MicroEcon Exam 3 Study Guide

A monopolist can sell 300 units of output for $45 per unit. Alternatively, it can sell 301 units of output for $44.60 per unit. The marginal revenue of the 301st unit of output is...

-$75.40 = (301*44.6) - (300*45) = (revenue of 301 unit) - (revenue of 300 unit)

What is the socially efficiently quantity of water?

1200

If the market for water were perfectly competitive instead of monopolistic, how many gallons of water would be produced and sold?

1200 where (marginal cost) = (marginal revenue)

If there are 500 identical firms in the market, what is the value of Q1?

150,000

Flying Elvis Copter Rides What is the value of B? (variable cost)

$100

Flying Elvis Copter Rides What is the value of E? (average variable cost)

$100

Flying Elvis Copter Rides What is the value of C? (marginal cost)

$100 = (cost of 1 unit) - (cost of 0 units)

What is Bill's economic profit-maximizing output level?

$115

Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each. What are Wanda's accounting profits?

$126 (total revenue - explicit costs) = (300*0.50) - (300*0.08)

If the average total cost is $30 at the profit-maximizing quantity, then the firm's maximum profit is

$144 = ($36*24) - ($30*24) = (total revenue) - (total cost)

What is the total revenue of selling 4 units?

$320 = (price) * (quantity)

Quantity - Total Revenue 0 - $0 1 - $5 2 - $10 3 - $15 4 - $20 For this firm, the price is...

$5 = (total revenue) / (quantity)

Flying Elvis Copter Rides What is the value of A? (Fixed Cost)

$50

Flying Elvis Copter Rides What is the value of D? (average fixed cost)

$50

Which of the followning statements is correct?

All of the above * Panel B represents the typical demand curve for a perfectly competitive firm * Panel A represents the typical demand curve for a monopoly * Panel A represents the typical demand curve for a perfectly competitive industry

Chp 13

Chp 13

Chp 14

Chp 14

Chp 15

Chp 15

Chp 16

Chp 16

Chp 17

Chp 17

Suppose that average cost is $36 when Q=24. What is the profit maximizing price and resulting profit?

P=$36, profit=$0

Which of the following statements is incorrect?

Panel B represents the typical demand curve for a perfectly competitive fir, and Panel A represents the typical demand curve for a monopoly

Product differentiation causes the seller of a good to face what type of demand curve?

downward sloping

To maximize profit, a monopolistically competitive form

chooses its quantity and price, just as a monopoly does

A distinguishing feature of an oligopolistic industry is the tension between

cooperation and self interest

For a monopolistically competitive firm, at the profit-maximizing quantitiy of output,

price exceeds marginal cost

Which of the following reasons describes the fundamental barrier to entry for the monopoly in the figure?

the production process

If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to...

increase as long as the new level of output is at least Q2

Pursuing its own best interest, Lopes will

increase the size of its store and parking lot regardless of the decision made by HomeMax

Pursuing its own interest, HomeMax will

increase the size of its store and parking lot regardless of the decision made by Lopes

A perfectly competitive firm produces where...

marginal cost equals price, while monopolist produces where price exceeds marginal cost

The story of the prisoners' dilemma shows why

oligopolies can fail to cooperate even when cooperation is in their best interest

Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each. What are Wanda's explicit costs per glass?

$0.08 (sum of costs excluding opportunity cost)

Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each. What are Wanda's implicit costs per glass?

$0.10 (opportunity costs)

Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each. What are Wanda's total economic costs per glass)?

$0.18 (all costs including opportunity costs)

If the average variable cost is $26 at the profit-maximizing quanitiy, and if the firm's profit is $40 at that quantitiy, then its fixed costs amount to

$200 = - 40 + ($36*24) - ($26*24) => (fixed costs) = - (profit) + (total revenue) - (variable cost)

If the average variable cost is $24 at the profit-maximizing quantity, and if the firm's fixed costs amount to $60, then the firm's maximum profit is

$228 = ($36*24) - (($24*24)+$60) = (total revenue) - (total costs) => total cost = (variable cost) + (fixed cost)

In order to maximize profit, the firm will charge a price of

$36 => point on demand curve above intersection of MC = MR

What is the marginal cost of the 5th unit?

$68 = (cost of 5th unit) - (cost of 4th unit)

What is the average revenue when 4 units are sold?

$80

What is the marginal revenue from selling the 1st unit?

$80 = (revenue from n units) - (revenue from n-1 units)

What is the marginal revenue from selling the 5th unit?

$80 = (revenue from n units) - (revenue from n-1 units)

Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each. What are Wanda's total economic profits?

$96 (total revenue - total economic costs) = (300*0.5) - (300*0.18)

The firm's profit-maximizing level of output is

24 unity => (marginal cost) = (marginal revenue)

At what quantity does Bill maximize profits?

6 units {where (marginal cost) = (marginal revenue)}

If Rochelle and Alec operate as a profit-maximizing monopoly in the market for water, how many gallons of water will be produced and sold?

600 where TR = (price) * (quantity)

Point - Price - Quantity A - $4 - 16 B - $4 - 32 C - $6 - 6 D - $8 - 64 The figure above is for a firm operating in a competitive industry. If there were four identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve?

A only

Profit can always be increased by increasing the level of output by one unit if operating at... Q1 Q2 Q3 Q4

Q1 or Q2 only

A firm that is a natural monopoly

all of the above *is likely to be concerned about new entrants eroding its monopoly power *is taking advantage of economies scale *would experience a higher average total cost if more firms entered the market

The fundamental cause of monopoly is...

barriers to entry

Increasing the size of its store and parking lot is a dominant strategy for

both Lopes and HomeMax

If the monopoly firm is currently producing Q3 units of output, then a decrease in profit to

decrease

In general, game theory is the study of

how people behave in strategic situations

In the short run, a firm in a monopolistically competitive market operates much like a

monopolist

Game theory is necessary to understand which kinds of markets?

oligopoly and duopoly