econ-micro final exam

Which one of the following is the most accurate description of a monopolist?

A sole producer of a product for which good substitutes are lacking in a market with high barriers to entry.

Which of these are used to determine the poverty line in the U.S.? High-end housing. Cost of a new car. Amount of income to cover basic standard of living. Amount of money in a savings account.

Amount of income to cover basic standard of living.

Assuming that the monopolistic competitor faces the demand and costs depicted below and finds the profit maximizing level of output, what will be the firm's revenue?

$0 because the firm will shut down

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total revenues are:

$220

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total variable costs are:

$432

Refer to the figure below. Total revenue is: monopoly.....

$480

Assuming that the monopolistic competitor faces the demand and costs depicted below and finds the profit maximizing level of output, what will be the firm's revenue?

96

Cut-throat competition happens when oligopolistic firms ________. compete hard and stop acting like perfect competitors, driving up costs and leading to a profit in the long run compete hard and end up acting very much like perfect competitors, driving down costs and leading to zero profits in the long run collude with each other and effectively act as a monopoly by succeeding in pushing up prices and earning consistently higher levels of profits

compete hard and end up acting very much like perfect competitors, driving down costs and leading to zero profits in the long run

In a prisoner's dilemma, what type of behavior provides the most benefit for each individual?

confess

An extremely high degree of ________, with very high taxes on the rich, would be likely to discourage work and entrepreneurship. income leveling redistribution earnings smoothing

redistribution

If a company produces at a quantity of output where marginal revenue exceeds marginal cost, it means that ________.

the company should keep expanding production

Given the data provided in the table below, what will the fixed costs equal for production at quantity (Q) level 4? Q P TC TR MR MC Profit 0 $5 $9 1 $5 $10 2 $5 $12 3 $5 $15 4 $5 $19 5 $5 $24 6 $5 $30 7 $5 $45

$9.00

Given the level of demand below, what is the marginal revenue of the third unit of production? Price Quantity 25 1 22 2 18 3 15 4 12 5

10

Assuming that the monopolistic competitor faces the demand and costs depicted below and finds the profit maximizing level of output, what will be the firm's revenue? monoplistic..

144

Refer to the graph below. Total profit is:

144

Using the costs and demand in the table below for a monopolistic competitor to find the level of output for maximizing its profit, what would the corresponding price be?

18

Suppose the monopolistic competitor faces costs and demand as depicted in the table below. Given the goal of maximizing profit, what level of output would the firm choose? Q = 1 2 3 4 5 6 Total Revenue = 10 18 24 28 30 30 Total Cost = 2 7 13 21 31 43

3

The following table shows a monopolist's demand curve and cost information for the production of its good. What quantity will it produce? Quantity Price per Unit Total Cost 10 $10 $20 20 $8 $50 30 $6 $65 40 $4 $90 50 $2 $120

30

Suppose a city releases 16 million gallons of raw sewage into a nearby lake. The table below shows the total costs of cleaning up the sewage to different levels, together with the total benefits of doing so. (Benefits include environmental, recreational, health, and industrial benefits.) Using the information in the table, calculate the marginal costs and marginal benefits of reducing sewage emissions for this city. What is the optimal level of sewage for this city? Total Cost (in thousands of dollars) Total Benefits (in thousands of dollars) 16 million gallons Current situation Current situation 12 million gallons 50 800 8 million gallons 150 1300 4 million gallons 500 1850 0 gallons 1200 2000 4 million gallons 12 million gallons 8 million gallons

4 million gallons

Refer to the figure below. Total profit is:

80

grocery store. They know that if they cooperated and produced less corn, they could raise the price of the corn. If they work independently, they will each earn $100. If they decide to work together and both lower their output, they can each earn $150. If one person lowers output and the other does not, the person who lowers output will earn $0 and the other person will capture the entire market and will earn $200. The table represents the choices available to Mary and Raj. What is the best choice for Raj if he is sure that Mary will cooperate? Mary Keeps Producing Mary Lowers Output Raj Keeps Producing $100, $100 $200, $0 Raj Lowers Output $0, $200 $150, $150 If Raj is sure Mary will cooperate, he should work independently. If Raj is sure that Mary will cooperate, he should agree to work together. If Raj is sure Mary will cooperate, he should cheat.

If Raj is sure Mary will cooperate, he should cheat.

All of the following are characteristics of Perfect Competition except:

Incomplete information about prices.

Where does an earning gap continue to exist in the U.S.? It exists only between gender. It exists between both gender and race. It exists only between races.

It exists between both gender and race.

