ECON Final Review

2. Which of the following conditions is characteristic of a monopolistically competitive firm in both the short run and the long run?

P > MC

30. The marginal product of labor is defined as the change in

c. output per additional unit of labor.

Which of the following will occur in the long run in this industry

firms will enter this industry

To say that a firm is competitive in the labor market is to say that the firm

has a little or no control over the wage it pays its workers

24. Refer to table 2. Suppose the firm sells each box of envelopes that it produces for $6. What is the marginal profit of the fourth worker?

$-96

The maximum total short-run economic profit for the monopolistically competitive firm in this figure is

$3,000

23. Diane's Auto World installs tires on automobiles, light trucks, and sport utility vehicles. She is a profitmaximizing business owner whose firm operates in a competitive market. The marginal cost of installing a tire is $20. The marginal productivity of the last worker that Diane hired was two tires per hour. What is the maximum hourly wage that Diane was willing to pay the last worker hired?

$40

Refer to Figure 2. In order to maximize its profit, the firm will choose to produce a. less than 100 units of output.

100 units of output

22. Refer to Table 1. Suppose the monopolistically competitive firm faces the following demand curve:

30 units

16. Refer to Figure 5. Given demand for labor, D1, and supply of labor, S1, what is the quantity demanded of labor if a minimum wage of $9 per hour is imposed on this market?

50

18. A competitive firm sells its output for $60 per unit. Assume that labor is the only input that varies for the firm. The marginal product of the 10th worker is 20 units of output per day; the marginal product of the 11th worker is 16 units of output per day. The firm pays its workers a wage of $150 per day. For the 11th worker, the value of the marginal product of labor is

960

5. Which of the following is not an argument made by critics of advertising?

Advertising promotes economies of scale

Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market

Graph b downwardish slope

Assuming that all other things are equal, including the wage, which of the following statements is correct?

b. The quantity of labor supplied for fun jobs exceeds that for dull jobs.

Refer to Figure 3. Which of the following would shift the labor supply curve from S1 to S2?

a change in workers' attitudes towards the work-leisure tradeoff in favor of work

Refer to Figure 2. The quantity of output at which the MC and ATC curves cross is the

a. efficient scale of the firm.

21. Which of the following would shift a market labor supply curve to the left?

b. An increase in the number of families deciding to have one parent stay at home to raise their children

26. Monopoly firms face

b. downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.

32. When a production function exhibits a diminishing, but positive, marginal product of labor

b. output increases, but at a decreasing rate, as more workers are employed.

27. The deadweight loss associated with a monopoly occurs because the monopolist

b. produces an output level less than the socially optimal level.

31. Value of marginal product is defined as the additional

b. revenue earned from hiring one more unit of a factor of production.

25. Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

c. Exactly $2.50

Which of the following is not a key feature of monopolistic competition?

c. Positive economic profits for firms in the long run

17. Refer to Figure 6. This graph illustrates the market for bakers who make homemade breads and breakfast pastries. If the bakery profession becomes more attractive to young women and men because of a new reality television show, what happens in the market for bakers?

c. Supply increases from S1 to S2.

29. If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then

c. its average total cost is less than $10.

28. Refer to Scenario 2. In the labor market in the northern United States, the equilibrium wage

d. will rise, and the equilibrium quantity of labor will fall.

Consider the market for capital equipment. Suppose the price of firms' output decreases. Holding all else constant, the equilibrium rental price of capital equipment will

decrease

1. If the value of the marginal product of labor exceeds the wage, then hiring another worker

increases the firm's profit.

If YumYum decides to advertise its product it can expect to

incur a loss of $1.5 million

long run equilibrium

only a perfectly competitive firm operates at its efficient scale

The relationship between advertising and product differentiation is

positive; the more differentiated the product, the more a firm is likely to spend on advertising