Economics Exam 2 - Rhaman

The above table gives some production and cost information for Flaming​ Fernando's, a restaurant that sells Fiery Frijoles. What is the average total cost of producing​ 4,500 frijoles? ​A. $225 B. $9,000 C. $2 D. $8,000 E. More information is needed to determine the answer.

C. $2

Which of the following four−firm concentration ratios would be the best indication of a perfectly competitive​ industry? A. 100 percent B. 50 percent C. 2 percent D. 78 percent E. 31 percent

C. 2 percent

Use the figure above to answer this question. Figure​ ________ shows a short−run equilibrium in good times because the firm makes​ a(n) ________. A. B; economic loss B. A; normal profit C. A; economic profit D. C; normal profit E. B; normal profit

C. A; economic profit

The figure above shows the​ demand, marginal​ revenue, and marginal cost curves for​ Paul's Parrot​ pillows, a monopoly producer of pillows stuffed with parrot feathers. When the pillow market is a​ monopoly, the price of a pillow is​ ________ and if the pillow market is perfectly​ competitive, the price of a pillow is​ ________. A. $70; $60 B. $100; $40 C. $40; $20 D. $60; $40 E. $40; $60

A. $70; $60

Diseconomies of scale is a result of: A. larger fixed costs as the firm's production increases. B. difficulties of coordinating and controlling a large enterprise. C. technological progress. D. mismanagement. E. specialization of labor, capital, and management.

B. difficulties of coordinating and controlling a large enterprise.

Jill runs a factory that makes lie detectors in Little​ Rock, Arkansas. This​ month, Jill's 34 workers produced 690 machines. Suppose Jill adds one more worker​ and, as a​ result, her​ factory's output increases to 700.​ Jill's marginal product of labor from the last worker hired equals​ ________. A. 10 B. 690 C. 20 D. 700 E. None of the above answers is correct.

A. 10

The table above shows the total product schedule for The X Firm. The average product of labor is maximized at​ ________ workers because​ ________. A. 4; productivity is maximized when the 4th worker is employed. B. 4; the marginal product of labor is increasing with the 4th worker. C. 3; output starts to decrease with the 4th worker. D. 5; output is maximized with the 5th worker. E. 5; the APL exceeds the MPL for the 5th worker.

A. 4; productivity is maximized when the 4th worker is employed.

​________ cost is defined as a cost of production that does not entail a direct money payment. A. An implicit B. A fixed C. An explicit D. A marginal E. A total

A. An implicit

The marginal revenue curve for a perfectly competitive firm is: A. horizontal. B. vertical. C. downward sloping. D. upward sloping. E. a straight line coming out of the origin with a 45 degree slope.

A. horizontal.

The average fixed cost curve: A. is always negatively sloped. B. is U−shaped. C. is always positively sloped. D. has an upside−down U shape. E. is horizontal.

A. is always negatively sloped.

Suppose a perfectly competitive market is in long−run equilibrium and then there is a permanent increase in the demand for that product. The new long−run equilibrium will have: A. more firms in the market. B. the same number of firms in the market. C. fewer firms in the market. D. probably a different number of​ firms, but it is not possible to determine if there will be more or fewer firms. E. a permanent decrease in supply.

A. more firms in the market.

In monopolistic​ competition, a firm can set the price for its product because of: A. product differentiation. B. easy entry and exit. C. economic profits. D. many competitors. E. the​ firm's upward sloping demand curve.

A. product differentiation.

If a perfectly competitive wheat farmer is maximizing its profit and then increases its​ output, the​ farmer's: A. total revenue​ increases, but total cost rises by more so that the​ farmer's total profit decreases. B. marginal revenue​ increases, but so does marginal cost so that the​ farmer's total profit increases. C. total revenue decreases and total cost​ increases, both thereby decreasing the​ farmer's total profit. D. total revenue does not change but total cost​ increases, thereby decreasing the​ farmer's total profit. E. total revenue and total cost both rise but the effect on the​ farmer's total profit is uncertain.