What role does the U.S. government play with respect to market competition?

It policies anticompetitive behavior and prohibits contracts that restrict competition.

If Congress reduced the period of patent protection from 20 years to 10 years, what would likely happen to the amount of private research and development?

It would make innovation less lucrative, so the amount of research and development would likely decline.

Which of the following are ways in which the government promotes positive externalities? Protection of intellectual property. Incentives for increasing output. Spending on research and development.

Protection of intellectual property. Spending on research and development.

Firms in a perfectly competitive market are said to be "price takers"—that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?

No, you would not raise the price.

The profit-maximizing choice for a perfectly competitive firm will occur where marginal revenue is equal to ________.

marginal cost

How is the total revenue calculated in a perfectly competitive firm?

Quantity of goods sold times the market price.

In a perfectly competitive market, which of the following is correct?

The firm's demand curve is perfectly elastic.

Which of the following would be classified as a positive externality? The increase in neighborhood property values from converting a derelict empty lot to a public vegetable garden. Reselling outdated textbooks to under-funded public schools. A surcharge for ambulance service is shifted to property taxes. Removing government education subsidies for public schools.

The increase in neighborhood property values from converting a derelict empty lot to a public vegetable garden.

Which of the following best describes the line of perfect income inequality in a Lorenz curve? The line of perfect income inequality is at 45 degrees, because all income is perfectly uniform. The line of perfect income inequality is at 0 degrees, because one person has all the wealth. The line of perfect income inequality is at 30 degrees, because greater rewards are given to more productive people.

The line of perfect income inequality is at 0 degrees, because one person has all the wealth.

In perfectly competitive market, which of the following is correct?

The market demand curve is downward sloping and the firm's demand curve is flat.

What happens to the value of a firm's additional output sold when the firm has some market power? The value of that additional output sold is its marginal profit. The value of that additional output sold is its marginal revenue. The value of that additional output sold is its marginal costs.

The value of that additional output sold is its marginal revenue.

Which of the following is not true about oligopolies? They exist as a large number of firms that have all or most of the market share. The decisions of one oligopoly affect the operations of another oligopoly. There tends to only be room for a few oligopolists in a particular industry due to competition and barriers to entry being significantly high.

They exist as a large number of firms that have all or most of the market share.

Which of the following is a potential source of income inequality? Wage disparity Increased influence of unions. Decreased demand for high-skilled workers.

Wage disparity

Which of the following are examples of positive externalities? You are a bird watcher, and your neighbor puts up birdhouses and gardens to attract birds. Investments in private education raise your country's standard of living. Your roommate is a smoker, but you are a nonsmoker.

You are a bird watcher, and your neighbor puts up birdhouses and gardens to attract birds. Investments in private education raise your country's standard of living.

Which of the following are examples of negative externalities? Construction of an airport to support commerce and travel in your community Your neighbor paints her house a hideous color. Trash dumped upstream flows downstream right past your house.

Your neighbor paints her house a hideous color. Trash dumped upstream flows downstream right past your house.

In the framework of an oligopoly, what strategy can work like a silent form of cooperation? legally enforceable agreements always match other cartel firms' price cuts, but don't match price increases immediately match price increases always match other cartel firms' price increases, but don't match price cuts

always match other cartel firms' price cuts, but don't match price increases

Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Firm A) is large and the other firm (Firm B) is small, as shown in the prisoner's dilemma box: What is Firm B's most likely choice? Firm B colludes with Firm A Firm B cheats by selling more output Firm A colludes with Firm B A gets $1,000, B gets $100 A gets $800, B gets $200 Firm A cheats by selling more output A gets $1,050, B gets $50 A gets $500, B gets $2 work independently cooperate with Firm A cheat

cooperate with Firm A

Question 51 pts If immigration consists of mainly high-skilled workers, then a(n) ________ in immigration will ________ the wages of high-skilled workers. decrease; increase increase; increase increase; not affect

decrease; increase

The concept of derived demand of labor means that demand for labor is decreased from a demand for output. supply for labor will increase from a demand for output. demand for labor is created from a demand for a good or service

demand for labor is created from a demand for a good or service

In a monopolistically competitive industry, when a business faces a ________ demand curve, it will choose a combination of quantity and ________ to maximize its profit.

downward-sloping; price

Price discrimination occurs when a:

firm charges different prices to different customers based on their willingness to pay.

