ECON101 Final (Ch. 7 onwards)
Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were:
$200,000 and its economic profits were zero.
Assume that in the short run a firm is producing 100 units of output, has ATC of $200, and AVC of $150. The firm's TFC are:
$5,000. ((ATC-AVC)(Output))
The following are the respective numbers for the four-firm concentration and Herfindahl index in an industry. Which set of numbers would indicate that the industry was monopolistically competitive?
25 and 207.
An explicit cost is:
A money payment made for resources not owned by the firm itself.
The mutual interdependance that characterizes oligopoly arises because:
A small number of firms produce a large proportion of industry output.
Which of the following curves is not U-shaped?
AFC
In the short run, it is impossible to decrease the following cost by decreasing the output:
AFC.
A fixed cost is:
Any cost which a firm would incur even if output was zero.
A profit-maximizing firm in the short run will expand output:
As long as marginal revenue is greater than marginal cost.
Game theory can be used to demonstrate that oligopolists:
Can increase their profits through collusion.
When patents on new medications expire, the market for those drugs:
Change from being monopoly to being competitive.
Average fixed cost:
Declines continually as output increases.
Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?
Depreciation charges on company-owned equipment.
Which of the following is an example of market collusion?
Dividing the markets.
A pure monopolist's demand curve is:
Downsloping.
The region of demand in which the monopolist will choose a price-output combination will be:
Elastic because as price declines and output increases, total revenue will increase.
In pure competition, marginal revenue is:
Equal to product price.
Which of the following is most likely to be a variable cost?
Fuel and power payments.
The study of how people (or firms) behave in strategic situations is called:
Game theory.
Under pure monopoly, a profit-maximizing firm will produce:
In the elastic range of its demand curve.
If a firm decides to produce no output in the short run, its costs will be:
Its fixed costs.
In two firm oligopoly, if one firm increases its price, then the other firm can:
Keep its price constant and thus increase its market share.
The individual fir's short-run supply curve is that part of its:
Marginal-cost curve lying above its AVC curve.
When total product is increasing at an increasing rate, marginal product is:
Positive and increasing.
Which of the following represents non-collusive strategy?
Price matching.
Which of the following is most likely to be a fixed cost?
Property insurance premiums.
Farmer Jones is producing wheat, and must accept the market price of $6.00 per bushel. At this time, her ATC and her marginal costs both equal $8.00 per bushel. Her AVC are $5 per bushel. In choosing her optimal output, farmer Jones should:
Reduce output but continue production.
A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 200 units is $6.00. The minimum possible AVC is $8. The market price of the product is $6. To maximize profit or minimize losses, the firm should:
Shut down.
If the TVC of 9 units of output is $90, and the TVC of 10 units of output is $120, then:
The average variable cost of 9 units is $10. (TVC/Output)
The basic characteristics of the short run is that:
The firm does not have sufficient time to change the size of its plant.
A purely competitive firm will be willing to produce at a loss in the short run provided:
The loss is no greater than its total fixed costs.
One defining characteristic of pure monopoly is:
The monopolist produces a product with no close substitutes.
In the standard model of pure competition, a profit-maximizing entrepreneur will shut down in the short run if:
Total revenue < total variable costs.