Micro Final- Homeworks

Payoff Matrix for George and Garner. The figure describes two people who sell handmade porcelain figurines in San Francisco. Both George and Garner have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. If both follow a tit-for-tat strategy, equilibrium will be reached when George produces _____ figurine sand Garner produces _____ figurines.

5,000; 5,000

Suppose that Avery and Stacey are going shopping at the local mall and that each decides independently whether to buy many items or few items. If both shoppers buy few items, both will receive 70 utils; if both buy many items, both will 100 utils. If one buys many items, and the other buys few items, the one who buys many items will receive 150 utils, while the other will receive 40 utils. What is the Nash equilibrium?

Both will buy many items

Suppose that hiring one, two, three, or four workers at a glass factory generates total outputs of 200, 350,450, or 500 fancy glasses, respectively. The marginal product of the fourth worker is _____ fancy glasses.

a. 50

TheProfit-Maximizing Output and Price in the Monopoly Diamond Market. Assume that there are no fixed costsand that AC = MC = $200. At the profit-maximizing output and price for a monopolist, total surplus is:

b. $4,800

Tangerines cost $2 per bushel, and passion fruit costs $5 per bushel. Cameron has $26 to spend. If Cameronbuys 4 bushels of passion fruit, how many bushels of tangerines can he buy?

b. 3

Oligopoly Pricing Strategy inWireless TV Market II. The noncooperative equilibrium in the cable TV market occurs when:

both firms set a low price, and each earns $90,000.

Gino's Pizza has a special offer: one slice for $2, two slices for $3.50, three slices for $4.50, and four slicesfor $5.00. The marginal cost of the fourth slice is

c. $0.50

Use Table: Cost Data for Handbags at Horatio's Handbag Factory. The average fixed cost of producing 2 handbags is:

c. $25

The price of Cracker Jacks (a caramel-coated popcorn with peanuts) is $0.50 per box, and the price of macadamia nuts is $0.25 per bag. You have $5 to spend on both goods. The maximum number of bags of macadamia nuts that you can purchase is

c. 20

Which of the following factors would NOT give rise to a monopoly market.

dependence on other firms for a scarce resource or input

If a monopolist is producing a quantity that generates MC = MR, then profit:

is maximized

The _____ of a good or service is the additional benefit derived from producing one more unit of that good or service

marginal benefit

The amount by which an additional unit of an activity increases total benefit is the:

marginal benefit

The amount by which an additional unit of an activity increases total cost is the

marginal cost

When a firm has diminishing marginal returns, its

marginal product is falling but can still be positive.

Dora operates a backpack shop in a perfectly competitive market. Although she has not taken microeconomics, she knows from experience that _____ revenue equals _____ for a firm like hers

marginal; the market price

The _____ curve shows how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input

total product

Accounting profit is the difference between _____ and _____.

total revenues; total cost

Suppose that Louise is the only person licensed to rent out tandem bicycles on the boardwalk in her small hometown. When she increases her rentals from 15 tandem bicycles to 16 tandem bicycles, the market rental price declines from $35 per rental to $34 per rental. The marginal revenue of the 16th tandem bicycle is:

$19.

Emilia is a civil rights lawyer with her own firm. She travels the country and provides legal advice to high-profile clients. Last year, she earned $250,000 in revenue for her services. She pays one employee $50,000 to manage her office in Chicago and pays $30,000 for rent and utilities for that office. Her accountant tells her that if she sold all her office equipment, she could put that money in the bank and earn $3,000 in interest next year. Emilia also has received an offer to teach law at the University of Chicago at a salary of $100,000. Emilia's accounting profit is _____, and her economic profit is _____.

b. $170,000; $67,000

Use Table: Utility from Reese's peanut butter cups. IfOliver consumes three peanut butter cups, his total utility will be _____ utils.

c. 54

Monopoly with a Linear Demand Curve.The deadweight loss associated with this monopoly is given by area:

c. C only

As you might imagine, oligopolists welcome the extra market power that comes when consumers think that their product is different from that of competitors. Many firms therefore make considerable efforts to _______

differentiate their products

Suppose a monopoly can separate its customers into two groups. If the monopoly practices price discrimination, it will charge the higher price to the group with:

the lower price elasticity of demand

Use Figure: Profit Maximization forSoCalGas - A Monopoly Firm. SoCalGas's cost per unit at its profit-maximizing quantity is:

$18.

