Econ Exam 3
True
A perfectly competitive firm that is maximizing profit produces the quantity of output at which price equals marginal cost.
each firm within the market must sell its good at the market price.
A perfectly competitive market is one where:
has the ability to influence the equilibrium price in the market.
A price maker is a buyer or a seller who:
takes the market price as given
A price taker is a buyer or a seller who:
decrease its level of table production.
Alex's Furniture Mart produces and sells tables in a perfectly competitive market. When Alex's Furniture Mart produces and sells 250 tables, its marginal cost is equal to $200, and AVC is rising. If the market price of tables is equal to $150, Alex's Furniture Mart should:
false
An example of a monopolistically competitive industry is cable television service.
True
An example of a monopolistically competitive industry is grocery stores.
make a positive economic profit
At the optimal production point, the firm in Figure 10.3 will: make a zero economic profit.
marginal cost equals average variable cost.
Average variable costs are minimized when:
True
Department stores are monopolistically competitive because stores differ in the amount of customer service they provide.
3000
Figure 8.3 shows a firm's marginal cost, average total cost, and average variable cost curves. The firm's total fixed cost is:
price always equals marginal revenue.
For the perfectly competitive firm:
price is equal to marginal revenue
If individual firms face a horizontal demand curve at a given market price:
the average total cost curve is decreasing
If the marginal cost of producing the next unit of output is less than the average total cost, then:
will be zero
In long-run equilibrium for a competitive firm, economic profits:
some; none
In the short run, ________ factors of production are fixed, while in the long run, ________ of them are.
True
Perfect competition is characterized by many firms and no barriers to entry.
$1, because Gladys earns $1 more in revenue by increasing her output to five units from four units.
Refer to Table 10.1, which shows the relationship between the price that Gladys charges for a product and the quantity of that product that Gladys sells. The marginal revenue that Gladys receives from selling the fifth unit of output is:
$8.60
Refer to Table 8.5. The average variable cost of producing five units of output is:
True
Some monopolistically competitive firms differentiate their products simply by opening a new store at a different location.
equal the average cost of production of Toor's beer.
Suppose Toor's beer is sold in a monopolistically competitive market. In the long run we expect the price of Toor's beer to:
both A and B
Under which conditions might diseconomies of scale result?
I,and II,
Which of the following is a characteristic of a monopolistically competitive market?I. There are many sellers.II.Firms sell slightly differentiated products.III.The demand curve facing each individual firm is horizontal.
selling a standardized product no barriers to entry a large number of firms in a market (all of the above basically)
Which of the following is a characteristic of a perfectly competitive market?
The government grants licenses to taxicab drivers, without which it is illegal to operate a taxicab.
Which of the following is an example of a barrier to entry?
Tino's Italian eatery, a local restauran
Which of the following is an example of a monopolistically competitive firm?
the interest income foregone by the firm's owner because the owner invested funds into the firm
Which of the following is an example of something that economists would consider a cost but accountants would not?
Jones's wheat farm in eastern Washington
Which of the following is the best example of a perfectly competitive firm?
There are barriers to entry in the market, like patents.
Which of the following is the reason why pharmaceutical firms are NOT monopolistically competitive
firms are able to alter some, but not all, of their factors of production.
in the short run
Under which conditions might diseconomies of scale result?
increasing price of inputs
Which of the following is an example of something that economists would consider a cost but accountants would not?
the wages that the owner of a firm could have earned in some alternative job
False
Entry of a second firm will result in a downward shift in the ATC curve.
Farmer Brown can sell as much wheat as she likes at $2.50 per bushel.
Farmer Brown sells her wheat in a perfectly competitive market. Suppose the current market price of wheat is $2.50 per bushel.
4000
Figure 8.2 presents a firm's marginal cost, average total cost, and average variable cost curves. The firm faces fixed costs of:
150
Figure 8.2 presents a firm's marginal cost, average total cost, and average variable cost curves. The firm minimizes average total costs by producing ________ units.
30
Figure 8.3 shows a firm's marginal cost, average total cost, and average variable cost curves. At Q = 100, the average fixed cost is:
7000
Figure 8.3 shows a firm's marginal cost, average total cost, and average variable cost curves. At Q = 100, the total cost is:
60
Figure 8.3 shows a firm's marginal cost, average total cost, and average variable cost curves. At Q = 50, the average fixed cost is:
4500
Figure 8.3 shows a firm's marginal cost, average total cost, and average variable cost curves. At Q = 50, the total cost is:
1500
Figure 8.3 shows a firm's marginal cost, average total cost, and average variable cost curves. At Q = 50, the total variable cost is:
increasing average variable cost outweighs decreasing average fixed cost.
