ECON EXAM 3

The following table shows the production costs for The Flying Elvis Copter Rides. Refer to Table 13-7. What is the value of A? a. $50 b. $25 c. $200 d. $100

a. $50

The following table shows the production costs for The Flying Elvis Copter Rides. Refer to Table 13-7. What is the value of D? a. $50 b. $100 c. $200 d. $25

a. $50

Refer to Figure 13-2. Which of the curves is most likely to represent average fixed cost? a. A b. B c. C d. D

a. A

Refer to Figure 15-1. The shape of the average total cost curve in the figure suggests an opportunity for a profit-maximizing monopolist to take advantage of a. economies of scale. b. diseconomies of scale. c. increasing marginal cost. d. diminishing marginal product.

a. economies of scale.

Refer to Figure 14-7. When the market is in long-run equilibrium at point W in graph (b), the firm represented in graph (a) will a. have a negative accounting profit. b. choose to increase production to increase profit. c. have a zero economic profit. d. exit the market.

c. have a zero economic profit.

If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then a. its total cost is more than $9,000. b. its marginal revenue is less than $10. c. its average total cost is less than $10. d. the firm cannot be a competitive firm because competitive firms cannot earn positive profits.

c. its average total cost is less than $10.

Suppose that a firm in a competitive market has the following cost curves: Refer to Figure 14-1. The firm should shut down if the market price is a. above $6 but less than $18. b. above $6 but less than $13. c. less than $6. d. above $13

c. less than $6.

Economies of scale occur when a. long-run average total costs rise as output increases. b. average fixed costs are falling. c. long-run average total costs fall as output increases. d. average fixed costs are constant.

c. long-run average total costs fall as output increases.

The minimum points of the average variable cost and average total cost curves occur where the a. marginal cost curve lies below the average variable cost and average total cost curves. b. average variable cost and average total cost curves intersect. c. marginal cost curve intersects those curves. d. slope of total cost is the smallest.

c. marginal cost curve intersects those curves.

Brady Industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firm's total fixed costs equal a. $4. b. $1,000. c. $2,000. d. $2.

b. $1,000.

The following table shows the production costs for The Flying Elvis Copter Rides. Refer to Table 13-7. What is the value of C? a. $25 b. $100 c. $50 d. $200

b. $100

The following table shows the production costs for The Flying Elvis Copter Rides. ​ Refer to Table 13-7. What is the value of B? a. $25 b. $100 c. $200 d. $50

b. $100

Adam Smith describes a visit to a car factory when discussing economies of scale in his book An Inquiry into the Nature and Causes of the Wealth of Nations. True False

False

Carol Anne makes candles. If she charges $20 for each candle, her total revenue will be a. $20 regardless of how many candles she sells. b. $500 if she sells 25 candles. c. $200 if she sells 5 candles. d. $1,000 if she sells 100 candles

b. $500 if she sells 25 candles.

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost? a. The rent that the firm pays for office space in a suburb of St. Louis b. The cost of the steel that is used in producing automobiles c. The $20 million payment that the firm pays each year for accounting services d. The cost of internet advertising incurred each year

b. The cost of the steel that is used in producing automobiles

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its profit is a. $8,000. b. $3,200. c. $1,600. d. −$1,600.

c. $1,600.

The following table shows the production and costs for the Wooden Chair Factory. ​ Refer to Table 13-5. Assume the Wooden Chair Factory currently employs 5 workers. What is the marginal product of labor when the factory adds a 6th worker? a. 5 chairs per hour b. 25 chairs per hour c. 15 chairs per hour d. 70 chairs per hour

c. 15 chairs per hour

Granting a pharmaceutical company a patent for a new medicine will lead to a. lower prices than without the patent. b. lower quantities of output than without the patent. c. a product that is priced higher than it would be without the exclusive rights. d. reduced incentives for pharmaceutical companies to invest in research and development.

c. a product that is priced higher than it would be without the exclusive rights.

