Microeconomic Exam #2 Ch. 7/7A, 9, 10, 11, 12

According to the accompanying diagram, at the profit-maximizing output, the firm will realize

an economic profit of ABGH

For a purely competitive seller, price equals

average revenue, marginal revenue, total revenue divided by output, all of these.

Refer to the diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. In the long run we should expect

firms to leave the industry, market supply to fall, and product price to rise

A natural monopoly occurs when

long-run average costs decline continuously through the range of demand.

A consumer's demand curve for a product is downsloping because

marginal utility diminishes as more of a product is consumed.

Refer to the diagram. Suppose the budget line shifts so that the consumer's equilibrium changes from point A to point B. This means that the

price of Y has decreased

Which of the following is not a characteristic of pure competition?

pricing strategies by firms

In the diagram,

the consumer is indifferent between points A and B, but neither point maximizes his utility

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting

profits were $0 and its economic losses were $500,000

Refer to the diagram for a nondiscriminating monopolist. Marginal revenue will be zero at output

q 2

Implicit and explicit costs are different in that

the former refer to nonexpenditure costs and the latter to monetary payments

Refer to the provided table. The total fixed cost of production is

$10

Answer the question on the basis of the accompanying demand schedule. The marginal revenue obtained from selling the fourth unit of output is

$1

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were

$200,000 and its economic profits were $0

Answer the question on the basis of the following cost data. The total cost of four units of output is

$310

The profit-maximizing price for the monopolist will be

$4.50

Refer to the diagram. At output level Q, total variable cost is

0 BEQ

Refer to the diagram. The total utility yielded by 4 units of X is

17

In the accompanying diagram, demand is relatively elastic

In the P2 P4 price range

Which of the following is characteristic of a purely competitive seller's demand curve?

Price and marginal revenue are equal at all levels of output

In the diagram, total product will be at a maximum at

Q 3 units of labor

Which of the following statements about utility is true?

Utility is difficult to measure quantitatively

Which of the following is a characteristic of pure monopoly?

barriers to entry

If all of the firms in a competitive industry are legally required to meet new regulations that increase their costs of production:

supply of the product will decrease

Use the following data to answer the question Diminishing returns begin to occur with the hiring of the _________ unit of labor

third

Refer to data. Marginal utility becomes negative beginning with the

fourth unit

Refer to the diagram. At output level Q, average fixed cost

is measured by both QF and ED

Refer to the diagram. At output level Q2,

resources are overallocated to this product and productive efficiency is not realized.

To the economist, total cost includes

explicit and implicit costs

What do economies of scale, the ownership of essential raw materials, and patents have in common?

They are all barriers to entry.

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed. Average product is at a maximum when

two workers are hired

The diagram suggests that

when marginal product lies above average product, average product is rising

Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices

between P 2 and P 3

The law of diminishing marginal utility states that

beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer

Marginal revenue is the

change in total revenue associated with the sale of one more unit of output

The graphs represent the demand for use of a local golf course for which there is no significant competition. (It has a local monopoly.) P denotes the price of a round of golf, and Q is the quantity of rounds "sold" each day. If the left graph represents the demand during weekdays and the right graph the weekend demand, this profit-maximizing golf course should

charge $7 for each round on weekdays and $10 during the weekend.

An indifference curve shows all

combinations of two products yielding the same total utility to a consumer

The provided graph represents a(n)

decreasing-cost industry: Firms may be paying lower prices for their inputs when the industry expands

If the competitive firm depicted in this diagram produces output Q, it will

earn a normal profit.

Refer to the diagram for a purely competitive producer. If product price is P3,

economic profits will be zero

In the provided diagram, at the profit-maximizing output, total profit is

efbc

Refer to the diagram, where variable inputs of labor are being added to a constant amount of property resources. The total output of this firm will cease to expand

if a labor force in excess of Q3 is employed

To economists, the main difference between the short run and the long run is that

in the long run all resources are variable, while in the short run at least one resource is fixed

In the accompanying diagram, if price is reduced from P1 to P2, total revenue will

increase by C − A

Answer the question on the basis of the following information. The marginal product of the fourth worker

is 5

If total utility is increasing, marginal utility

is positive but may be either increasing or decreasing

For a purely competitive firm, total revenue

is price times quantity sold, increases by a constant absolute amount as output expands, graphs as a straight upsloping line from the origin, has all of these characteristics