Figure 8.3 shows a firm's marginal cost, average total cost, and average variable cost curves. For an output level greater than Q = 100, the average total cost curve is upward-sloping because:
7200
Figure 9.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $40 and the firm is currently producing the profit maximizing output level, its total fixed cost is:
19800
Figure 9.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $40 and the firm is currently producing the profit maximizing output level, its total variable cost is:
9000
Figure 9.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $40 and the firm is currently producing the profit maximizing output level, the firm's profit is:
900
Figure 9.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $40, the firm's profit maximizing output level is:
200
Figure 9.2 shows the cost structure of a firm in a perfectly competitive market. If the market price is $10 and the firm chooses the profit maximizing output level, its profit is:
300
Figure 9.3 shows the cost structure of a firm in a perfectly competitive market. Assume the market price is $3 and the firm is currently producing 100 units. If the firm produces zero units in the short run, it will reduce its economic loss by:
False
Firms earning negative profits in the short run should always shut down.
is less than the price of output
For a monopolist, marginal revenue ________ for all units of output except the first unit.
the firm is earning negative economic profit.
In a perfectly competitive market, if price is less than average total cost, but greater than average variable cost at the level of output where marginal cost equals marginal revenue:
there are no barriers to entry in a perfectly competitive market.
In the long run, the main reason that a monopolist can earn positive economic profits while a perfectly competitive firm cannot is:
False
In the short run, a firm that is incurring losses would always be better off if it keeps producing.
False
In the short run, monopolistically competitive firms find their profit-maximizing quantity by setting price equal to marginal cost.
price is less than the minimum of the average variable cost of production.
In the short run, the firm should shut down when:
increase golf ball production.
Kevin's Golf-a-Rama sells golf balls in a perfectly competitive market. At its current level of golf ball production, Kevin has a marginal cost equal to $1, and AVC is rising. If the market price of golf balls is $2, Kevin should
decrease production of golf balls
Kevin's Golf-a-Rama sells golf balls in a perfectly competitive market. At its current level of golf ball production, Kevin has marginal costs equal to $2. If the market price of golf balls is $1, Kevin should:
total revenue increases by the price of the good when an additional unit is sold.
Marginal revenue is equal to price for a perfectly competitive firm because:
all of the above
Monopolistically competitive firms differentiate their products by: creating a special aura or image for the product with advertising. selling products at different locations. selling products with slightly different physical characteristics. all of the above
true
Monopolistically competitive industries are characterized by no barriers to entry.
False
Monopolistically competitive industries have only a single firm and there is a barrier to entry.
true
Monopoly reduces market efficiency compared to perfect competition.
total costs are positive when output is zero implying fixed costs.
One can tell that Figure 8.4 shows short run costs because
differentiate Pepsi from other types of soft drinks.
Pepsi uses advertising to create the impression that Pepsi is superior to any other soft drink. Pepsi is attempting to:
the vertical distance between Curve 1 and Curve 2 at a given level of output.
Refer to Figure 8.1, which shows a family of average cost curves. The average fixed cost at a given level of output is represented by:
Curve 3.
Refer to Figure 8.1, which shows a family of average cost curves. The average fixed cost curve is represented by:
the vertical sum of curve 2 and curve 3 at a given level of output
Refer to Figure 8.1, which shows a family of average cost curves. The average total cost at a given level of output is represented by: the vertical distance between Curve 1 and Curve 2 at a given level of output. the vertical sum of Curve 2 and Curve 3 at a given level of output. the vertical sum of Curve 1 and Curve 2 at a given level of output. the vertical distance between Curve 2 and Curve 3 at a given level of output.
curve 1
Refer to Figure 8.1, which shows a family of average cost curves. The average total cost curve is represented by:
6
Refer to Table 10.1, which shows the relationship between the price that Gladys charges for a product and the quantity of that product that Gladys sells. Gladys' marginal revenue becomes negative starting with the production of which unit?
3
Refer to Table 10.1, which shows the relationship between the price that Gladys charges for a product and the quantity of that product that Gladys sells. The marginal revenue that Gladys receives from selling the fourth unit of output is:
24
Refer to Table 10.1, which shows the relationship between the price that Gladys charges for a product and the quantity of that product that Gladys sells. The total revenue that Gladys receives from selling four units of output is:
15
Refer to Table 8.5. The total fixed cost of producing two units is:
43
Refer to Table 8.5. The total variable cost of producing five units of output is:
firms to enter the detergent market and sell products similar to Wave, shifting the demand curve for Wave to the left.
