Econ 150 Exam 3
Refer to the data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total profit will be
$82
A farmer who has a fixed amount of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. The farmer's product sells for $3 per unit, and the wage rate is $13 per worker. What is the farmer's profit-maximizing output?
37
Which of the following statements best illustrates the concept of derived demand
A decline in the demand for shoes will cause the demand for leather to delcine
A firm will find it profitable to hire workers up to the point at which their:
Marginal resource cost is equal to their MRP
A competitive firm is the short run can determine the profit-maximizing (or loss- minimizing output by equating
Marginal revenue and marginal cost
Assume the figure applies to a pure monopolist and that MC is the same for both graphs. If this firm is able to price discriminate between children and adults, it should change prices of
P1 to children and P2 to adults
At P3 in the accompanying diagram, this firm will
Produce 62 units and earn only a normal profit
Employers will hire more units of a resource if the:
Productivity of the resource increases
If some firms leave a monopolistyically competitive industry, the demand curves of the remaining firms will
Shift to the right
Monopolistic competition resembles pure competition because
Barriers to entry are either weak or nonexistent
Which of the diagrams correctly portrays the demand (D) and marginal revenue (MR) curves of a purely competitive seller?
C
The antitrust laws are based on the
idea that competition leads to greater economic efficiency than does monopoly.
Aluminum competes with copper in the market for power transmission lines. This illustrates:
interindustry competition
If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use:
less labor as a consequence of the output effect
The Sherman Act was designed to
make monopoly and acts that restrain trade illegal.
Monopolistic competition means
many firms producing differentiated products
When a monopolistically competitive firm is in long-run equilibrium:
marginal revenue equals marginal cost and price equals average total cost
If one worker can pick $30 worth of grapes and two workers together can pick $50 worth of grapes, the:
marginal revenue product of the second worker is $20
Large minimum efficient scale of plant combined with limited market demand may lead to:
natural monopoly
At its profit-maximizing output, a pure nondiscriminating monopolist achieves:
neither productive efficiency nor allocative efficiency
Oligopoly is more difficult to analyze than other market models because:
of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models
Economic profit in the long run is
possible for a pure monopoly but not for a pure competitor.
Marginal Product is
the amount an additional worker adds to the firm's total output.
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
The demand for airline pilots results from the demand for air travel. This fact is and example of
the derived demand for labor
The diagram portrays
the equilibrium position of a competitive firm in the long run
In the four-firm concentration ratio for industry x is 60
the four largest firms account for 60% of total sales
Marginal resource cost is
the increase in total resource cost associated with the hire of one more unit of the resource.
Creative destruction is least beneficial to
workers in the "destroyed" industries
A farmer who has a fixed amount of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. The farmer's product sells for $3 per unit, and the wage rate is $13 per worker. The marginal revenue product of the second worker is
$24
Refer to the data. At its profit-maximizing output, this firm's total revenue will be
$280
Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. Profit maximizing output for this firm will be
160
Suppose the firms in a five-firm industry have market shares of 30, 30, 20, 10, and 10 percent, respectively. The Herfindahl index for the industry is:
2,400
Refer to the data in the accompanying table. If the firm's minimum average variable cost is $10, the firm's profit-maximizing level of output would be.
3
Assume Manfred's Shoe Shine Parlor hires labors, its only variable input, under purely competitive conditions. Shoe shines are also sold Competitively. What is the marginal product of the 6th worker?
3 Units
The accompanying table give cost data for a firms hat is selling a purely competitive market. If the market price for the firm's product is $24, it will produce?
4 units at a loss of $138
If there are significant economies of scale in an industry, then
A firm that is large may be able to produce at a lower unit cost than can a small firm
Which of the following is least likely to violate the Sherman Act or the Clayton Act?
Competitive firms F and G independently charge lower prices to frequent customers than to occasional customers
The economic inefficiencies of monopolistic competition may be offset by the fact that
Consumers have increased product variety
Refer to the diagram for a non collusive oligopolist. We assume that the firms is initially in equilibrium at point E, where the equilibrium price and quantity are P and Q. If the firm's rivals will ignore any price increase but match any price reduction, the firm's marginal revenue curve will be (moving from left to right)
MR2 a b MR1
An unregulated pure monopolist will maximize profits by
MR=MC
If a purely competitive firm is producing at some output level less that the profit-maximizing output, then
Marginal revenue exceeds marginal cost
Oligopoly is more difficult to analyze than other market models because:
Of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models
A Monopolistically competitive industry combines elements of both competition and monopoly. The monopoly elements result from
Product differentiation
In which one of the following market models is X-inefficiency least likely to be present
Pure competition
The labor demand curve of a purely competit
Slopes downward because of diminishing marginal productivity
In the market for superstar,
Small differences in talent get magnified into huge differences in pay
The prisoner's dilemma reveals that
Sometimes when individuals act independently in their own self-interest, everyone is worse off than if they had cooperated
The likelihood of a cartel being successful is greater when
cost and demand curves of various participants are very similar
If a pure monopolist is operating in a range of output where demand is elastic:
marginal revenue will be positive but decline
Monopolistically competitive firms
may realize either profits or losses in the short run but realize normal profits in the long run.
The demand curve of a monopolistically competitive producer is
more elastic than that of a pure monopolist, but less elastic than that of a pure competitor
Suppose that two firms in and industry with a Hefindahl index of 5,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 5,500. The antitrust authorities will most likely
prevent the merger, contending that it violates the Clayton Act
The change in a firm's total revenue that results from hiring an additional worker is measured by
the marginal revenue product
Which of the following is an illustration of differentiated oligopoly
the soft drink industry
The main purpose of the antitrust laws is
to prevent the monopolization of industries
A nondiscriminating profit-maximizing monopolist
will never produce in the output range where demand is inelastic
When a firm is maximizing profit it will necessarily be
Maximizing the difference between total revenue and total cost.
