econ final

A firm that shuts down and produces no output incurs a loss equal to its Correct! total fixed costs. total variable costs. marginal costs. marginal revenue.

a

At a firm's break-even point, its Correct Answer total revenue equals its total opportunity cost. marginal revenue exceeds its marginal cost. You Answered marginal revenue equals its average variable cost. marginal revenue equals its average fixed cost.

a

In a prisoners' dilemma game, in the Nash equilibrium both players have another outcome that does not occur but is more favorable. neither player has another outcome that does not occur and is more favorable. one player has another outcome that does not occur and is more favorable. collusion would not alter the outcome

a

In a prisoners' dilemma game, which of the following strategies gives the best outcome for both prisoners? Both deny (collusion). Both confess (not collude). One confesses while the other denies. none of the above

a

In perfect competition, at all levels of output the market price is the same as the firm's ________. Correct! marginal revenue normal profit average variable cost fixed cost

a

In perfect competition, the product of a single firm Correct! has many perfect substitutes produced by other firms. has many perfect complements produced by other firms. is sold under many differing brand names. is sold to different customers at different prices.

a

In the short run, a perfectly competitive firm will shut down if at the profit maximizing quantity the Correct! P < AVC AVC < ATC P > ATC P > MC

a

Marginal product is Correct! the increase in output that results from a one-unit increase in the quantity of labor employed with all other inputs remaining the same. total amount of output produced. total amount of output produced divided by the quantity of labor employed. total amount of output produced divided by price of the output.

a

The government imposes a sales tax on hot dogs. The tax would be paid entirely by hot dog sellers if the supply is perfectly inelastic. supply is perfectly elastic. demand is perfectly inelastic. none of the above.

a

The marginal revenue curve for a single-price monopoly lies below its demand curve. coincides with its demand curve. lies above its demand curve. is horizontal.

a

Two software firms have developed an identical new software application. They are debating whether to give the new app away free and then sell add-ons or sell the application at $30 a copy. The payoff matrix is above and the payoffs are profits in millions of dollars. What is Firm 1's best strategy? Give away the application regardless of what Firm 2 does. Sell the application at $30 a copy regardless of what Firm 2 does. Give away the application only if Firm 2 sells the application. Give away the application only if Firm 2 gives away the application.

a

When a sales tax is imposed on sellers, the supply curve shifts so that the vertical distance between the old and the new supply curve equals the amount of the sales tax. sales tax multiplied by the price elasticity of supply. sales tax divided by the price elasticity of demand. sales tax multiplied by the price elasticity of demand.

a

Which of the following is FALSE for a profit-maximizing single-price monopolist? P = MC MC = MR P > MR None of the above because they are all true.

a

Which of the following is NOT a potential impact of a rent ceiling set below the equilibrium rent? a surplus an increase in search a deadweight loss None of the above because they are all impacts of a rent ceiling set below the equilibrium

a

Which of the following is an effect of a price ceiling set below the equilibrium price? Less of the good is produced with the ceiling than would be produced without the ceiling. The price ceiling has no effect on the market equilibrium. Consumers can buy more than they can at the equilibrium price because the ceiling price is lower. None of the above answers is correct.

a

Which of the following statements is TRUE for both a competitive market and a single-price monopoly? The firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost. The firm can make an economic profit in the long run. The price is set where the supply curve and demand curve intersect. The firm always produces at the lowest possible long-run average cost.

a

________ is a group of firms that have colluded to limit their output and raise their price. A cartel An oligopoly A strategy A duopoly

a

A market structure in which a small number of producers compete against each other is monopolistic competition. oligopoly. monopoly. perfect competition.

b

A perfectly competitive firm is definitely making an economic profit when MR < MC. Correct Answer P > ATC. P < ATC. You Answered P > AVC.

b

A perfectly competitive firm maximizes its profit by setting its price so that it exceeds the marginal revenue. Correct! choosing to produce the quantity that sets MC equal to MR. cutting wages. manipulating demand.

b

A price ceiling is a price below which a seller cannot legally sell. above which a seller cannot legally sell. that creates a surplus of the good. Both answers A and C are correct.

b

If a monopoly is producing an amount of output level at which marginal revenue exceeds marginal cost, in order to increase its profit the monopoly will ________ its price and ________ its output. raise; decrease lower; increase lower; decrease raise; increase

b

In the short run, a firm will You Answered not produce if its total revenue does not cover its total cost. Correct Answer produce and incur an economic loss if its total revenue covers its total variable cost but not its total cost. produce and break even if its total revenue covers its total fixed cost but not its total variable cost. produce and earn an economic profit if its total revenue is equal to its total cost.

b

In the short run, a perfectly competitive firm NEVER earns an economic profit. Correct! incurs a loss greater than its total fixed costs. produces where MR = MC. earns a normal profit.

b

Rent (dollars per month) Quantity of apartments supplied (per month) Quantity of apartments demanded (per month) 200 20 100 300 40 80 400 60 60 500 80 40 600 100 20 The above table gives the demand schedule and the supply schedule for housing in Anytown, U.S.A. If a rent ceiling of $300 is imposed in the housing market, then there would be a surplus of apartments. there would be a shortage of apartments. the market would reach equilibrium at the quantity of 60 housing units. the supply of housing would increase.

