mic ch 15-18

Use Figure: The Cost Curves for Charlie's Cookie Confections. The curve labeled X represents the firm's _____ cost curve. 1. marginal 2. average 3. fixed costs per unit 4. variable costs per unit

4. variable costs per unit

Average cost is: 1. the change in cost divided by the change in quantity. 2. total cost divided by quantity. 3. the change in quantity divided by the change in cost. 4. total cost times quantity.

2. total cost divided by quantity.

Candice's stand-up paddleboard company will earn profits producing and selling at any output level where the company's: 1. marginal cost curve is above its demand curve 2. average cost curve is above its marginal revenue curve 3. demand curve is above its average cost curve 4. marginal revenue curve is above its average cost curve

3. demand curve is above its average cost curve

Use the table to answer the question. If Angelica charges $1, then Raquel should charge____. If angelica charges $3, then raquel should charge___. 1. 1;3 2. 3;3 3. 3;1 4. 1;1

4. 1;1

David's financial planner tells him that he made a profit of $31,300 running a ballroom dance studio in Sacramento. David's wife, an actuary, claims David lost $31,300 running his ballroom dance studio. This means his wife is claiming that he incurred______ in _____costs. 1. $62,600; implicit opportunity 2. $ 31,300 ; implicit opportunity 3. $31,300; explicit financial 4. $62,600; explicit financial

1. $62,600; implicit opportunity

use the table to answer the question. gizelle tries to put herslelf in devin's place. if she (gizelle) charges a price of $7, then she thinks that devin will charge____to earn a profit of___. 1. 6; 2,500 2. 6; 5,000 3. 8; 1,000 4. 8, 4;000

1. 6; 2500

if maria charges $8, then jose should charge___. If maria charges $4, then jose should charge____. 1. 4; 4 2. 4; 8 3. 8;4 4. 8; 8

1. 4; 4

Luana gives up a salary of $80,000 per year to start her company. She invests $50,000 of her savings in her company, savings that had been earning her $4,000 per year in interest. During Luana's first year in business, total revenue is $300,000, and her explicit financial costs are $225,000. What is Luana's accounting profit from her first year in business? 1. $75,000 2. -$9,000 3. -$59,000 4. $71,000

1. $75,000

4. at or just below the marginal benefit

When price discriminating, a company owner should set price ___ for each customer. 1. equal to marginal cost 2. at the competitive market equilibrium 3. no higher than the marginal cost 4. at or just below the marginal benefit

Which term describes analysis that proceeds as follows: "Start by analyzing the last period of the game, Use the result to determine what would have happened in the second-to-last period, and keep reasoning backward until you see all the consequences that follow from today's decision." 1. reasoning forward 2. chain-based analytics 3. reverse sequencing 4. reasoning backward

4. reasoning backward

You are in a group preparing a class presentation debunking spurious arguments against free trade. To make the strongest case possible, each group member should examine a different argument. Your group is participating in a___ game. 1. an anti-coordination 2. a coordination 3. an indefinitely repeated 4. a repeated

anti-coordination

___markets do not necessarily lead to efficient outcomes, whereas ___markets tend to yield efficient outcomes. 1. Strategic; prisoner-based 2. Prisoner-based; strategic 3. Competitive; strategic interactions in 4. Strategic interactions in; competitive

4. Strategic interactions in; competitive

Use the table to answer the question. The payoff cells are labeled A, B, C, and D. If the payoffs in cells A or D are equally likely, which approach would help solve the problem and lead to D? 1. Workers continue to avoid training, as they have been accustomed to doing in the past. 2. Businesses announce that they will work with whatever skill level exists in the workforce. 3. All firms move to common resource ownership. 4. The government adds workforce skill training to compulsory education requirements.

4. The government adds workforce skill training to compulsory education requirements.

You own an orange juice stand in a competitive market, and so you are a price-taking firm. Which event would MOST likely increase your market power? 1. The government abolishes the system of patents and copyrights. 2. A booming economy increases the demand for orange juice and attracts entry into the market. 3. The average total cost curve for firms in the industry becomes horizontal. 4. You acquire exclusive rights to harvest oranges from all domestic citrus orchards.

