econ exam2

Refer to the data. The average total cost of producing 3 units of output is

$16

Refer to the data. The average fixed cost of producing 3 units of output is

$8

The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the data. Creamy Crisp's economic profit is

$94,000

Refer to the above graph. It shows the cost curves for a competitive firm. If the market price falls to $0.55, the optimal output rate is

0

In the diagram below, the profit maximizing output level is

0A

Refer to the above graph for a monopolist in short-run equilibrium. This monopolist has total cost equal to area

0ADQ

Refer to the above graph. To maximize profits, the firm should produce the quantity

0C

Refer to the above graph for a profit-maximizing monopolist. The firm will set its price at

0J

In the diagram below, the profit maximizing price level is

4

Refer to the above graph. Which point is definitely not on the competitive firm's short-run supply curve?

A

Refer to the above graph. At the profit-maximizing level of output, the firm earns profits given by th area

ABGH

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if price is below

Average variable cost

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 1,000 units is $2.50. The minimum possible average variable cost is $2.00. The market price of the product is $2.50. To maximize profits or minimize losses, the firm should

Continue producing 1,000 units

Farmer Jones is producing wheat, and must accept the market price of $6.00 per bushel. At this time, her average total costs and her marginal costs both equal $8.00 per bushel. Her average variable costs are $5 per bushel. In order to maximize profits or minimize losses, farmer Jones should

Continue producing, but reduce output

Price is taken to be a "given" by an individual firm selling in a purely competitive market because

Each seller supplies a negligible fraction of total market

Cash expenditures a firm makes to pay for resources are called

Explicit costs

Natural monopolies result from

Extensive economies of scale in production

Which of the following is a reason why individual firms under pure competition would not find it gainful to advertize their product?

Firms produce a homogeneous product

Which of the following is most likely to be a variable cost?

Fuel and power payments

A purely competitive firm does not try to sell more of its product by lowering its price below the market price because

It can sell all it wants to at the market price

A profit maximizing monopolist sets output where

MC = MR

Refer to the graphs above for a purely competitive market in the short run. The graphs suggest that i the long run, assuming no changes in the given information

New firms will be attracted into the industry

The profit maximizing output level for a perfectly competitive firm is always where

P = MC

Refer to the above graph. It shows short-run cost curves for a competitive firm. At what minimum price would the firm be willing to product some output in the short run?

P3

Refer to the above graph for a profit-maximizing monopolist. At equilibrium, the firm will be earning

Positive profits

Which idea is inconsistent with pure competition?

Product differentiation

Which of the following is not a source of monopoly power?

Rapid low cost technological change in the industry

Assume that the market for corn is purely competitive. Currently, firms growing corn are suffering economic losses. In the long run, we can expect

Some firms to exit causing the market price of corn to rise

Refer to the above graphs for a competitive market in the short run. Which of the following statements is true?

The firm is experiencing economic losses

One defining characteristic of pure monopoly is that

The monopolist produces a product with no close substitutes

If the market demand for the product increases, in the short run a purely competitive firm

Will earn higher profits or experience smaller losses as a result of the change in the market

The representative firm in a purely competitive industry

Will earn zero economic profit in the long run

Consider the purely competitive firm pictured above. At its short-run equilibrium point, the firm is earning

Zero economic profits

Monopoly is characterized by

a downward sloping demand curve

Fixed cost is

any cost that does not change when the firm changes its output

The law of diminishing returns indicates that

as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point

Refer to the above graph for a purely competitive firm operating at a loss in the short run. Which are in the graph represents the amount of economic loss for the firm?

bcde

Marginal cost equals

both average variable cost and average total cost at their respective minimums

Refer to the diagram. The profit-maximizing level of output for this firm

cannot be determined from the information given

According to the text, the most important of the five factors which give rise to monopoly is

economies of scale

To the economist, total cost includes

explicit and implicit costs

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

The marginal revenue curve of a single price monopolist

lies below the demand curve

In the long run, the typical firm in this market will produce a quantity equal to

q3

If a firm's demand curve falls below its AVC curve, then the firm should

shut down now

Refer to the diagram. The vertical distance between ATC and AVC reflects

the average fixed cost at each level of output

Economic profits are equal to

the difference between accounting profits and implicit costs

Marginal product is

the increase in total output attributable to the employment of one more worker

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed. Refer to the data. Diminishing marginal returns become evident with the addition of the:

third worker

Accounting profits equal total revenue minus

total explicit costs