is $3.50, profit at the profit-maximizing quantity of output is:

-$5.50

(Exhibit: Utility) The marginal utility for the second unit is:

15.

(Exhibit: A Profit-Maximizing Monopoly Firm) The profit-maximizing firm in this exhibit will produce _____ units of output per week:

220.

(Exhibit: Consumer Equilibrium 1) Assume that the price of both goods X and Y is $1 per unit, and you have $7 of income to spend on both goods. To maximize utility, you would consumer _____ units of X and _____ units of Y.

4; 3.

(Exhibit: Profit Maximizing) The exhibit shows cost curves for a firm operating in a perfectly competitive market. If the market price is P4, the firm will produce quantity _____ and _____ in the short run.

Q3; make a profit.

Which of the following statements is true regarding utility?

Utility cannot be measured.

An industry that contains a firm that is the only producer of a good or service for which there are no close substitutes and for which entry by potential rivals is prohibitively difficult is:

a monopoly.

(Exhibit: Profit Maximizing) The exhibit shows cost curves for a firm operating in a perfectly competitive market. Curve M must cross curves N and O:

at their minimum.

(Exhibit: Short-Run Costs) The vertical difference between curve B and curve C at any quantity of output is:

average fixed cost.

Variable cost divided by the quantity of output produced is:

average variable cost.

Conditions that prevent the entry of new firms in a monopoly market are:

barriers to entry.

(Exhibit: Long-Run Average Cost) Output per period in the region from O to A indicated that a firm is experiencing:

economies of scale.

Marginal utility is best computed as the:

change in total utility from an additional unit consumed.

A natural monopoly exists whenever a single firm:

confronts economies of scale over the entire range of production that is relevant to its market.

(Exhibit: Total Product) Units of labor added after L1 and up to L2 are:

described in A and C.

Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand. Your monopoly would result from:

economies of scale.

(Exhibit: Total Product and Marginal Product) Negative marginal returns begin when the _____ worker is added.

eighth.

A type of firm that usually has a natural monopoly in most of its markets is a(n):

electric utility.

Perfect competition is a model of the market that assumes all of the following EXCEPT:

firms face downward-sloping demand curves.

(Exhibit: Costs of Producing Bagels) Average total cost reaches its minimum value for the _____ bagel.

fourth.

(Exhibit: Total Product) Diminishing marginal returns begin with the _____ worker.

fourth.

(Exhibit: Utility) Total utility is maximized at the _____ unit.

fourth.

If your local government gives you the exclusive right to sell breakfast bagels in your community, your monopoly would result from:

government restrictions.

Price takers are individuals in a market who:

have no ability to affect the price of a good in a market.

An assumption of the model of perfect competition is:

identical goods.

Costs included in the economic concept of cost but that are not an explicit cost are:

implicit costs.

Marginal revenue is a firm's:

increase in total revenue when it sells an additional unit of output.

A curve that represents combinations of two goods that yield equal levels of satisfaction is a(n):

indifference curve.

The substitution and income effects work in opposite directions for:

inferior goods.

The Aluminum Company of America gained monopoly power because:

it had exclusive ownership of a resource required to produce aluminum.

(Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $2 per unit and the price of good Y is $1 per unit, and you consume 3 units of good X and 3 units of good Y. To maximize utility, assuming that the goods are divisible, you would consume:

less of X and more of Y.

Economic profit in long-run equilibrium in perfect competition will be:

less than accounting profit.

In dealing with utility, we assume that the ability of consumers to purchase goods and services is:

limited.

If you are the only seller of gasoline in a smaller town or community, your monopoly would result from:

location.

A planning period during which all of a firm's factors of production are variable is the:

long run.

The lowest cost per unit at each level of output, assuming all factors of production are variable, is the:

long-run average cost curve.

(Exhibit: Supply: Short and Long Run) S3 would be the _____ -run supply curve if _____.

long; expanded production leaves production costs unchanged.