MICRO FINAL EXAM pt.2

The price elasticity of demand is calculated using percentage changes in order to:

avoid problems associated with units of measurement

the market demand curve in a perfectly competitive market is downward sloping:

because of the law of demand

at very high wage rates, it is likely that na individual's labor-supply curve:

bends backward

a market that experiences both strikes and lockouts at different times is most likely characterized by:

bilateral monopoly

if a perfectly competitive firm can sell 400 computers at $800 each, in order to sell one more computer, the firm:

can sell the 41st computer at $800

the marginal wage is

change is total wage paid/ change in quantity of labor employed

when officers of firms in an industry get together to discuss how they can improve their mutual well-being, the result is

collusion

Greater labor productivity means:

higher output per worker

if a firm can change market prices by altering its output, then:

it has market power

An essential characteristic of perfectly competitive firm is that:

it is a price taker

which of the following characterizes monopolistic competition?

price discrimination

Carla buys one soft drink a day regardless of the price. Which of the following is correct with respect of Carla?

price elasticity of demand for soft drinks is O

the kinked-demand curve explains:

price fixing along the elastic part of the demand curve and predatory pricing on the inelastic portion

A market in which a single seller is required for efficient production is

pure monopoly

the refusal to work by unionized labor is an example of

strike

If marginal utility is negative:

total utility decreases with additional consumption of a good

t/f: Colluding oligopolists face the conflict between maximizing joint-market profit or their own market share

true

t/f: The opportunity cost of working is the amount of leisure time that must be given up in order to work.

true

t/f: a monopsonist must raise the wage rate if it desires to hire additional workers

true

t/f: antitrust laws can restrain the abuse of monopoly power

true

t/f: duopoly is an oligopoly with only two firms

true

t/f: if close substitutes are available with have only slight product differentiation, a firm is not a monopoly

true

t/f: if the long run, a firm will leave the market if it is not covering all of its fixed costs.

true

t/f: if, at the optimum level of output, a typical perfectly competitive firm;s price is greater than its ATC, the firm should increase output

true

t/f: in a monopoly labor market, the optimal union wage can be read off the marginal revenue product curve

true

a clothing store can sell two shirts for $20 each or three shirts for 18$ each. At a quantity of three shirts sold, marginal revenue is

$14

which of the following is equivalent to ATC?

(FC+VC)/ Q

compared with eh profit-maximizing choice of a natural monopolist, output regulation will result in:

A higher level of output and a lower price

the production function:

All of the Above

Monopolistically competitive industries are characterized by :

All of the above

When there is market failure:

Government intervention is beneficial only when the marginal benefit of intervention exceeds the marginal cost

the law of diminishing returns states that , ceteris paribus, the :

MPP of labor declines as more labor is employed

Which of the following rules will always be satisfied when any firm (i.e. perfectly competitive or monopoly) has maximized profits?

MR= MC

Oligopolistic firms will maximize total profits for all of the firms in the market at the rate of output where:

MR=MC for the market

When the MPP of labor is zero, ceteris paribus

No further increases in output can be achieved by using additional units of labor

Which market structure is characterized by a few interdependent firms?

Oligopoly

in a contestable market

a few firms use predatory prices to achieve market share

A gap in the marginal revenue curve results from

a kinked demand curve

Which of the following is least likely to occur during the long run in a perfectly competitive market experiencing economic profits?

a rightward shift in the market supply curve

Suppose a monopsonist must pay $10 per hour to attract 10 workers. If the same monopsomist must raise its wage to $11 per hour to attract the 11th worker, what is its marginal factor cost for labor?

$21 per hour

Suppose tha ta monopoly firm produces tables and can sell 10 tables per month at price of $400 per table. In order to increase sales by one table per month, the monopolist must lower the price of its tables by $30 to $370 per table. The marginal revenue of the eleventh table is:

$70

profit is:

(PxQ)-TC

which of the following is equivalent to ATC?

AFC + AVC

If economic profits are earned in a competitive market, then in the long run:

All of the above

rising marginal costs results from:

All of the above

the entry of firms into a market:

All of the above

which of the following is a characteristic of a perfectly competitive market?

All of the above

an individual's labor-supply curve reflects his or her:

Choice between work and leisure

a monopolistic who does not practice price discrimination should never produce in the

Inelastic portion of its demand curve because it can increase total revenue by more than it increases total cost by reducing the price

A production function:

Is a technological relationship between factors of production and output

according to the text, what type of market failure provides the best case for government regulation?

