Econ Final Exam

Refer to Figure 15-11. If the monopoly firm perfectly price discriminates, then consumer surplus amounts to

$0

Refer to Figure 15-11. If the monopoly firm perfectly price discriminates, then the deadweight loss amounts to

$0

Refer to Figure 15-11. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to

$1,000

Refer to Table 13-5. What is the value of C?

$100

John has decided to start his own lawn-mowing business. To purchase the mowers and the trailer to transport the mowers, John withdrew $1000 from his savings account, which was earning 3% interest, and borrowed an additional $2000 from the bank at an interest rate of 7%, What is John's annual opportunity cost of the financial capital that has been invested in the business?

$170

Kristen sells 300 glasses of lemonade at $0.50 each. Her total costs are $125. Her profits are

$25

Suppose a firm in a competitive market producers and sells 8 units of output and has a marginal revenue of $8. What would be the firm's total revenue if it instead produced and sold 4 units of output?

$32

Refer to Scenario 15-6. How much profit will the airline earn if it sets the price of a ticket at $600?

$40,000

Refer to Scenario 15-6. How much profit will the airline earn if it engages in price discrimination?

$55,000

Refer to Table 10-2. How large would a subsidy need to be in this market to move the market from the equilibrium level of output to the socially-optimal level of output?

$7

Price discrimination adds to social welfare in the form of (i) increased total surplus (ii) reduced costs of production (iii) increased consumer surplus

(i) only

Refer to Table 15-1. Assume this monopolist's marginal cost is constant at $12. What quantity of output (Q) will it produce and what price (P) will it charge?

Q = 4, P = $26

Refer to Figure 10-4. If all external costs were internalized, then the market's equilibrium output would be

Q2

Refer to Figure 10-4. The socially optimal quantity would be

Q2

Refer to Figure 10-4. Without government intervention, the equilibrium quantity would be

Q3

For a firm, the production function represents the relationship between

Quantity of inputs and quantity of output

Refer to Table 14-5. If the firm finds that its marginal cost is $11, it should

Reduce production to increase profit

The length of the short run

Is different for different types of firms

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

(i) only

Competitive firms differ from monopolies in which of the following ways? i) Competitive firms do not have to worry about the price effect lowering their total revenue. ii) Marginal revenue for a competitive firm equals price, while marginal revenue for a monopoly is less than the price is able to charge. iii) Monopolies must lower their price in order to sell more of their product, while competitive firms do not.

(i), (ii), and (iii)

As part of an estate settlement, Mary received $1 million. She decided to use the money to purchase a small business in Anywhere, USA. Her business operated in a perfectly competitive industry. If Mary would have invested the $1 million in a risk-free bond fund she could have made $100,000 each year. She also quit her job with Lucky.Com Inc. to devote all of her time to her new business; her salary at Lucky.Com Inc was $75,000 per year. At the end of the first year of operation her new business, Mary's accountant reported an accounting profit of $150,000. What was Mary's economic profit?

-$25,000

Refer to Table 10-1. How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

2

Refer to Table 10-1. What is the socially-optimal quantity of output in this market?

2 Units

Refer to Table 13-1. What is the marginal product of the second worker?

25

A firm in a competitive market has the following cost structure: If the firm's fixed cost of production is $3, and the market price is $10, how many units should the firm produce to maximize profit?

3 Units

Refer to Table 10-1. It shows the private value, private cost, and external cost for various quantities of output in a market. What is the equilibrium quantity of output in the market?

3 Units

In the short run, a market consists of 100 identical firms. The market price is $8, and the total cost to each firm of producing various levels of output is given in the table below. What will total quantity supplied be in the market?

300 units

Refer to Table 10-2. What is the equilibrium quantity of output in this market?

4 Units

Refer to Table 10-2. It shows the private value, private cost, and social value for a market with a positive externality. What is the socially-optimal level of output in this market.

5 units

Refer to Table 14-5. The profit maximizing level of output is

6

Refer to Table 13-3. What is the total output when 2 workers are hired?

70

Refer to Table 15-47. A monopolist faces the following demand curve. The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit. If the monopolist were able to perfectly price discriminate, how many units would it sell?

900

If the government were to impose a fine of $1,000 for each unit of air-pollution released by a steel mill, the policy would be considered

A corrective tax

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then

A one-unit increase in output will increase the firm's profit

Refer to Figure 14-6. Which line segment best reflects the short-run supply curve for this firm?

ABCF

Altering incentives so that people take account of the external effects of their actions

All of the above - is called internalizing the externality, can be done by imposing a corrective tax, is the role of government in markets with externalities

Refer to Figure 14-9. Assume that the market starts in equilibrium at point

An eventual increase in the number of firms in the market and a new long-run equilibrium at point C

Which of the following measures of cost is best described as "the cost of a typical unit of output if total cost is divided evenly over all the units produced?"

