micro quiz 17, micro quiz 16, Quiz Chapter 15, quiz 13 micro , Micro quiz 14
Refer to Figure 16-2. What price will the monopolistically competitive firm charge in this market?
70
Which of the following is not an example of price discrimination?
A bakery charges a higher price for brownies than for cookies.
Which of the following examples illustrates an oligopoly market?
A city with two firms who are licensed to sell school uniforms for the local schools
Refer to Figure 15-4. What price will the monopolist charge in order to maximize profit?
B
Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takers.
true both are price makers
The long-run market supply curve in a competitive market will
typically be more elastic than the short-run supply curve.
Whenever a cartel in a duopoly breaks down,
total output in the market will rise.
Refer to Figure 16-5. The firm's maximum profit is
$0
The following table shows the production costs for The Flying Elvis Copter Rides. Output (Helicopter rides) Average Refer to Table 13-7. What is the value of C?
$100
Ryzard decides to open his own business and earns $60,000 in accounting profit the first year. When deciding to open his own business, he withdrew $20,000 from his savings, which earned 6 percent interest. He also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Ryzard's economic profit from running his own business?
$13,800
The information below applies to a competitive firm that sells its output for $45 per unit. • When the firm produces and sells 100 units of output, its average total cost is $24.5. • When the firm produces and sells 101 units of output, its average total cost is $24.65. Refer to Scenario 14-2. Suppose the firm is producing 100 units of output and its fixed cost is $900. Then its average variable cost amounts to
$15.50.
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $40, its average revenue is $80, and its average total cost is $44.
$18,000
Assume that a local restaurant sells two items, salads and steaks. The restaurant's only two customers on a particular day are Mr. Carnivore and Ms. Leafygreens. Mr. Carnivore is willing to pay $20 for a steak and $7 for a salad. Ms. Leafygreens is willing to pay only $8 for a steak, but is willing to pay $12 for a salad. Assume that the restaurant can provide each of these items at zero marginal cost.
$20
Imagine a small town in which only two residents, Sydney and Matthew, own wells that produce safe drinking water. Each week Sydney and Matthew work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Sydney and Matthew can pump as much water as they want without cost so that the marginal cost of water equals zero. The town's weekly demand schedule and total revenue schedule for water is shown in the following table:
$24
Suppose a firm in a competitive market earned $3,000 in total revenue and had a marginal revenue of $30 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold?
$30 and 100 units
Refer to Table 13-5. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. What is the total daily cost of producing at a rate of 55 chairs per hour if the factory operates 8 hours per day?
$520
Refer to Figure 14-2. The firm will earn zero economic profit if the market price is
$6
Refer to Figure 16-2. How much profit will the monopolistically competitive firm earn in this situation?
$600
Refer to Table 13-8. What is the marginal cost of producing the fifth unit of output?
$70
The following graph depicts the market situation for a monopoly pastry shop called Bearclaws. Refer to Figure 15-5. Based upon the information shown, what are total costs for Bearclaws, given that it maximizes profits?
$700.
Taylor sells 400 candy bars at $0.50 Cach. Her total costs are $125. Her profits are a, S75.00.
$75.00
Refer to Table 14-6. In order to maximize profits, the firm will produce
5 units of output because marginal revenue equals marginal cost.
A monopolist can sell 300 units of output for $50 per unit. Alternatively, it can sell 301 units of output for $49.60 per unit. The marginal revenue of the 301st unit of output is
-$70.40.
Refer to Scenario 13-1. Suppose Kore purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory?
18,000
Refer to Figure 16-3. At the profit-maximizing, or loss-minimizing, output level, how many units of output will the firm in this figure produce?
30
Refer to Figure 16-2. How much output will the monopolistically competitive firm produce in this situation?
30 units
Refer to Table 16-2. Suppose the monopolistically competitive firm faces the following demand curve: To maximize profit (or minimize losses), the firm will produce
30 units.
Refer to Figure 14-4. If there are 300 identical firms in this market, what level of output will be supplied to the market when price is $1.00?
30,000
Hanna and Alicia are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The following table shows the payoffs for this situation, where the higher a player's payoff number, the better off that player is.
Alicia has no dominant strategy.
Refer to Table 14-5. If the firm is currently producing 14 units, what would you advise the owners?
Continue to operate at 14 units
Which of the following is not a characteristic of a competitive market?
Entry is limited.
unique to a monopolistically competitive firm compared to an oligopoly?
Monopolistic competition has many sellers.
If a certain market were a monopoly, then the monopolist would maximize its profit by producing 4,000 units of output. If, instead, that market were a duopoly, then which of the following outcomes would be most likely if the duopolists successfully collude?
One duopolist produces 2,400 units of output and the other produces 1,600 units of output.
Refer to Figure 15-2. A profit-maximizing monopoly's total revenue is equal to
P5 × Q3.
revenue equals
Price x Quantity
Raiman's Shoe Repair produces custom-made shoes. When Mr. Raiman produces 12 pairs per week, the marginal cost of the 12th pair is $84, and the marginal revenue of the 12th pair is $70. What would you advise Mr. Raiman to do?
Produce fewer custom-made shoes
Which of the following is a necessary characteristic of a monopoly?
The firm is the sole seller of its product.
Which of the following statements is not correct?
The government may break up a natural monopoly to lower the price charged to customers.
In which of the following markets are strategic interactions among firms most likely to occur?
The market for tennis balls
Refer to Figure 15-6. What is the area of deadweight loss?