Suppose Wave detergent is sold in a monopolistically competitive market. If the price of Wave detergent is currently $6, and the average cost of producing Wave is $4, in the long run we can expect:
the market quantity of coffee demanded will increase, but the quantity of coffee supplied by any individual coffee shop declines
Suppose coffee is sold in a monopolistically competitive market, where coffee is differentiated by coffee shop location. As firms enter in the long run and the price of coffee falls:
570
Suppose that Figure 10.4 shows a monopolist's demand curve, marginal revenue, and its costs. At the profit-maximizing output level, the monopolist's profit would be:
35
Suppose that Figure 10.4 shows a monopolist's demand curve, marginal revenue, and its costs. The monopolist would maximize its profit by charging a price of: $35. $25. $20. $16.
30 units
Suppose that Figure 10.4 shows a monopolist's demand curve, marginal revenue, and its costs. The monopolist would maximize its profit by producing a quantity of:
35;$65
Suppose that Figure 10.5 shows a monopolist's demand curve, marginal revenue, and its cost. The monopolist would maximize its profit by producing a quantity of ________ and by charging a price of ________.
some firms may earn negative profits in the short run.
Suppose that a monopolistically competitive market is in its long-run equilibrium. If the market demand curve shifts to the left due to a recession:
firms will earn positive economic profits in the short run.
Suppose that a monopolistically competitive market is in its long-run equilibrium. If the market demand curve shifts to the right due to changes in consumer preferences:
False
Suppose that the market price of sugar is 25 cents per pound and a farmer's marginal cost of producing sugar is 28 cents per pound. The farmer should increase her sugar production.
average total cost is minimized at the current level of output.
Suppose you know that at the current level of production average total cost equals marginal cost, then you know that it is also true that:
we can expect firms to enter your market and sell a similar good in the long run
Suppose you operate in a monopolistically competitive market. If you sell your good at a price of $10 and your average cost of production is $8:
you should expect competing firms to enter your market and shift the demand curve for your good to the left.
Suppose you operate in a monopolistically competitive market. If you sell your good at a price of $20 and your average cost of production is $15:
30
Table 8.3 presents the cost schedule for Candy's Cakes. If Candy produces one cake, Candy's total variable costs are:
240
Table 8.4 presents the cost schedule for David's Figs. If David produces three figs, David's total variable costs are:
$85.
Table 8.4 presents the cost schedule for David's Figs. If David produces two figs, David's average variable costs are:
$100.
Table 8.4 presents the cost schedule for David's Figs. If David produces zero figs, David's total costs are:
the firm suffers a loss and is better off shutting down.
Table 9.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $3:
the firm suffers a loss but is better off producing at the output where MR = MC.
Table 9.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $5:
40
When a monopolist sells two units of output its total revenues are $100. When the monopolist sells three units of output its total revenues are $120. When the monopolist sells three units of output, the price per unit is:
5
When a monopolist sells two units of output its total revenues are $100. When the monopolist sells three units of output, its price per unit is $35. The monopolist's marginal revenue from selling the third unit of output is:
the original firm's price decreases. the original firm's quantity decreases. the original firm's ATC increases. All of the above are correct.
When a second firm enters a market, the original firm's profits decline because:
shift to the left
When a second firm enters a monopolist's market, the initial demand curve facing the monopolist will:
shift to the left as its initial demand curve shifts to the left.
When a second firm enters a monopolist's market, the monopolist's marginal revenue curve will:
market price will drop
When a second firm enters a monopolist's market:
the demand curve the former monopolist faces shifts to the left.
When a second firm enters a monopolist's market:
the market price falls.
When a second firm enters a monopolist's market:
Never
When does a firm's average variable cost exceed the average total cost?
factors that prevent other firms from challenging a firm with market power.
When economists say a market has "barriers to entry," they refer to:
There are substantial barriers to entry.
Which of the following is NOT a characteristic of a monopolistically competitive market?
I, II, and III
Which of the following is a characteristic of a monopolistically competitive market?I. There are many sellers.II.Firms sell slightly differentiated products.III.Each firm faces a downward-sloping demand curve.
I and II only
Which of the following is a characteristic of a monopolistically competitive market?I.Firms sell differentiated products.II.Each firm is earning a zero economic profit in the long run.III.Potential entrants face artificial barriers to entry
A firm's total accounting cost is at least as large as the firm's implicit cost.