Average Total Cost

If Franco's Pizza Parlor knows that the marginal cost of the 500th pizza is $3.50 and that the average total cost of making 499 pizzas is $3.30, then

Average total costs are rising at Q = 500

Refer to Figure 15-3. What price will the monopolist charge?

B

The fundamental cause of monopoly is

Barriers to entry

In order for antitrust laws to raise social welfare, the government must

Be able to determine which mergers are desirable and which are not.

Refer to Figure 13-7. The efficient scale of production occurs at which quantity?

C

The supply curve for a product reflects the

Cost to sellers of producing the product

When marginal cost is rising, average variable cost

Could be rising or falling

In the long run Firm A incurs total costs of $1,050 when output is 20 units and $1,200 when output is 40 units. Firm A exhibits

Economies of scale because average total cost is falling as output rises

The defining characteristic of a natural monopoly is

Economies of scale over the relevant range of output

Drug companies are allowed to be monopolists in the drugs they discover in order to

Encourage research

When producers operate in a market characterized by negative externalities, a tax that forces them to internalize the externality will

Give sellers the incentive to account for the external effects of their actions

At any given quantity, the willingess to pay in the market for gasoline is reflected in the

Height of the demand curve at that quantity

Refer to Figure 14-10. If the price is P1 in the short run, what will happen in the long run?

Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.

The total cost of the firm of producing zero units of output is

Its fixed cost in the short run and zero in the long run

Refer to Figure 15-3. How much output will the monopolist produce?

K

Refer to Figure 14-4. In the short run, if the market price is higher than P1 but less than P4, individual firms in a competitive industry will earn

Losses, but will produce a positive quantity

In the short-run, a firm's supply curve is equal to the

Marginal cost curve above its average variable cost curve

When a firm's only variable input is labor, then the slope of the production function measures the

Marginal product of labor

Charlene sells cotton candy. The cotton candy industry is competitive. Charlene hires a business consultant to analyze her company's financial records. The consultant recommends that Charlene increase her production. The consultant must have concluded that Charlene's

Marginal revenue exceeds her marginal cost

Economists normally assume that the goal of a firm is to

Maximize its profit

All remedies for externalities share the goal of

Moving the allocation of resources toward the socially optimal equilibrium.

For a monopolist, when the price effect is greater than the output effect, marginal revenue is

Negative

In a perfectly competitive market

No one seller can influence the price of the market

Refer to Figure 13-9. The firm experiences economies of scale at which output levels?

Output levels less than M

For a profit-maximizing monopolist,

P > MR = MC

Refer to Figure 14-4. Firms would be encouraged to enter this market for all prices that exceed.

P4

If the government were to limit the release of air-pollution produced by a steel mill to 75 part per million, the policy would be considered a

Regulation

Price discrimination is the business practice of

Selling the same good at different price to different customers.

When firms in a competitive market have different costs, it is likely that

Some firms will earn positive economic profits in the long run

The accountants hired by Davis Golf Course have determined total fixed cost to be $75,00 total variable cost to be $130,000, and total revenue to be $145,000. Because of this information, in the short run, Davis Golf Course should

Stay open because shutting down would be expensive

Which of the following policies is the government most inclined to use when faced with a positive externality?

Subsidies

Suppose that electricity producers create a negative externality equal to $6 per unit. Further suppose that the government imposes a $8 per-unit tax on the producers. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced?

The after-tax equilibrium quantity is less than the socially optimal quantity

On a 100-acre farm, a farmer is able to produce 3000 bushels of wheat when he hires 2 workers. His is able to produce 4400 bushels of wheat when he hires 3 workers. Which of the following outcomes can occur if the production function exhibits diminishing marginal productivity of labor starting from the 4th worker?

The farmer is able to produce 5600 bushels of wheat when he hires 4 workers.

Suppose that large-scale pork production has the potential to create ground water pollution. Why might this type of pollution be considered an externality?

The pollution has the potential for creating a health risk for water users in the region surrounding the pork production facility.

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

The size of the factory is fixed

An example of an opportunity cost that is also an implicit cost is

The value of the business owner's time

Refer to Table 13-1. Alyson's pet siting service experiences diminishing marginal productivity with the addition of the

Third Worker

Refer to Figure 14-4. In the short run, if the market price is P4, individual firms in a competitive industry will earn

Zero profits

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized mutually beneficial trades are

a dead weight loss to society

What is the shape of the monopolist's marginal revenue curve?

a downward-sloping line that lies below the demand curve

Refer to Figure 10-4. This market is characterized by

a negative externality

In the long run, a firm will exit a competitive industry if

average total cost exceeds the price

Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total revenues from the sale are $500. Which of the following statements is correct? i) Marginal Revenue = $5 ii) Average revenue = $5 iii) Price = $5

i), ii), and iii)

In order to sell more of its product, a monopolist must

lower its price

When new firms enter a perfectly competitive market,

the short-run market supply curve shifts right

Economic profit is equal to

total revenue - the opportunity cost of producing goods and services

In the short run, a firm incurs fixed costs

whether it produces output or not