Microeconomic Exam #2 Ch. 7/7A, 9, 10, 11, 12
According to the accompanying diagram, at the profit-maximizing output, the firm will realize
an economic profit of ABGH
For a purely competitive seller, price equals
average revenue, marginal revenue, total revenue divided by output, all of these.
Refer to the diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. In the long run we should expect
firms to leave the industry, market supply to fall, and product price to rise
A natural monopoly occurs when
long-run average costs decline continuously through the range of demand.
A consumer's demand curve for a product is downsloping because
marginal utility diminishes as more of a product is consumed.
Refer to the diagram. Suppose the budget line shifts so that the consumer's equilibrium changes from point A to point B. This means that the
price of Y has decreased
Which of the following is not a characteristic of pure competition?
pricing strategies by firms
In the diagram,
the consumer is indifferent between points A and B, but neither point maximizes his utility
Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting
profits were $0 and its economic losses were $500,000
Refer to the diagram for a nondiscriminating monopolist. Marginal revenue will be zero at output
q 2
Implicit and explicit costs are different in that
the former refer to nonexpenditure costs and the latter to monetary payments
Refer to the provided table. The total fixed cost of production is
$10
Answer the question on the basis of the accompanying demand schedule. The marginal revenue obtained from selling the fourth unit of output is
$1
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 $0
Answer the question on the basis of the following cost data. The total cost of four units of output is
$310
The profit-maximizing price for the monopolist will be
$4.50
Refer to the diagram. At output level Q, total variable cost is
0 BEQ
Refer to the diagram. The total utility yielded by 4 units of X is
17
In the accompanying diagram, demand is relatively elastic
In the P2 P4 price range
Which of the following is characteristic of a purely competitive seller's demand curve?
Price and marginal revenue are equal at all levels of output
In the diagram, total product will be at a maximum at
Q 3 units of labor
Which of the following statements about utility is true?
Utility is difficult to measure quantitatively
Which of the following is a characteristic of pure monopoly?
barriers to entry
If all of the firms in a competitive industry are legally required to meet new regulations that increase their costs of production:
supply of the product will decrease
Use the following data to answer the question Diminishing returns begin to occur with the hiring of the _________ unit of labor
third
Refer to data. Marginal utility becomes negative beginning with the
fourth unit
Refer to the diagram. At output level Q, average fixed cost
is measured by both QF and ED
Refer to the diagram. At output level Q2,
resources are overallocated to this product and productive efficiency is not realized.
To the economist, total cost includes
explicit and implicit costs
What do economies of scale, the ownership of essential raw materials, and patents have in common?
They are all barriers to entry.
Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed. Average product is at a maximum when
two workers are hired
The diagram suggests that
when marginal product lies above average product, average product is rising
Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices
between P 2 and P 3
The law of diminishing marginal utility states that
beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer
Marginal revenue is the
change in total revenue associated with the sale of one more unit of output
The graphs represent the demand for use of a local golf course for which there is no significant competition. (It has a local monopoly.) P denotes the price of a round of golf, and Q is the quantity of rounds "sold" each day. If the left graph represents the demand during weekdays and the right graph the weekend demand, this profit-maximizing golf course should
charge $7 for each round on weekdays and $10 during the weekend.
An indifference curve shows all
combinations of two products yielding the same total utility to a consumer
The provided graph represents a(n)
decreasing-cost industry: Firms may be paying lower prices for their inputs when the industry expands
If the competitive firm depicted in this diagram produces output Q, it will
earn a normal profit.
Refer to the diagram for a purely competitive producer. If product price is P3,
economic profits will be zero
In the provided diagram, at the profit-maximizing output, total profit is
efbc
Refer to the diagram, where variable inputs of labor are being added to a constant amount of property resources. The total output of this firm will cease to expand
if a labor force in excess of Q3 is employed
To economists, the main difference between the short run and the long run is that
in the long run all resources are variable, while in the short run at least one resource is fixed
In the accompanying diagram, if price is reduced from P1 to P2, total revenue will
increase by C − A
Answer the question on the basis of the following information. The marginal product of the fourth worker
is 5
If total utility is increasing, marginal utility
is positive but may be either increasing or decreasing
For a purely competitive firm, total revenue
is price times quantity sold, increases by a constant absolute amount as output expands, graphs as a straight upsloping line from the origin, has all of these characteristics
If a price-discriminating monopolist sells the same product in two markets but charges a higher price in market X and a lower price in market Y, the pricing difference indicates that demand is
less elastic in market X than in market Y
Refer to the diagram, where xy is the relevant budget line and I 1, I 2, and I 3 are indifference curves. The equilibrium position for the consumer is at
point K
In the provided diagram, the short-run supply curve for this firm is the
segment of the MC curve lying to the right of output level h
Refer to the data in the accompanying table. At the profit-maximizing output, the firm's total revenue is
$48
Refer to the short-run data in the accompanying graph. The profit-maximizing output for this firm is
320 units
Refer to the diagram. Diseconomies of scale
begin at output Q 3
The industry represented by the accompanying graph must be one where
resource prices fall when the industry contracts.