Market power

In which of the following types of markets does a single from have the most market power:

Monopoly

The only market structure in which there is significant interdependence among firms with regard to their pricing and output decisions is:

Monopoly

the correct ranking of barriers to entry (from highest to lowest) in the market is :

Monopoly, monopolisitc competition, oligopoly, perfect competition

a consumer maximized his or her satisfaction fro a given amount of income when

Mua/Pa=MUb/Pb=... MUn/Pn

a firm should shut down production when:

P< minimum AVC

economic profit equals zero where :

P= Minimum ATC

in which of the following cases would a firm enter a market?

P> short-run ATC

Economists assume the principal motivation of producers is:

Profit

The exit of firms from a market, ceteris paribus:

Reduces the economic losses of remaining firms in a market

The collapse of AT&T's natural monopoly in long distance telephone service was caused by:

Satellite technology which made it easier and less expensive for new companies to provide long distance- service

Which of the following prohibits price discrimination, certain types of mergers, and interlocking boards of directors among competing companies?

The Sherman Act

which of the following markets best illustrates the practice of discrimination

The airline market

the creation of another antitrust agency besides the justice department was accomplished through:

The federal trade commission act

When an individuals MRP is not measurable, his or her market wage is usually determined by:

The individual's MPP

the law of diminishing returns states that beyond some point, ceteris paribus:

The marginal physical product of a factor of production diminishes as more of that factor is used

which of the following firms is most likely to have more market power?

The only airline serving tow cities (assume this is a contestable market)

The demand curve faced by a monopoly firm is

The same as the market demand for the product

firms in a monopolistcally competitive market will:

Use the profit-maximizing rule MC=MR

in a perfectly competitive market economy, business failures can benefit society by causing:

a decline in market prices as remaining firms attempt to increase sale and stay in business

which of the following is likely to be monopolist?

a drug firm that has a patent granting it the exclusive right to produce a drug

in the long run

all of a firm=s resources are variable

the doctrine of laissez faire is consistent with

all of the aboce

The danger of experimenting with pricing for an oligopoly is:

all of the above

economies of scale of the entire range of market output:

all of the above

the most common form of non-price competition is :

all of the above

which of the following influences the price elasticity of demand?

all of the above

which of the following may characterize oligopolistic behavior

all of the above

which of the followings an example of government failure?

all of the above

marginal cost is equal to :

change in total cost- change in total output

The marginal revenue product of labor is equal to:

change in total revenue/ change in quantity of labor supplied

one could argue that advertising

creates barriers to entry

in making a production decision, an entrepreneur:

decides what level of output will maximize profits

Which of the following is barrier to entry in a monopoly market?

difficulty in obtaining resources

The demand for labor is downward sloping because of:

diminishing returns to labor

The supply curve for a monopolist

does not exist

When total utility is at a maximum, marginal utility is

equals to zero

t/f: A monopolist has market power because it faces a downward-sloping demand curve

false

t/f: Monopolists can charge any price and sell any amount of output they want since no competition exists

false

t/f: Monopolists in the labor market equate the marginal wage with the marginal revenue product

false

t/f: a multiplant monopolist produces more than if each of its plants were a separate firm in a competitive market

false

t/f: an attempt by one oligopolist to increase its market share by cutting prices will leave competitors unaffected

false

t/f: entry and exit barriers are highest in a perfectly competitive industry

false

t/f: if marginal revenue product is declining, the marginal physical product must decline.

false

t/f: individual farmers face a horizontal demand curve

false

t/f: the concept of laissez faire calls for government intervention if market failure is evident

false

t/f: the marginal physical product of a factor is equal to the additional revenue generated from employing 1 additional unit of the factor.

false

t/f: unlike most monopolies, unions do not attempt to use their market power to raise the equilibrium wage above its competitive level

false

t/f: unregulated natural monopolists produce sub-optimal rates of output

false

t/f: when the minimum wage is set above the market equilibrium wage, it has no effect on wages in that market

false

t/f: when there are economies of scale, a firm can simply increase production rates in the long run, and the unit costs will rise

false

t/f: unions do not need to control the labor supply in order to have market power

fase

Typical goals of a labor union in the united states include:

higher wages, better working conditions, more job security

jane loves to work. She does not receive any enjoyment fro leisure time. The last dollar that she earns each year means just as much to her as the first dollar. Which of the following best describes the shape of Jane's labor supply curve?

