MICRO - Exam 2

A monopolistic firm has a sales schedule such that it can sell 10 prefabricated garages per week at $10,000 each, but if it restricts its output to 9 per week it can sell these at $11,000 each. The marginal revenue of the tenth unit of sales per week is: A. - $1,000. B. $9,000. C. $10,000. D. $1,000.

$1,000

(SS 7) For a nondiscriminating monopolist, at its profit-maximizing output, this firm's total costs will be: A. $300. B. $248. C. $198. D. $126.

$198

(SS 7) Refer to the above data. At its profit-maximizing output, this firm's total revenue will be: A. $300. B. $198. C. $180. D. $280.

$280

(SS 7) For a nondiscriminating monopolist, at its profit-maximizing output, this firm's price will exceed its marginal cost by ____ and its average total cost by ____. A. $20; $27.33 B. $10; $10.40 C. $24; $27.33 D. $30; $20.50

$30; $20.50

(Use SS 2) Refer to the above data. The marginal cost of the fourth unit of output is: A. $2. B. $12. C. $37. D. $16.

$37

(SS 8) The profit-maximizing price for the monopolist will be: A. $5.00. B. $2.90. C. $3.35. D. $4.50.

$4.50

Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit. The marginal revenue of the twenty-first unit of output is: A. $9.75. B. $204.75. C. $4.75. D. $.25.

$4.75

Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and average variable costs of $150. The firm's total fixed costs are: A. $5,000. B. $500. C. $.50. D. $50.

$5,000

(Use SS 1) The average fixed cost of producing 3 units of output is: A. $8. B. $7.40. C. $5.50. SSD. $6.

$8

(refer to SS 4) At the profit-maximizing output, total revenue will be: A. 0AHE. B. 0BGE. C. 0CFE. D. ABGE.

0AHE

(refer to SS 4) Refer to the above diagram. At the profit-maximizing output, total variable cost is equal to: A. 0AHE. B. 0CFE. C. 0BGE. D. ABGH.

0CFE

(refer to SS 6) At P1, this firm will produce: A. 47 units and break even. B. 47 units and realize an economic profit. C. 66 units and earn only a normal profit. D. 24 units and earn only a normal profit.

47 units and realize an economic profit.

(SS 8) The profit-maximizing level of output will be: A. 4 units. B. 7 units. C. 6 units. D. 5 units.

5 units

If a profitable firm's fixed costs somehow were zero: A. MC and ATC would be equal at all levels of output. B. AFC would become negative as output increases. C. AVC and ATC would coincide. D. ATC would be zero at all output levels.

AVC and ATC would coincide

Other things equal, if the wage rates paid to a firm's labor inputs were to rise, we would expect the: A. AFC, AVC, ATC, and MC curves all to rise. B. AVC, ATC, and MC curves all to rise. C. AFC and ATC curves to fall. D. MP curve to fall.

AVC, ATC, and MC curves all to rise

(refer to SS 4) At the profit-maximizing output, total fixed cost is equal to: A. 0AHE. B. 0BGE. C. 0CFE. D. BCFG.

BCFG

(refer to SS 4) To maximize profit or minimize losses this firm will produce: A. K units at price C. B. D units at price J. C. E units at price A. D. E units at price B.

E units at price A

Which of the following is true concerning purely competitive industries? A. There will be economic losses in the long run because of cut-throat competition. B. Economic profits will persist in the long run if consumer demand is strong and stable. C. In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits. D. There are economic profits in the long run, but not in the short run.

In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits

Which of the following statements is CORRECT? A. The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping. B. The demand curve for a purely competitive firm is downsloping, but the demand curve for a purely competitive industry is perfectly elastic. C. The demand curves are downsloping for both a purely competitive firm and a purely competitive industry. D. The demand curves are perfectly elastic for both a purely competitive firm and a purely competitive industry.

The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping

Which of the following holds true? A. There is no relationship between AP and AVC. B. When MP is rising AVC is falling, and when MP is falling AVC is rising. C. When AP is rising AVC is falling, and when AP is falling AVC is rising. D. When AP is rising AVC is rising, and when AP is falling AVC is falling.

When AP is rising AVC is falling, and when AP is falling AVC is rising

Which of the following is NOT correct? A. Where marginal product is greater than average product, average product is rising. B. Where total product is at a maximum, average product is also at a maximum. C. Where marginal product is zero, total product is at a maximum. D. Marginal product becomes negative before average product becomes negative.