If a price-discriminating monopolist sells the same product in two markets but charges a higher price in market X and a lower price in market Y, the pricing difference indicates that demand is

less elastic in market X than in market Y

Refer to the diagram, where xy is the relevant budget line and I 1, I 2, and I 3 are indifference curves. The equilibrium position for the consumer is at

point K

In the provided diagram, the short-run supply curve for this firm is the

segment of the MC curve lying to the right of output level h

Refer to the data in the accompanying table. At the profit-maximizing output, the firm's total revenue is

$48

Refer to the short-run data in the accompanying graph. The profit-maximizing output for this firm is

320 units

Refer to the diagram. Diseconomies of scale

begin at output Q 3

The industry represented by the accompanying graph must be one where

resource prices fall when the industry contracts.

Refer to the provided table. The total variable cost of producing 5 units of output is

$63

Refer to the data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total profit will be

$82

Long-run competitive equilibrium

results in zero economic profits.

At each point on an indifference curve,

total utility is the same

Refer to the diagram. At the profit-maximizing level of output, total cost will be

0 BHE.

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all non labor resources are fixed. The marginal product of the sixth worker is

15 units of output

Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products J and K. If the consumer's money income were cut from $52 to $28, and the prices of J and K remain at $8 and $4, respectively, she would maximize her satisfaction by purchasing

2 units of J and 3 units of K

Refer to the data for a non discriminating monopolist. This firm will maximize its profit by producing

4 units

Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction (marginal utility) that a consumer would get from successive quantities of products J and K. If the consumer has money income of $52 and the prices of J and K are $8 and $4 respectively, the consumer will maximize her utility by purchasing

4 units of J and 5 units of K

Answer the question on the basis of the following total utility data for products L and M. Assume that the prices of L and M are $3 and $4, respectively, and that the consumer's income is $18. What level of total utility does the rational consumer realize in equilibrium?

51 utils

The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is

8 units of utility

Balin's Burger Barn operates in a perfectly competitive market. Balin's is currently earning economic profits of $20,000 per year. Based on this information, we can conclude that

Balin's is operating in the short run, but not the long run.

Which of the following statements applies to a purely competitive producer?

It will not advertise its product.

An unregulated pure monopolist will maximize profits by producing that output at which

MR = MC.

Refer to the diagram for a pure monopolist. Suppose a regulatory commission is created to determine a legal price for the monopoly. If the commission seeks to provide the monopolist with a "fair return," it will set price at

P 1.

Refer to the diagram for a pure monopolist. If a regulatory commission seeks to achieve the socially optimal allocation of resources to this line of production, it will set a price of

P 2.

Which of the following conditions is true for a purely competitive firm in long-run equilibrium?

P = MC = minimum ATC.

The law of diminishing returns results in

a total product curve that eventually increases at a decreasing rate

Refer to the diagram. At the profit-maximizing level of output, the firm will realize

an economic profit of ABHJ

The budget line shift from ab to cd in the figure is consistent with

an increase in the price of M and a decrease in the price of N

If MU a/ Pa = 100/$35 = MU b/ Pb = 300/? = MU c/ Pc = 400/?, the prices of products B and C in consumer equilibrium

are $105 and $140, respectively

To practice long-run price discrimination, a monopolist must

be able to separate buyers into different markets with different price elasticities.

Refer to the diagram for a natural monopolist. If a regulatory commission were to set a maximum price of P 3, the monopolist would

maximize profits

Suppose that MU x/ Px exceeds MU y/ Py. To maximize utility, the consumer who is spending all her money income should buy

more of X and/or less of Y

Mary says, "You would have to pay me $50 to attend that pro wrestling event." For Mary, the marginal utility of the event is

negative

When a purely competitive firm is in long-run equilibrium,

price equals marginal cost

If the budget line shifts from BB to bb in the diagram, we can infer that the

price of Y has increased and the price of X has decreased

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for the firm's product is $28, the competitive firm will

produce 7 units at a loss of $14.00

Refer to the diagram for a natural monopolist. If a regulatory commission set a maximum price of P 2, the monopolist would

produce output Q 3 and realize a normal profit

At the profit-maximizing level of output, a purely competitive firm will:

produce the quantity of output at which marginal cost equals price

Refer to the diagram for a purely competitive producer. The firm's short-run supply curve is

the bcd segment and above on the MC curve