A. total revenue​ increases, but total cost rises by more so that the​ farmer's total profit decreases.

Suppose a monopoly can sell 10 units of output for​ $21. In order to sell 11 units of​ output, the price must fall to​ $20. What is the marginal revenue of the 11th​ unit? A. $220 B. $10 C. $20 D. $41 E. $1

B. $10

The table above gives costs at​ Jan's Bike Shop.​ Unfortunately, Jan's record keeping has been spotty. Each worker is paid​ $100 a day. Labor costs are the only variable costs of production. What is the total variable cost of producing 60​ bikes? A. $200 B. $300 C. $400 D. $500 E. None of the above answers are correct.

B. $300

A single−price monopoly has marginal revenue and marginal cost equal to​ $19 at 15 units of output where the price on the demand curve is​ $38. At what price will this firm sell the​ output? A. $570 B. $38 C. $285 D. $19 E. There is not enough information given to answer the question.

B. $38

The above table gives the demand schedule for a single−price monopoly. If the marginal cost is​ $3, the profit maximizing output for the monopoly will be between: A. 1 to 2 units. B. 2 to 3 units. C. 3 to 4 units. D. 4 to 5 units. E. Exactly 5 units.

B. 2 to 3 units.

The table above shows the total product schedule for The X Firm. Increasing marginal returns occur until the​ ________ worker because​ ________. A. 3rd; the average product of labor is also increasing B. 4th; the marginal product of the 4th worker exceeds the 3rd​ worker, but not the 5th worker C. 4th; the average product of labor is also increasing D. 5th; output is maximized E. 5th; output declines with the 6th worker

B. 4th; the marginal product of the 4th worker exceeds the 3rd​ worker, but not the 5th worker

Which of the following is​ correct? A. The short run is the same for all firms. B. The long run is the time frame in which the quantities of all resources can be varied. C. The short run for a firm can be longer than the long run for the same firm. D. The long run does not exist for some firms. E. The long run is the time frame in which all resources are fixed.

B. The long run is the time frame in which the quantities of all resources can be varied.

A group of firms that has entered into an agreement to restrict output and increase prices and profits is called: A. a duopoly. B. a cartel. C. a compliance. D. a multi−firm monopoly. E. an oligopoly.

B. a cartel.

Collusion results when a group of firms i. act separately to limit​ output, lower​ prices, and decrease economic profits. ii. act together to limit​ output, raise​ prices, and increase economic profits. iii. in the United States legally fix prices. A. iii only B. ii only C. ii and iii D. i and iii E. i only

B. ii only

Patents: A. increase the incentive to capture economies of scale. B. increase the incentive to innovate. C. grant the holder a monopoly that lasts forever. D. require that monopolies increase the amount they produce. E. are granted only to competitive firms and not monopolies.

B. increase the incentive to innovate.

Computer memory chips are produced on​ wafers, each wafer having many separate chips that are separated and sold. The above table shows costs for a perfectly competitive producer of computer memory chips. If the market price of a wafer is​ $2,400 dollars, the firm is: A. incurring an economic loss of​ $2,800 an hour. B. incurring an economic loss of​ $2,000 an hour. C. making zero economic profit. D. making an economic profit of​ $2,400 an hour. E. making an economic profit of​ $12,000 an hour.

B. incurring an economic loss of​ $2,000 an hour.

The above figure shows a perfectly competitive firm. If the market price is​ $10, the firm: A. will immediately shut down. B. is making zero economic profit. C. is making an economic profit. D. is incurring an economic loss. E. might shut down but more information is needed about the AVC.

B. is making zero economic profit.

If a large number of firms are​ competing, the market could be A. oligopoly or monopoly. B. perfect competition or monopolistic competition. C. perfect competition or monopoly. D. monopolistic competition or monopoly. E. monopolistic competition or oligopoly

B. perfect competition or monopolistic competition.

Each firm in a perfectly competitive industry: A. produces a good that is slightly different from that of the other firms. B. produces a good that is identical to that of the other firms. C. has an important influence on the market price of the good or service being produced. D. attains economies of scale so that its efficient size is large compared to the market as a whole. E. has control over at least one unique resource to separate themselves from their competitors.

B. produces a good that is identical to that of the other firms.

If the price is less than a perfectly competitive​ firm's minimum average variable​ cost, the firm: operates and incurs an economic A. loss equal to average variable cost. B. shuts down and incurs an economic loss equal to total fixed cost. C. operates and incurs an economic loss equal to total fixed cost. D. earns an economic profit. E. shuts down and incurs an economic loss equal to average variable cost.