4. You acquire exclusive rights to harvest oranges from all domestic citrus orchards.

Use Figure: Payoff Matrix for Alex and Sybil. Alex and Sybil are the only producers of frozen yogurt in their town. Every week, each decides whether to price high or low for the following week. The figure shows the profit per week earned by the two businesses. The BEST response for Alex is to: 1. price high 2. price low 3. price low when sybil prices high 4. price high when sybil prices low

price low

4. verifiable; difficult-to-change

When segmenting your market demand into groups, base them on ___ and ___ characteristics. 1. income; preference 2. equal; unifying 3. easy-to-observe; demand-unifying 4. verifiable; difficult-to-change

asha tries to put herself in Hui Er's shoes. Tasha concludes that if she (Tasha) charges___ then Hui Er will charge to earn a profit of____. 1. 5; 3000 2. 5; 700 3. 9; 6000 4. 9; 5000

1. 5; 3000

Apple produces accessories such as chargers, cases, and ear plugs that are specific to Apple's iPhone and that are incompatible with phones of other companies. What strategy is Apple using to create a barrier to entry? 1. creating cost advantages 2. controlling the markets for key inputs needed by all companies in the product market 3. intimidating rivals 4. increasing switching costs to ensure demand for its product

4. increasing switching costs to ensure demand for its product

You find a note on your door from your friend that says, "Hey, I can't find my phone, but I'll meet you at the Greek restaurant for dinner at seven." You search "Greek restaurants near me" and find two, Anna's Taste of Greece and Theo's. You don't know which one your friend meant, but you realize the possibilities can be summarized in this payoff matrix. This situation is a coordination game with: 1. a single, clear Nash equilibrium 2. a first-mover advantage 3. bad equilibria involving a grim trigger strategy 4. possible outcomes that lead to an anti-coordination game

4. possible outcomes that lead to an anti-coordination game

A Nash equilibrium is an equilibrium in which __________________. 1. no trade-offs are made by buyers and sellers 2. maximum profits are earned by each player, due to cooperative decision making 3. the choice each player makes is a best response to the choice other players are making 4. cooperation between market participants leads to self-serving but non-optimum results

3. the choice each player makes is a best response to the choice other players are making

David's Candle Company has a cost advantage over rival candle makers in the form of a long-term exclusive contract with a key supplier of paraffin, a key ingredient in candles. Consider the accompanying diagram. David's average cost curve is: 1. A 2. B 3. C 4. unknowable, based on info given

3. C

Ever since Giselle's company developed its new product ten years ago, Giselle has managed its production with little turnover in workers. During that time, the company's average cost has fallen by 30%, due to the refinement of its production methods, thereby achieving greater efficiency. Other rival companies have not achieved such low costs. The cost advantage that Giselle's company now has over rivals stems from_____achieved through_____. 1. a marginal cost reduction; long-term production 2. a key input price reduction; unique cost advantages 3. a unique cost advantage; learning by doing 4. mass production; key input price reduction

3. a unique cost advantage; learning by doing

2. IBM was charging customers a price close to their marginal benefit but still above IBM's marginal cost.

IBM once offered a laser printer in two versions: a regular version, which printed 10 pages per minute, and a Series E version "E" stands for "economy"), which printed 5 pages per minute. As befits a more efficient machine, the regular version cost more than the Series E version. However, the Series E version cost more to produce because IBM embedded in it an extra chip to slow it down! Why would IBM pay extra to compromise the effectiveness of one of its products, then charge less for it? 1. IBM was behaving irrationally, a tendency described by behavioral economists 2. IBM was charging customers a price close to their marginal benefit but still above IBM's marginal cost. 3. IBM was charging customers a price close to their marginal cost but still below IBM's marginal benefit 4. IBM was segmenting the market for its printers based on verifiable characteristics

Suppose a local hardware store has explicit costs of $2 million per year and implicit costs of $44,000 per year. If the store earned an economic profit of $50,000 last year, this means that the store's accounting profit equaled: 1. $94,000 2. $6,000 3. $2.05 mil 4. $2.044 mil

1. $94,000

In the long run, each firm in an industry will: 1. earn only enough to cover the opportunity costs of all resources used in production 2. produce where MR is less than MC 3. offer more than one variation of the same good 4. set price in coordination with other producers in the market

1. earn only enough to cover the opportunity costs of all resources used in production

In the long run, firms will: 1. enter this market until all firms earn zero economic profit. 2. exit this market until all remaining firms earn zero profit. 3. enter this market, leading to excess profit for all firms. 4. exit this market, leading to excess profit for all the remaining firms.

