ES211 Exam 2

The average variable cost (AVC) and average total cost (ATC) for a firm are indicated in Figure 8-2. If the marginal cost curve were constructed, at what output would it cross the AVC curve?

15

Using Figure 8-9, calculate the firm's approximate average total cost when it produces 50 units.

17

According to Figure 8-3, at what output would a properly constructed marginal cost curve cross the ATC curve?

4

In the short run, if average variable costs equal $45, average total costs equal $50, and output equals 100, the total fixed costs will equal

500

Refer to Figure 4-25. After the tax is levied, producer surplus is represented by area

F

Which of the following is a primary difference between price searchers and price takers?

Price searchers have to cut their price to sell additional output, but price takers do not.

Bart operates a lemonade stand in front of his house. His father works at the Springfield Nuclear Power Plant. Which of the following is most likely to be true?

The long run is longer for the power plant than it is for the lemonade stand.

Which of the following statements about monopoly is most accurate?

The monopolist "understocks" the market and charges too high a price.

Suppose the development of new drought-resistant hybrid seed corn leads to a 50-percent increase in the average yield per acre without increasing the cost to the farmers who use the new technology. If the conditions in the corn production industry are approximated by the price-taker model, which of the following is most likely to occur?

The profits of corn farmers who quickly adopt the new technology will increase.

Which of the following statements regarding black markets is true?

The rate of violence is higher in black markets than in legal markets.

Which of the following best explains why the monopolist's marginal revenue is less than the sales price?

When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist

When a law is passed that requires businesses to obtain permission from government officials in order to enter a market, this is an example of

a barrier to entry

If the expansion of output in an industry leads to unchanged resource prices, the industry is most likely to be

a constant cost industry

A substantial revision of the income tax code that made business and personal tax returns much easier to complete would tend to cause which of the following changes in the labor market for accountants?

a decrease in the wage rate of accountants

If a competitive price-taker 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.

If the federal government placed a 50 cent per pack excise tax on cigarette manufacturers, and if as a result, the price to consumers of a pack of cigarettes went up by 40 cents, the

actual burden of this tax falls mostly on consumers.

Which of the following would cause a firm's cost curves to shift upward?

an increase in government regulations

Which of the following factors is least likely to be a barrier limiting the entry of potential competitors into a market?

an inelastic demand for a product

A progressive tax is defined as a tax for which the

average tax rate rises as income increases.

In which of the following industries would we expect collusion to be most effective?

crude oil production, where most oil is sold by a small number of large sellers

Assume a certain competitive price-taker firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. To maximize its profit, the firm should

decrease its output, but continue to produce.

Which of the following has tended to increase the competitiveness of markets in the United States during the last couple of decades?

development of the Internet

A car leasing company that expands its size by buying its competitors may run the risk of increasing production costs due to

diseconomies of scale

Which of the following is a residual reward that accrues to business decision makers who use resources so as to increase their value?

economic profit

A large aircraft manufacturer, like Boeing, may have a cost advantage over a new smaller manufacturer because of

economies of scale

If marginal revenue exceeds marginal cost, a price-taker firm should

expand output

Refer to Figure 9-13. When price rises from P2 to P3, the firm finds that

expanding output to Q4 would leave the firm with losses.

Costs that a firm remaining in business will still incur even if it halts current production are called

fixed costs

After a natural disaster, such as a hurricane, the increased demand for certain items (like lumber, electric generators, and chainsaws) causes their prices to rise. These higher prices

help to direct the items toward their highest valued uses.

Which of the following is an obstacle that would reduce the likelihood of effective collusion among oligopolists?

highly unstable demand for the product

Collusion among sellers will be less attractive when

it is difficult to determine if some firms are providing secret price cuts

If a single firm in a price-taker market lowers its price below the market equilibrium price,

it will lose revenue without increasing the quantity it can sell

Larger firms will often have lower minimum per-unit costs than smaller firms becaus

large-scale output allows greater specialization for both labor and machines in the production process

At the profit-maximizing level of production, the monopoly in Figure 11-20 will have a

loss per unit of output of $2

If marginal revenue exceeds marginal cost, a profit-maximizing monopolist will

lower price and increase output

A local doughnut shop produces about 600 dozen doughnuts daily. If flour prices increase 20 percent

marginal cost, average variable cost, and average total cost will shift up.

In the short run, which are most important in determining changes in output?

marginal costs and marginal revenue

The main difference between a firm that is a price searcher and a firm that is a price taker is that a

price searcher will still be able to sell some of its product if it increases its price

The demand and cost conditions in an industry are as depicted in Figure 11-7. In the viewpoint of economic efficiency, what would the ideal price and output be?

price, $10; quantity produced, 170

If the output in the industry is produced by a monopolist, at what price will the good sell and what quantity will be produced in Figure 11-7?

price, $14; quantity produced, 100

Use the table below to choose the correct answer. Income Tax (dollars) (dollars) 10,000 2,000 20,000 4,000 40,000 8,000 The tax schedule shown here is

proportional

When firms use resources in an attempt to secure and maintain grants of market protection from the government, it is called

rent-seeking

Deadweight losses are associated with

taxes that distort the incentives that people face.

Economists generally criticize high barriers to market entry because

the ability of consumers to discipline producers is weakened.

If the federal government began granting a subsidy of 10 cents per apple to apple growers and as a result the price of apples to consumers falls by 8 cents,

the actual benefit of this subsidy goes mostly to consumers.

The actual burden of a tax is determined primarily by

the elasticities of demand and supply

"Market power" is an expression used to indicate that a firm has

the power to sell a given output at whatever price it chooses.

f a price-taker industry is in long-run equilibrium, the market price in the industry will be just sufficient to cover the firm's average

total costs

At the market price of $6 in Figure 9-4, indicate the firm's total revenue and total cost at its profit-maximizing level of output.

total revenue, $30 million; total cost, $30 millio

If a firm produces nothing, which of the following costs will be zero?

variable cost