Refer to the provided table. The total variable cost of producing 5 units of output is
$63
Refer to the data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total profit will be
$82
Long-run competitive equilibrium
results in zero economic profits.
At each point on an indifference curve,
total utility is the same
Refer to the diagram. At the profit-maximizing level of output, total cost will be
0 BHE.
Answer the question on the basis of the following output data for a firm. Assume that the amounts of all non labor resources are fixed. The marginal product of the sixth worker is
15 units of output
Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products J and K. If the consumer's money income were cut from $52 to $28, and the prices of J and K remain at $8 and $4, respectively, she would maximize her satisfaction by purchasing
2 units of J and 3 units of K
Refer to the data for a non discriminating monopolist. This firm will maximize its profit by producing
4 units
Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products J and K. If the consumer has money income of $52 and the prices of J and K are $8 and $4 respectively, the consumer will maximize her utility by purchasing
4 units of J and 5 units of K
Answer the question on the basis of the following total utility data for products L and M. Assume that the prices of L and M are $3 and $4, respectively, and that the consumer's income is $18. What level of total utility does the rational consumer realize in equilibrium?
51 utils
The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is
8 units of utility
Balin's Burger Barn operates in a perfectly competitive market. Balin's is currently earning economic profits of $20,000 per year. Based on this information, we can conclude that
Balin's is operating in the short run, but not the long run.
Which of the following statements applies to a purely competitive producer?
It will not advertise its product.
An unregulated pure monopolist will maximize profits by producing that output at which
MR = MC.
Refer to the diagram for a pure monopolist. Suppose a regulatory commission is created to determine a legal price for the monopoly. If the commission seeks to provide the monopolist with a "fair return," it will set price at
P 1.
Refer to the diagram for a pure monopolist. If a regulatory commission seeks to achieve the socially optimal allocation of resources to this line of production, it will set a price of
P 2.
Which of the following conditions is true for a purely competitive firm in long-run equilibrium?
P = MC = minimum ATC.
The law of diminishing returns results in
a total product curve that eventually increases at a decreasing rate
Refer to the diagram. At the profit-maximizing level of output, the firm will realize
an economic profit of ABHJ
The budget line shift from ab to cd in the figure is consistent with
an increase in the price of M and a decrease in the price of N
If MU a/ Pa = 100/$35 = MU b/ Pb = 300/? = MU c/ Pc = 400/?, the prices of products B and C in consumer equilibrium
are $105 and $140, respectively
To practice long-run price discrimination, a monopolist must
be able to separate buyers into different markets with different price elasticities.
Refer to the diagram for a natural monopolist. If a regulatory commission were to set a maximum price of P 3, the monopolist would
maximize profits
Suppose that MU x/ Px exceeds MU y/ Py. To maximize utility, the consumer who is spending all her money income should buy
more of X and/or less of Y
Mary says, "You would have to pay me $50 to attend that pro wrestling event." For Mary, the marginal utility of the event is
negative
When a purely competitive firm is in long-run equilibrium,
price equals marginal cost
If the budget line shifts from BB to bb in the diagram, we can infer that the
price of Y has increased and the price of X has decreased
The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for the firm's product is $28, the competitive firm will
produce 7 units at a loss of $14.00
Refer to the diagram for a natural monopolist. If a regulatory commission set a maximum price of P 2, the monopolist would
produce output Q 3 and realize a normal profit
At the profit-maximizing level of output, a purely competitive firm will:
produce the quantity of output at which marginal cost equals price
Refer to the diagram for a purely competitive producer. The firm's short-run supply curve is
the bcd segment and above on the MC curve