B. shuts down and incurs an economic loss equal to total fixed cost.

If we know the amount of total​ cost, average total​ cost, average variable​ cost, and marginal cost for each level of​ output, how can we find the level of output where the marginal product is the​ greatest? A. It is the output for which the total cost is maximized. B. It is the output for which the marginal cost equals average variable cost. C. It is the output for which the marginal cost is minimized. D. It is the output for which the marginal cost equals average total cost. E. There is no way to find where marginal product is the greatest knowing only cost data.

C. It is the output for which the marginal cost is minimized.

Which of the following is ALWAYS true when a single−price monopolist maximizes its​ profit? A. P​ = MC B. MC​ = ATC C. MR​ = MC D. P​ > ATC E. P​ = MR

C. MR​ = MC

A price−discriminating monopoly charges: A. each customer a price that equals the marginal cost of serving that customer. B. different prices to buyers for different products. C. a different price to different types of buyers for the same​ product, even though there are no differences in costs. D. a different price to different​ buyers, because the costs are different. E. the same price to every buyer for the same product.

C. a different price to different types of buyers for the same​ product, even though there are no differences in costs.

Intel and AMD are a duopoly that produces CPU chips. Intel and AMD must choose whether to conduct​ R&D or not conduct​ R&D. The table shows the payoff matrix for the two firms. The numbers are millions of dollars of profit. The Nash equilibrium is for Intel to​ ________ and for AMD to​ ________ . A. conduct​ R&D; not conduct​ R&D B. not conduct​ R&D; not conduct​ R&D C. conduct​ R&D; conduct​ R&D D. not conduct​ R&D; conduct​ R&D E. conduct​ R&D; either conduct​ R&D or not conduct​ R&D, the equilibrium could be either choice for AMD

C. conduct​ R&D; conduct​ R&D

When a monopoly price​ discriminates, it: A. decreases its economic profit. B. converts economic profit into consumer surplus. C. converts consumer surplus into economic profit. D. increases the amount of consumer surplus. E. has no effect on the deadweight loss in the market.

C. converts consumer surplus into economic profit.

A characteristic common in both oligopoly and monopolistic competition​ is: A. the firms in the market are interdependent. B. natural or legal barriers prevent the entry of new firms into the market. C. each firm faces a downward−sloping demand curve. D. a small number of firms compete in the market. E. each firm has a large share of the market.

C. each firm faces a downward−sloping demand curve.

The table above shows the total product schedule for​ Rick's Lawn​ Service, a yard care company. The total product schedule shows: A. output first increases then increases. B. only decreasing marginal returns. C. first increasing and then decreasing marginal returns. D. increasing marginal returns when the 6th worker is hired. E. decreasing marginal returns when the 1st worker is hired.

C. first increasing and then decreasing marginal returns.

Advertising costs and other selling costs are: A. efficient. B. considered as part of demand because they affect the demand for the good. C. fixed costs. D. variable costs. E. marginal costs.

C. fixed costs.

Diseconomies of scale can occur as a result of which of the​ following? A. greater specialization of labor and capital as the firm increases its size. B. lower total fixed cost as the firm increases its size. C. management difficulties as the firm increases its size. D. increases in the labor force not matched by increases in the plant. E. increasing marginal returns as the firm increases its size.

C. management difficulties as the firm increases its size.

If a perfectly competitive firm raised the price of its​ product, A. its total revenue would rise but its total cost would rise by more. B. its profits would increase. C. the quantity of output it sells decreases to zero. D. rival firms will follow suit and raise their prices also. E. the firm will be forced to advertise more.

C. the quantity of output it sells decreases to zero.

Product differentiation allows a firm to compete with another firm on the basis of: A. efficiency. B. demand. C. ​quality, price, and marketing. D. the level of output and the price. E. elasticity.

C. ​quality, price, and marketing.

The above table has the total revenue and total cost schedule for​ Omar, a perfectly competitive grower of rutabagas. When Omar produces 2 bushels of​ rutabagas, his total profit equals: A. $48. B. $28. C. −​$8. D. $20. E. $0.

