Final Micro week 5

Reference the graph to find Company A's cost curves. Company A is maximizing profit in a perfectly competitive market. If company A currently earns zero economic profit, what are total costs?

$2100

The figure shows demand, marginal revenue and cost curves for a manufacturer with a patent on the good it produces, making the the firm the only supplier. At the profit maximizing output quantity, this firm earns ___ in profits.

$400

The figure shows demand, marginal revenue and cost curves for a firm that produces designer jeans. There are many producers of jeans, each selling a differentiated product. This firm maximizes profits when it produces ___ pairs per hour.

16

The graph shows cost curves, demand and marginal revenue for a monopolist that produces laptop computers. When the firm profit maximizes, what is total revenue?

3262.50

The graph shows cost curves, demand and marginal revenue for a monopolist that produces laptop computers. What quantity (thousands) should the monopolist choose to maximize profits?

7

AVC<Price<ATC.

Produce in the short-run, exit the market in the long-run

Suppose the market is in long-run equilibrium with 40 bushels produced and a price of $60 per bushel. If the demand curve shifts from D to D', what is the effect on firms in the short-run?

firms earn positive economic profits. correct

In the short-run, perfectly competitive firms

shut down if the market price is less than average variable costs.

The figure accompanying this question shows the market for apples. At a price of $80 per bushelTo review this concept, see the section Market Equilibrium.

there is a surplus (excess supply) of apples. correct

Monopolistic competition

is probably the single most common market structure. It provides powerful incentives for innovation, as firms seek to earn profits in the short run, while entry assures that firms do not earn economic profits in the long run.

The graph shows cost curves, demand and marginal revenue for a monopolist that produces laptop computers. How much does the firm earn in profits?

$1012.50

The figure represents a firms short-run marginal, average, and variable costs. If the price of a MT of sugarcane is $63, how much profit will the firm earn?

$270

The graph shows cost curves, demand and marginal revenue for a laptop computer producer with a patent on the production process. What price will the firm charge to maximize profits?

$375

The graph shows cost curves, demand and marginal revenue for a monopolist that produces laptop computers. What price should the monopolist charge to maximize profits?

$375

The figure shows the demand for oil in a particular country, in this country there is only one firm in the market for oil with monopoly power. What will be the change in revenue (in millions) if the firm decides to increase production of oil from Q1 to Q2?

$600

The figure shows demand, marginal revenue and cost curves for a firm that produces designer jeans. There are many producers of jeans, each selling a differentiated product. This firm maximizes profits when it charges ___ per pair.

$90

characteristic of monopolistic competition?

- Multiple producers - Freedom of entry and exit - Some control of the market price

An example of a barrier to entry is

- a patent that legally prevents firms other than the patent holder from producing a good. - lack of access to a key resource required for production. - a very large fixed cost required to enter a market.

Three companies supply apples to the market. Their cost curves are shown, respectively, by the graphs labeled Hugo, Jonas, and Rodrigo. At a market price of $1.50, about how many apples will be supplied to the market?

6 + 12 + 16 = 34

The graph shows average costs, marginal cost and marginal revenue for a perfectly competitive apple producer. According to the graph, how many apples (in millions) will be supplied by this producer?

8

A monopolist's profit maximizing quantity and price.

A

The market for pens is shown in the figure. Beginning at point B, what would be the new equilibrium in the market for pens if the supply of pens were decreased?

A

Patent

A government rule that gives the inventor the exclusive legal right to make, use, or sell the invention for a limited time

Differentiated product

A product that is perceived by consumers as distinctive in some way

Monopoly

A situation in which one firm produces all of the output in a market

Which of the following goods is most likely to be produced in a perfectly competitive market?

Apples

The figure represents a firms short-run marginal, average, and variable costs. Each point in the figure represents a combination of price and quantity, which of the points in the figure shows the firm earning positive profits?

B

Whats not a characteristic of monopolistic competition?

Barriers to entry

Profit maximizing output quantity

C

The figure represents a perfectly competitive firm's short-run marginal and average cost curves. In the figure three different prices are each labeled A, B, and C respectively. Which of these prices, if any, would result in the firm earning negative profits?

C

The firm will shut down in the short-run if the price is below:

D

Natural monopoly

Economic conditions in the industry, for example, economies of scale or control of a critical resource, that limit effective competition

The graph accompanying this question shows the cost curves and demand for a drug producer with the patent on the production process of laptop computers. After the patent expires, what is expected to happen

Firms will enter the market

Which of the following would NOT prohibit new firms from entering a market?

High Prices.

If in a perfectly competitive market the price of sugar is $50 and all current suppliers are making a profit, what is likely to happen in the long-run?

More suppliers will enter the market, causing the equilibrium price to drop to the point where no firms earn a profit.

The figure depicts a perfectly competitive firm's short-run marginal and average cost curves. At a price of P, the firm is making ___________ profits.

Negative

In a perfectly competitive market structure:

Price = marginal revenue

Barriers to entry

The legal, technological, or market forces that may discourage or prevent potential competitors from entering a market

The graph shows cost curves, demand and marginal revenue for a monopolistically competitive soda producer. Which of the following is likely to happen to the number of firms in this market in the long-run?

The number of firms will likely remain constant in the long-run.

Suppose Mario is a sugarcane supplier in a perfectly competitive market. Which of the following is a choice Mario makes in the long-run?

Whether to continue to produce or exit the market entirely.

The figure shows demand, marginal revenue and cost curves for a monopolist with a patent on the production to good it produces. At the profit maximizing output quantity, this firm earns

earns zero economic profit

A monopolistically competitive producer of laundry detergent is currently earning negative economic profits. We expect that in the long-run,

firms will exit this market.

The figure shows demand, marginal revenue and cost curves for a producer of power. The firm is currently the only supplier of power. Assume all firms would face similar costs. This firm is likely to remain a monopoly because

high fixed costs will keep other firms out.

Which of the following is not a feature of the perfect competition model

individual firms have considerable influence on market price and quantity

Monopoly power is the ability of a firm to:

influence market price through choice of quantity.

Natural monopolies

occur when high initial fixed costs give a large cost advantage to the first producer. correct

The graph shows average total costs, average variable costs, marginal cost and marginal revenue for a perfectly competitive apple producer. What is true about this firm's profits in the short-run?

profits are negative, the firm's revenue is able to cover some of its costs, but not all of them.