Exam 3

If Celia and Venya operate as a profit-maximizing monopoly in the market for water, how much profit will the two of them together earn?

$4,320

In the short run, a firm in a monopolistically competitive market operates much like a

monopolist

TC = 3Q3 -18Q2 + 30Q

$3

Curve C represents which type of cost curve?

average fixed cost

What is Gwen's annual opportunity cost of the financial capital that has been invested in the business?

$340

Refer to Scenario 6. Calculate profit (or loss) for the profit maximizing level of output.

$0

Larry's Lunchcart is a small street vendor business. If Larry makes 15 pretzels in his first hour of business and incurs a total cost of $16.50, his average total cost per pretzel is

$1.10

Katherine gives piano lessons for $20 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are?

$100

The deadweight loss from the monopoly power is

$1012.50

Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%. Refer to Scenario 5. Emily's annual explicit cost of capital is

$12,000

If this firm operates to maximize profits, then how much profit will it earn?

$125.0

Refer to Table 8. For this firm, the average revenue from selling 4 units is

$15

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. what is the average total cost of production when the firm hires 5 workers?

$2.00

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. The marginal product of the seventh unit of labor is 4. Given this information, what is the marginal cost of production when the firm hires the 7th worker?

$2.50

Calculate the farmer's profit, if the farmer is producing the profit maximizing level of output.

$3000

Suppose the firm sells its output for $14 per unit, and it pays each of its workers $33 per day. When the number of workers increases from 4 to 5, the

$42, $11.

How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

$450

If the monopolist can engage in perfect price discrimination, what is the total revenue when 3 ties are sold?

$450

Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 275 of the units it produced. The average cost of production for each unit of output produced was $100. The price for each of the 275 units sold was $95. Total profit for Billy's Bean Bag Emporium would be?

-$3,875

Suppose the competitive firm's selling price is $4.00 and the marginal factor cost of labor is $600, how many units of labor will the firm hire?

4

Suppose that a firm in a competitive market faces the following revenues and costs:. The firm should not produce an output level beyond

5 units

If the monopolist facing the demand curve P = 10 - Q is a perfectly discriminating monopolist and the marginal cost is constant at $4, how much will the firm sell if it maximizes its profits?

6

If the market price of soybeans falls to $8/bushel, then to maximize profit how many bushels of output that this farmer should produce?

700

If the firm were to produce 154.92 units of output,

ATC would be at its minimum value

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect

All of the above are correct.

Which of the following can defeat the profit-maximizing strategy of price discrimination?

Arbitrage

Why doesn't the total cost curve begin at the origin (the point 0,0)?

Because fixed costs are positive when output is zero

The deadweight loss due to monopoly is represented by the area

FHE

Which firm's long-run marginal cost decreases as output increases?

Firm 1

Refer to Figure 13, the total cost of producing the profit maximizing level of output is shown by

OP2BQ1

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. i. L = 4; Quantity Produced = 5200 bushels of wheat ii. L = 4; Quantity Produced = 5400 bushels of wheat

Only (i) and (ii)

Refer to Figure 13, the profit-maximizing price and quantity established by the unregulated monopolist in the above figure are

Q1 units of output and a price of P1

Suppose that a firm in a competitive market has the cost curve in the above figure. In the long run the typical firm in this market will produce a quantity equal to

Q3

For the firm whose production function and costs are specified in the table, its average-total-cost curve is

U-Shaped

Which of the following statements about oligopolies is not correct?

Unlike monopolies, monopolistically competitive firm's prices do not exceed their marginal costs in the long run

Compared to a perfectly competitive market, consumer surplus is lower in a monopoly by an amount equal to the

area P1P2EF

Suppose a market is initially perfectly competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect

a decrease in market output and an increase in the price of the product

Assume that the market starts in equilibrium at point W in graph (b). An increase in demand from D0 to D1 will result in

an eventual increase in the number of firms

As a result of a fire, a small business owner loses some of her computers and other equipment. If the property of diminishing returns applies to all factors of production, she should expect to see

an increase in the marginal productivity of her remaining capital and a decrease in the marginal productivity of her labor.

At Bert's Bootery, the total cost of producing twenty pairs of boots is $400. The marginal cost of producing the twenty-first pair of boots is $83. We can conclude that the

average total cost of 21 pairs of boots is $23.

At a widget manufacturing company, the total costs of producing 19 widgets is $575 and the marginal cost of producing the twentieth widget is $79.65.

average total costs of 20 widgets is $32.73

At point D the firm is

breaking even

Joan grows pumpkins. If Joan plants no seeds on her farm, she gets no harvest. If she plants 1 bag of seeds, she gets 500 pumpkins Refer to Scenario 4. Joan's production function exhibits

decreasing marginal product

A monopoly can earn positive profits over the long run because it

can maintain a price such that total revenues will exceed total costs without attracting new entrants.

Bette's Breakfast, a perfectly competitive eatery, sells

continue producing in the short run, but plan to go out of business in the long run.

Mrs. Smith operates a business in a competitive market. The current market price is $8.10. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

continue to operate in the short run but shut down in the long run.

Ohio workers will

decrease because the marginal decrease.

Refer to Figure 13, suppose the monopolist is producing at Q3. The firm should

decrease output and increase price

Robin owns a horse stable and riding academy and gives riding lessons for children at "pony camp." Her business operates in a competitive industry. Robin gives riding lessons to 20 children per month. Her monthly total revenue is $4,000. The marginal cost of pony camp is $100 per child. To maximize profits, Robin should

give riding lessons to more than 20 childrens per month

Job A is hard, dull, and dangerous. Job B is easy, fun, and safe. All else equal, we would expect Job A to pay

higher wages than Job B because the labor supplied for Job B will be greater

A firm that wants to achieve economies of scale could do so by

hiring a larger number of workers to carry out specialized tasks.

Joan's total-cost curve is

increasing at an increasing rate

At a widget manufacturing company, the total costs of producing 19 widgets is $575 and the marginal cost of producing the twentieth widget is $79.65, and the ATC of producing twenty first widget is $35.07. We can conclude that the

marginal cost of 21st widget is $81.82

A contrast between perfect competition and monopolistic competition is that

monopolistic competition generates a deadweight loss while perfect competition does not.

If the market price falls below $6, the firm will earn

negative economic profits in the short run and shut down.

Refer to Scenario 6. Find the ATC for the firm.

q + 2 + 100/q

A firm is currently selling its product at $20 each. It estimates that its average total cost of production is $100 and its average fixed cost is $40. In the short run the firm should

shut down

A firm is currently selling its product at $20 each. It estimates that its average total cost of production is $100, and its average fixed cost is $40. In the short run the firm should

shutdown

Suppose this market is served by one firms who faces the marginal cost curve shown in the diagram. If this firm maximizes its profits,

the total output will be 2 units and the price will be $8.00 per unit

Refer to Figure 11. Suppose the intersection of the supply and demand curves matches with a value of $200 on the vertical axis. Then

the value of the marginal product of capital is $200