Ch 13, Ch 8, Ch 9, Ch 10, Ch 11, Chapter 12

Refer to Q6-Q9 , what is the total fixed cost when 400 units of output are produced? a. $500 b. $2,000 c. $3,500 d. $5,000

a. $500

If market price is $30, how many units of output will the firm produce? a. 0, the firm will shut down. b. 1 c. 2 d. 3

a. 0, the firm will shut down.

In the table Q1-Q3 , the marginal product of the fifth unit of labor is a. 4 b. -2 c. 10 d. 16

a. 4

Refer to Q6-Q8 The profit-maximizing level of output is a. 60 b. 70 c. 80 d. 100

a. 60

Refer to Q6-Q9 , what is the average total cost when 200 units of output are produced? a. $2.30 b. $2.50 c. $4.00 d. $4.80

d. $4.80

Refer to Q6-Q9, what is the marginal cost of the 300th unit of output? a. $0.14 b. $2.40 c. $4.00 d. $7.40

d. $7.40

Refer to Q3-Q5 If market price is $60, how many units of output will the firm produce? a. 1 unit of output b. 2 units of output c. 3 units of output d. 4 units of output

d. 4 units of output

Refer to Q9-Q10 If market price is $5, how much output will the firm produce? a. 0 unit b. 300 units c. 500 units d. 600 units.

d. 600 units.

One method of measuring the extent of a firm's market power is a. the Lerner index b. price elasticity of demand for the firm's product c. the Herfindahl index (HHI) d. All of the above

d. All of the above

When a perfect competitive industry is in long-run equilibrium a. firms have no incentive to enter or exit the industry. b. market price is equal to minimum long−run average cost. c. each firm earns a normal profit. d. All of the above

d. All of the above

Refer to Q9-Q10 If market price is $5, how much profit will the firm earn? a. $3,000 b. $0 c. $600 d. $900

c. $600

In the table Q1-Q3, the average product of labor when 4 units of labor are employed is a. 20 b. 16 c. 19 d. 22

c. 19

In the table Q1-Q3, diminishing returns begin with the a. first unit of labor b. third unit of labor c. fourth unit of labor d. sixth unit of labor

b. third unit of labor

Refer to Q5-Q10 If Greene Enterprises produces 6,000 units of output, what is estimated average total cost (ATC)? a. $60 b. $70 c. $90 d. $80

c. $90

Refer to Q6-Q8 Two men's clothing stores that compete for most of the market in a small town in Ohio must choose their advertising levels simultaneously. The following payoff table facing the two firms, Arbuckle & Son and Mr. B's, shows the weekly profit outcomes for the various advertising decision combinations. Use this payoff table to answer the question. Which of the following statements is NOT true for the advertising decision facing Arbuckle & Son and Mr. B? a. When both firms choose a high level of advertising, they are in Nash equilibrium. b. When both firms choose a low level of advertising, they are in Nash equilibrium. c. This is a prisoners' dilemma decision situation. d. A dominant strategy equilibrium exists for Arbuckle and Mr. B.

a. When both firms choose a high level of advertising, they are in Nash equilibrium.

A cubic specification for a short-run production function is appropriate when the scatter diagram indicates a. an S-shaped total product curve. b. marginal product of labor falls throughout the range of labor usage. c. total product is decreasing throughout the range of labor usage. d. an S-shaped marginal product of labor curve.

a. an S-shaped total product curve.

A sofa manufacturer currently is using 50 workers and 30 machines to produce 5,000 sofas a day. The wage rate is $200 and the rental rate for a machine is $1,000. At these input levels, another worker adds 200 sofas, while another machine adds 500 sofas. If the firm uses 45 workers and 31 machines instead, then its a. cost will be unchanged, and its output will decrease by 500 units. b. cost will be unchanged, and its output will increase by 300 units. c. cost will be unchanged, and its output will increase by 500 units d. None of the above

a. cost will be unchanged, and its output will decrease by 500 units.

Refer to Q5-Q10 When Greene's output is 2,000 units, average variable cost (AVC) is a. falling b. less than short-run marginal cost c. rising d. greater than average total cost

a. falling

In a monopolistically competitive market, a. firms are small relative to the total market. b. no firm has any market power. c. there is a significant entry barrier in the market. d. None of the above

a. firms are small relative to the total market.

For a price-taking firm, its marginal revenue (MR) a. is the addition to total revenue from producing one more unit of output. b. decreases as the firm produces more output. c. is greater than the market price at any level of output d. none of the above

a. is the addition to total revenue from producing one more unit of output.

Long−run average total cost (LAC) a. represents the lowest average cost of producing a given level of output. b. is always equal to or greater than short−run average total cost. c. can be measured in the short-run. d. None of the above

a. represents the lowest average cost of producing a given level of output.

