ECON

Refer to Table 15-4. If the monopolist produces 10 units, what is its average revenue?

$10

Ivana produces cookies. Her production cost is $6 per dozen. She sells the cookies for $8 per dozen. Her producer surplus per dozen cookies is

$2

Refer to Figure 7-1. If the price of the good is $150, then consumer surplus amounts to

$250

Pat bought a new car for $15,500 but was willing to pay $24,000. The consumer surplus is

$8,5000

When a profit-maximizing firm is earning profits, those profits can be identified by

(P - ATC) x Q

Average total cost equals

(fixed costs + variable costs) divided by quantity produced

Which of the following are necessary characteristics of a monopoly? (i)The firm is the sole seller of its product.(ii)The firm's product does not have close substitutes.(iii)The firm generates a large economic profit.(iv)The firm is located in a small geographic market.

(i) and (ii) only

When a restaurant stays open for lunch service even though few customers patronize the restaurant for lunch, which of the following principles is (are) best demonstrated?(i)Fixed costs are sunk in the short run.(ii)In the short run, only fixed costs are important to the decision to stay open for lunch.(iii)If revenue exceeds variable cost, the restaurant owner is making a smart decision to remain open for lunch.

(i) and (iii) only

What happens to the price and quantity sold of a drug when its patent runs out? (i)The price will fall.(ii)The quantity sold will fall.(iii)The marginal cost of producing the drug will rise.

(i) only

In a perfectly competitive market, the process of entry and exit will end when (i)accounting profits are zero.(ii)economic profits are zero.(iii)price equals minimum marginal cost.(iv)price equals minimum average total cost.

(ii) and (iv) only

An industry is a natural monopoly when(i)the government assists the firm in maintaining the monopoly.(ii)a single firm owns a key resource.(iii)a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms.

(iii) only

Total revenue equals

(price x quantity)

Refer to Table 15-6. What is the marginal revenue from the sale of the 4th unit?

-$3

Refer to Table 15-4. If the monopolist produces 10 units, what is its marginal revenue?

-$5

Grace is a self-employed artist. She can make 20 pieces of pottery per week. She is considering hiring her sister Kate to work for her. Both she and Kate can make 35 pieces of pottery per week. What is Kate's marginal product?

15 pieces of pottery

Refer to Table 13-2. What is the marginal product of the first worker?

200 units

Refer to Table 13-5. The marginal product of the third worker is

700 units

Refer to Figure 15-3. The demand curve for a monopoly firm is depicted by curve

A

Refer to Figure 7-2. When the price is P1, consumer surplus is

A+B+C

Suppose a firm operating in a competitive market has the following cost curves: Refer to Figure 14-8. The firm will exit the market for any price on the line segment

AB

Refer to Figure 7-8. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

ABGD

Refer to Figure 7-8. Which area represents producer surplus when the price is P2?

ACH

Refer to Figure 7-8. Which area represents the increase in producer surplus when the price rises from P1 to P2?

AHGB

Producer surplus equals

Amount received by sellers - Costs of sellers.

Refer to Figure 15-3. The marginal revenue curve for a monopoly firm is depicted by curve

B

Refer to Figure 15-5. What price will the monopolist charge?

B

Refer to Figure 7-8. Which area represents producer surplus when the price is P1?

BCG

A monopolist maximizes profits by

Both a and b are correct.

Which of the following is a characteristic of a competitive market?

Buyers and sellers are price takers.

All else equal, what happens to consumer surplus if the price of a good decreases?

Consumer surplus increases.

Refer to Figure 15-3. The average total cost curve for a monopoly firm is depicted by curve

D

Marginal cost is equal to

DTC/DQ

Table 7-1 BuyerWillingness To Pay Lori$50.00 Audrey$30.00 Zach$20.00 Calvin$10.00 Refer to Table 7-1. If the price of the product is $15, then who would be willing to purchase the product?

Lori, Audrey, and Zach

A firm that is the sole seller of a product without close substitutes is

a monopolist

Laissez-faire is a French expression which literally means

allow them to do.