1. enter this market until all firms earn zero economic profit.

Use Figure: Payoff Matrix for Antojito and Carolina Reaper. The combined profit of Carolina Reaper and Antojito is maximized when Carolina Reaper produces , and Antojito produces a) low quantity; low quantity b) high quantity; high quantity c) low quantity; high quantity d) high quantity; low quantity

1. low quantity; low quantity

Which is NOT a government action that results in a barrier to entry in a product market? 1. granting a patent on a product 2. prohibiting advertisers from making false claims 3. imposing regulations that increase start-up costs for new companies 4. requiring that companies have licenses to produce the product

2. prohibiting advertisers from making false claims

economic profits encourage firms to___the industry and losses encourage firms to____the industry 1. enter; enter 2. exit; exit 3. enter; exit 4. exit; enter

3. enter; exit

3. quantity 3

A business that price discriminates will produce at what output level? 1. quantity 1 2. quantity 2 3. quantity 3 4. quantity 4

2. less price sensitive on weekends than on weekdays.

The local cinema offers students discounts during the week but not on Friday and Saturday nights, when it charges everyone the same price. The theater believes students are: 1. more price sensitive on weekends than on weekdays 2. less price sensitive on weekends than on weekdays. 3. less price sensitive than other moviegoers. 4. indifferent between seeing movies on weekdays or weekends.

1. sensitive; less; insensitive; more

You notice that the prices of coffee at your local supermarket vary from week to week, causing you to buy different brands, depending on which is cheaper that week. Your friend William, by contrast, is a hardcore Peet's fan and buys only Peet's, whether the price is $5.99 per pound or $12.99 per pound. By varying coffee prices, the supermarket sells both to you, who is relatively price ____ and ____ particular about coffee, and to William, who is relatively price ____ and ____. 1. sensitive; less; insensitive; more 2. insensitive; more; sensitive; less 3. sensitive; more; insensitive; less 4. insensitive; less; sensitive; more

Firms will choose a Grim trigger strategy if they: 1. believe high profits are sustainable 2. believe that the firms in the industry will compete with each other for a long time to come. 3. have little control over the market price 4. are sure that cheating behavior will go unnoticed

2. believe that the firms in the industry will compete with each other for a long time to come.

Sellers in a market will become less profitable when: 1. average revenue rises. 2. market demand rises. 3. marginal cost falls. 4. new sellers enter the market.

4. new sellers enter the market

2. $12; $24; $18; $24

Belinda runs the only bakery in town and so has a monopoly position in the cake market. She initially makes and sells the quantity of cakes at which her marginal cost equals her marginal revenue, as shown in the accompanying graph: After a period of time, however, she decides to use her market power to negotiate the selling price of each cake with its buyer. If she were to sell each cake at a price equal to the marginal benefit of the purchaser, belinda's producer surplus would go from___to___. Total surplus would go from____to____. 1. $4.50; $12; $6; $12 2. $12; $24; $18; $24 3. $18; $24; $6; $24 4. $6; $12; $6; $12

3. The company's output is where marginal cost equals the last customer's marginal benefit.

How can price discrimination improve efficiency compared to a situation in which a company must charge a single price? 1. the price is pushed down to the level of average costs 2. the average cost ends up at the level of minimum average costs 3. the company's output is where marginal cost equals the last customer's marginal benefit 4. everyone willing and able to pay for the product get the same low price

4. price discrimination; legal

Many hotel chains offer discounts to AAA members. This is an example of ___ that is ___ in the United States. 1. market power; illegal 2. single-price monopoly power; legal 3. price discrimination; illegal 4. price discrimination; legal

1. charging different prices to buyers of the same good.

Price discrimination is the practice of 1. charging different prices to buyers of the same good. 2. paying different prices to suppliers of the same good 3. equating price to marginal cost 4. equating price to marginal revenue

4. group pricing

Price discrimination that involves charging different prices to different groups of people is called: 1. group discrimination 2. price partitoning 3. segmentation 4. group pricing

4. People can easily switch from wearing nail polish to not wearing it.

Why would it be a bad idea for a retailer to use "wearing nail polish" as the basis for segmenting customers into groups for price discrimination? 1. a retailer can't easily verify whether a customer is wearing nail polish 2. preferences regarding nail polish closely relate to preferences for the retailer's product 3. there aren't any differences between customers who wear nail polish and those who do not 4. People can easily switch from wearing nail polish to not wearing it.

