Econ 7-12 EOC

If a monopoly faces a demand curve that is downward-sloping, then marginal revenue will be which of the following? a Must be less than price b Must be equal to price c Must be greater than price d Is not related to the price

a Must be less than price

Assume a constant-cost industry in a competitive market. What are the short-term effects of the following change? An increase in fixed costs will ______________ the equilibrium price and ______________ equilibrium quantity in the market. a Not change; not change b Increase; increase c Decrease; increase d Not change; increase

a Not change; not change

For a firm in a perfectly competitive market, average revenue equals ________. a The market price b Average total cost c Fixed cost d Price divided by quantity

a The market price

A firm's long-run total cost curve is ________. a Upward sloping b Downward sloping c Horizontal d Any of the above, depending on the industry

a Upward sloping

Explain in your own words why a cartel may fail in its goals.

a cartel may fail in its goals if one member doesn't follow the rules. This means if they lower their prices than what the cartel decided it would cause all the other members of the cartel to loose business.

A profit-maximizing monopoly will produce where which of the following is true? a Marginal revenue is less than the price b Marginal revenue is equal to the marginal cost c Marginal revenue is positive

a,b,c

If a monopoly increases the quantity above the profit-maximizing level which of the following will be true? a Marginal revenue will be lower than before b Marginal cost will be greater than marginal revenue c Price would decrease

a,b,c

The production of 75 sofas per week requires 15 workers. The average product of each worker is ______________sofas per week. a 5 b 15 c 75 d 225

a-5

10.23 In the figure above, the firm's profit would be ______. a Positive b Negative c Zero d Cannot be determined

a-positive

Will a change in fixed costs change average cost? a-yes b-no

a-yes

Will a change in fixed costs change total fixed cost? a Yes b No

a-yes

7.30 Using the table below, calculate the average cost of producing 80, 120, and 160 computers per month. a A = 150.00 , B = 150.00 , C = 250.00 b A = 120.48 , B = 120.50 , C = 128.13 c A = 197.50 , B = 150.00 , C = 128.13 d A = 197.50 , B = 2,000 , C = 240.00

c A = 197.50 , B = 150.00 , C = 128.13

10.20 In the figure above, the quantity a monopoly produce would be ___ (C / D).

c

Santa Claus's only variable input is labor. The wage he must pay is 200 candy canes per week. What is Santa's total weekly variable cost if he hires 200 elves? a 200 candy canes b 400 candy canes c 40,000 candy canes d It depends on the level of output.

c 40,000 candy canes

7.17 In the table below, what is the marginal product of the third worker? a 40 units b 50 units c 55 units d 60 units

c 55 units

If the average product of labor is 12 units of output per worker per day when eight workers are hired, eight workers will be able to produce ______________units per day. a 12 b 8 c 10 d 96

d-96

Match the input to its correct category ______.(land, capital, labor) cow- robotic drill press- computer software- lawyer- fresh water- tractor trailer-

land capital capital labor land capital

10.19 In the figure below, the demand curve is represented by (1) ___ while the marginal revenue curve is represented by (2) ___ . demand curve- marginal revenue curve-

line a, line b

When comparing a monopoly and a perfectly competitive market where the costs are the same, the monopoly will produce a ______________(greater / lower / same) quantity.

lower

7.21 Fill in the missing value for A from the table below. a 110 b 100 c 90 d 80

d-80

Rank each type of market on their prices from highest to lowest. Assume that there is a bit of competition among the oligopolies

1. monopoly 2.oligopoly 3.monopolistic competition 4. perfect competition

Rank each type of market on their industry quantities from highest to lowest. Assume that there is a bit of competition among the oligopolies.

1.perfect competition 2.monopolistic competition 3.oligopoly 4.monopoly

If the cost of that additional automobile is $12,000, what is the new average?

14000

Suppose that a factory is producing two automobiles per hour. The total fixed cost is $20,000. The total variable cost is $10,000. The average cost is ______________.

15000.0

Given the previous two questions, suppose that we now increase production by one automobile per hour. If the cost of that additional automobile is $18,000, what is the new average?

16000

Calculate marginal revenue in the following case: price is $100 and 20 units are sold, then price drops to $99 and 21 units are sold.

79

10.21 In the figure above, the price the monopoly would charge would be ___ (E / F).

E

Explain why firms in a monopolistically competitive market may be able to charge slightly different prices while prices will be identical in a perfectly competitive market.