The following table shows the production costs for The Flying Elvis Copter Rides. Refer to Table 13-7. What is the value of F? a. $50 b. $200 c. $100 d. $150

d. $150

Cindy's Car Wash has average variable costs of $2 and average fixed costs of $3 when it produces 100 units of output (car washes). The firm's total cost is a. $100. b. $300. c. $200. d. $500

d. $500

In the following figure, graph (a) depicts the linear marginal cost (MC) of a firm in a competitive market, and graph (b) depicts the linear market supply curve for a market with a fixed number of identical firms. 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? a. 60,000 b. 6,000 c. 300 d. 30,000

d. 30,000

Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy? a. 2 houses b. 3 houses c. 5 houses d. 8 houses

d. 8 houses

Refer to Figure 14-7. Suppose a firm in a competitive market, like the one depicted in graph (a), observes market price rising from P 1 to P 2. Which of the following could explain this observation? a. The entry of new firms into the market. b. The exit of existing consumers from the market. c. An increase in market supply from S0 to S1. d. An increase in market demand from D0 to D1.

d. An increase in market demand from D0 to D1.

The following figure depicts average total cost functions for a firm that produces automobiles. Refer to Figure 13-6. At levels of output between M and N, the firm experiences a. economies of scale. b. diseconomies of scale. c. both the benefits of specialization and diminishing marginal productivity. d. constant returns to scale.

d. constant returns to scale.

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters a. diseconomies of scale. b. economies of scale. c. increasing marginal product. d. diminishing marginal product.

d. diminishing marginal product.

Refer to Figure 13-1. The graph illustrates a typical a. marginal product of labor curve. b. total-cost curve. c. production possibilities frontier. d. production function.

d. production function.

Suppose that a firm in a competitive market has the following cost curves: Refer to Figure 14-1. If the market price falls below $6, the firm will earn a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits in the short run and shut down. d. zero economic profits in the short run.

c. negative economic profits in the short run and shut down.

Refer to Figure 13-2. Curve D is increasing because a. marginal product first increases, then decreases. b. of increasing marginal product. c. of diminishing marginal product. d. marginal product first decreases, then increases.

c. of diminishing marginal product.

Suppose that a firm in a competitive market has the following cost curves: Refer to Figure 14-1. If the market price rises above $13, the firm will earn a. zero economic profits in the short run. b. negative economic profits and shut down. c. positive economic profits in the short run. d. negative economic profits in the short run but remain in business.

c. positive economic profits in the short run.

Vincent operates a scenic tour business in Boston. He has one bus that can fit 50 people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed at $450. Vincent's cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, Vincent charges each passenger his/her willingness to pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those rates, on a typical day Vincent's demand is: Assume that Vincent's customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day. Refer to Scenario 15-2. What is Vincent's total revenue on a typical day?​ a. $2,170 b. $1,800 c. $1,500 d. $2,700 ​

a. $2,170

Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is able to engage in perfect price discrimination. Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the total revenue when 3 ties are sold? a. $450 b. $140 c. $420 d. $620

a. $450

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market? a. Exactly $2.50 b. More than $2.50 c. The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm. d. Less than $2.50

a. Exactly $2.50

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 a. competitive market. b. monopoly. c. strategic market. d. concentrated market.

a. competitive market.

Cold Duck Airlines flies between Tacoma and Portland. The company leases planes on a year-long contract at a cost that averages $600 per flight. Other costs (fuel, flight attendants, etc.) amount to $550 per flight. Currently, Cold Duck's revenues are $1,000 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profit, Cold Duck Airlines should a. continue flying until the lease expires and then drop the run. b. continue the flight. c. drop the flight immediately. d. drop the flight now but renew the lease if conditions improve.

a. continue flying until the lease expires and then drop the run.

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing a. the quantity at which market price is equal to Mr. McDonald's marginal cost of production. b. the quantity at which market price exceeds Mr. McDonald's marginal cost of production by the greatest amount. c. to produce the quantity at which average variable cost is minimized. d. to produce the quantity at which average fixed cost is minimized.

a. the quantity at which market price is equal to Mr. McDonald's marginal cost of production.

Vincent operates a scenic tour business in Boston. He has one bus that can fit 50 people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed at $450. Vincent's cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, Vincent charges each passenger his/her willingness to pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those rates, on a typical day Vincent's demand is: Assume that Vincent's customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day.​ Refer to Scenario 15-2. What is Vincent's profit on a typical day? a. $2,170 b. $820 c. $1,350 d. $660 ​

b. $820

Refer to Table 13-9. What is the marginal product of the third worker? a. 40 units b. 60 units c. 20 units d. 80 units

b. 60 units

Refer to Figure 13-2. Curve A represents which type of cost curve? a. Average total cost b. Average fixed cost c. Marginal cost d. Average variable cost

b. Average fixed cost

If Brunhilda's Butcher Shop sells its product in a competitive market, then a. Brunhilda's Butcher Shop's Shop's total cost must be a constant multiple of its quantity of output. b. Brunhilda's Butcher Shop's Shop's total revenue must be proportional to its quantity of output. c. the price of that product depends on the quantity of the product that Brunhilda's Butcher Shop produces and sells because the firm's demand curve is downward sloping. d. Brunhilda's Butcher Shop's total revenue must be equal to its average revenue.

b. Brunhilda's Butcher Shop's Shop's total revenue must be proportional to its quantity of output.

