Macroeconomics

a sunk cost is one that

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

in game theory, a nash equilibrium is

All of the above are correct

If Bradley's Butcher Shop sells its product in a competitive market, then

bradleys butcher shop total revenue must be proportional to its quantity of output

A monopoly can earn positive profits because it

can maintain a price such that total revenues will exceed total costs

When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor, the firm is experiencing

diminishing marginal product

Chloes Cafe sells gourmet cinnamon rolls. in the long run, the cafe incurs a total cost of $500 to produce 1,000 cinnamon rolls. if chloes cafe returns to scale between 1,000 and 1,500 cinnamon rolls, the long run average total cost for 1,250 cinnamon rolls is

equal to $0.50

which of the following represents the firms long run condition for exiting a market?

exit if P<ATC

A certain competitive firm sells its output for $20 per unit. The 50th unit of output that the firm produces has a marginal cost of $22. It follows that the production of the 50th unit of output a. increases the firm's total revenue by $20. b. increases the firm's total cost by $22. c. decreases the firm's profit by $2. d. All of the above are correct.

increase the firms average variable cost by $.44

GRAPH pursuing its own best interest, tapes will

increase the size of its store and parking lot regardless of the decision made my homemix

which of the following is an example of a barrier to entry

larry obtains a copyright for the new computer greater than he

economies of scale occur when a firms

long-run average total costs are decreasing as output increases.

diseconomies of scale occur when

long-run average total costs rise as output increases

Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $200. In order to maximize profits, Laura should

make more than 20 wedding cakes per month

Willie's Wading Adventures sells hip waders for fishing and duck hunting in a perfectly competitive market. If hip waders sell for $100 each and average total cost per unit is $95 at the profit-maximizing output level, then in the long run

more firms will enter the market

free entry means that

no legal barriers prevent a firm from entering an industry

game theory is necessary to understand which kinds of markets?

oligopoly

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

when marginal cost is greater than average cost, average cost is

rising

in a competitive market the current price is $5. the typical firm in the market has AVC= $5,000 and AVC= $4.50

the firm will earn zero profits in both the short run and long run

whenever a cartel in a duopoly breaks down

total output in the market will rise

in a competitive market the price is $8. a typical firm in the market has ATC = $6, AVC= $5 and MC= $8. how much economic profit is in the firm earning the short run

$2 per unit

When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?

$80

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

(P-ATC)xQ

GRAPH two home improvement stores

1.5 million

GRAPH when this game reaches a Nash equilibrium, annual profit will by

1.5 million for homemax and by 1 million for lopes

a special kind of imperfectly competitive market that has only two firms is called

a duopoly

For a construction company that builds houses, which of the following costs would be a fixed cost?

all of the above

Suppose Jan started up a small lemonade stand business last month. Variable costs for Jan's lemonade stand now include the cost of

all of the above are correct

in the prisoners dilemma game, self interest leads

all of the above are correct

average total cost is very high when a small amount of output is produced because

average fixed cost is high

for an individual firm operating in a competitive market, marginal revenue equals

average revenue and the price for all levels of output

profit maximizing firms enter a competitive market when existing firms in that market have

average total cost less than market price

at berts bootery, the total cost of producing twenty pairs of boots is $400. the marginal cost of producing the twenty first pair of boots is $83. we can conclude that the

average total cost of 21 pairs of boots is $23

If Franco's Pizza Parlor knows that the marginal cost of the 500th pizza is $3.50 and that the average total cost of making 499 pizzas is $3.30, then

average total costs are rising at Q=500

Susan quit her job as a teacher, which paid her $36,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also borrowed $12,000 from her bank at 10 percent interest, which she also spent on equipment. For the past several months she has spent $1,000 per month on ingredients and other variable costs. Also for the past several months she has earned $4,500 in monthly revenue. In the short run, Susan should a. shut down her business, and in the long run she should exit the industry. b. continue to operate her business, but in the long run she should exit the industry. c. continue to operate her business, but in the long run she will probably face competition from newly entering firms. d. continue to operate her business, and she is also in long-run equilibrium.

continue to operate her business but in the long run she will probably face competition from newly entering firms

in a two person repeated game, a tit for tat strategy starts with

cooperation and then each player mimics the other players last move

a patent gives the inventor monopoly control over the patented good. patents who

create incentives to develop new products

which of the following is not a characteristic of a competitive market?

entry is limited

in a competitive market with identical firms

free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to earn positive economic profit in the short run.

David's firm experiences diminishing marginal product for all ranges of inputs. The total cost curve associated with David's firm

gets stronger as output increases

a production functions describes

how a firm turns inputs into output

competitive firms that earn a loss in the short run should

shut down if P<AVC

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000. Because of this information, in the short run, the Brookside Racquet Club should

stay open because shutting down would be more expensive

which of the following statements is correct for a monopolist?

(i) and (iv) only

suppose that a firm operating in perfectly competitive market with 300 units of output at a price of $3 each. which of the following statements is correct?

(i) only

which of the following are necessarily characteristics of a monopoly

(ii) and (i) only

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal product?

15 bouquets

Microsoft faces very little competition from other firms for its Windows software. Why isn't the price of the software $1,000 per copy?

because the company would sell so few copies that they would earn higher profits by selling at a lower price

a natural monopoly occurs when

there are economies of scale over the relevant range of output