This means that they have control over the market price. The elastic consumers will be charged less and the inelastic consumers would charged more. A perfectly competitive market is a price taker

7.29 Using the information from the table above, if the monthly wage of an office chair factory worker is $2,160, what is the marginal cost of increasing output from 190 office chairs per month to 235 office chairs per month? a $48.00 b $37.73 c $2,160 d $8,640.00

a $48.00

A monopoly will not necessarily be technically efficient because which of the following is true? a Barriers to entry will keep firms from entering b Firms will enter until the price is lowered to where price equals average cost c Monopolies have no close substitutes d Monopolies charge the highest price on the demand curve

a Barriers to entry will keep firms from entering

If the long-run average cost curve is horizontal, it implies that the firm is experiencing _________. a Constant returns to scale b Technical efficiency of inputs c Constant total costs d Unchanging levels of production

a Constant returns to scale

A decrease in variable costs will cause the monopoly to do what? a Decrease the price b Decrease the economic profits c Lower the level of output d Increase the marginal revenue

a Decrease the price

Assume the price of coffee increases. If the market for tea is perfectly competitive and a constant cost industry, what will happen to the tea market in the long run? Output will ______________; prices will ______________; and economic profits will ______________Indicate whether increase, decrease, cannot tell, or no change as before the price shift is correct for each blank space. a Increase; not change; not change b Decrease; increase; increase c Increase; not change; decrease d Decrease; decrease; not change

a Increase; not change; not change

The clothing and attire retail market has seen an increased number of firms entering the industry. Thus, there is a lot of competition in markets for many types of clothing. What is the result of this high amount of competition? a Individual buyers and sellers cannot affect the market price. b Firms have a lot of flexibility in pricing their products. c One individual firm can determine the market price. d Some firms must necessarily leave since the prices will be too low.

a Individual buyers and sellers cannot affect the market price.

Which of the following is NOT true regarding perfectly competitive markets? a It is difficult or impossible for a firm to enter and compete in the market b All firms in the market are price takers c Homogenous goods are sold by the firms d The market contains many buyers and sellers

a It is difficult or impossible for a firm to enter and compete in the market

A monopoly would never produce where marginal revenue is negative because which of the following is true? a Marginal cost is always positive b Profits would automatically be negative c A firm is always trying to maximize revenue

a Marginal cost is always positive

At 600 units of output, total fixed cost is equal to $1,000 and total variable cost is equal to $12,000. Total cost is equal to _______. a $6,000 b $13,000 c $20 d $21.67

b $13,000

At 2,000 units of output, the variable cost of production is $12,500 per week. Total cost of producing 2,000 units per week is $45,500. The fixed cost of producing 2,000 units of output per week is equal to ______. a $29,000 b $33,000 c $29.00 d $22.75

b $33,000

For any firm, what is the long-run average cost curve? a A downward sloping line b A function which shows the lowest average cost of producing any output level c The same as the long-run marginal cost curve d Upward sloping at all levels of output

b A function which shows the lowest average cost of producing any output level

Which of the following most likely represents a short-run business decision? a Jane is trying to decide whether to start a second franchise of her business. b Aaron hires two additional workers to help cover the holiday rush at his shop. c Xiang lists his delivery truck for sale in hopes of raising money to buy a new one. d Ellen applies for a loan to finance an expansion of her plumbing business.

b Aaron hires two additional workers to help cover the holiday rush at his shop.

Monopolies will price discriminate if which of the following is true? a They dislike one group more than another and want to increase the price b At the current price, one group of consumers is elastic while another group is not as responsive (inelastic) c They can increase quantity without changing revenue

b At the current price, one group of consumers is elastic while another group is not as responsive (inelastic)

