Econ 101 exam 3
30 units at $10 each, Marginal revenue is
$10
Mr. Porter sells 10 bottles of champagne per week at $50 per bottle. He can sell 11 bottles per week if he lowers the price to $45 per bottle. The quantity and the price effects on total revenue would be, respectively, an increase of _____ and a decrease of _____.
$45;$50
Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to sell six, she can only charge $20,000 each. The price effect of selling the sixth motor home is:
-5,000
Local floral shop has explicit costs of 200k per year and implicit costs of 50k per yr. If store earned economic profit of 50k last year, the stores acct profit equals
100k
Austins fixed cost is 3600 and he employs 20 workers for 600. what is his total cost
15600
Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to sell six, she can charge only $20,000 each. The quantity effect of selling the sixth motor home is:
20,000
What is NOT an example of price discrimination
4th of july sale
You can either take a job that will pay 45k per year or go to school and earn an MBA. If you go back to school you will have to pay 32000. You have a 10k scholarship and savings bond of 500 a year. The annual opportunity cost of you going to school would be
67500
Sarahs accountant tells her that she will make 43,002 running a pottery in orlando. Sarahs hubby says she lost 43,002 running her pottery shit. This means he is saying that she incurred _______ in _______ costs.
86,004; implicit
The lowest point on a perfectly competitive firms short run supply curve corresponds to the minimum point on the _______ curve
AVC
The total cost curve(of production function) gets steeper as output increases because of
Decreasing returns to the variable input
Natural monopolies are likely to include all except
Diamond mining companies
You own a deli. What is most likely a fixed input at the deli?
Dining room
One of the major differences between a monopolist and a purely competitive firm is that the monopolist has a _____ demand curve, while the purely competitive firm has a _____ demand curve.
Downward sloping; perfectly elastic
Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, the typical firm is likely to:
Earn an economic profit
Buffalo aircraft doubles the amount of all the inputs it uses---the factory doubles in size and twice as many workers are hired. After this expansion, the number of aircraft produced triples. If the price of inputs in unchanged, this means that buffaloAircraft is operating with
Economies of scale
Suppose that you build a new jumbo jet that can carry five times more passengers than any other competitor. You have high fixed costs due to the quantity of capital used to build the jets, and average cost is decreasing for all levels of demand. In this case, your monopoly would result from:
Economies of scale
When marginal cost is BELOW average variable cost, average variable cost must be
Falling
In the long run, economic profits are driven to zero in both a monopoly and a perfectly competitive market
False
Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles, and you are the only firm providing this service. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand. Your monopoly would result from:
Increasing returns to sale
A monopolist responds to an increase in demand by _____ price and _____ output.
Increasing; increasing
The municipal swimming pool charges lower entrance fees to local residents than to nonresidents. Assuming that this pricing strategy increases the profits of the pool, we can conclude that nonresidents must have a _____ demand for swimming at the pool than residents.
Less elastic
A community college charges lower tuition fees to town residents than to nonresidents. This pricing strategy increases the profits of the community college. Using this information, we can conclude that nonresidents must have a _____ demand for attending the community college than residents.
Less price-elatic
A monopolist is likely to produce _______ and charge _______ than a comparable perectly competitive firm
Less; more
In perfect competition, the assumption of easy entry and exit implies that in the _____ run all firms in the industry will earn ______ economic profits.
Long; Zero
Spreading effect leads to a
Lower average fixed cost
A perfectly competitive firm will maximize profits when the
Marginal revenue equals the marginal cost
The ability of a monopolist to raise the price of a product above the competitive level by producing the output is known as
Market power
What is not true about opportunity cost?
Opportunity cost is synonomous with explicit cost
A perfectly competitive firm produces output and earns ZERO economic profit if
P=ATC
Which of the following is MOST likely to cause firms to exit a perfectly competitive industry?
Consumer income falls
Zoes bakery determines that P<ATC and P>AVC. In the short run, Zoe should
Continue to operate even though she is taking an economic loss
What decision is most likely to be made in the LONG run of a deli?
Renovate the second floor to increase size of dining room
A perfectly competitive small organic farm produces 1,000 cauliflower heads in the short run. Its ATC=$6 and AFC= $2. The market price is $3 per head and is equal to MC. To maximze profits or minimize losses, this farm should
Shut down
You own a small deli that sells sandwiches. What is an implicit cost of the business?