When Greene's output is 6,000 units, average variable cost (AVC) is a. rising b. greater than average total cost c. falling d. greater than short-run marginal cost

a. rising

All of the following could be a barrier to entry EXCEPT a. rising long-run average costs. b. patents. c. decreasing long-run average cost. d. a government franchise.

a. rising long-run average costs.

A competitive firm will maximize profit by producing the level of output at which a. the last unit of output produced adds the same amount to total revenue as to total cost. b. the additional revenue from the last unit of output produced exceeds the additional cost of the last unit of output c. the firm's total revenue is equal to the total costs. d. All of the above

a. the last unit of output produced adds the same amount to total revenue as to total cost.

A linear specification, Q = aK + bL, is not appropriate for estimating a production function because a. the marginal products of the inputs are constant. b. it does not allow the firm to substitute capital for labor. c. the firm could produce positive levels of output at zero cost. d. all of the above

a. the marginal products of the inputs are constant.

One reason a firm or firms might charge a price lower than its profit-maximizing price is a. to discourage the entry of new firms. b. to follow a tit-for-tat strategy. c. to erect multiproduct barriers to entry. d. None of the above

a. to discourage the entry of new firms.

Suppose that installation of a new assembly line increases the output produced per worker. The cost per unit of output a. will increase. b. will decrease. c. will remain the same. d. will be at the minimum.

b. will decrease.

Refer to Q6-Q9, what is the average fixed cost when 300 units of output are produced? a. $0.60 b. $1.66 c. $2.87 d. $500

b. $1.66

Refer to Q5-Q10 If Greene Enterprises produces 6,000 units of output, what is estimated short-run marginal cost (SMC)? a. $92 b. $100 c. $83 d. $74

b. $100

Refer to Q6-Q8 The firm earns profits of a. $150 b. $120 c. $75 d. $180

b. $120

Refer to Q6-Q8 The firm will sell its output at a price of a. $4 b. $5 c. $2 d. $3

b. $5

If market price is $60, what is the maximum profit the firm can earn? a. $65 b. $75 c. $85 d. Zero profit, the firm will shut down.

b. $75

Which of the following statements is true? a. In the short run all inputs are fixed. b. In the long run a firm is making the optimal input choice when the marginal products per dollar are equal among all inputs. c. Diminishing returns to labor means that adding one more worker will decrease output. d. All the above

b. In the long run a firm is making the optimal input choice when the marginal products per dollar are equal among all inputs.

A short-run production function assumes that a. only capital can be the fixed input. b. at least one input is a fixed input. c. all inputs are fixed inputs. d. the level of output is fixed.

b. at least one input is a fixed input.

A firm is using 500 units of capital and 200 units of labor to produce 10,000 units of output. Capital costs $100 per unit and labor $20 per unit. The last unit of capital added 50 units of output, while the last unit of labor added 20 units of output. The firm a. could produce the same level of output at a lower cost by using more capital and less labor. b. could produce the same level of output at a lower cost by using less capital and more labor. c. should use more of both inputs in equal proportions. d. is using the cost−minimizing combination of capital and labor.

b. could produce the same level of output at a lower cost by using less capital and more labor.

Diseconomies of scale a. exist when fixed cost increases as output increases. b. exist when long−run average cost increases as output increases. c. result eventually as the firm uses more and more labor with a fixed capital stock. d. never happen to a large company.

b. exist when long−run average cost increases as output increases.

Refer to Q6-Q8 Two men's clothing stores that compete for most of the market in a small town in Ohio must choose their advertising levels simultaneously. The following payoff table facing the two firms, Arbuckle & Son and Mr. B's, shows the weekly profit outcomes for the various advertising decision combinations. Use this payoff table to answer the question. Arbuckle and Son a. has a dominant strategy: choose a high level of advertising. b. has a dominant strategy: choose a low level of advertising. c. has no dominant strategy. d. is indifferent between choosing either low or high level of advertising.

b. has a dominant strategy: choose a low level of advertising.

Refer to Q6-Q8 Two men's clothing stores that compete for most of the market in a small town in Ohio must choose their advertising levels simultaneously. The following payoff table facing the two firms, Arbuckle & Son and Mr. B's, shows the weekly profit outcomes for the various advertising decision combinations. Use this payoff table to answer the question. Mr. B's a. has a dominant strategy: choose a high level of advertising. b. has a dominant strategy: choose a low level of advertising. c. has no dominant strategy. d. is indifferent between choosing either low or high level of advertising.

b. has a dominant strategy: choose a low level of advertising.

You overhear a businessman say: "We want to be big because there are economies associated with bigness." What he means is that a. total cost decreases as more is produced. b. long-run average cost decreases as more is produced. c. marginal cost decreases as more is produced. d. total fixed cost decreases as more is produced.

b. long-run average cost decreases as more is produced.