b

The amount of a tax paid by the sellers will be larger the more ________ the demand and the more ________ the supply. elastic; elastic elastic; inelastic inelastic; elastic inelastic; inelastic

b

The government sets a price floor for corn which is above the equilibrium price of corn. As a result, ________. the corn market will be efficient a deadweight loss will be created a shortage of corn will be created none of the above answers is correct

b

Today, firms in a perfectly competitive market are making an economic profit. In the long run, firms will ________ the market until all firms in the market are ________. exit; covering only their total fixed costs Correct! enter; making zero economic profit exit; producing at the minimum point on their long-run average cost curve enter; making zero normal profit

b

Two students are assigned a group project. Each has the option to work or not work to achieve a high grade. The payoffs are shown in the above table. Student 1 should work only if student 2 works. Correct! work regardless of the decision made by student 2. not work if student 2 works. not work regardless of what student 2 decides.

b

A firm's total product curve shows that inefficiency is not possible. how the cost of the fixed resources change when output changes. Correct! how the amount of output changes when the quantity of labor changes. that in the long run the firm must adjust the quantity of all the resources it employs.

c

A period of time in which the quantity of at least one factor of production used by a firm is fixed is called the market period. intermediate run. Correct! short run. long run.

c

A sales tax is imposed on the sellers of gasoline. This tax shifts both the supply curve of gasoline and demand curve for gasoline leftward. the demand for gasoline curve leftward. the supply of gasoline curve leftward. the supply of gasoline curve rightward.

c

For a monopoly, the market demand curve is the firm's a;supply curve. b;marginal revenue curve. c;demand curve. d;profit function.

c

For a perfectly competitive firm, as its output increases its marginal revenue ________ and its marginal cost ________. changes; changes changes; does not change Correct! does not change; changes does not change; does not change

c

If a minimum wage is set above the equilibrium wage rate, employment will increase. will not change. Correct! will decrease. may increase, decrease or not change depending on how the supply of labor is affected by the minimum wage.

c

If marginal revenue equals zero, then demand at this level of output is perfectly inelastic. inelastic. unit elastic. elastic.

c

In order to have an effect, a price ceiling must be set ________. above the equilibrium price equal to the equilibrium price below the equilibrium price by suppliers

c

Marginal revenue is equal to total revenue divided by price. the change in total revenue divided by total output. Correct! the change in total revenue divided by the change in quantity sold. price divided by quantity sold.

c

The incidence of sales tax is determined by the level of government (for example, local, state, or federal) which imposes the tax. federal government in all cases. price elasticities of supply and demand. greed of the sellers.

c

The opportunity cost of buying a good includes the price of the good. the value of time spent searching for the good. only I only II both I and II neither I nor II

c

Which of the following is NOT an assumption of perfect competition? many firms many buyers Correct! restrictions on entry into the market each firm sells an identical product

c

Which of the following statements is TRUE? The presence of positive economic profit in a perfectly competitive market is consistent with the characteristics of a long-run competitive equilibrium. When firms in a perfectly competitive market incur economic losses, some will exit in the long run, thereby shifting the industry supply curve rightward. Correct! If a profit-maximizing firm in a perfectly competitive market is making an economic profit, then it must be producing at a level of output where price is greater than average total cost. If a profit-maximizing firm in a perfectly competitive market is incurring an economic loss, then it must be producing at a level of output where price is greater than average total cost.

c

As long as the supply curve for a good is upward sloping and the demand curve is downward sloping, a sales tax imposed on sellers shifts the supply curve leftward and possibly raises the equilibrium price. rightward and possibly increases the equilibrium quantity. rightward and definitely decreases the equilibrium quantity. leftward and definitely raises the equilibrium price.

d

In perfect competition, ________. there are restrictions on entry into the market firms in the market have advantages over firms that plan to enter the market only firms know their competitors' prices Correct! there are many firms that sell identical products

d

The amount of a tax paid by the buyers will be larger the more inelastic are both the supply and demand. more elastic are both the supply and demand. more elastic the demand and the more inelastic the supply. more inelastic the demand and the more elastic the supply.

d

The demand and the supply for a good are each neither perfectly elastic nor perfectly inelastic. If a sales tax on sellers of the good is imposed, the tax is paid by only sellers. neither buyers nor sellers. only buyers. both buyers and sellers.

d

The difference between a perfectly competitive firm's total revenue and its total cost is always positive. You Answered always negative. always zero. Correct Answer greatest at the profit-maximizing level of output.

d

The government of Healthyland imposes a tax on sellers of salt. The tax is $0.10 per pound. With no tax, the price of salt is $0.40 per pound. The demand for salt is perfectly inelastic and the elasticity of supply is 1.5. With the tax, buyers in Healthyland pay $0.40 per pound. $0.45 per pound. $0.35 per pound. $0.50 per pound.

d

The marginal cost (MC) curve intersects the ATC, AVC, and AFC curves at their minimum points. ATC and AFC curves at their minimum points. AVC and AFC curves at their minimum points. Correct! ATC and AVC curves at their minimum points.

d

Which of the following is NOT a characteristic of a monopoly? a;a single firm b;no close substitutes for the product produced c;barriers to entry d;easy entry and exit

d