If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:
New firms will enter market
Which one of the following acts declared "every contract, combination... or conspiracy, in restraint of trade or commerce among the several state... to be illegal?
The Sherman Act
Assume the price of capital falls relative to the price of labor and, as a result, the demand for labor increases. Therefore:
The output effect is greater than the substitution effect
Economists use the term imperfect competition to describe
Those markets that are not purely competitive
A merge between a maker of household detergents and a fast-food chain would be an example
a conglomerate merge
Which of the following will not cause a shift in the demand for resource X
a decline in the price of resource X
The term oligopoly indicates:
a few firms producing either a differentiated or a homogeneous product.
Which one of the following is most likely to increase the Herfindahl index of a particular industry?
a horizontal merger
Nonprice competition refers to
advertising, product promotion, and changes in the real or perceived characteristics of a product.
Marginal revenue product measures the
amount by which the addition of one more worker increases a firm's total revenue
Refer to the diagram. At the profit-maximizing level of output, the firm will realize
an economic profit of ABHJ
An increasing-cost industry is associated with
an upsloping long-run supply curve
According to the accompanying diagram, at the profit-maximizing output, the firm will realize
and economic profit of ABGH
Suppose a purely competitive, increasing-cost industry is in long-run equilibrium. Now assume that a decrease in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price:
and industry output will be less than the initial price and output
Other things equal, the resource demand curve of an imperfectly competitive seller will
be less elastic than that of a purely competitive seller
The case of ATMs and bank tellers illustrates that
capital is, overall, a complement for labor, not substitue
The MR=MC rule applies
in both the short run and the long run
A decline in the price of resource A will
increase the demand for complementary resource B.
Which of the following is the best example of oligopoly?
Automobile manufacturing
The larger the number of firms and the smaller the degree of product differentiation the:
more elastic is the monopolistically competitive firm's demand curve
The marginal revenue product schedule is
the firm's resource demand schedule
The labor demand curve of a firm
will shift to the left if the price of the product the labor is producing falls
Refer to the diagram for a purely competitive producer. If product price is P3:
Economic profits will be zero
Long-run adjustments in a purely competitive markets primarily take the form of
Entry or exit of firms in the market
Refer to the diagram for a monopolistically competitive producer. This firm is experiencing
Excess capacity DE
The demand for resource depends primarily on
the demand for the product or service that it helps produce.
At P1 in the accompanying diagram, this firm will produce
47 units and realize and economic profit
The accompanying table gives cost data for a firm that is selling a purely competitive market. If the market price for the firm's product is $32, the competitive firm will produce
8 Units at an economic profit of $16
Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. If Beta commits to a high-price policy, Alpha will gain the largest profit by
adopting a low - price policy
In which of the following market models do demand and marginal revenue not diverge?
pure competition
Refer to the diagrams. Firm A is a
pure competitor, and Firm B is a pure monopoly
When economists say that the demand for labor is a derived demand, they mean that it is
related to the demand for the product or service labor is producing
Resource pricing is important because
resource prices are a major determinant of money incomes. resource prices allocate scarce resources among alternative uses. resource prices, along with resource productivity, are important to firms in minimizing their costs. All of these reasons
A constant-cost industry is one in which
resource prices remain unchanged as output is increased.
Assume Manfred's Shoe Shine Parlor hires labors, its only variable input, under purely competitive conditions. Shoe shines are also sold Competitively. If the wage rate is $11 and Manfred's only fixed input is capital, the total cost of which is $30, then what will be his economic profit
$32
The graphs represent the demand for use of a local golf course for which there is no significant competition. (It is 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 will earn how much economic profit over the course of a full seven-day week?
$4,200
Refer to the data in the accompanying table. At the profit-maximizing output, the firm's total revenue is
$48
The accompanying table gives cost data for a firm that is selling a purely competitie market. At 3 units of output, total variable cost is_____ and total cost is______.
$60;120
Refer to the table, which give data for a firm that is hiring labor in purely competitive market. If the wage rate is $20 how many workers will the firm choose to employ
2
Refer to the data. Suppose that firms A and F merged into a single firm. The four-firm concentration ratio and the Herfindahl index would be
90% and 2,200 respectively
Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. If Alpha and Beta engage in collusion, the outcome of the game will be at cell
A
Which of the following statements best illustrates the concept of derived demand?
A decline in the demand for shoes will cause the demand for leather to decline
Refer to the payoff matrix. Which of the following statements is true regarding the outcome of this game?
Both firms will price low, and this outcome is a Nash equilibrium
Refer to the diagram. To maximize profits or minimize losses, this firm should produce
E units and charge price A
Price is constant to individual firm selling in a purely competitive market because
Each seller supplies a negligible fraction o total supply
Which of the following statements is correct?
Economic profits induce firms to enter an industry; losses encourage firms to leave.
The copper, aluminum, cement, and industrial alcohol industries are examples of:
Homogeneous oligopoly
Which of the following statement applies to a purely competitive producer?
It will not advertise its product
The theory of creative destruction was advanced many years ago by
Joseph Schumpeter
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
The Sherman Act
declared monopoly and restraints of trade to be illegal.
The automobile, household appliance, and automobile tire industries are illustrations of
differentiated oligopoly
