Econ Test 3

d. rise in the short run. Some firms will enter the indusiry. Price will then fall to mach the new long-run equilibrium.

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will a. fall in the short run. All, some, or no firms will shut down, and some of there will the enter the industry. Price will then rise to reach the new long-run equilibrium. b. not rise in the short run because firms will enter to maintain die pree. C. rise in the short run. Some firms will enter the industry. Price will then rise to the new long run equilibrium. d. rise in the short run. Some firms will enter the indusiry. Price will then fall to mach the new long-run equilibrium.

c.produce 3 units in the short run and exit in the long run.

A firm in a competitive market has the following cost structure: If the market price is $4, this firm will a. produce 2 units in the short run and exit in the long run. b. shut down in the short run and exit in the long run. c. produce 3 units in the short run and exit in the long run. d. produce 4 units in the short run and exit in the long run.

C. the short run but not in the long run.

A firm operating in a monopolistically competitive market can earn economic profits in a. neither the short run nor the long run. b. the long run but not in the short run. c. the short run but not in the long run. d. both the short run and the long run.

D. is not likely to be concerned about new entrants eroding its monopoly power.

A firm that is a natural monopoly a. All of the above are correct. b. is taking advantage of diseconomies of scale. c. would experience a lower average total cost if more firms entered the market. d. is not likely to be concerned about new entrants eroding its monopoly power.

B. Barriers to entry

A fundamental source of monopoly market power arises from A. perfectly elastic demand B. Barriers to entry C. availability of "free" natural resources, such as water or air. D. perfectly inclastic demand

D. (ii) and (iii) only

A market is competitive if (i)firms have the flexibility to price their own product. (ii)each buyer is small compared to the market. (iii)each seller is small compared to the market. a. (i) and (iii) only b. (i) and (ii) only c. (i), (ii), and (iii) d. (ii) and (iii) only

B. monopolistic competition.

A market structure in which there are many firms selling products that are similar but not identical is known as a. perfect competition. b. monopolistic competition. c. oligopoly. d. monopoly.

C. 5 Units

A monopolist faces the following demand curve: If a monopolist faces a constant marginal cost of $2, how much output should the firm produce in order to maximize profit? Select one: a. 3 units b. 2 units c. 5 units d. 4 units

b.2 units

A monopolist faces the following demand curve: If a monopolist faces a constant marginal cost of $20, how much output should the firm produce in order to maximize profit? Select one: a.3 units b.2 units c.5 units d.4 units

C. $3

A monopolist faces the following demand curve: What is the marginal revenue from the sale of the 3rd unit? a. -$3 b. $24 c. $3 d. $9

a.-$3

A monopolist faces the following demand curve: What is the marginal revenue from the sale of the 4th unit? Select one: a.-$3 b.$24 c.$3 d.$9

B. less than the socially efficient quantity of output but at a higher price than in a competitive market.

A monopolist produces a. the socially efficient quantity of output but at a higher price than in a competitive market. b. less than the socially efficient quantity of output but at a higher price than in a competitive market. c. possibly more or possibly less than the socially efficient quantity of output, but definitely at a higher price than in a competitive market. d. more than the socially efficient quantity of output but at a higher price than in a competitive market.

A. price and quantity just as a monopoly does

A monopolistically competitive firm chooses its A. price and quantity just as a monopoly does B. price but can sell any quantity at the market price just as an oligopoly does. C. price and quantity bused on the decisions of the other firms in the industry just as an oligopoly does. D. quantity but faces a hortontal demand curve just as a competitive firm does

D. maximize profit and produce a socially-optimal level of output

A perfectly price-discriminating monopolist is able to A. exercise illegal preferences regarding the race and/or gender of its employees B. produce a socially-optimal level of output, but not maximire profit. C. maximize profit, but not produce a socially-optimal level of output. D. maximize profit and produce a socially-optimal level of output

A. price is less than average variable cost.

A profit-maximizing firm will shut down in the short run when a. price is less than average variable cost. b. price is less than average total cost. c. average revenue is greater than marginal cost. d. average revenue is greater than average fixed cost.

B. Q3

A profit-maximizing monopoly will produce an output level of a. Q4. b. Q3. c. Q2. d. Q1.

C.sell all he wants at the going price, so he has little reason to charge less.