Which of the following statements is INCORRECT?
price is less than average variable cost when marginal revenue equals marginal cost.
You are hired by Jimbo's Potato Farm to determine when Jimbo should shut down and produce no potatoes in the short run. Jimbo sells his potatoes in a perfectly competitive market. You tell Jimbo to shut down if:
fixed costs
_______ is a cost that is independent of the quantity produced by the firm and is incurred by the firm in the short run.
Both B and C are correct.
________ are costs that require a monetary payment. Implicit costs Explicit costs Accounting costs Both B and C are correct.
Figure 9.3 shows the cost structure of a firm in a perfectly competitive market. If the market price is $6, then the firm will:
be better off exiting the market and using the resources for other production activities
the firm is earning an economic profit greater than zero.
In a perfectly competitive market, if price is greater than average total cost at the level of output where marginal cost equals marginal revenue:
P > AVC.
A firm will not shut down in the short run as long as at the point where MR = MC:
average variable cost at the level of output where marginal revenue equals marginal cost.
A firm will not shut down in the short run as long as price exceeds:
true
A firm with total revenue of $500, total cost of $700, and variable cost of $400 should continue to operate its production facility.
monopoly.
A market served by only one firm is called a(n):
True
A monopolist will never produce a level of output where MR < 0.
True
A monopolist's marginal cost is less than the price it charges.
many firms sell similar yet slightly different products.
A monopolistically competitive market is one in which:
sell as much as it can produce at the market price.
A perfectly competitive firm can:
True
A perfectly competitive firm has no control over the price that it charges.
True
A perfectly competitive firm maximizes profit where marginal revenue or pice equals marginal cost
True
After the first unit, a monopolist's marginal revenue is less than the price it charges because to sell an additional unit it needs to lower its price.
location is a source for product differentiation.
Gasoline stations carrying the same fuel brand (e.g., Chevron) are able to charge different prices in San Francisco because:
marginal revenue is equal to marginal cost
If a competitive firm is in short-run equilibrium, then:
a perfectly competitive market.
If a firm can maximize its profit by producing the output where price is equal to its marginal cost, the firm is operating in:
Earning a zero economic profit
If a firm in a perfectly competitive market is currently producing the output where price = marginal cost = average total cost, the firm is:
earning a positive profit
If a firm in a perfectly competitive market is currently producing the output where price = marginal cost > average total cost, the firm is:
horizontal
If a firm is a price taker, the demand curve faced by the firm is:
the firm will earn a zero economic profi
If a firm is operating in a monopolistically competitive market, then in the long run:
P > MR because the monopolist must decrease price on all units in order to sell another unit.
If a monopolist charges the same price for all of the units of the good that it sells, then beyond the first unit sold:
equated marginal cost and marginal revenue.
If a monopolist is maximizing its profits, we know that it has:
the firm is earning an economic profit equal to zero.
If a perfectly competitive firm charges a price that is equal to its average total cost:
making zero economic profit
If a profit-maximizing firm in a perfectly competitive market is currently producing the output where (price - average variable cost) = average fixed cost, the firm is:
making a positive economic profit.
If a profit-maximizing firm in a perfectly competitive market is currently producing the output where (price - average variable cost) > average fixed cost, the firm is:
price is greater than average cost
If profits in a monopolistically competitive market are positive, we can conclude that:
any additional output will not result in a lower long run average cost.
If the firm has already reached the minimum efficient scale, then
equals the average variable cost curve.
If the firm is producing in the long run, then the firm's average total cost curve:
the average total cost curve is increasing.
If the marginal cost of producing the next unit of output exceeds the average total cost, then:
will be able to charge a higher price for their product
If the market demand increases for a good sold in a perfectly competitive market, individual firms in the market:
is earning an economic profit greater than zero.
If your firm is producing a good at a level where marginal revenue equals marginal cost, and price is greater than average total cost, your firm
monopolistically competitive market.
In Eugene, Oregon, there are several Italian restaurants, each offering slightly different items prepared in slightly different ways. It is likely that an Italian restaurant in Eugene, Oregon, operates in a(n):
fixed costs.
In Figure 8.4, the difference between total costs and variable cost is:
a perfectly competitive market.
In a market for a homogeneous good, if sellers and buyers can enter or exit a market freely, the market is most likely:
true
The entry of an additional firm into a market decreases the profit per unit of output because entry decreases the price.
average total costs are minimized in the short run.
The marginal cost curve intersects the short-run average total cost curve where:
.the output level beyond which the firm will not experience scale economies.
The minimum efficient scale is:
