Econ final study guide

Table 13-1 Number of Workers Total Output Marginal Product 0 0 -1 30 2 45 3 60 4 50 5 40 7. Refer to Table 13-1. What is total output when 3 workers are hired? a. 15 b. 60 c. 105 d. 135

D look at guide

. For a monopolist, a. average revenue is always greater than the price of the good. b. marginal revenue is always less than the price of the good. c. marginal cost is always greater than average total cost. d. marginal revenue equals marginal cost at the point where total revenue is maximized.

b

. For a typical natural monopoly, average total cost is a. falling, and marginal cost is above average total cost. b. falling, and marginal cost is below average total cost. c. rising, and marginal cost is below average total cost. d. rising, and marginal cost is above average total cost.

b

. Monopolies use their market power to a. charge prices that equal minimum average total cost. b. increase the quantity sold as they increase price. c. charge a price that is higher than marginal cost. d. dump excess supplies of their product on the market.

b

. One problem with regulating a monopolist on the basis of cost is that a. by focusing on costs, the regulators ignore profits. b. it does not provide an incentive for the monopolist to reduce its cost. c. a monopolist's costs, by definition, are higher than costs of perfectly competitive firms. d. a monopolist is still able to generate excessive economic profits

b

15. For a monopoly firm, a. price always exceeds average revenue. b. price always exceeds marginal revenue. c. any price-quantity combination will maximize profits. d. All of the above are correct

b

17. An industry is a natural monopoly when (i) the government assists the firm in maintaining the monopoly. (ii) a single firm owns a key resource. (iii) a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms. a. (ii) only b. (iii) only c. (i) and (ii) only d. (ii) and (iii) only

b

9. Refer to Table 13-13. What is the average variable cost for the month if 6 instructional modules are produced? a. $180.00 b. $533.33 c. $700.00 d. $713.33

b

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

c

. In the short run for a particular market, there are 5,000 firms. Each firm has a marginal cost of $7 when it produces 200 units of output. One point on the market supply curve is a. quantity = 5,000; price = $7. b. quantity = 35,000 price = $35,000. c. quantity = 1,000,000, price = $7. d. quantity = 1,000,000, price = $35,000.

c

. Which of the following is not an example of a barrier to entry? a. Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. b. A chemist receives a patent for a new skin cream. c. An entrepreneur opens a cupcake bakery. d. A taxi cab driver in New York City obtains a license to legally provide transportation in New York City

c

14. Bubba is a shrimp fisherman who catches 4,000 pounds of shrimp per year. He can sell the shrimp for $5 per pound. His average total cost of catching shrimp is $3 per pound. Bubba's annual total revenue is a. $8,000. b. $12,000. c. $20,000. d. $32,000.

c

One of the defining characteristics of a perfectly competitive market is a. a small number of sellers. b. a large number of buyers and a small number of sellers. c. a similar product. d. significant advertising by firms to promote their products.

c

When profit-maximizing firms in competitive markets are earning profits, a. market demand must exceed market supply at the market equilibrium price. b. market supply must exceed market demand at the market equilibrium price. c. new firms will enter the market. d. the most inefficient firms will be encouraged to leave the market.

c

Which of the following is a characteristic of a monopoly? a. low fixed costs as a portion of total costs b. free entry and exit c. barriers to entry d. declining marginal cost

c

22. Refer to Table 14-8. In order to maximize profits, the firm will produce a. 1 unit of output because marginal cost is minimized. b. 4 units of output because marginal revenue exceeds marginal cost. c. 5 units of output because marginal revenue equals marginal cost. d. 7 units of output because total revenue is maximized.

c look at guide

27. Refer to Table 13-9. The average total cost of producing 240 units is a. $0.13. b. $0.19. c. $0.32. d. $0.80.

c look at guide

28. Refer to Table 15-7. What is the total revenue from selling 8 pairs of shoes? a. $90 b. $695 c. $720 d. $800

c look at guide

9. Refer to Figure 15-5. A profit-maximizing monopoly will produce an output level of a. Q1. b. Q2. c. Q3. d. Q4

c look at guide

. 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. economies of scale. b. diseconomies of scale. c. increasing marginal product. d. diminishing marginal product.

d

. Because the goods offered for sale in a competitive market are largely the same, a. there will be few sellers in the market. b. there will be few buyers in the market. c. only a few buyers will have market power. d. sellers will have little reason to charge less than the going market price

d

21. When economists refer to a production cost that has already been committed and cannot be recovered, they use the term a. implicit cost. b. explicit cost. c. variable cost. d. sunk cost.

d

In the long run, assuming that the owner of a firm in a competitive industry has positive opportunity costs, she a. should exit the industry unless her economic profits are positive. b. will earn zero accounting profits but positive economic profits. c. will earn zero economic profits but positive accounting profits. d. should ignore opportunity costs because they are a type of sunk cost that disappears in the long run.