Where total product is at a maximum, average product is also at a maximum

(refer to SS 4) Refer to the above diagram. At the profit-maximizing output, the firm will realize: A. a loss equal to BCFG. B. a loss equal to ACFH. C. an economic profit of ACFH. D. an economic profit of ABGH.

an economic profit of ABGH

The law of diminishing returns indicates that: A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. B. because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped. C. the demand for goods produced by purely competitive industries is downsloping. D. beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.

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

The short run is characterized by: A. plenty of time for firms to either enter or leave the industry. B. increasing, but not diminishing returns. C. at least one fixed resource. D. zero fixed costs.

at least one fixed resource

Average fixed cost: A. equals marginal cost when average total cost is at its minimum. B. may be found for any output by adding average variable cost and average total cost. C. graphs as a U-shaped curve. D. declines continually as output increases.

declines continually as output increases

The MR = MC rule can be restated for a purely competitive seller as P = MC because: A. each additional unit of output adds exactly its price to total revenue. B. the firm's average revenue curve is downsloping. C. the market demand curve is downsloping. D. the firm's marginal revenue and total revenue curves will coincide.

each additional unit of output adds exactly its price to total revenue

(SS 3) The firm's: A. economic profit is $12. B. economic profit is $16. C. loss is $14. D. economic profit is $3.

economic profit is $16

Suppose that, when producing 10 units of output, a firm's AVC is $22, its AFC is $5, and its MC is $30. This: A. firm's ATC is $35. B. firm's ATC is $57. C. firm's total cost is $270. D. firm's total cost is $30.

firm's total cost is $270

A constant-cost industry is one in which: A. a higher price per unit will not result in an increased output. B. if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth. C. the demand curve and therefore the unit price and quantity sold seldom change. D. the total cost of producing 200 or 300 units is no greater than the cost of producing 100 units.

if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth

Other things equal, if the prices of a firm's variable inputs were to fall: A. one could not predict how unit costs of production would be affected. B. marginal cost, average variable cost, and average fixed cost would all fall. C. marginal cost, average variable cost, and average total cost would all fall. D. average variable cost would fall, but marginal cost would be unchanged.

marginal cost, average variable cost, and average total cost would all fall

Assume for a competitive firm that MC = AVC at $12, MC = ATC at $20, and MC = MR at $16. This firm will: A. realize a profit of $4 per unit of output. B. maximize its profit by producing in the short run. C. minimize its losses by producing in the short run. D. shut down in the short run.

minimize its losses by producing in the short run

(SS 8) The monopolist will realize a: A. profit of $8.50. B. profit of $7.50. C. profit of $16. D. loss of $14.

profit of $16

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting: A. profits were $100,000 and its economic profits were zero. B. losses were $500,000 and its economic losses were zero. C. profits were $500,000 and its economic profits were $1 million. D. profits were zero and its economic losses were $500,000.

profits were zero and its economic losses were $500,000.

The long run is characterized by: A. the relevance of the law of diminishing returns. B. at least one fixed input. C. insufficient time for firms to enter or leave the industry. D. the ability of the firm to change its plant size.

the ability of the firm to change its plant size.

Implicit and explicit costs are different in that: A. explicit costs are relevant only in the short run. B. implicit costs are relevant only in the short run. C. the latter refer to nonexpenditure costs and the former to out-of-pocket costs. D. the former refer to nonexpenditure costs and the latter to out-of-pocket costs.

the former refer to nonexpenditure costs and the latter to out-of-pocket costs.

When diseconomies of scale occur: A. the long-run average total cost curve falls. B. marginal cost intersects average total cost. C. the long-run average total cost curve rises. D. average fixed costs will rise.

the long-run average total cost curve rises

For an imperfectly competitive firm: A. total revenue is a straight, upsloping line because a firm's sales are independent of product price. B. the marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold. C. the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold. D. the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold.

the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold

In a purely competitive industry: A. there will be no economic profits in either the short run or the long run. B. economic profits may persist in the long run if consumer demand is strong and stable. C. there may be economic profits in the short run, but not in the long run. D. there may be economic profits in the long run, but not in the short run.

there may be economic profits in the short run, but not in the long run

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue: A. may be either greater or less than $5. B. will also be $5. C. will be less than $5. D. will be greater than $5.

will also be $5

(refer to SS 5) If the market price for the firm's product is $12, the competitive firm will produce: A. 4 units at a loss of $109. B. 4 units at an economic profit of $31.75. C. 8 units at a loss of $48.80. D. zero units at a loss of $100.

zero units at a loss of $100