A seller in a competitive market can a. influence the profic cacued by competing firms by adjusting his output. b. influence the market pried by adjusting his output. C.sell all he wants at the going price, so he has little reason to charge less. d. All of the above are correct.

Ed shovels and Aaron does not shovel.

Aaron and Ed are roommates. After a big snowstorm, their driveway needs to be shoveled. Each person has to decide whether to take part in shoveling the driveway. At the end of the day, either the driveway will be shoveled (if one or both roommates take part in shoveling), or it will remain unshoveled (if neither roommate shovels). With happiness measured on a scale of 1 (very unhappy) to 10 (very happy), the possible outcomes are as follows: If this game is played only once, then which of the following outcomes is the most likely one? a. All of the above outcomes are equally likely. b. Aaron shovels and Ed does not shovel. c. Aaron and Ed both shovel. d. Ed shovels and Aaron does not shovel.

A. $30,000

An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc. How much additional profit can the airline earn by charging each customer their willingness to pay relative to charging a flat price of $300 per ticket? a. $30,000 b. $15,000 c. $45,000 d. $10,000

C. 700

Anaya has decided to start her own hair-styling salon. To purchase the necessary equipment, Anya withdrew $10,000 from her savings account, which was earning 3% interest, and borrowed an additional $5,000 from the bank at an interest rate of 8%. What is Anya's annual opportunity cost of the financial capital that has been invested in the business? a. $300 B. $400 C.$700 D. $1,650

d. as a single monopolist.

As a group, oligopolists would always be better off if they would act collectively a. as if they were each secking to maximize their own individual profits. b. as a single perfectly competitive firm. C. in a manner that would prohibit collusive agreements. d. as a single monopolist.

C. charge the same price that a monopolist would charge if the market were a monopoly.

As a group, oligopolists would always earn the highest profit if they would a. produce the perfectly competitive quantity of output. b. produce more than the perfectly competitive quantity of output. c. charge the same price that a monopolist would charge if the market were a monopoly. d. operate according to their own individual self-interests.

B. an eventual increase in the number of firms in the market and a new long-run quilibrium at point z.

Assume that the market starts in equilibrium at pont W in panel (b). An increase in demand from DO to DI will result in A. rising prices and falling profits for existing firms in the market. B. an eventual increase in the number of firms in the market and a new long-run quilibrium at point z. C. a new market equilibrium at point X. D.falling prices and falling profits for existing fins in the market.

b. Bev's economic profit is $3,700

Bev is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bev hadn't opened her own business, she would have earned a salary of $25,000. In her first year, Bev's revenues were $30,000, and she spent $1,000 on materials and supplies. Which of the following statements is correct? a.Bev's accounting profits exceed her economic profits by $300. b. Bev's economic profit is $3,700 C. Bev's total implicit costs are $300 d. Bevs total explicit costs are $26,300.

b.increase price in the short run but not in the long run.

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will a. increase price both in the short and the long run. b. increase price in the short run but not in the long run. c. not affect price in either the short or the long run. d. increase price in the long run but not in the short run.

c.$0.18

Erika owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each. What are Erika's total economic costs per glass? a. $0.08 b. $0.10 c. $0.18 d. $0.02

b.the $30,000 per year salary paid to the company's bookkeeper

For a construction company that builds houses, which of the following costs would be a fixed cost? a. All of the above are correct. b.the $30,000 per year salary paid to the company's bookkeeper C.the $20 per hour wage paid to a construction foreman d.the $2 per worker-hour paid to the state government for workers' compensation insurance

a.quantity of inputs and quantity of output.

For a firm, the production function represents the relationship between a. quantity of inputs and quantity of output. b. implicit costs and explicit costs. c. quantity of output and total cost. d. quantity of inputs and total cost.

c.the cost of the steel that is used in producing automobiles

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost? a. the $20 million payment that the firm pays each year for accounting services b. All of the above are correct. c. the cost of the steel that is used in producing automobiles d. the rent that the firm pays for office space in a suburb of St. Louis