C

. Entry into a market by new firms will increase the a. supply of the good. b. profits of existing firms. c. price of the good. d. marginal cost of producing the good

a

. When there are economies of scale over the relevant range of output for a monopoly, the monopoly a. is a natural monopoly. b. is a government-granted monopoly. c. has monopoly power due to the ownership of a patent or copyright. d. has monopoly power due to the ownership of a key production resource.

a

0. Tom quit his $65,000 a year corporate lawyer job to open up his own law practice. In Tom's first year in business his total revenue equaled $150,000. Tom's explicit cost during the year totaled $85,000. What is Tom's economic profit for his first year in business? a. $0 b. $20,000 c. $65,000 d. $85,000

a

4. For a firm in a perfectly competitive market, the price of the good is always a. equal to marginal revenue. b. equal to total revenue. c. greater than average revenue. d. equal to the firm's efficient scale of output.

a

9. Suppose the long-run supply curve for a good is upward-sloping. The upward slope could be explained by a. increases in production costs resulting from more firms coming into the market. b. a breakdown of the "free entry and exit" feature of competition. c. a breakdown of the "price taking" feature of competition. d. a stable demand curve for the good, that is, a demand curve that never shifts. Copyright Cengage Learning. Powered by Cognero.

a

A monopolist maximizes profits by a. producing an output level where marginal revenue equals marginal cost. b. charging a price equal to marginal revenue and marginal cost. c. charging a price where marginal cost equals average total cost. d. Both a and b are correct.

a

A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. 38. Refer to Scenario 15-3. At Q = 500, the firm's profit is a. $13,000. b. $15,000. c. $17,000. d. $30,000.

a

Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. 3. Refer to Scenario 14-2. At Q = 999, the firm's profits equal Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. 3. Refer to Scenario 14-2. At Q = 999, the firm's profits equal a. $4,990. b. $5,000. c. $5,020. d. $5,030.

a

Suppose you value a special watch at $100. You purchase it for $75. On your way home from class one day, you lose the watch. The store is still selling the same watch, but the price has risen to $85. Assume that losing the watch has not altered how you value it. What should you do? a. Pay the $85 to buy the watch. b. Wait to see if the watch goes on sale. If the price drops to $75 or less, buy the watch. c. Wait to see if the watch goes on sale. If the price drops to $25 or less, buy the watch. d. Do not buy the watch.

a

. Refer to Table 14-11. If the firm is producing 3 units of output, it should produce a. more units of output because its marginal revenue is greater than its marginal cost. b. fewer units of output because its marginal revenue is less than its marginal cost. c. more units of output because its marginal revenue is less than its marginal cost. d. fewer units of output because its marginal revenue is greater than its marginal cost.

a look at guide

34. Refer to Table 13-8. What is the average fixed cost of producing 5 units of output? a. $4 b. $5 c. $40 d. $44

a look at guide

The difference between accounting profit and economic profit is a. explicit costs. b. implicit costs. c. total revenue. d. marginal product.

b

16. Refer to Table 13-7. What is the value of A? a. $25 b. $50 c. $100 d. $200

b look at guide

39. Refer to Figure 15-9. To maximize its profit, a monopolist would choose which of the following outcomes? a. 100 units of output and a price of $20 per unit b. 100 units of output and a price of $40 per unit c. 150 units of output and a price of $30 per unit d. 200 units of output and a price of $40 per unit

b look at guide

Which of the following is an example of an implicit cost? a. salaries paid to owners who work for the firm b. interest on money borrowed to finance equipment purchases c. cash payments for raw materials d. foregone rent on office space owned and used by the firm

d

3. Refer to Figure 15-9. The monopolist's maximum profit a. is $1,600. b. is $2,000. c. is $2,500. d. cannot be determined from the diagram

d look at guide

5. Refer to Figure 14-10. If there are 500 identical firms in this market, what is the value of Q1? a. 10,000 b. 20,000 c. 50,000 d. 150,000

d look at guide