An increase in fixed costs for a monopoly will do which of the following? a Increase the price b Decrease the economic profits c Lower the level of output d Lower marginal revenue

b Decrease the economic profits

In a perfectly competitive industry, the industry demand curve is __________. a Upward sloping b Downward sloping c Horizontal d Vertical

b Downward sloping

An electric power plant most likely experiences which of the following? a Constant returns to scale b Economies of scale c Diseconomies of scale

b Economies of scale

in a model with only labor and capital as inputs, in the short run the amount of ______________ is fixed, while in the long run the amount of ______________ is variable. a Capital, capital b Either labor or capital, both labor and capital c Both labor and capital, either labor or capital d Labor, labor

b Either labor or capital, both labor and capital

As a firm increases output, long-run average costs typically _________. a Rise, peak, then fall b Fall, hit a minimum, then rise c Increase gradually d Remain constant

b Fall, hit a minimum, then rise

When can diseconomies of scale occur? a In the short-run b In the long-run c When total costs are falling d When average costs are falling

b In the long-run

Which of the following is a cause of diminishing marginal productivity? a In the long run, labor gets tired as more labor gets added to the production process. b In the short run, labor runs out of available capital as more labor gets added to the production process. c In the long run, capital depreciates as more capital gets added to the production process. d In the short run, capital gets more expensive as you add more capital to the production process.

b In the short run, labor runs out of available capital as more labor gets added to the production process.

Consider the effect on costs of an increase in wages in an economy. What is the increase likely to do? a Increase short-run average costs, but not increase long-run average costs. b Increase short-run average costs and long-run average costs. c Increase long-run average costs, but not increase short-run average costs. d Increase neither short-run or long-run average costs, businesses will use less labor and more capital.

b Increase short-run average costs and long-run average costs.

Assume a constant-cost industry in a competitive market. What are the long-term effects of the following change? An increase in fixed costs will ______________ the equilibrium price and ______________ equilibrium quantity in the market. a Not change; not change b Increase; decrease c Decrease; increase d Not change; increase

b Increase; decrease

Suppose a firm doubles its inputs (therefore doubling its total costs as well). If this firm is experiencing diseconomies of scale, then __________. a Output will double b Output will increase, but less than double c Output will remain the same d Output will decrease

b Output will increase, but less than double

Which of the following is NOT one of the reasons a firm might be expected to experience economies of scale? a Specialization of all inputs b Reducing issues with diminishing marginal product of labor c Firms using larger volume equipment d Improved equipment

b Reducing issues with diminishing marginal product of labor

10.22 In the figure above, if a monopoly charged the price of F and produced the monopoly quantity, then there would be a(n) ________. a Equilibrium b Shortage c Surplus d None of the above

b Shortage

The marginal product of labor (MPL) can be defined as which of the following? a The change in output costs when another worker is hired b The change in output level as the result of hiring another worker c The change in the wage rate as the result of hiring another worker d The change in capital productivity when another worker is hired

b The change in output level as the result of hiring another worker

Regarding perfect competition, what does it mean when the goods sold by the firms in a market are homogeneous? a Firms can produce the same good with different inputs and different costs. b The good sold by one firm is a perfect substitute of the good sold by another firm in the same market. c The firms in the market are the same size. d The goods sold by one firm are complements of the goods sold by another firm in another market.

b The good sold by one firm is a perfect substitute of the good sold by another firm in the same market.

Why are perfectly competitive markets are considered economically efficient? a There is only a small amount of deadweight loss b The opportunity cost of society for making the good is equal to society's value of the good. c Consumers enjoy the goods produced in these markets most d Firms always have low and identical costs

b The opportunity cost of society for making the good is equal to society's value of the good.

A monopoly producing where marginal revenue equals marginal cost will do which of the following? a It will make positive profits b It cannot increase quantity and make a greater profit c It is producing at the highest profit possible in their market d It is producing where the additional revenue is just equal to the additional cost for each output

b/c,d

For the next three questions, the following abbreviations are used. MPL = marginal product of labor. MPK = marginal product of capital. W = wage rate (the cost of a unit of labor). R = rental rate (the cost of a unit of capital). Assume a firm is operating in the long-run. At the current level of output, MPL = 30 and MPK = 50. Also assume that in this industry, W = 5 and R = 10. Keeping output the same, how can this firm lower production costs? a Use more K and less L b Use more L and less K c The firm is already using the optimal cost-minimizing combination of inputs for this level of output.

b Use more L and less K

Compare the levels of economic profits in a long-run equilibrium for a perfectly competitive firm, a monopoly, a monopolistically competitive firm, and an oligopoly. Economic profits will most likely be: a Zero in perfect competition and positive in monopoly, monopolistic competition and oligopoly b Zero in perfect competition and monopolistic competition, perhaps positive in a monopoly and perhaps positive in oligopoly c Zero in perfect competition, monopolistic competition, and oligopoly and perhaps positive in monopoly d Zero in all four market models e Positive in all four market models

b Zero in perfect competition and monopolistic competition, perhaps positive in a monopoly and perhaps positive in oligopoly