Casey recently inherited $100,000 from her grandmother. Rather than invest the money in a mutual fund that earns 5% per year, she quit her job as a translator for the United Nations, which paid $60,000 per year, and started Casey's Coffee Crush, a small café in Tribeca. The location she rented cost $20,000 for the year. The equipment, café furniture, and coffee machines cost another $60,000. Staff, sales help, and advertising cost yet another $40,000. In her first year, her revenue was $150,000. What is the implicit cost of Casey's Coffee Crush?

c. $65,000

Ashley Furniture expects its marginal cost curve to eventually slope upward because, as with most production processes, furniture manufacturing has

diminishing marginal returns

The larger the output, the more of the variable input is needed to produce additional units of output. Called the _____ effect, this leads to a _____ average variable cost as output rises

diminishing returns; higher

The implicit cost of capital is

the opportunity cost of the capital used by a business

Use Figure: Prisoners' Dilemma for Thelma andLouise. Thelma and Louise are arrested and jailed for bank robbery. Given the payoff matrix in the figure, theNash equilibrium behavior is for Thelma _____ and Louise _____.

to confess; to confess

A firm's total output times the price at which it sells that output is _____ revenue

total

Use Figure: Profit Maximization forSoCalGas—A Monopoly Firm. SoCalGas's unit profit is:

$12

Nardelli owns Nardelli's Grinder Shoppe in Connecticut and can produce 300 sandwiches per day with two workers and 400 sandwiches per day with three workers. The marginal product of the third worker is _____ sandwiches.

a. 100

Use Figure: MarginalBenefits and Marginal Costs from Studying Microeconomics. More time spent studying microeconomics leadsto higher exam scores in microeconomics (MB) but at the expense of lower exam scores in political science(MC). When Camille studies microeconomics for 4 hours, the marginal benefit is _____ points; when shestudies for 6 hours, the marginal benefit is _____ points.

a. 20; 10

The price of Twix is $2 per bar. If the price of Twix decreases to $1 per bar, the marginal utility per dollar for each bar of Twix will:

a. increase.

If Giordano's pizza in Chicago computed its profits without taking into account its implicit costs, it would then only be considering its _____ profit

accounting

In practice, true monopolies are hard to find in the modern American economy, partly because of legal obstacles and partly because of ______.

antitrust laws

If marginal cost is LESS than average total cost, then _____ cost is _____.

average total; decreasing

Cost of Producing Bagels at the BagelFactory. Christophe recently purchased a Bagel Factory franchise that he opened in Park Slope, Brooklyn. His costs are given in the table below. The marginal cost of producing the second bagel is

b. $0.10.

Costs of Wedding Cakes. Assume that fixed costs are $10.What is the marginal cost of the second wedding cake

b. $10

Jackson operates in a perfectly competitive market. As a price taker, he:

cannot affect the price of a good in the market.

In making an "either-or" decision, it is generally recommended to:

choose the activity that results in the greater economic profit

Cost of Producing Bagels at the BagelFactory. Christophe recently purchased a Bagel Factory franchise that he opened in Park Slope, Brooklyn. His costs are given in the table below. The total cost of producing 6 bagels is

d. $0.90

The price of Cracker Jacks (a caramel-coated popcorn with peanuts) is $0.50 per box, and the price of macadamia nuts is $0.25 per bag. You have $10 to spend on both goods. The maximum number of bags of macadamia nuts you can purchase is:

d. 40

Use Figure: Short-Run Monopoly in theMarket for Electricity. The profit-maximizing price is:

N

A Fly Fishing Salmon Monopoly. Andrew is theonly licensed fly-fishing guide in Matane, Quebec. If Andrew is regulated by the local government so that heearns zero economic profit, Andrew will sell _____ guided tours at a price of _____ each

Q4; P3

Use Figure: Short-Run Monopoly in theMarket for Electricity. The profit-maximizing quantity of output is:

R

Short-Run Monopoly in theMarket for Electricity. The profit-maximizing rule is satisfied by the intersection at point:

R.

Oligopoly Pricing Strategy inWireless TV Market I. In the figure, the dominant strategy for Next Wireless:

does not exist

The long run is a planning period

during which all inputs are variable

Diminishing marginal returns occur when

each additional unit of a variable factor adds less to total output than the previous unit

A dominant-strategy equilibrium occurs when

each players' choice is always best for him or her, regardless of the choice of the other player

If a firm's average total cost falls over the entire range of its output, then the firm possesses

economies of scale

A price-discriminating firm will adjust prices so that customers with more _____ demand pay _____ customers with _____ elastic demand.

elastic; less than; less

Producer surplus will _____ when a monopolist goes from single-price monopoly to perfect price discrimination.

increase

A market is in ______ when the quantity supplied equals the quantity demanded, given that sufficient time has elapsed for entry into and exit from the industry to occur.