The triangle 1/2[(X − Z) × (K − J)]
Two CEOs from different firms in the same market collude to fix the price in the market. This action violates the
Two CEOs from different firms in the same market collude to fix the price in the market. This action violates the
Which of the following is an example of public ownership of a monopoly?
U.S. Postal Service
Which of the following statements about oligopolies is not correct?
Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal costs.
Suppose a market is initially perfectly competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect
a decrease in market output and an increase in the price of the product.
When an oligopoly market reaches a Nash equilibrium,
a firm will have chosen its best strategy, given the strategies chosen by other firms in the market.
Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is
above $6.5.
In monopolistically competitive markets, free entry and exit suggests that
all firms earn zero economic profits in the long run.
The average fixed cost curve
always declines with increased levels of output.
A firm produces 400 units of output at a total cost of $1,200. If total variable costs are $1,000
average fixed cost is 50 cents.
Refer to Table 13-7. What is the value of D?
b $50
9. Refer to Table 13-2. At which number of workers does diminishing marginal product begin?
b. 2
The fundamental source of monopoly power is
barriers to entry.
If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will
be able to increase its markup over marginal cost.
Total cost is the
c. market value of inputs a firm uses in production
Price discrimination
can maximize profits if the seller can prevent the resale of goods between customers.
Refer to Table 14-1. The price and quantity relationship in the table is most likely a demand curve faced by a firm in a
competitive market.
Assume a certain firm in a competitive market 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. Refer to Scenario 14-1. To maximize its profit, the firm should
decrease its output but continue to produce.
Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue
does not change.
The information in the following table shows the total demand for internet radio subscriptions in a small urban market. Assume that each company that provides these subscriptions incurs an annual fixed cost of $20,000 (per year) and that the marginal cost of providing an additional subscription is always $16.
each firm will charge a price of $40 and each firm will sell 1,500 subscriptions.
In the prisoners' dilemma game, self-interest leads
each prisoner to confess.
A benefit to society of the patent and copyright laws is that those laws
encourage creative activity.
When new firms enter a perfectly competitive market,
existing firms may see their costs rise if more firms compete for limited resources.
The equilibrium quantity in markets characterized by oligopoly is
higher than in monopoly markets and lower than in perfectly competitive markets.
In a natural monopoly,
if the government requires marginal cost pricing, it will likely have to subsidize the firm.
In a prisoners' dilemma game,
if the players play the game repeatedly, the players can achieve a higher payoff, on average, than when they play the game only once.
Brand names may help consumers
if they provide information about the quality of a product when acquiring such information is difficult.
Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers
labor to be variable and capital to be fixed.
Refer to Figure 14-1. The firm should shut down if the market price is
less than $3.
Economies of scale occur when.
long-run average total costs fall as output increases.
In order to sell more of its product, a monopolist must
lower its price.
Average total cost is increasing whenever.
marginal cost is greater than average total cost
If marginal cost is rising,
marginal product must be falling
The two types of imperfectly competitive markets are
monopolistic competition and oligopoly.
Hanna and Alicia are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The following table shows the payoffs for this situation, where the higher a player's payoff number, the better off that player is.
not clean, and Hanna's payoff will be 20.
In a long-run equilibrium,
only a perfectly competitive firm operates at its efficient scale.
If duopoly firms that are not colluding were able to successfully collude, then
price would rise and quantity would fall.
The deadweight loss associated with a monopoly occurs because the monopolist
produces an output level less than the socially optimal level.
In the short run, a firm operating in a monopolistically competitive market
produces an output where marginal revenue equals marginal cost, and the price is determined by demand.
Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition. Refer to Scenario 16-2. As a result of the new restaurant, consumers in Boston are likely to experience a
product-variety externality, which is a positive externality.
The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which
profit is maximized.
For a monopolistically competitive firm,
profit-maximizing quantity of output, marginal revenue equals marginal cost.
The Sherman Antitrust Act
prohibits price-fixing in the sense that competing executives cannot even talk about fixing prices.
Defenders of advertising argue that in some markets advertising may
provide information to customers about products, including prices and seller locations.
The accountants hired by Forever Fitness have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000. Because of this information, in the short run, Forever Fitness should
shut down because staying open would be more expensive.
According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that
the existence of an expensive advertisement is more important than the content of the advertisement.
A government-created monopoly arises when
the government gives a firm the exclusive right to sell some good or service.
The short-run supply curve for a firm in a perfectly competitive market is
the portion of its marginal cost curve that lies above its average variable cost.
A natural monopoly occurs when
there are economies of scale over the relevant range of output.
Haidy consumes Pepsi exclusively. She claims that there is a clear taste difference and that competing brands of cola leave an unsavory taste in her mouth. In a blind taste test, Haidy is found to prefer Pepsi to store-brand cola nine out of ten times. The results of Haidy's taste test would refute claims by critics of brand names that
brand names cause consumers to perceive differences that do not really exist.
Refer to Table 13-7. What is the value of E?
c $100
Refer to Table 13-7. What is the value of F?
c $100
An oligopolist will increase production if the output effect is
greater than the price effect.
When the market is in long-run equilibrium at point W in graph (b), the firm represented in graph (a) will
have a zero economic profit.
Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's
implicit costs
A difference between explicit and implicit costs is that.
implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.
According to the Clayton Act,
individuals can sue to recover damages from illegal cooperative agreements.
Refer to Figure 16-3. The firm in this figure is monopolistically competitive and maximizing profit. This firm
is earning a short-run economic profit.
For a firm to price discriminate,
it must have some market power.
A firm cannot price discriminate if
it operates in a competitive market.
A firm that shuts down temporarily has to pay
its fixed costs but not its variable costs