A. (i) and (ii) only

Granting a pharmaceutical company a patent for a new medicine will lead to (i)a product that is priced higher than it would be without the exclusive rights. (ii)incentives for pharmaceutical companies to invest in research and development. (iii)higher quantities of output than without the patent. a. (i) and (ii) only b. (i) and (iii) only c. (ii) and (iii) only d. (i), (ii), and (iii)

a.$340

Gwen has decided to start her own photography studio. To purchase the necessary equipment, Gwen withdrew $2,000 from her savings account, which was earning 3% interest, and borrowed an additional $4,000 from the bank at an interest rate of 7%. What is Gwen's annual opportunity cost of the financial capital that has been invested in the business? a. $340 b. $280 c. $660 d. $60

D. In both cases, total social welfare is the same.

How does a competitive market compare to a monopoly that engages in perfect price discrimination? a. Consumer surplus is the same in both cases. b. In both cases, some potentially mutually beneficial trades do not occur. c. Total social welfare is higher in the competitive market than with the perfectly price discriminating monopoly. d. In both cases, total social welfare is the same.

A. Diminishing marginal product

If Farmer Green plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, be gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost. Farmer Green's production function exhibits A. diminishing marginal product. B. increasing marginal product. C. constant marginal product. D. The production function is unrelated to the marginal product.

a. the number of workers and the quantity of output.

If a firm uses labor to produce output, the firm's production function depicts the relationship between a. the number of workers and the quantity of output. b. the maximum quantity that the firm can produce as it adds more capital to a fixed quantity of labor. C.marginal product and marginal cost. d. fixed inputs and variable inputs in the short run.

b. fewer firms in the market.

If the market starts in equilibrium at point Z in panel (b), a decrease in demand will ultimately lead to a, more firms in the industry but lower levels of output for each firm. b. fewer firms in the market. C. lower prices once the new long-run equilibrium is reached. d. a new long-run equilibrium at point X in panel (b).

C. $20

In order to maximize profit monopolist should charge a price of A. $9 B. $12 C. $20 D. $23

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

In the long run a company that produces and sells candy bars incurs total costs of $1,200 when output is 2,400 candy bars and $1,400 when output is 2,900 candy bars. The candy bar company exhibits a. diseconomies of scale because average total cost is rising as output rises. b. diseconomies of scale because total cost is rising as output rises. c. economies of scale because average total cost is falling as output rises. d. economies of scale because total cost is rising as output rises.

A. $20,000.

Joe is a shrimp fisherman who catches 4,000 pounds of shrimp per year. He can sell the shrimp for $5 per pound. His average total cost of catching shrimp is $3 per pound. Joe's annual total revenue is a. $20,000. b. $32,000. c. $8,000. d. $12,000.

B. $40

Joe is a shrimp fisherman who used 5,000 from his personal savings account to buy a boat and equipment for his shrimp business. The savings account paid 2% interest. What is Joel annual opportunity cost of the financial capital that he invested in his business? A. $20 B. $40 C. $200 D. $400

d. can choose quantity of butter that it produces but not the price at which it sells its butter.

Land of Many Lakes (LML) sells butter to a broker in Albert L.ca, Minnesota. Bocause the market for butter is generally considered to be competitive, LML a. can choose both the price at which it sells its butter and the quantity of butter that it produces. b. cannot choose either the price at which it sells it butter or the quantity of butter that it produces. c. can choose the price at which it sells its butter but not the quantity of butter that it produces. d. can choose quantity of butter that it produces but not the price at which it sells its butter.

B. Chooses the price at which it sells its butter

Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML does not a. have any fixed costs of production. b. choose the price at which it sells its butter. c. choose the quantity of butter to produce. d. set marginal revenue equal to marginal cost to maximize profit.

b. The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers.

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product? a. Any of the above could be correct. b. The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers. c. The farmer is able to produce 6,000 bushels of wheat when he hires 4 workers. d. The farmer is able to produce 5,800 bushels of wheat when he hires 4 workers.

B. $ 20

Only two firms, Acme and Ultima, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $8 and zero fixed cost. Acme and Ultima agree to jointly maximize profits, and split the profit maximizing production and profits evenly. If Acme and Ultima each break the agreement and each produce 5 more than agreed upon, how much less profit does each make, compared to the profit at to the cartel output? Select one: a. $90 b. $20 c. $60 d. $5

b. lower than $0.50.