Kendrick, a recent high school graduate, is trying to decide between going to college or running his family's food catering business. Which would be an implicit opportunity cost of going to college? a) his college tuition fees b) the profit he would earn running the catering business c) a student loan he takes out to pay his college tuition fees d) the labor and other costs he would incur in running the catering service

b) the profit he would earn running the catering business

You determine that there are enough nostalgic baby-boomers in your town to make a retro soda shop profitable. While you are making plans to open one, you hear of a potential rival with the same idea. You are sure that one shop would be profitable but that two would mean that both lose money. You recognize that, in this market: a. the elements of a coordination game are present. b. there are multiple equilibria. c. there may be a Grimm Trigger strategy. d. there is a first-mover advantage.

d. there is a first-mover advantage.

Use Figure: Oligopoly Pricing Strategy for TV Service Providers II. If Philo followed a high-price strategy one period but found that Sling followed a noncooperative low-price strategy, and Philo decided to lower prices for the next month, one would say that Philo is following a: 1. kinked demand model. 2. best response. 3. Grim Trigger strategy. 4. collusive strategy.

grim trigger strategy

The demand curve for a monopoly is: 1. the sum of the supply curves of all the firms in the monopoly's industry. 2. the market demand curve. 3. horizontal because no firm can enter the market. 4. the sum of the demand curves of all the firms in the monopoly's industry.

2. the market demand curve.

Use Figure: Prisoners' Dilemma for Thelma and Louise. Thelma and Louise are arrested and jailed for bank robbery. Given the payoff matrix in the figure, the BEST response for Louise is: 1. to confess 2. not to confess 3. adapt the same strategy as thelma 4. louise does not have a best response

1. to confess

1. charges different prices to different customers who are all buying the same product

Price discrimination occurs when a company: 1. charges different prices to different customers who are all buying the same product 2. refuses to sell its product to certain customers based on some distinguishing factor such as race or religion 3. produces different versions of a product 4. buys a given input from several sellers and pays a different price to each seller

Which curve has the most common shape of an average cost curve? 1. Curve A 2. Curve B 3. Curve C 4. Curve D

2. curve b

3. the same price for all consumers for all cupcakes available

Samantha wants to practice price discrimination in her cupcake bakery. Which strategy should Samantha NOT use? 1. volume discounts for customers who buy large numbers of cupcakes 2. discounted prices for customers who buy day-old cupcakes 3. the same price for all consumers for all cupcakes available 4. an annual fee for customers who want to earn a 2% discount each time they shop in the bakery

The science that is useful in helping decision makers analyze their options when an individual's best choice may depend on what other people choose, and other people's best choices may depend on what the individual chooses, is 1. strategic interaction theory 2. game theory 3. analytical strategy 4. partial equilibrium analysis

2. game theory

The Mile End Deli serves traditional delicatessen food in Brooklyn, New York. Which cost is MOST likely fixed at the deli? 1. the staff 2. the chairs customers sit on 3. the rye bread used to make pastrami sandwiches 4. the tomato sauce used to make soups

2. the chairs customers sit on

What advantage might a second-mover gain? 1. the flexibility to adapt a strategy based on what the first mover did 2. the avoidance of failure if the first mover fails 3. the time to consider options more thoroughly 4. the assurance of a better result

1. the flexibility to adapt a strategy based on what the first mover did

Connor's Corner Gas and Steven's Super Fuel are the only two providers of gasoline in their small town. Connor summarizes his pricing strategy as, "I'll put a high price on my gas, since that's what Steven is doing. But if he lowers his price, I'll lower mine and keep it there." This is an example of a(n): 1. best response. 2. Grim Trigger strategy. 3. irrational strategy. 4. follow-the-leader strategy.