8.16 Consider the table below showing different average costs for three different firm sizes across a range of output levels. At a long-run chosen output level of 400, which firm size (amount of capital) would the firm want to use? a K = 1 b K = 2 c K = 3

b-K=2

Will a change in fixed costs change marginal cost? a-yes b-no

b-no

Will a change in fixed costs change total variable cost? a-yes b-no

b-no

Which situation would be labeled a "natural monopoly"? a A firm owns exclusive rights to a natural resource. b A firm applies for a patent to exclude others from entering. c A firm has large economies of scale, and is thus able to sell the good for a lower price than would if there were many firms.

c A firm has large economies of scale, and is thus able to sell the good for a lower price than would if there were many firms.

For a firm, the short-run is defined as being __________. a A period of time less than one year b A period of time less than one month c A period of time in which at least one of the firm's inputs is unchangeable d A period of time in which all the firm's inputs are variable

c A period of time in which at least one of the firm's inputs is unchangeable

What is true about the long-run for a firm? a At least one input cannot be changed b The firm only uses one of either capital or labor, whichever is cheapest c All inputs can be changed d No inputs can be changed

c All inputs can be changed

Assume a constant-cost industry in a competitive market. What are the short-term effects of the following change? A decrease in variable costs in the short run will ______________ the equilibrium price and ______________ equilibrium quantity in the goods' market. a Not change; not change b Increase; decrease c Decrease; increase d Not change; increase

c Decrease; increase

In the long run, a monopolistically competitive firm will produce where price ___________. a Equals marginal cost and is greater than average cost b Equals marginal and average cost c Equals average cost and is greater than the marginal cost d Is greater than marginal and average cost

c Equals average cost and is greater than the marginal cost

Copyrights on movies, books, and music act as a barrier to entry in order to give people what? a Guaranteed profits b Starter money for to pay for research and development c Incentives to create d Unfair advantages

c Incentives to create

8.17 See the table below. At a long-run chosen output level of 500, which firm size (amount of capital) would the firm want to use? a K = 1 b K = 2 c K = 3

c K = 3

A perfectly competitive firm will maximize profits at the output level where which of the following is true? a Average cost is equal to marginal revenue b Marginal cost is total revenue c Marginal cost is equal to marginal revenue d Average total cost is equal to average revenue

c Marginal cost is equal to marginal revenue

An effective price ceiling in a competitive industry will mean that which of the following is true? a Marginal cost is greater than marginal revenue. b Marginal revenue is greater than marginal cost. c Marginal cost is equal to marginal revenue. d One cannot tell because the price ceiling prohibits the competitive firms from producing at a profit-maximizing rate of output.

c Marginal cost is equal to marginal revenue.

Given all the characteristics of perfect competition, which of the following is the main factor that affects consumers' decisions on which firm to purchase a good from? a Opinions of friends b Quality of the good c Price d Reputation of the firm

c Price

Variable cost ______________while fixed cost ______________ as output ______________ in the short run. a Rises, falls, decreases b Rises, stays the same, decreases c Rises, stays the same, increases d Falls, falls, decreases

c Rises, stays the same, increases

See the table below. Suppose the firm chooses a permanent output level of 500 units but remains in firm size K = 2. What is the result of this? a The firm will find a way to lower costs further with this amount of capital. b The firm will certainly go out of business. c The firm will be operating inefficiently at higher costs, therefore not maximizing profits. d The firm will be required to begin producing inferior quality goods.

c The firm will be operating inefficiently at higher costs, therefore not maximizing profits.

Regarding input choices, how would a firm respond to an increase in the wage rate? a The firm would use less capital. b The firm would use less labor. c The firm would use less labor and more capital. d The firm would use more labor and less capital.

c The firm would use less labor and more capital.

The market demand in a monopoly market differs (or not) from the demand the monopoly itself faces by _________. a The amount of marginal revenue b The fixed revenue c The monopoly is the only firm in the market, so it does not differ. d The monopoly is the only firm in the market, so the demand curve is steeper.

c The monopoly is the only firm in the market, so it does not differ.

