Microeconomics - midterm 3 multiple choice

An agreement among firms in a market about quantities to produce or prices to charge is called

collusion

What is the Nash Equilibrium of this price-setting game?

Grocery store 1: Low price Grocery store 2: Low price

Which of the following represents the excess capacity of this firm?

LM

The table shows the town of Mauston's demand schedule for gasoline. For simplicity, assume the town's gasoline seller(s) incur no costs in selling gasoline. If the market for gasoline in Mauston is perfectly competitive, then the equilibrium price of gasoline is

$0 and the equilibrium quantity is 500 gallons

Peter has a monopoly. Peter's demand and cost values for sales per day are given in the table below. What price should Peter charge per double scoop ice cream cone to maximize his profit?

$4.40

if the market for gasoline in Mauston is a monopoly, then the profit-maximizing monopolist will charge a price of

$5 and sell 250 gallons

Trevor's Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for a price of $65. Trevor's Tire Company's total profits are

$7500

Which of the following are necessary characteristics of a monopoly? (i) The firm is the sole seller of its product. (ii) The firm's product does not have close substitutes. (iii) The firm generates a large economic profit. (iv) The firm is located in a small geographic market

(I) and (ii) only

Which of the following is an example of an implicit cost? (i) the owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm (ii) interest paid on the firm's debt (iii) rent paid by the firm to lease office space

(I) only

What is total cost when 2 units are produced?

75

if there are exactly two sellers of gasoline in Mauston and if they collude, then which of the following outcomes is most likely

Each seller will sell 125 gallons and charge a price of $5

Which firm is experiencing diseconomies of scale?

Firm C only

Consider a small town that has two grocery stores from which residents can choose to buy a loaf of bread. The store owners each must make a decision to set a high bread price or a low bread price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2). If grocery store 2 sets a low price, what price should grocery store 1 set? And what will grocery store 1's payoff equal?

Low price, $500

Economists assume that the typical person who starts her own business does so with the intention of

Maximizing profits

Which of the following statements is correct?

Only for competitive firms does average revenue equal marginal revenue

The graph below is for a monopolistically competitive firm. Suppose that average total cost is $36 when Q=24. What is the profit-maximizing price and resulting profit?

P=$36; profit=$0

suppose there are exactly two sellers of gasoline in Mauston: Shellon and Standstop. If Shellon sells 150 gallons and Standstop sells 200 gallons, then

Shellon's profit is $450 and Standstop's profit is $600

In the language of game theory, a situation in which each person must consider how others might respond to his or her own actions is called a

Strategic situation

which of the following best describes the profit-maximizing outcome?

This firm is in long run equilibrium and will continue to earn zero profit

Which of the following characteristics of competitive markets is necessary for firms to be price takers? (i) There are many sellers. (ii) Firms can freely enter or exit the market. (iii) Goods offered for sale are largely the same

all

What is grocery store 1's dominant strategy?

grocery store 1 should always set a low price

A restaurant that has market power can

influence the market price for the meals it sells

If grocery store 2 sets a high price, what price should grocery store 1 set? And what will grocery store 1's payoff equal?

low price, $800

what is the monopoly price and quantity?

price = a; quantity = x

What is the socially efficient price and quantity?

price = b; quantity = y

what is the Nash equilibrium Duopoly combined output

q=333

Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to

remain unchanged

The amount of money that a firm receives from the sale of its output is called

total revenue

if all of the firms in an oligopoly successfully collude and form a cartel, then total profit for the cartel is equal to what it would be if the market were a monopoly

true