If a firm is producing the level of output at which long−run average cost equals long−run marginal cost, then a. long−run marginal cost is at its minimum point. b. long−run average cost is at its minimum point. c. long−run total cost is at its minimum point. d. output is maximized

b. long−run average cost is at its minimum point.

If the average product (AP) is decreasing, then it must be the case that a. the marginal product (MP) is greater than the average product (AP). b. the marginal product (MP) is less than the average product (AP). c. the marginal product (MP) is increasing. d. the marginal product (MP) is decreasing.

b. the marginal product (MP) is less than the average product (AP).

Refer to Q4-Q5 At any price above $______ demand is elastic a. $5 b. $10 c. $15 d. $20

c. $15

Refer to Q4-Q5 If production costs are constant and equal to $10 (i.e., LAC = LMC = $10), what price will the monopoly charge? a. $10 b. $15 c. $20 d. $25

c. $20

Refer to Q5-Q10 When Greene Enterprises produces 6,000 units, average variable cost (AVC) is a. $45 b. $55 c. $40 d. $60

c. $40

Refer to Q5-Q10 When Greene's output is 2,000 units, what is average variable cost (AVC)? a. $20 b. $72 c. $48 d. $62

c. $48

Which of the following is NOT a characteristic of long-run equilibrium for a perfectly competitive firm a. Economic profit is zero. b. The firm produces the output level at which long-run average cost is at its minimum. c. Price is greater than long-run average cost. d. Price is equal to long-run marginal cost.

c. Price is greater than long-run average cost.

In the long run, a. a firm cannot adjust at least one input. b. the law of diminishing returns still holds. c. all inputs can be varied. d. all inputs are fixed.

c. all inputs can be varied.

Suppose that when a firm increases its usage of all inputs by 100%, output increases by less than 100%. The firm's production function exhibits a. increasing returns to scale b. decreasing marginal rate of technical substitution. c. decreasing returns to scale. d. constant returns to scale.

c. decreasing returns to scale.

Price leadership a. is rather uncommon today. b. is a pricing arrangement in which one firm in an oligopoly agrees to act as a cartel manager and set a price that will maximize the profits of all the firms in the oligopoly market. c. would not be useful to a dominant firm if it could eliminate all its rivals through a price war. d. None of the above

c. none of the above

The number of Nash equilibrium in a 2X2 game can be a. only one. b. one or two. c. one, two, or no Nash equilibrium. d. one, two, three, or four.

c. one, two, or no Nash equilibrium.

When participants in a game choose to take actions that represent a Nash equilibrium, a. no single participant has an incentive to change its action. b. each participant has chosen the best action possible, given what the others have chosen. c. no participants can be better off by switching the strategy. d. All of the above

d. All of the above

A monopolist a. can raise market price by cutting its output because it is the only supplier in the market. b. can earn a greater than normal profit in the long run. c. always charges a price that is higher than marginal costs. d. All of the above.

d. All of the above.

An average variable cost function is estimated as AVC = 96 - 2Q + 0.05Q2 Which of the following cost functions is associated with this estimate? a. SMC = 96 - 4Q + 0.1Q2 b. TVC = 96Q + 4Q2 + 0.15Q3 c. TVC = 96Q - 2Q2 + 0.15Q3 d. SMC = 96 - 4Q + 0.15Q^2

d. SMC = 96 - 4Q + 0.15Q^2

In game theory, a dominant strategy is a. a strategy used by a large firm to compete against smaller firms. b. a strategy followed by the price leader. c. a strategy involving a high risk but also a high return. d. a strategy that leads to the best outcome no matter what a rival does.

d. a strategy that leads to the best outcome no matter what a rival does.

An estimated short-run cost function a. can be used to make price and output decisions. b. holds the capital stock constant. c. can be estimated using time-series data. d. all of the above

d. all of the above

Cooperation is achieved in an oligopoly market when a. most of the firms in the market decide not to cheat. b. some of the firms in the market decide not to cheat. c. at least one of the firms in the market decide not to cheat. d. all of the firms in the market decide not to cheat.

d. all of the firms in the market decide not to cheat.

If a monopolistically competitive market is in long-run equilibrium, each firm a. earns excess profits. b. cannot exit the market freely. c. produces that level of output at which long-run average cost is minimum. d. charges a price which is higher than marginal cost.

d. charges a price which is higher than marginal cost.

What is the most important characteristic of oligopoly? a. product differentiation b. firms have market power c. barriers to entry d. interdependence of decision making

d. interdependence of decision making

Economies of scale exist when a. marginal cost decreases as output increases. b. total cost decreases as output increases. c. fixed cost decreases as output increases. d. long-run average cost decreases as output increases.

d. long-run average cost decreases as output increases.

In a perfectly competitive market a. a firm must lower its price than the market price to attract more customers b. the additional revenue from selling one more unit of output is less than price. c. demand facing the firm is perfectly inelastic. d. none of the above

d. none of the above