ECON test
In the absence of barriers to entry, a typical firm is currently in long-run equilibrium. Assume there is an increase in the market demand for the good that the firm is producing. Which of the following will happen in the long run?
New firms will enter the market.
A single-price monopolist is currently producing in the inelastic portion of its market demand curve. In order to maximize profits, the monopolist should change the price and output in which of the following ways?
Price Increase Output Decrease
If the monopolist chooses to maximize total revenue rather than total profit, it will choose which combination of price and output?
Price P3 Output Q3
Which of the following is true of both monopolistically competitive and perfectly competitive firms in long-run equilibrium?
Price equals average total cost.
The graph above shows the demand (D), marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves for a monopoly. Based on the information in the graph provided, what is the profit-maximizing quantity for a monopolist that engages in perfect price discrimination? Responses
Q3
A monopolistically competitive profit-maximizing firm is currently producing and selling 2,000 units of output. At this output level, marginal revenue is $9, average revenue is $10, and the average variable cost is $8. The product price is
$10
Assume that total fixed costs are $46, that the average product of labor is 5 units when 10 units of output are produced, and that the wage rate is $12. If labor is the only variable input, what is the average total cost of producing 10 units of output?
$7
If the product price is $85, how many units of output must the firm produce in order to maximize profits?
5
Assume that labor is the only variable input. If a firm's short-run marginal cost is increasing as output rises, which of the following must be true?
Marginal product of labor is decreasing
Raheem is currently working as a financial analyst earning $75,000 a year and is considering quitting his current job to start an art gallery. The estimated annual revenue from the art gallery is $175,000. The annual cost of labor, advertising, and acquiring the art inventory is $125,000. What are Raheem's accounting and economic profits if he opens the art gallery?
Accounting profit is $50,000, and economic profit is -$25,000.
Which of the following statements regarding accounting profits, opportunity costs, and economic profits is true?
If accounting profits are less than opportunity costs, there will be economic losses.
In the short run, which of the following is true of a firm's average total cost of production?
It is equal to average fixed cost plus average variable cost.
The table above shows the short-run production function for picking apples. Based on the production data, which of the following statements about the marginal product of the fifth worker is true?
It is less than the marginal product of the third worker due to diminishing returns.
Which of the following indicates the presence of economies of scale as the quantity of output increases?
Long-run average total cost decreases.
Which of the following is necessary for a firm to practice price discrimination?
The firm can prevent resale of its goods.
Assume that a profit-maximizing, perfectly competitive firm has economic losses in the short run. If the firm continues to produce and sell its goods, then which of the following must be true?
The firm is covering all of its variable costs but not all of its fixed costs of production.
Which of the following is more likely to occur when there are high barriers to entry in an industry?
The firm(s) in the industry earn economic profits in the long run.
Which of the following is true for a perfectly competitive, decreasing-cost industry?
The long-run market supply curve will be downward sloping.
A perfectly competitive firm, earning economic profits, produces and sells 100 units of output at a price of $20 per unit. If its marginal cost of increasing output to a rate of 101 units is $18, which of the following statements is correct?
The total profit from selling 101 units is $2 greater than the total profit from selling 100 units.
If Zeta, a single producer, had exclusive control of a key resource needed to produce good Z , a likely result would be which of the following?
There would be a barrier to entry, and Zeta would have a monopoly on good Z
A farmer grows wheat using two inputs: labor and land whose prices are constant. If she doubles her inputs, she finds that the quantity of wheat produced more than doubles. Therefore, it must be true that in this output range her long-run average total cost curve is
downward sloping
If total revenue is increasing as output increases, marginal revenue is always
greater than zero