Sarah's Café sells gourmet bagels. In the long run, the café incurs a total cost of $500 to produce 1,000 bagels. If Sarah's Café exhibits economies of scale between 1,000 and 2,000 bagels, the long-run average total cost for 1,500 bagels is a. higher than $500. b. lower than $0.50. C. equal to $0.50. d. higher than $0.50.

A. there are cconomics of scale in retail sales

Since the 1980, Wal-Mart stores have appeared in almost every community in America. Wal-Mart buys its goods in large quantities and, therefore, at cheaper prices. Wal-Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal-Mart because of low prices. Local retailers , like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that A. there are cconomics of scale in retail sales B. consumers do not react to changing price C. there are diminishing returns to producing and selling retail goods D. there are diseconomies of scale in retail sales.

B. Because the price is below the firm's average variable costs, the firms will shut down.

Suppose a firm in a competitive industry has the following cost curves: If the price is $2 in the short run, what will happen in the long run? a. Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. b. Because the price is below the firm's average variable costs, the firms will shut down. c. Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. d. Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.

a.Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.

Suppose a firm in a competitive industry has the following cost curves: If the price is $3.5 in the short run, what will happen in the long run? Select one: a.Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. b.Because the price is below the firm's average variable costs, the firms will shut down. c.Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. d.Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.

A. Nothing. The price it consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry

Suppose a firm in a competitive industry has the following cost curves: If the price is $4.50 in the short run, what will happen in the long run? A. Nothing. The price it consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry B. Because the price is below the firms average variable cost, the firms will shut down C. Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry. D. Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry

A. (i) only

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 cach. Which of the following statements is correct? (i)Marginal revenue equals $3. (ii)Average revenue equals $100. (iii)Total revenue equals 5300. A. (i) only B. (iii) only C. (i) and (ii) only D. (i), (ii), and (iii)

c.(i), (ii), and (iii)

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? (i)Marginal revenue equals $3. (ii)Average revenue equals $3. (iii)Total revenue equals $900. a.(i) and (ii) only b.(iii) only c.(i), (ii), and (iii) d.(i) only

B. Increase

Suppose that firms in a competitive industry are earning positive economic profits. All else equal, in the long run, we would expect the number of firms in the industry to a. remain the same. b. increase. c. We do not have enough information with which to answer this question. d. decrease.

C. Google ties its web search engine to other products, such as Android OS

The FTC's main case against Google in its 2020 anti-trust action is based primarily on the claim that, a. Google Ads force others off webpages b. Google overprices internet search c. Google ties its web search engine to other products, such as Android OS d. Google charges monopoly prices for phones

C. $25,000

The concert promoters of a heavy-metal band, WeR2Loud, know that there are two types of concert-goers: die-hard fans and casual fans. For a particular WeR2Loud concert, there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket. There are 1,500 seats available at the concert venue. Suppose the cost of putting on the concert is $50,000, which includes the cost of the band, lighting, security, etc. How much additional profit can the concert promoters carn by charging each customer their willingness to pay relative to charging a flat price of $150 per ticket? a. $50,000 b. $100,000 C. $25,000 d. $75,000

B. 70

The diagram depicts the market situation for a monopoly pastry shop called MuffinHaus. Based upon the information shown, how many units will MuffinHaus produce to maximize profits? A.105 B. 70 C. 90 D. 130

D. ​$14.

The diagram depicts the market situation for a monopoly pastry shop called MuffinHaus. Based upon the information shown, what price will MuffinHaus charge to maximize profits? a. ​$7. b. ​$10.50. c. ​$12. d. ​$14.

B. $280

The diagram depicts the market situation for a monopoly pastry shop called MuffinHaus. Given that MuffinHaus chooses the profit maximizing price and quantity, what profit level will it obtain? a. ​$700. b. ​$280. c. ​$490. d. ​$980.

a.C

The efficient scale of production occurs at which quantity? Select one: a.C b.D c.B d.A

A. All of the above are correct

The figure is drawn for a monopolistically-competitive firm. In response to the situation represented by the figure, we would expect: A. All of the above are correct B. some of the firms that are currently in the market to exit. C. the demand for this firm's product to increase, assuming this firm does not exit. D. this firm's profit to move from its current value toward zero.

B. More firms will enter this market and each firm will have a smaller share of the total market demand, shifting this firm's demand curve to the left.

