Micro Economics Final
Union membership in the US rose significantly during the
1940s
Consider the following numbers at which a monopolist is producing, where MR=MC: Quantity=20; Price=$9; Total Cost=$6. What is the total revenue and profit?
$180;$60 $9*20 = 180 $6*20 = 60
The Fish Shack is the only seafood restaurant in a remote village. It charges $15 for a bowl of fish soup and sells 10 bowls of it a day. In order to increase sales to 11 bowls a day, it must reduce the price to $14. What is the marginal revenue of the eleventh bowl?
$4
A monopoly firm exhibits all of the following characteristics EXCEPT:
A marginal revenue curve that equals price at all quantities
Suppose there are six firms in a market, with market shares shown in the table. If Firms 3 and 4 merge, how would the HHI in this market change?
HHI increases by 484 12+10 = 22 (22)^2 = 484
Which of these shows characteristics of a perfectly competitive firm?
JorDawn cannot tell which farm the peaches he purchased came from because all the peaches look alike
The graph represents a firm that produces the profit-maximizing quantity in the short run. What will happen in the long run?
Market supply will increase, pushing prices lower
(Figure: Nail Polish Externalities) Based on the figure, Sp(MPC) represents the private supply curve of a particular type of nail polish, the manufacture of which is associated with the release of toxic chemicals into the atmosphere. Ss(MSC) includes the cost of that toxicity borne by others. What is the socially optimal quantity of this nail polish?
Q2
If the average total cost is $10 and the price is $8 at the profit-maximizing quantity, what will happen in the long run in a perfectly competitive market?
Some firms will exit the market, pushing the market price higher
In a segmented labor market as shown in the graph, the wage gap between the two markets is represented as:
W1-W2
According to the rate of return approach, present value is equal to:
[EXn/(1-i)^n]-C
A monopolistically competitive firm will produce its product as long as the marginal revenue is:
above marginal costs
The market for air travel from Dallas to Chicago is:
an Oligopoly
Which of these would NOT be categorized as "land" as a factor of production?
an ax used to cut down trees in a forest
Applegate University announces that its employees can now take college courses free of charge. This change will eventually lead to a(n):
decrease in labor demand
You have recently earned an hourly pay raise. As your wages increase, the opportunity cost of going to the beach rather than working:
decreases
The price of land is primarily determined by shifts in:
demand
Market failures can arise when:
externalities exist
When a bonds rating goes from AAA to C, this means that the price of the bonds already issued will likely (blank), which will (blank) its yield.
fall; increase
Which of these is a characteristic of a natural monopoly?
high economies of scale
The kinked demand curve model assumes that if a firm raises its price, then its rivals will (blank) the price increase, but if a firm lowers its price, its rivals will (blank) the price decrease.
ignore; match
When an individual labor supply curve bends backward, this means that the:
income effect is stronger than the substitution effect
Unions tend to (blank) wage differentials between a union and non-union sector by (blank) entry into union-sector jobs.
increase; restricting
If an oligopolistic firm believes that its competitors would match a price decrease, but not match a price increase, its demand curve is:
kinked, being steeper below the current price
Which item is NOT an example of a negative externality?
landscaping
The income effect for labor supply states that people work:
less as wages rise because the opportunity cost of leisure increases
Compared with a competitive market, a cartel as a whole will produce:
less output in order to increase prices
Each oligopolistic firm recognizes that it must take into account the behavior of its competitors when it makes pricing decisions. This recognition is called:
mutual interdependence
Which of these is a characteristic of an oligopoly market structure?
mutual interdependence
Free health insurance offered by an employer is referred to as a(n):
non-wage benefit
Externalities are the impacts:
on third parties
Which characteristic is NOT typical of monopolistic competition?
one seller
Which labor supply curves will bend backward at high wages?
only the individual labor supply curve
An important tradeoff that entrepreneurs face in their decision making is (blank) versus (blank).
profit; risk
A form of regulation that controls a firms prices and profits based on its costs and capital investments is called:
rate of return regulation
When a theme park sells a 1-day adult pass for $110 and a 2-day adult pass for $180, and a 1-day child pass for $90 and a 2-day child pass for $150, the theme park is engaging in:
second- and third-degree price discrimination
When people choose leisure over work as wages rise, they are indicating:
the income effect is stronger than the substitution effect
Which of these is NOT an example of an intellectual property right?
the name of a famous basketball player
When firms in a market offer to "match any lower price offered by any competitor," but do not match price increases, then:
this indicates that firms in this market may face kinked demand curves
An example of a negative externality created in the market system would be:
water pollution
When after a game ends and one participants gains have come at the expense of the other participants, it is described as a:
zero-sum game
The perfectly competitIve market structure assumes all of these EXCEPT:
A small number of buyers and sellers
Which product is least likely to be produced in a perfectly competitive market?
Airline Jet Fuel
A firm in a perfectly competitive industry would exhibit which characteristic?
An ability to produce as much output as the firm desires at the market price
Which sequence of market structures ranks the barriers to entry from the fewest to the most?
Perfect Competition, Oligopoly, Monopoly
In which situation does a free rider problem occur?
Someone benefits from a good but does not have to pay for it
Assume that a monopolistically competitive firm faces the following situation: P=$14, output=9000 units, MC=$11, ATC=$16, AVC=$7, and MR=$11. Which statement is correct regarding profit maximization?
The firm is minimizing its losses
Alex pays Dale to fix his roof. Alexs neighbor Chris works at night and cannot sleep during the day because of the noise from the roof repairs. This situation is an example of:
an externality
Interdependence is a key characteristic of:`
an oligopoly
The Coase theorem states that, under certain conditions, the efficient allocation of resources among parties can be attained through:
bargaining
In economics, the term "land" refers to:
both a physical area of the Earths surface and natural resources
When the producer of Doritos tortilla chips spends money for TV commercials, it intends to shift the:
demand curve to the right and make demand less elastic
Which of these is NOT a potential benefit provided by monopolies?
increased consumer surplus as a result of a smaller scale of operations
The substitution effect for labor supply states that people work:
more as wages rise because the opportunity cost of leisure increases
With a kinked demand curve model, the discontinuity of the marginal revenue curve suggests that:
prices will be stable
