Micro Exam 2
If a firm collects $80 in revenue when it sells 4 units, $100 in revenue when it sells 5 units, and $120 in revenue when it sells 6 units, then one can infer the firm is a(n):
perfect competitor
The profit maximizing rule P = MC applies to:
perfectly competitive firms only
Imperfect price discrimination occurs when a monopolist:
price discriminates but some buyers pay less than their reservation price.
The reason economists consider monopoly to be socially undesirable is that monopolists:
produce less than the socially optimal level of output.
"Market power" refers to a firm's ability to:
raise its price without losing all of its sales
If a consumer buys two different goods, the rational spending rule requires that the:
ratio of marginal utility to price be equal for the two goods.
Alex wants to maximize his utility. At his current level of consumption, Alex's marginal utility from an additional cup of coffee is 15 utils, and his marginal utility from an additional can of soda is 11 utils. If the price of a cup of coffee is $3 and the price of a can of soda is $2, Alex should:
reallocate his spending away from coffee and towards soda.
The goal of utility maximization is to allocate your ______ in order to maximize your ______.
resources; satisfaction
Joaquin's marginal utility from an additional slice of pumpkin pie is 4 utils and his marginal utility from an additional slice of pecan pie is 6 utils. If a slice of pumpkin pie costs $2.50, and a slice of pecan pie costs $3.00, then Joaquin:
should reallocate his spending towards pecan pie and away from pumpkin pie.
Suppose a perfectly competitive firm and a monopolist are both charging $5 for their respective products. From this, one can infer that:
the marginal benefit from selling an additional unit of output is $5 for the competitive firm and less than $5 for the monopolist.
Which of the following factors would impact a buyer's reservation price for a given good or service?
the price of a good
If the marginal utility of the 3rd cup of coffee is 23 and the marginal utility of the 4th cup is 15, then:
there is evidence of diminishing marginal utility
When a perfectly competitive firm sells additional units of output, ______, and when a monopolist sells additional units of output, ______.
total revenue always rises; total revenue could rise, fall, or remain unchanged
If marginal utility is positive, then as consumption increases:
total utility will increase
For a natural monopoly, average cost declines as the number of units produced increases over the relevant output range.
true
Perfectly competitive firms have no control over the price they charge for their product.
true
according to economists, the satisfaction people get from their consumption activities is called:
utility
Taking a limousine to a five-star restaurant in New York is a:
want to both Joe Average and Richie Rich.
Marginal Revenue (MR)=
∆TR/∆Q
Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your total cost (in dollars) is given by the equation TC = 300 + 10Q, where Q represents the number of t-shirts you make. If you make 100 t-shirts, your average total cost is ______.
$13
Which of the following is NOT an example of a good with network economies?
a computer printer
A pure monopoly exists when:
a single firm produces a good with no close substitutes
According to the law of demand, when the price of shoes ______, people will consume ______ shoes.
falls; more
In a perfectly competitive industry, the industry demand curve is horizontal, whereas for a monopoly it is downward-sloping.
false
Which of the following industries does NOT fit the natural monopoly model?
fast food restaurants
A price setter is a firm that
has some degree of control over the price of its product
If a monopolist's marginal revenue exceeds its marginal cost at its current level of output, then to maximize its profit the monopolist should:
increase output until marginal revenue equals marginal cost.
During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. Your total utility ______ with the first three pies you ate.
increased
Sven likes to water ski, but can only water ski during the one week each year when he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. Sven's total utility ______ with each hour that he skied.
increased
Both a perfectly competitive firm and a monopolist find that:
it is best to expand production until the benefit and the cost of the last unit produced are equal.
If a firm functions in an oligopoly, it is:
one of a small number of firms that produce goods that are either close or perfect substitutes.
Given the total cost function TC = 2,000 + 2Q, when output is 1,000 units average total cost is ______ and total fixed cost is ______.
$4; $2,000
Consider an industry with two firms producing similar products. Each firm's total cost (in dollars) is given below. Mega Corp: TC = 5,000 + 100Q Big Inc: TC = 4,000 + 200Q If each firm produces 10 units, Mega Corp's total cost will be ______, and Big Inc's total cost will be ______.
$6,000; $6,000
If the demand curve facing the monopolist is P = 70 − 14Q, then the slope of its marginal revenue curve is:
-28
Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your total cost (in dollars) is given by the equation TC = 300 + 10Q, where Q represents the number of t-shirts you make. If you make 1,000 t-shirts, your average total cost is ______.
10.30
If the marginal cost of producing each unit of output is $5, then this monopolist's profit-maximizing level of output is ______.
3
Laura's total utility from consuming 8, 9, and 10 bonbons is 35, 42, and 45, respectively. Her marginal utility from the 9th bonbon is _____.
7
The primary objective of an imperfectly competitive firm is to:
Maximize profit
Consumer surplus is the area of the triangle below the demand curve and above the equilibrium price.
The area of any triangle is equal to ½(b × h), where b = base and h = height. So here, consumer surplus is equal to ½(40 × 4) = $80.
Which of the following firms is most likely to be a pure monopolist?
The only gas station in a small, isolated town
A good is characterized by network economies if it:
becomes more valuable as more people own it.
Price discrimination means charging:
different prices to different consumers when production costs are the same
An imperfectly competitive firm faces a demand curve that is ______, while a perfectly competitive firm faces a demand curve that is ______.
downward-sloping; perfectly elastic.
According to the textbook, the most important and enduring source of market power is:
economies of scale
For perfectly competitive firms, marginal revenue ______ price; for monopolists marginal revenue ______ price.
equals; is less than
A perfectly price discriminating monopolist charges each buyer:
exactly his or her reservation price.
The essential feature that differentiates imperfectly competitive firms from perfectly competitive firms is that an imperfectly competitive firm:
faces a downward-sloping demand curve.
The tendency for consumers to purchase more of a good or service as its price falls is captured by the:
law of demand
For all firms, the additional revenue collected from the sale of one additional unit of output is termed:
marginal revenue
The additional utility gained from consuming an additional unit of a good is called:
marginal utility
If a firm collects $90 in revenue when it sells 4 units, $100 in revenue when it sells 5 units, and $105 in revenue when it sells 6 units, then one can infer the firm is a:
monopolist
A monopoly that results from economies of scale is called a(n):
natural monoply
Pat's total utility after eating 99 Reese's Peanut Butter Cups was greater than his total utility after eating 100 Reese's Peanut Butter Cups. Therefore, Pat's marginal utility from the 100th peanut butter cup was:
negative
Once a firm has determined the quantity of output it wishes to sell, the maximum price it can charge for each unit is determined by:
the demand curve facing the firm.
Consumer surplus measures:
the difference between the most a buyer would be willing to pay for a product and the price actually paid.
The monopolist will maximize profits at the output level for which:
MR=MC
A monopolistically competitive firm is one:
of many firms that sell products that are close but not perfect substitutes.
After subsistence levels of food, shelter, and clothing have been provided, economists refer to all other goods and services as:
wants