The graph depicts a monopolistically competitive firm in the short run. Which of the following explanations best describes the long run adjustment? a. More firms will enter this market and each firm will have a larger share of the total market demand, shifting this firm's demand to the right. b. More firms will enter this market and each firm will have a smaller share of the total market demand, shifting this firm's demand curve to the left. c. Firms will exit this market and each firm will have a smaller share of the total market demand, shifting this firm's demand to the left. d. Firms will exit this market and each firm will have a larger share of the total market demand, shifting this firm's demand to the right.

D. $0.75

What is the marginal cost of producing 280 units of output? a. $0.48 b. $30 c. $40 d. $0.75

A. have a zero economic profit.

When the market is in long-run equilibrium at point W in panel (b), the firm represented in panel (a) will a. have a zero economic profit. b. exit the market. c. have a negative accounting profit. d. choose to increase production to increase profit.

C. G

Which area represents the deadweight loss from monopoly? a. C+F b. A+B c. G d. A+B+C+F

D. a hot dog vendor in New York

Which of the following firms is the closest to being a perfectly competitive firm? A. the campus bookstore B. Ford Motor Company C. Microsoft Corporation D. a hot dog vendor in New York

A. Satellite radio

Which of the following industries is least likely to exhibit the characteristic of free entry? a. satellite radio b. yoga studios c. bookstores d. hairstyling salons

b. municipal water and sewer

Which of the following industries is least likely to exhibit the characteristic of free entry? a. ethnic restaurants b. municipal water and sewer C. grocery stores d. corn farming

B. All of the above are correct.

Which of the following is an example of price discrimination? a. Amtrak offers a lower price for weekend travel compared to weekday rates on the same routes. b. All of the above are correct. c. Nabisco provides cents-off coupons for its products. d. Hotel rates for AAA members are lower than for nonmembers.

B. Hotel rates for AAA members are lower than for nonmembers.

Which of the following is an example of price discrimination? a. An online bookstore charges more for overnight shipping than standard shipping when customers buy books from it. b. Hotel rates for AAA members are lower than for nonmembers. C. All of the above are correct. d. Airline tickets are more expensive for first-class seats than for coach.

A.A soybean farmer is the finst in her county to use a new brand of fertilizer.

Which of the following is not an example of a barrier to entry? A.A soybean farmer is the finst in her county to use a new brand of fertilizer. B. A pharmaccutical company obtains a patent for a new medication to treat migraines headaches. C.Microsoft obtains a copyright for its Windows operating system. D. A taxi cab driver in New York City obtains a license to legally provide transportation in New York City

C. An entrepreneur opens a cupcake bakery.

Which of the following is not an example of a barrier to entry? a. A taxi cab driver in New York City obtains a license to legally provide transportation in New York City. b. Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. c. An entrepreneur opens a cupcake bakery. d. A chemist receives a patent for a new skin cream.

a. John Jr. owns the best seafood restaurant in a popular resort area. He charges high prices because the quality of the food is so good.

Which of the following is not an example of a barrier to entry? a. John Jr. owns the best seafood restaurant in a popular resort area. He charges high prices because the quality of the food is so good. b. Jackie owns the copyright to a popular song. She receives royalties every time a radio station plays her song. C. Caroline owns the patent for a new running shoe. She receives payments from the company who manufactures the shoes. d. John owns the only parcel of lakeside property with a beach that is safe for swimming. He charges admission ta neighbors who want to use the beach.

C. The demand curve facing a competitive firm is horiontal, whereas the demand curve facing a mocopolist is downward sloping.

Which of the following statements is correct? A. The demand curve facing a competitive firm is dowmward sloping, an is the demand curve facing a monopolist B. The demand curve facing a competitive firm is horizontal, as is the demand curve facing a monopolist. C. The demand curve facing a competitive firm is horiontal, whereas the demand curve facing a mocopolist is downward sloping. D. The demand curve facing a competitive firm is downward sloping, whereas the demand curve facing a monopolist is horizontal

C. If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit.

Which of the following statements is correct? a. If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling fewer units at a higher price per unit. b. If the monopolist is earning a positive economic profit, it must be producing where MR = MC. c. If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit. d. When a monopolist produces where price equals the minimum of average total cost, it earns a positive economic profit.