Econ exam 3

If a monopolist practices perfect price discrimination, then that company Select one: a.creates no deadweight loss. b.charges a higher price but produces the same monopoly level of output as when a single price is charged. c.charges some customers a price below marginal cost because costs are covered by the high-priced buyers. d.charges one group of buyers a higher price than another group, such as offering a student discount.

a. creates no deadweight loss.

Generic drugs can enter the market after the patent runs out on a patented drug. What happens next in the market? Select one: a.Price decreases, and total surplus increases. b.Price increases, and total surplus decreases. c.Price increases, and total surplus increases. d.Price decreases, and total surplus decreases.

a.Price decreases, and total surplus increases.

In the case of a typical natural monopoly, average total cost (ATC) is Select one: a.declining, often because fixed costs are very large. b.rising, often because fixed costs are very large. c.rising, often because marginal costs are very large. d.declining, often because marginal costs are very large.

a.declining, often because fixed costs are very large.

Which of the following represents the firm's short-run condition for shutting down? Select one: a.shut down if TR < VC b.shut down if P < ATC c.shut down if TR < FC d.shut down if TR < TC

a.shut down if TR < VC

As the sole producer of a good in the market, a monopolist can alter the price of its good (i) without affecting the quantity sold. (ii) without affecting its average total cost. (iii) by adjusting the quantity it supplies to the market.

b. (iii) only

Which of the following is true in a long-run equilibrium, Select one: a.only a monopolistically competitive firm operates at its efficient scale. b.only a perfectly competitive firm operates at its efficient scale. c.neither a competitive firm nor a monopolistically competitive firm charges a markup over marginal cost. d.both a perfectly competitive firm and a monopolistically competitive firm operate at their efficient scale of production.

b. only a perfectly competitive firm operates at its efficient scale.

The primary reason that economists criticize monopolists is because they Select one: a.produce a large quantity of waste. b.produce less than the socially efficient level of output. c.do not innovate. d.charge a price that equals marginal cost rather than a price that equals average cost.

b. produce less than the socially efficient level of output.

Sarah's Café sells gourmet bagels. In the long run, the café incurs a total cost of $500 to produce 1,000 bagels. If Sarah's Café exhibits economies of scale between 1,000 and 2,000 bagels, the long-run average total cost for 1,500 bagels is Select one: a.​higher than $0.50. b.​lower than $0.50. c.​equal to $0.50. d.​higher than $500.

b. ​lower than $0.50.

Suppose promoters at a concert know that 100 adults are willing to pay $12 for admission to the concert on a weekend. Suppose the promoters also know that 200 students are willing to pay $8 for admission on a weekend. The cost of operating the concert on a weekend is $2,000. How much profit will the concert earn if it engages in price discrimination? Select one: a.$1,200 b.$800 c.$2,800 d.$1,600

b.$800

Which of these assumptions is often realistic for a firm in the short run? Select one: a.The firm can vary the size of its factory but not the number of workers it employs. b.The firm can vary neither the size of its factory nor the number of workers it employs. c.The firm can vary the number of workers it employs but not the size of its factory. d.The firm can vary both the size of its factory and the number of workers it employs.

c. The firm can vary the number of workers it employs but not the size of its factory.

Average total cost is very high when a small amount of output is produced because Select one: a.marginal cost is high. b.marginal product is high. c.average fixed cost is high. d.average variable cost is high.

c. average fixed cost is high.

Suppose that the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost. Then the firm will Select one: a.earn negative profits, causing the firm to exit the industry. b.earn positive profits, causing other firms to enter the industry. c.earn zero profits. d.minimize costs in order to lower the price that it charges.

c. earn zero profits.

Lauren opened a yoga studio where she teaches classes and sells yoga clothing. Fixed costs for Lauren's yoga studio include the cost of the (i) tank tops. (ii) wages paid to the other yoga instructors. (iii) lease on the studio space. (iv) insurance that the landlord requires Sonia to carry for the studio.

c.(iii) and (iv) only

What is the name for a group of firms that act collectively to maximize total profits? Select one: a.monopolistically competitive industry. b.monopoly. c.cartel. d.Nash equilibrium market.

c.cartel.

The average-fixed-cost curve Select one: a.is constant. b.intersects marginal cost at the minimum of average fixed cost. c.is always decreasing. d.intersects marginal cost at the minimum of marginal cost.

c.is always decreasing.

Andre is a house painter. He can paint three houses per week. He is considering hiring his friend Henry. Together, Andre and Henry can paint five houses per week. What is Henry's marginal product? Select one: a.8 houses b.5 houses c.3 houses d.2 houses

d. 2 houses

Rachel crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Erika to help her. Together, Rachel and Erika can bottle and sell seven cases per week. What is Erika's marginal product? Select one: a.2 cases b.7 cases c.5 cases d.3 cases

d. 3 cases

Which of the following statements are true about a monopolistically competitive firm? Select one: a.It has the usual deadweight loss of monopoly pricing. b.It experiences a zero profit in a long-run equilibrium. c.It is said to have excess capacity. d.All of the above are correct.

d. All of the above are correct.

Which of the following represents the firm's long-run condition for exiting a market? Select one: a.exit if MR < MC b.exit if P < MC c.exit if P < FC d.exit if P < ATC

d. exit if P < ATC

Diseconomies of scale occur when Select one: a.average fixed costs are falling. b.average fixed costs are constant. c.long-run average total costs fall as output increases. d.long-run average total costs rise as output increases.

d. long-run average total costs rise as output increases.

Based on what we have learned in class, what must a monopolist do in order to sell more of a good? Select one: a.advertise. b.lobby the government for a subsidy. c.enact barriers to entry in related markets. d.lower its price.

d. lower its price.

Lillyanne's Lunchcart is a small street vendor business. If Lillyanne makes 15 bagels in her first hour of business and incurs a total cost of $16.50, her average total cost per bagel is Select one: a.$6.50. b.$16.50. c.$15.00. d.$1.10.

d.$1.10.

Suppose Tia started up a small lemonade stand business last month. Variable costs for Tia's lemonade stand now include the cost of Select one: a.lemons and sugar. b.paper cups. c.the wages paid to her hourly workers. d.All of the above are correct.

d.All of the above are correct.

A monopolist can maximize profits by Select one: a.producing an output level where marginal revenue equals marginal cost. b.charging a price that is greater than marginal revenue. c.earning a profit of (P - MC) x Q. d.Both a and b are correct.

d.Both a and b are correct.

Wild Goose Airlines flies between Baton Rouge and Seattle. The company rents airplanes on a year-long contract at a cost that averages $600 per flight. Other costs (fuel, flight attendants, etc.) amount to $550 per flight. Currently, Wild Goose's revenues are $1,000 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profit, Wild Goose Airlines should Select one: a.continue the flight. b.drop the flight now but renew the lease if conditions improve. c.drop the flight immediately. d.continue flying until the lease expires and then drop the run.

d.continue flying until the lease expires and then drop the run.

Suppose that a monopolist's marginal costs increase by $1 for every level of production, then the monopoly price will Select one: a.not change, but profits will decrease. b.rise by $1. c.rise by more than $1. d.rise by less than $1.

d.rise by less than $1.