long-run market equilibrium

For Domingo, the optimum consumption bundle is the one that _____ his _____, given his budget constraint

maximizes; utility

An input whose quantity can be changed in the short run is a(n) _____ input.

variable

In the long run, all costs are

variable

Oligopoly Pricing Strategy inWireless TV Market I. If the two firms in the cable TV market collude:

neither firm advertises, and each earns $150,00

A(n)______ gives an inventor a temporary monopoly on the use or sale of an invention

patent

The purpose of antitrust policy is to

prevent the exercise of monopoly power

In perfect competition:

price and average revenue are the same

Abigail, a lawyer at Kirkland & Ellis LLP in Chicago, charges different prices to different clients for the same service without any corresponding differences in costs. Abigail thereby practices

price discrimination

In a perfectly competitive industry, each firm

produces a standardized product

In the short run, if P = ATC, a perfectly competitive firm

produces the optimal quantity of output and earns zero economic profit.

_____ is the mistaken belief that an unrecoverable cost represents an opportunity cost

sunk cost fallacy

Use Figure: Profit Maximization forSoCalGas - A Monopoly Firm. SoCalGas will produce _____ units of output per week.

200

The amount by which total utility changes when an additional unit of a good is consumed is called _____ utility

marginal

(Table: Marginal Utility per Dollar of Twix) Use Table: Marginal Utility per Dollar of Twix. Themarginal utility of the second Twix bar is:

4

Payoff Matrix for George and Garner. The figure describes two people who sell handmade porcelain figurines in San Francisco. Both George and Garner have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. The combined profits of the two are maximized if George produces _____ figurines and Garnerproduces _____ figurines.

5,000; 5,000

Use Figure: Collusion in Oligopoly. The quantity of output produced bythe industry with collusion is shown by:

T

According to the principle of "either-or" decision making, an either-or decision entails:

a choice between two activities

Cost Data for Handbags at Horatio's Handbag Factory. The average fixed cost of producing 4 handbags is:

a. $12.50.

The Utility of California Rolls. The marginal utility ofthe third roll is:

c. 10

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 is a single-price monopoly and maximizes profit, producer surplus will be:

d. $140

Some airports have only one runway; others have two, three, or more. If each runway costs $10 million, thetotal benefit of a three-runway airport must be _____ million

d. $30 or more

The difference between total revenue and total cost is

the economic profit or loss

In Napa Valley, California, the wine tour industry tends to follow a price leadership model. This means that:

the largest wine tour operator often sets a price, and rival vineyards follow with similar if notidentical prices.

Scenario: Payoff Matrix for Two Computer ManufacturersThe following table provides the payoff matrix for two firms, Krazy Komputer and Komputer Koala. They are the only two firms in the industry and can either compete or cooperate with each other, with the following profitresults reflecting their actions.

their joint profits are maximized.

Gabriel has a weekly income (N) of $50, which he uses to purchase cupcakes (C) and tea (T). The price ofa cupcake is $1, and the price of tea is $2.50. Suppose Gabriel's income increases to $100, and the prices of bothcupcakes and tea remain unchanged. Given this income change, one would expect Gabriel's budget line to

a. shift to the right

Lunch on the Lake with William. The table shows the market demand for afternoon picnic lunches for visitors who take all-day canoeing trips on Lake Campbell.William's firm provides lunches to visitors at a constant marginal cost and a constant average cost of $4. IfWilliam's firm is one of many firms in a competitive market, what price will he charge for a lunch in the longrun?

$4

A Fly Fishing Salmon Monopoly. Andrew is the only licensed fly-fishing guide in Matane, Quebec. If Andrew maximizes profit, then he will earn profit equal to:

(P1 - P4) × Q2

Cost of Producing Bagels at the BagelFactory. Christophe recently purchased a Bagel Factory franchise that he opened in Park Slope, Brooklyn. His costs are given in the table below. Average total cost reaches its minimum value with the _____ bagel.

c. fourth

Which statement BEST describes the principle of diminishing marginal utility? As an individual consumes more of a good

c. the addition to total utility obtained from the nth unit of the good will be less than that obtained from the n - 1th unit of the good

Name: Class: Date:HW_8_Ch13/14Copyright Macmillan Learning. Powered by Cognero. Page 14c. $1,000.d. $1,600.31. (Scenario: Payoff Matrix for Two Computer Manufacturers) Use Scenario: Payoff Matrix for TwoComputer Manufacturers. Krazy Komputer has:Scenario: Payoff Matrix for Two Computer ManufacturersThe following table provides the payoff matrix for two firms, Krazy Komputer and Komputer Koala. They arethe only two firms in the industry and can either compete or cooperate with each other, with the following profitlevels reflecting their actions.

a dominant strategy to cooperate