Consumer surplus is the

amount a consumer is willing to pay minus the amount the consumer actually pays

Consumer surplus in a market can be represented by the

area below the demand curve and above the price

Marginal cost is equal to average total cost when

average total cost is at its minimum

If marginal cost is equal to average total cost, then

average total cost is minimized.

Constant returns to scale occur when the firm's long-run

average total costs are constant as output increases.

Which of the following is a characteristic of a monopoly?

barriers to entry

Producer surplus is the area

below the price and above the supply curve

Total surplus in a market is equal to

consumer surplus + producer surplus

Refer to Figure 7-2. Area C represents the

consumer surplus to new consumers who enter the market when the price falls from P2 to P1.

Figure 7-2Refer to Figure 7-2. When the price rises from P1 to P2, consumer surplus

decreases by an amount equal to B+C

If the total cost curve gets steeper as output increases, the firm is experiencing

diminishing marginal product

In the long run Firm A incurs total costs of $1,200 when output is 30 units and $1,400 when output is 40 units. Firm A exhibits

economies of scale because average total cost is falling as output rises.

For a firm in a perfectly competitive market, the price of the good is always

equal to marginal revenue.

Which of the following represents the firm's long-run condition for exiting a market?

exit if P < ATC

A market might have an upward-sloping long-run supply curve if

firms have different costs.

Patent and copyright laws are major sources of

government-created monopolies

A consumer's willingness to pay directly measures

how much a buyer values a good.

Welfare economics is the study of

how the allocation of resources affects economic well-being

The marginal product of labor is equal to the

increase in output obtained from a one unit increase in labor

In the long run,

inputs that were fixed in the short run become variable.

If marginal cost is below average total cost, then average total cost

is falling

For a monopolist, marginal revenue is

less than price, whereas marginal revenue is equal to price for a perfectly competitive firm

For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

marginal cost curve

In the short-run, a firm's supply curve is equal to the

marginal cost curve above its average variable cost curve.

Profit-maximizing firms in a competitive market produce an output level where

marginal cost equals marginal revenue.

One difference between a perfectly competitive firm and a monopoly is that a perfectly competitive firm produces where

marginal cost equals price, while a monopolist produces where price exceeds marginal cost

Diminishing marginal product suggests that

marginal cost is upward sloping

Refer to Figure 15-1. The shape of the average total cost curve reveals information about the nature of the barrier to entry that might exist in a monopoly market. Which of the following monopoly types best coincides with the figure?

natural monopoly

Refer to Figure 14-1. If the market price is $5.00, the firm will earn

negative economic profits in the short run but remain in business.

Free entry means that

no legal barriers prevent a firm from entering an industry

The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as

price discrimination.

A monopolist maximizes profits by

producing an output level where marginal revenue equals marginal cost

Refer to Figure 13-2. The graph illustrates a typical

production function.

For a firm, the production function represents the relationship between

quantity of inputs and quantity of output.

A production function is a relationship between inputs and

quantity of output.

Cost is a measure of the

seller's willingness to sell

When total revenue is less than variable costs, a firm in a competitive market will

shut down

Which of the following represents the firm's short-run condition for shutting down?

shut down if TR < VC

One of the defining characteristics of a perfectly competitive market is

similar product.

In a perfectly competitive market, the market supply curve is

the horizontal sum of all the individual firms' supply curves.

Which of these curves is the competitive firm's short-run supply curve?

the marginal cost curve above average variable cost

Generic drugs enter the pharmaceutical drug market once

the patent on the name brand drug expires.

The short-run supply curve for a firm in a perfectly competitive market is

the portion of its marginal cost curve that lies above its average variable cost.

Efficiency in a market is achieved when

the sum of producer surplus and consumer surplus is maximized

We can say that the allocation of resources is efficient if

total surplus is maximized.

Total surplus in a market is equal to

value to buyers - costs of sellers.

If a firm produces nothing, which of the following costs will be zero?

variable cost

A sunk cost is one that

was paid in the past and will not change regardless of the present decision

In a market, the marginal buyer is the buyer

who would be the first to leave the market if the price were any higher

The maximum price that a buyer will pay for a good is called the

willingness to pay.

Economies of scale arise when

workers are able to specialize in a particular task