2. Grim Trigger strategy

3. the same price for a product

When a seller uses group pricing, members of the same group pay: 1. a price above their marginal benefit 2. an individually negotiated price 3. the same price for a product 4. an escalating price

4. Those who prefer tacos and those who prefer burritos are induced to get a unit of their less preferred product because they can buy it at a discounted price of $3 by buying a bundle

Jordan's food truck sells tacos and burritos. Her most popular items are chicken tacos and beef tacos. Bean burritos are the least popular item on her menu, although some buyers like the burrito's large size compared to that of the tacos. The tacos and the burritos both sell for $4. Jordan offers a special deal of a taco and a bean burrito for $7. How is this a form of price discrimination? 1. buyers are grouped according to preferences for tacos or burritos. those who prefer tacos pay a lower price for the taco in the bundle. 2. buyers are grouped according to preferences for tacos or burritos. Those who prefer burritos pay a lower price for the burrito in the bundle. 3. buyers who buy the bundle are getting less satisfaction per dollar spent because they are getting a less preferred item instead of two of their more preferred items 4. Those who prefer tacos and those who prefer burritos are induced to get a unit of their less preferred product because they can buy it at a discounted price of $3 by buying a bundle

2. 8

Use Figure: Pay Per View Movies on Xfinity Cable. The figure shows the demand and marginal revenue curves for on-demand movie rentals on Xfinity Cable. Assume that marginal cost and average cost are constant at $30. If the cable company practices perfect price discrimination, then it will sell ____movie rentals. 1. 4 2. 8 3. 6 4. 0

2. the hurdle method; reservation price

When a seller offers lower prices to buyers willing to overcome some obstacle to get it, the seller is using ____ to get buyers to reveal their ____. 1. segment blocking; marginal benefit 2. the hurdle method; reservation price 3. impediment pricing; marginal benefit 4. the hurdle method; marginal cost

Your student club, Bluegrass Lovers, is having a cookie sale to raise money to see Alison Krauss in concert. As you are covering your table in the student center with homemade cookies, you notice that the Stand Up with Us student comedy club is also selling cookies, to fund a trip to see John Mulaney do his stand-up act. The table displays the payoffs. A comedy club member texts you and suggests that both groups set a high price. Which is NOT a problem associated with this cooperative agreement? 1. The combined funds are greatest if both charge a high price. 2. Bluegrass Lovers may not be able to resist the temptation to defect and try to make $600, not just $400. 3. Stand Up with Us may not be able to resist the temptation to defect and try to make $600, not just $400. 4. Both clubs may succumb to temptation and make $200, not $400.

1. The combined funds are greatest if both charge a high price.

2. 90; 530; 0; 620

A student-run latte stand at the center of campus serves two types of customers: students and professors. There are 500 students and 30 professors at the college. Each student's reservation price for a latte is $2; each professor's reservation price for a latte is $5. Each individual buys one latte per day. The latte stand's marginal cost of producing a latte is constant at $1.Suppose the latte stand can't price-discriminate. If it charges $2 per latte, the consumer surplus will be ___ per day, and the producer surplus will be ___ per day. Suppose now that the latte stand can price-discriminate. If it charges students (who must show their student IDs) $2 and professors $5, the consumer surplus will be ___ per day, and the producer surplus will be ___ per day. 1. 0; 530; 90; 530 2. 90; 530; 0; 620 3. 90; 0; 90; 530 4. 0; 0; 0; 620

Saudi Arabia has the second largest oil reserves and the lowest marginal cost of producing oil in the world. The Saudis have started several oil price wars to achieve various objectives, for example, in 2014-2015, when it sought to undermine the growing U.S. shale-based oil industry. They did so again in 2020, when it was unhappy with Russia's continued supply of oil as global demand plummeted during the COVID-19 pandemic. By repeatedly starting price wars, Saudi Arabia is: A-seeking to inject competition into the market. B-seeking to raise oil quality standards. C-using its cost advantages to deter competitors from bringing oil to market. D-leveraging its superior research and development capabilities to intimidate potential rivals.

C-using its cost advantages to deter competitors from bringing oil to market.

2. 150,000; 100,000

Ulrik, an antiques dealer, acquires 12 authentic Tiffany lamps for $10,000 each - items that he knows from experience, he can sell for anywhere between $4,000 and $1 million each. He toys with the idea of pricing each at $30,000, which, given the projected demand shown in the accompanying diagram, would yield a revenue of $90,000 and a profit of $60,000 (and three unsold lamps, which he would save to sell at a later date).He then decides to auction off each lamp individually, expecting thereby to better approximate buyers' reservation prices. In the first auction, the winning bid is $50,000; in the second, it's $40,000; in the third, it's $30,000; in the fourth, it's $20,000; and in the final auction, it's $10,000. He thus receives a total revenue of ___ and a profit of ___. 1. 150,000; 150,000 2. 150,000; 100,000 3. 90,000; 30,000 4. 90,000; 50,000