An individual who wants others to pay for public goods, but plans to use those goods without paying, is often referred to as a ________.

free rider

The earnings gap in the U.S. labor market between black and white workers ________. has not diminished at all since 1960 has diminished since 1960, but a gap still remains was completely eliminated by the end of the 1960s

has diminished since 1960, but a gap still remains

A Lorenz curve refers to a graphic illustration of the cumulative share of population on the ________ and the cumulative percentage of total income received on the ________ . vertical axis : horizontal axis horizontal axis : vertical axis right quintile : left quintile left quintile : right quintile

horizontal axis : vertical axis

Employment will be lower in a(n) ________ competitive industry than in a ________ competitive industry. imperfectly; normative perfectly; imperfectly imperfectly; perfectly

imperfectly; perfectly

When income is allocated among members of society and is seen as equitable or inequitable it is called ________. money allocation wealth distribution income distribution

income distribution

Question 31 pts Over the past half of a century in the United States, ethnic diversity and racial diversity is ________. increasing decreasing remaining constant

increasing

The effects of a poverty trap can be reduced by ________. limiting the number of participants in the program not imposing work requirements as a condition of receiving benefits initially decreasing the government payments by smaller amounts x`

initially decreasing the government payments by smaller amounts

The demand for labor is a derived demand because it is dependent on the number of workers willing to be employed. it is independent of the demand for output. it is dependent on the demand for output

it is dependent on the demand for output

Which of the following is most likely to be a monopoly?

local electricity distributor

Firms in an oligopoly often:

make decisions based on the behavior or expected behavior of their competitors.

A monopolist is a price:

maker.

For firms with market power, they choose the number of workers where the market wage equals the firm's ________. revenue product marginal cost product marginal revenue product

marginal revenue product

By agreeing to work together, either formally or informally, oligopolies in a market can ________ profits by reducing output and charging a ________ price which is much like a monopoly. maximize; higher minimize; higher maximize; lower

maximize; higher

A public good is a good that is ________, and thus is difficult for market producers to sell to individual consumers. excludable or rivalrous unexcludable or unrivaled excludable and rivalrous nonexcludable and nonrivalrous

nonexcludable and nonrivalrous

In order for a good to be classified as ________ , when one person uses the good, others are also able to use it. nonrivalrous unrivalrous nonexcludable unexcludable

nonrivalrous

A monopolist is able to maximize its profits by:

producing output where MR = MC and charging a price along the demand curve.

The poverty line is determined by ________. annual estimates based on a sampling of U.S. middle- and high-income households surveys completed on the elderly the level of income needed to cover basic needs

the level of income needed to cover basic needs

If large numbers of individuals choose to behave as free riders, ________. the public good may never be provided more of the public good will be available for paying riders public goods will quickly be privatized

the public good may never be provided

A pollution charge is a form of tax imposed on low-income market-oriented industries. every economy in the world. the quantity of pollution that a firm emits. pollution- control technologies.

the quantity of pollution that a firm emits.

Which scenario below is an example of an Oligopoly? A new medicine that cures cancer has just been created and only one company creates and sell it A strawberry farmer that sells a similar product as everyone else and is a price taker Many firms that sell different style clothing; restaurants and grocery stores that sell different food. The soda industry with very few large firms that have a lot of control over the market, such as Pepsi and Coke

the soda industry with very few large firms that have a lot of control over the market, such as Pepsi and Coke

If incomes rise for both low-income and high-income workers, but rise less for the high- income workers, then poverty will fall and inequality will rise. then poverty will rise and inequality will fall then poverty will fall and inequality will fall.

then poverty will fall and inequality will fall.

If incomes rise for both low-income and high-income workers, but rise less for the high-income workers, then poverty will rise and inequality will rise. then poverty will fall and inequality will rise. then poverty will fall and inequality will fall. then poverty will rise and inequality will fall.

then poverty will fall and inequality will fall.

Oligopolists are allocatively and productively inefficient in the markets because ________. they typically operate at a level of output where price is less than marginal cost and do not produce at the minimum point on their average cost curves. they typically operate at a level of output where price is greater than marginal cost and do produce at the minimum point on their average cost curves. they typically operate at a level of output where price is greater than marginal cost and do not produce at the minimum point on their average cost curves.

they typically operate at a level of output where price is greater than marginal cost and do not produce at the minimum point on their average cost curves.

In the short-run, the firm will operate (not shut down) as long as revenue is more than enough to cover ________.

variable costs

In order for a monopolistic competitor to produce at a level of output that is profit-maximizing, it will select an output level

where marginal revenue equals marginal cost.

If U.S. immigration consists of mainly low-skilled workers, then an increase in immigration ________ the wages of low-skilled workers. may increase or reduce will increase will reduce

will reduce