horizontal

with greater consumption, total utility always:

increases as long as marginal utility is positive

the long-run average total cost curve of a natural monopolist:

is U-shaped

the marginal utility of additional units consumed of any good

is always positive

monopoly power

is the ability of a firm to influence the price of its product

price discrimination

is the sale o an identical good at different prices to different consumers by a single seller

if a firm can raise market price by reducing it output, then:

it faces a downward-sloping demand curve

the responsiveness of workers to a change in wage rates, ceteris paribus, is measured by the:

labor-demand curve

the change is total revenue that results from a 1-unit increase in the quantity sold is:

marginal revenue

a profit-maximizing monopsonist wilier workers at the point where the marginal factor cost curve intersects the

marginal revenue product curve

market failure includes:

marke power resulting in reduced output and higher prices

Competitive firjms and monopolies both face downward-sloping

market demand curves

when firms have the power to restrict output, raise prices, stifle competition, and inhibit innovation the market failure involves is:

market power

in which of the following market structures are entry barriers the highest?

monopoly

president Bush once claimed, "i wouldn't eat broccoli if you paid me" we can assume that for hi the marginal utility of broccoli is

negative

if the equilibrium price in a perfectly competitive market for strawberries is $1.50 per pound, then an individual firm in this market could:

not sell additional strawberries unless the firm lowers its price

the soft drink market is dominated by Coke, Pepsi, and very few other firms. The firms often start price wars. The market can best be classified as:

oligopoly

the pricing strategy in which one firm is allowed by its rivals to establish the market price for all firms in the market is called

overt collusion

To maximize profits or minimize losses, a monopolist should at so that

p=AC

oligopolists have a mutual interest in coordination production decisions in order to maximize combined:

profits

the labor-supply curve depicts the:

quantities of labor supplied at alternative wage rates

price discrimination allows a producer to

reap the highest possible average price for the quantity supplied

technical efficiency

requires getting maximum output from the resources used in production

labor, land, and capital used in production are

resources

other things being equal, as more firms enter a market, the market supply curve:

shifts to the right

assume MUx=30 utils, MUy15, Px=$2, and Py=$0.50. this consumer

should buy less of X and more of Y

the number of firms in an oligopoly must be:

small enough so that tone firms decisions have a significant impact on the decisions of the other

which of the following determinants of demand is most directly an indication of a consumer's utility for a good?

tastes

which of following is the same for monopoly and competition under the same cost ad demand conditions?

the amount of output that is produced

which of the following is likely to be a monopolist?

the boeing company, which is one of the largest producers of airplanes

when a monopolistically competitive firm advertises, it is attempting to increase:

the demand and decrease the price elasticity of demand for its product

if more firms enter a monopolistically competitive market, we would expect:

the demand curves facing existing firms to shift to eh left and become more price elastic

ceteris paribus, if immigration to the united states increases the number of workers:

the labor-supply curve will shift to the right and the equilibrium wage rate will fall.

the change in total output associated with one additional unit of input is:

the marginal physical product

the best measure of the economic cost of doing your homework is

the most valuable opportunity you give up when you do your homework

the law of demand implies that, ceteris paribus:

the quantity demanded increases at lower prices

a demand curve is described as perfectly inelastic if:

the same quantity is purchased regardless of price

the slope of the production function with respect to an input is:

the unit cost of the input

To be successful in changing wage rates and employment conditions, labor unions need to have over only:

their own members

to maximize profits, a competitive firm will seek to expand output until:

total revenue equals total cost

t/f: monopoly and mopsony are basically explaining the same thing

true

t/f: the intersection of labor market supply and market demand curves establishes the minimum wage

true

as long as additional workers are attracted into the labor force by higher wages, the market labor supply curve is:

upward-sloping

economic costs and economic profits are:

usually greater and smaller, respectively, than their accounting counterparts

The quantity of labor demanded can change without shifting labor demand curve when there is a change in:

wage rate

what will happen to wages and the level of employment in a competitive market when the government eliminates a minimum wage, ceteris paribus

wages will fall but employment will rise

if the sellers of labor in a competitive market decided to unionize, ceteris paribus, then:

wages would rise and employment would fall

total utility will be maximized:

when marginal utility zero

Price-discriminating firms which sell in two markets will charge higher prices in the market, ceteris paribus:

with the more price- inelastic demand