Econ 361, Chapter 7 Review Qs

Suppose the demand is given Q=10-P. What is the consumer surplus when the price is P=4?

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Suppose the demand is given by Q=10-P what is the consumer surplus when the price is P=4

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Assume that a firm operates in the short run with fixed levels of capital K bar=5 and production function Q(K,L)=KL with production target Q=100 how much labor should the firm produce in the short run.

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If the short-run total cost is given by STC(Q) =32+2Q^2, and 7 of the fixed costs are sunk what is minimum efficent scale?

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Assume that a firm operates with production function Q(K,L)=KL with production target Q=32. The price of labor w=2 and the price of capital r=1. How much labor should the firm produce in the LONG RUN.

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When the goverment introduces a subsidy in a market which of the following is true

Both consumer surplus and producer surplus increase

when the government introduces a subsidy in a market, which of the following is true?

Both consumer surplus and producer surplus increase

Under first-degree price discrimination

DWL and Consumer surplus are zero

which of the following would lead to the highest producer surplus for a monopolist in a market

First-Degree price discrimination

To solve the long-run cost-minimization problem, you do the following

Fix an isoquant and find the isocost furthest to the southwest that still intersects the given isoquant line

Which of the following leads to an excess supply?

Price Floor

which of the following would lead to an excess supply?

Price Floor

If a monopolist is producing where marginal revenue is less than marginal cost then in order to increase profits the monopolist should

Produce less

Which of the following is true about the relationship between the long-run total cost(TC(Q)) and the short-run total cost (STC(Q))?

STC(Q) is always higher or equal to TC(Q)

Wildcat pizza charges students $4 for the first 10 slices of pizza they buy in a given year. Any additional slices of pizza only cost the student $2 for the rest of the year. This is an example of

Second-Degree Price discrimination

An endogenous variable in the firms cost-minimizing problem would be?

The amount of labor and capital

Which of the following is not a characteristic of perfect competition

The industry does not have a lot of buyers and sellers

The long-run total cost curve shows

The minimum total cost to produce any level of output holding input prices fixed and choosing all inputs to minimize cost.

which statement about the long-run and short-run total cost curve is true?

The short-run total cost is greater than or equal to the long-run total cost.

assume the amount of labor is on the x-axis and the amount of capital is on the the y-axis. If the price of the labor doubles what happens to the slope of the isocost lines?

They become steeper(more negative)

Wildcar pizza charges students $4 to regular customers $2 for students this is an example of

Third-Degree Price Discrimination

A firm is trying to produce Q0=100 units of output and faces a production function of Q(L,K)=LK. Currently the firm is producing 100 units of output, has MPL=10 and MPK=20 and faces a price of labor w=1 per unit and price of capital r=3 per unit.

Use less capital more and more labor

economics of scale occur when

When average cost is decreasing

Which market would you expect to have the lowest deadweight loss

a perfectly competitve market

a subsidy is?

a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.

If ac(q) is less then mc(q), then

ac(q) is increasing

An isocost line represents:

all combinations of a firm's factors of production that have the same total cost.

An isoquant line repersents

all combinations of of inputs in which the firm has the same level of total cost

For a level of production Q1 such that 0>MC(Q1)<MR(Q1) an increase in production will lead to?

an increase in profits because cost will increase and revenue will increase even more

Tesla selling cars with batteries that are limited by software is an example of

damaged goods

Cost minimization

determine what mix of labor and capital produces output at the lowest cost. In other words, what the most cost-effective method of delivering goods and services would be while maintaining a desired level of quality.

With _______ degree price discrimination the firm tries to price each unit at the consumers reservation price

first

An analysis that determines the equilibrium prices and quantities in more than one market at a time simultaneously is called

general equilbrium analysis

an analysis determines the equilibrium prices and quantities in more then one market simultaneously is called?

general equilibrium analysis

A firm has a production function with diminishing MRTS L,K is currently producting Q=25 units of output at the cost minimizing combination of labor and capital. if the cost of capital decreases then the new cost minimizing combination of labor and capital will have?

more capital and less labor

A monopsony market is one with

one buyer and many sellers

In the short run, a firm in a perfectly competitive market will earl

profits that could be positive, negative, or zero.

consumer surplus is?

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

producer surplus is?

the amount a seller is paid for a good minus the seller's cost of providing it

if the incidence of a tax is less than the negative one (the demand curve is relatively more inelastic than the supply curve) what can we say?

the consumer will bear more of the burden of the tax than the producer

an example of an implicit cost for you if you decide to build your own house would be a

the cost of spending time working on the house rather than at your job (implicit costs are opportunity costs)

Which of the following will make price discrimination difficult?

the firm is a price taker

which statement about the long-run and short-run total cost curve is true

the short-run total cost is greater than or equal to the long-run total cost

In a perfectly competitive market with a subsidy, what can we say?

there will be one value for the consumer surplus and the producer surplus.

In a perfectly competitive market with a subsidy what can we say?

there will be only one value for consumer and producer surplus