C. −​$8.

The three largest firms in an industry have market shares of 40​ percent, 30​ percent, and 2 percent. The remaining 47 firms in the industry each have a market share of 1 percent. The Herfindahl−Hirschman Index​ (HHI) for this industry is​ ________. A. 24,061 B. 5,184 C. ​3,013 D. 2,551 E. 10,000

D. 2,551

When economies of scale exist so that one firm can meet the entire market demand at a lower average total cost than two or more​ firms, A. the monopoly converts all of the consumer surplus into economic profit. B. economic profit is reduced to zero. C. the monopoly encounters competition. D. a natural monopoly develops. E. there is always the opportunity to price discriminate.

D. a natural monopoly develops.

Jennifer owns a pig farm near​ Salina, Kansas. Last year she earned​ $39,000 in total revenue while incurring​ $38,000 in explicit costs. She could have earned​ $27,000 as a teacher in Salina. These are all her revenue and costs. Therefore Jennifer earned an: A. economic profit of​ $1,000. B. accounting profit of​ $1,000 but incurred an economic loss of​ $65,000. C. accounting profit of​ $1,000 but incurred an economic loss of​ $38,000. D. accounting profit of​ $1,000 but incurred an economic loss of​ $26,000. E. None of the above answers is correct.

D. accounting profit of​ $1,000 but incurred an economic loss of​ $26,000.

Intel and AMD are a duopoly that produces CPU chips. Intel and AMD must choose whether to conduct​ R&D or not conduct​ R&D. The table shows the payoff matrix for the two firms. AMD is playing a​ tit-for-tat strategy and Intel did not conduct​ R&D last period. ​Then, of the following​ answers, Intel's total profit for the next two periods is the highest if Intel​ ________ R&D this period and​ ________ R&D next period. A. conducts; conducts B. does not​ conduct; does not conduct C. conducts; does not conduct D. does not​ conduct; conducts E. conducts; either conducts or does not conduct because the profit is the same in either case

D. does not​ conduct; conducts

A market with only two firms is called a: A. two−firm quasi monopoly. B. two−firm monopolistic competition. C. two−firm monopoly. D. duopoly. E. cartel.

D. duopoly.

The​ prisoners' dilemma is an example of A. decision making in a monopoly. B. collusion. C. product differentiation. D. game theory. E. monopolistic competition.

D. game theory.

If a perfectly competitive firm finds that the price exceeds its ATC​, then the firm: A. will lower its price to increase its economic profit. B. is earning zero economic profit. C. will raise its price to increase its economic profit. D. is earning an economic profit. E. is incurring an economic loss.

D. is earning an economic profit.

Bill is an economics professor who earns​ $37,000 teaching but decides to leave and fulfill his dream of catering barbecues. During his year of barbecuing he earned total revenue of​ $60,000. He spent​ $30,000 on food and supplies. He also paid his wife​ $10,000 to help serve food. The normal profit for an entrepreneur running a barbecue business is​ $3,000. Bill also rented an industrial​ grill/fry truck for​ $12,000. Bill had an economic: A. loss of −​$42,000. B. profit of zero. C. profit of​ $28,000. D. loss of −​$32,000. E. profit of​ $20,000.

D. loss of −​$32,000.

The above figure shows three possible average total cost curves. If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC1​, each produce 30​ units, and the market price of the good is​ $16 per​ unit, then the firms: A. make an economic profit and new firms enter the industry. B. make zero economic profit and so some firms exit the industry. C. incur an economic loss and so some firms exit the industry. D. make zero economic profit and firms neither enter nor exit the industry. E. incur an economic loss and so new firms enter the industry.

D. make zero economic profit and firms neither enter nor exit the industry.

For a firm in monopolistic​ competition, innovation and product development are A. inconsequential because each firm produces a different product. B. necessary to allow new firms to enter. C. senseless because economic profit is always zero in the long run. D. necessary in order to have a chance of earning at least a short−run economic profit. E. uncommon because other firms already produce similar products.

