Microecon Week 2

The satisfaction a person receives from consuming goods and services is called

utility

Refer to Figure 12-10. The total cost at the profit-maximizing output level equals

$3,300.

Figure 15-3 above shows the demand and cost curves facing a monopolist. Refer to Figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the profit-maximizing/loss-minimizing output level?

630

Which one of the following about a monopoly is false?

A monopoly must have some kind of government privilege or government imposed barrier to maintain its monopoly.

Terence has $50 per week to spend on Subway sandwiches and milkshakes. The price of a Subway sandwich is $5 and the price of a milkshake is $4. He buys 6 sandwiches and 5 milkshakes. The marginal utility of the 6th sandwich = 25 and the marginal utility of the 5th milkshake = 24. Which of the following is true?

He is not maximizing his utility and should buy more milkshakes

Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit-maximizing outputs?

Marginal revenue is less than price.

Marge buys 5 CDs and 7 DVDs. The marginal utility of the 5th CD and the marginal utility of the 7th DVD are both equal to 30 utils. Can we say that this is the optimal combination of CDs and DVDs for Marge?

No. If this was the optimal combination, the marginal utility per dollar of the 5th CD and the 7th DVD would be equal

A perfectly competitive firm's supply curve is its

marginal cost curve above its minimum average fixed cost. wrong marginal cost curve wrong marginal cost curve above its minimum average total cost. wrong marginal cost curve above its minimum average variable cost.

To maximize profit a monopolist will produce where

marginal revenue is equal to marginal cost

A firm will break even when

p = atc

Governments grant patents to encourage

research and development on new products

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

sunk costs

The limitation that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

the budget constraint

Refer to Figure 12-10. Total revenue at the profit-maximizing level of output is

$6,000.

The graphs in Figure 12-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry. Refer to Figure 12-17. Which of the following statements is true?

The firm will produce 30 thousands pounds of apples in the short run and earn an economic profit. In the long run the firm will break even.

A monopolist faces

a downward-sloping demand curve.

If a typical firm in a perfectly competitive industry is earning profits, then

new firms will enter in the long run causing market supply to increase, market price to fall, and profits to decrease.

Marginal utility can be

positive, negative, or zero

At the profit-maximizing level of output for a perfectly competitive firm

price equals marginal cost

Along a downward-sloping linear demand curve

the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases.

The demand curve for a monopoly's product is

the market demand for the product.

In order to derive an individual's demand curve for salmon, we would observe what happens to the utility-maximizing bundle when we change

the price of the product and hold everything else constant.

A monopoly is characterized by all of the following except

there are only a few sellers, each selling a unique product

Producing where marginal revenue equals marginal cost is equivalent to producing where

total profit is maximized.

Profit is the difference between

total revenue and total cost.

A monopolist's profit-maximizing price and output correspond to the point on a graph

where marginal revenue equals marginal cost and charging the price on the market demand curve for that output.

Refer to Table 10-2. Holding prices constant, when Keira's income changed from $18 to $23, her utility maximizing bundle changed. Based on your answers to her optimal choices at the two income levels, what type of goods are soup and sandwiches

Both soup and sandwiches are normal goods

Consider the following characteristics: a. a market structure with barriers to entry b. demand curves that are easily identified c. firm cannot make zero profits in the long run d. firm can reap long-run profits. Which of the characteristics in the list above is shared by an oligopolist and a monopolist?

a and d

If marginal utility of apples is diminishing and is a positive amount, consuming one more apple will cause

a consumer's total utility to increase

In making decisions about what to consume, a person's goal is to

allocate her limited income among all the products she wishes to buy so that she receives the highest total utility.