The job you did not accept at a local catering service
Lawn mowing is a perfectly competitive industry. In the short run it will shut down if
The total revenue cant cover variable costs
The sum of fixed and variable costs is _____ cost
Total
A monopoly has no rivals
True
MR=MC is a profit maximizing rule for any firm
True
Monopolies produce to little and charge too much from the standpoint of efficiency
True
Monopoly profits can continue in the long run
True
The term "diminishing returns/product" refers to
a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant
Profit computed without implicit costs is _______ profit
accounting
In perfectly competitive long-run equilibrium:
all firms produce at the minimum point of their average total cost curves
The _____ cost curve is NOT affected by diminishing returns
average fixed
The long run average total cost curve is tangent to an infinite number of short run _____ cost curves
average total
If marginal cost is greater than average total cost
average total cost is increasing
A perfectly competitive industry is said to be efficient because the:
average total cost of production of the industrys output is minimized
The large barriers to entry are a reason a monopoly
earns an economic profit in the long run
A firm that is able to use its inputs more efficiently as it increases production in the long run best demonstrates
economies of scale
Suppose that the market for haircuts in a community is a perfectly competitive constant-cost industry and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the long run, firms will _____ the market, driving the price of haircuts _____ and the profits of individual firms _____.
enter; down; back to zero
Economic profits in a perfectly competitive industry encourage firms to _____ the industry, and losses encourage firms to _____ the industry
enter; exit
Marginal revenue
equals the market price in perfect competition
De Beers became a monopoly by
establishing control over diamond mines
When the marginal product of labor is upward sloping, the marginal cost curve is upward sloping
false
Perfectly competitve market does not include
firms attempt to maximize total revenue patents and copyrights
If firms are making positive economic profits in the short run, then in the long run
firms will enter the industry
An input whose quantity can NOT be changed in the short run is
fixed
Once diminishing returns have set in, as output increases, the total cost curve
gets steeper
If you had a license for the exclusive right to sell breakfast bagels in your community, your monopoly would result from
government-set barriers
A natural monopoly exists whenever a single firm
has economies of scale over the entire range of production that is relevant to its market
Price discrimination leads to a _____ price for consumers with a _____ demand
higher; less elastic
One government policy for dealing with natural monopoly is to:
impose a price ceiling to reduce economic profit
Marginal revenue is a firm's
increase in total revenue when it sells an additional unit of output
A monopolist or an imperfectly competitive firm practices price discrimination primarily to:
increase profits
A monopolist responds to an increase in marginal cost by _____ price and _____ output.
increasing; decreasing
A curve that shows the quantity of a good or service supplied at various prices after all long-run adjustments to a price change have been completed is a long-run _____ curve.
industry supply
Marginal cost curve intersects the average variable cost curve at
its lowest point
Economic profit is
less than accounting profit if implicit costs exist
A short-run supply curve for a perfectly competitive firm is its
marginal cost curve above its average variable cost curve
The ______ is the increase in output that is produced when a firm hires an additional worker
marginal product
The change in total output resulting from a one-unit increase in the quantity of an input used, holding the quantities of all other units constant is
marginal product
In contrast with perfect competition, a monopolist
may have economic profits in the long run
Suppose the elasticity of demand for tickets to Broadway shows is 2.0 for men and 0.3 for women. To use price discrimination to increase profits, the producers should charge lower prices to _____ because their demand is _____.
men; elastic
Most electric, gas, and water companies are examples of
natural monopolies
In the model of perfect competition
no individual or firm has enough power to affect price
Not a charatceristic of perfect competiton
one firm has 25% and others have 2%
The demand curve in a perfectly competitive firm is
perfectly elastic
Because business travelers' demand for airline flights is relatively _____, small increases in price will result in relatively _____ decreases in additional business travelers.
price inelastic; small
A perfectly competitive firm is a
price taker
If the price is greater than average total cost at the profit maximizing quantity of output in the short run, a perfectly run competitive firm will
produce at a profit
A monopoly
produces a product with no close substitutes
In a perfectly competitive industry,
products are differentiated
If the accounting profit for a firm is negative
the economic profit must be negative
The break-even price for a perfectly competitive competitive firm is equal to
the minimum value of Average Total Cost
Market structures are categorized by
the number of firms and whether the products are differentiated
Jack is a student at a major unversity. What would not be an explicit cost of her attending?
the salary she could have earned working full time
The marginal product of labor is
the slope of the total product of labor curve
Profit is the difference between ______ and ______
total revenues; total costs
The total cost curve for a snowmobile dealership shows how ______ cost depends on the quantity of _______
total; output
In the long run, all costs are
variable
An input whose quantity can be changed in the short run is a
variable input
diminishing returns/product to an input occur
when some inputs are fixed and some are variable
The total product curve(or production function)
will become flatter as output increases if there are diminishing returns to the variable input
A fixed cost
can be positive, even if the firm doesnt produce any output in the short run
Which of the following are barriers to entry
control of scarce resources economies of scale patents and copyrights
If the government allowed only one airline to serve the entire U.S. market, there would be a _____ loss associated with _____ efficiency in the airline industry.
deadweight; reduced
In a perfectly competitive industry, the market demand curve is usually
downward sloping
The demand curve facing a monopolist is
downward-sloping