Imagine two firms with identical cost structures that do not exhibit economies of scale at high levels of production. One is competing in a perfectly competitive market and one is a monopoly. In the long run which of the following is true? a The monopoly and the perfectly competitive firm will produce the same quantity b The monopoly and the perfectly competitive firm will charge the same price c The monopoly will charge a higher price than the perfectly competitive firm d The monopoly will sell a higher quantity than the perfectly competitive firm

c The monopoly will charge a higher price than the perfectly competitive firm

Marginal cost is the slope of _______. a The average cost curve b The average product curve c The total cost curve d The marginal product curve

c The total cost curve

Assume a constant-cost industry in a competitive market. What are the long-term effects of the following change? A decrease in variable costs in the long run will cause the equilibrium price to ______________ and the equilibrium quantity in the market to ______________. a Not change; not change b Increase; decrease c Decrease; increase by more than in the short run d Decrease; increase less than in the short run

c-Decrease; increase by more than in the short run

Peter can produce 50 lunches per hour for $1,250. If he hires one more cook for $15 an hour, he can produce 55 lunches per hour. The marginal cost of expanding hourly lunch production from 50 to 55 is _____. a $1,265.00 b $15.00 c $23.00 d $3.00

d $3.00

7.28 Using the information from the table below, what is the marginal product of the 4th worker? a 235 office chairs b 58.80 office chairs c 58.25 office chairs d 45.00 office chairs

d 45.00 office chairs

The supply curve in a perfectly competitive market is the sum of all of the individual firm's marginal cost curves. What is the supply curve for a monopoly? a The marginal revenue curve b The marginal cost curve c The demand curve d A monopoly does not have a supply curve

d A monopoly does not have a supply curve

If a monopoly is not producing at the profit-maximizing quantity, then it must be the case that which of the following is true? a Marginal cost is greater than marginal revenue b Marginal revenue is greater than marginal cost c Marginal revenue is negative d All of the above are possible

d All of the above are possible

The law of diminishing marginal returns is the cause of ______________ marginal product and ______________marginal cost. a Increasing; increasing b Increasing; decreasing c Decreasing; decreasing d Decreasing; increasing

d Decreasing; increasing

The amount of time a firm operates with the ability to make long-run decisions is how long? a Between five and ten years b Greater than five years c Greater than two years d Differs by industry

d Differs by industry

8.18 See the table below. At what long-run output levels would it be best to choose firm size K = 2? a Any output level less than 500 b Output levels between 200 and 400 c Output levels between 300 and 500 d Output levels between 300 and 400

d Output levels between 300 and 400

Assume an additional waiter can increase the number of customers served in a restaurant by 100 customers per day. The waiter will cost the restaurant $50 per day. On the other hand, a new microwave oven will speed the cooking process and allow each customer to be served more quickly. The oven will allow 200 more customers to be served with no additional labor. The oven can be rented for $75 per day. What should the restaurant do? a Hire another waiter, because the waiter is cheaper b Rent a microwave because the expansion in output is greater than the increase resulting from a new waiter c Hire another waiter, because the increase in output per dollar spent is greater than the increase per dollar spent from renting a microwave d Rent a microwave, because the increase in output per dollar spent is greater than the increase in output per dollar spent from hiring another worker

d Rent a microwave, because the increase in output per dollar spent is greater than the increase in output per dollar spent from hiring another worker

In the theory of firm behavior, we assume that firms attempt to maximize _________. a Total revenue b Marginal revenue c The number of customers d Total economic profits

d Total economic profits

A monopoly produces a level of output where demand is (elastic, inelastic, or unit elastic) ______________.

elastic

A movie theater price discriminates by charging children and seniors lower prices than adults because their demand is ______________(elastic / inelastic).

elastic

A monopoly will always charge a price that is ______________ (greater than / less than / equal to) marginal cost.

greater than

Outline the advantages and disadvantages of advertising from the point of view of economic efficiency.

the advantages can help with creating more demand which could increase the allocative efficiency. The disadvantage would be that you are spending money to advertise which might make you less technically efficient.

Match each type of market with whether or not their average costs at all outputs are as low as possible. PC mC O m

yes no no no

Match each type of market with whether or not their price equals their marginal cost. PC MC O M

yes no no no

Match each type of market with whether or not they can have economic profits in the short run. PC- MC O- M-

yes for all