D. necessary in order to have a chance of earning at least a short−run economic profit.

Which of the following is found ONLY in​ oligopoly? A. producers who sell identical products B. the​ firm's demand curve is horizontal C. sellers face a downward sloping demand curve for their product D. one​ firm's actions affect another​ firm's profit E. entry into the industry is blocked

D. one​ firm's actions affect another​ firm's profit

A natural monopoly arises when: A. one firm naturally convinces the government to limit competition in the market. B. there are firms which act together as a monopoly. C. a firm has many small firms that it can control. D. the long−run average cost curve slopes downward as it crosses the demand curve. E. one firm controls the supply of a unique resource.

D. the long−run average cost curve slopes downward as it crosses the demand curve.

When a market has barriers to​ entry: A. then in the long run it is possible for the firms to incur economic losses. B. oligopolies cannot be created. C. then in the long run the only possible outcome for the firms to make zero economic profit. D. then in the long run it might be possible for the firms to make a positive economic profit. E. the HHI almost always falls below​ 1,000.

D. then in the long run it might be possible for the firms to make a positive economic profit.

In both monopolistic competition and perfect​ competition, A. firms are price takers. B. firms face horizontal demand curves. C. firms sell identical products. D. there is easy entry and exit. E. the marginal revenue curve and the demand curve are the same.

D. there is easy entry and exit.

The table above shows the revenue figures for the top four firms along with a total for the remaining firms in the fast−food industry. What is the four−firm concentration ratio for the​ industry? A. 25 percent B. 80 percent C. 200 percent D. 100 percent E. 20 percent

E. 20 percent

Suppose there are 7 firms in the candy industry with the market shares shown below. What is the HHI for the​ industry? A. 6400 B. 20 C. 1850 D. 100 E. 2000

E. 2000

Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a single−price monopoly. The figure above shows the relevant demand and cost curves. When the market is perfectly​ competitive, the quantity of steak is: A. 2,000 pounds. B. 5,000 pounds. C. less than​ 2,000 pounds. D. 4,000 pounds. E. 3,000 pounds.

E. 3,000 pounds.

Which of the following is an example of a natural​ monopoly? A. JCPenney, the large department store chain B. Sony, the Japanese producer of the PS4 C. Ford​ Motors, the large​ automobile-producing company D. the Pittsburgh Penguins hockey​ team, a National Hockey League team E. Florida Power and​ Light, an electric utility in Florida

E. Florida Power and​ Light, an electric utility in Florida

Is a single−price monopoly​ efficient? A. Yes, because it produces the quantity at which ​MR=MC. B. Yes, because consumers lose and producers gain some of their surpluses. C. Yes, because it creates a deadweight loss. D. Yes, because consumers gain and producers lose some of their surpluses. E. No, because it creates a deadweight loss.

E. No, because it creates a deadweight loss.

A perfectly competitive firm will shutdown when the price is just below the minimum point on the: A. marginal revenue curve. B. marginal cost curve. C. average fixed cost curve. D. average total cost curve. E. average variable cost curve.

E. average variable cost curve.

For a firm in monopolistic​ competition, selling costs A. always increase demand. B. can lower total cost. C. increase costs and reduce profits. D. has no effect on the quantity sold. E. can change the quantity produced and lower the average total cost.

E. can change the quantity produced and lower the average total cost.

A perfectly competitive​ firm's short−run supply curve is: A. its marginal cost curve below the marginal revenue curve. B. horizontal at the market price. C. its marginal revenue curve below the ATC curve. D. its total cost curve above the AVC. E. its marginal cost curve above the AVC curve.

E. its marginal cost curve above the AVC curve.

Diseconomies of scale can occur as a result of which of the​ following? A. increasing marginal returns as the firm increases its size B. increases in the labor force not matched by increases in the plant C. lower total fixed cost as the firm increases its size D. greater specialization of labor and capital as the firm increases its size E. management difficulties as the firm increases its size

E. management difficulties as the firm increases its size

To maintain their economic​ profits, firms in monopolistic competition must continually engage in A. making the demand for their product more elastic. B. raising their​ product's price. C. realizing short−run losses. D. lowering their​ product's price. E. product development and marketing.

E. product development and marketing.

The price charged by a perfectly competitive firm is: A. higher the more the firm produces. B. lower the more the firm produces. C. different than the price charged by competing firms. D. indeterminate. E. the same as the market price.

E. the same as the market price.