An example of an explicit cost of production would be the a. cost of forgone labor earnings for an entrepreneur. b. lease payments for the land on which a firm's factory stands. c. value of the time the business could've spent producing something else. d. lost opportunity to invest in capital markets when the money is invested in one's business.

b. lease payments for the land on which a firm's factory stands.

Suppose that a firm in a competitive market has the following cost curves: Refer to Figure 14-1. The firm should shut down if the market price is a. above $13. b. less than $6. c. above $6 but less than $18. d. above $6 but less than $13.

b. less than $6.

Refer to Figure 13-1. As the number of workers increases, a. total output decreases. b. marginal product decreases. c. marginal product increases but at a decreasing rate. d. total output increases at an increasing rate.

b. marginal product decreases.

Antitrust laws have economic benefits that outweigh the costs if they a. allow mergers that would decrease competition regardless of what happens to the costs of production. b. prevent mergers that would decrease competition and raise the costs of production. c. prevent mergers that would decrease competition and lower the costs of production. d. allow mergers that would decrease competition and raise the costs of production.

b. prevent mergers that would decrease competition and raise the costs of production.

Refer to Figure 13-5. The efficient scale of production occurs at which quantity? a. A b. B c. C d. D

c. C

Suppose a firm operating in a competitive market has the following cost curves: Refer to Figure 14-3. Firms would be encouraged to enter this market for all prices that exceed a. P3. b. P2. c. P4. d. P1.

c. P4.

Suppose that a firm in a competitive market has the following cost curves: Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is a. less than $13 but more than $6. b. less than $6. c. above $13. d. exactly $13.

c. above $13.

A benefit to society of the patent and copyright laws is that those laws a. discourage the production of inefficient products. b. help to prevent a single firm from acquiring ownership of a key resource. c. encourage creative activity. d. help to keep prices down.

c. encourage creative activity.

Suppose that a firm in a competitive market has the following cost curves: Refer to Figure 14-1. The firm's short-run supply curve is its marginal cost curve above a. $13. b. $10. c. $4. d. $6.

d. $6.

The following table shows the production costs for The Flying Elvis Copter Rides. Refer to Table 13-7. What is the value of E? a. $50 b. $150 c. $25 d. $100

d. $100

Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is able to engage in perfect price discrimination. Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the average revenue when 7 ties are sold? a. $100 b. $90 c. $110 d. $130

d. $130

Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is a monopolist and maximizing his profit, which of the following statements is true? a. Costs are irrelevant to Bob because he is a monopolist. b. The price of Bob's bison burgers will equal Bob's marginal cost. c. The price of Bob's bison burgers will be less than Bob's marginal cost. d. The price of Bob's bison burgers will exceed Bob's marginal cost.

d. The price of Bob's bison burgers will exceed Bob's marginal cost.

Reduced competition through merging of companies will raise social welfare a. always. b. never. c. if the social cost from the synergies exceeds the benefit of increased market power. d. if the benefit from the synergies exceeds the social cost of increased market power.

d. if the benefit from the synergies exceeds the social cost of increased market power.

If marginal cost is rising, a. average variable cost must be falling. b. marginal product must be rising. c. average fixed cost must be rising. d. marginal product must be falling.

d. marginal product must be falling.

A perfectly price-discriminating monopolist is able to a. maximize profit, but not produce a socially optimal level of output. b. exercise illegal preferences regarding the race and/or gender of its employees. c. produce a socially optimal level of output, but not maximize profit. d. maximize profit and produce a socially optimal level of output.

d. maximize profit and produce a socially optimal level of output.

Suppose a monopolist is able to charge each customer a price equal to that customer's willingness-to-pay for the product. Then the monopolist is engaging in a. marginal cost pricing. b. arbitrage pricing. c. voodoo economics. d. perfect price discrimination

d. perfect price discrimination.