Micro Test 3 Practice

Diminishing returns to an input occur when:

at least one input is fixed

When price discriminating, a company owner should set price _____ for each customer.

at or just below marginal benefit

If a monopolist produces a quantity that generates MC < MR, then profit:

can be increased by increasing output

Price discrimination occurs when a company:

charges different prices to different customers who are all buying the same product

Price discrimination is the practice of:

charging different prices to buyers of the same good

Candice's stand-up paddle board company will earn profits producing and selling at any output level where the company's:

demand curve is above its average cost curve

Marginal revenue is the output effect minus the ______ effect for a given quantity.

discount

In the long run, each firm in an industry will:

earn only enough to cover the opportunity costs of all resources used in production

The market for orthodontic services in most communities is _____ because it offers a large number of similar but not identical options.

monopolistically competitive

The Tennessee Valley Authority (TVA) is the sixth-largest power supplier in the United States, supplying hydroelectric energy to power companies in several Southeastern states. In many rural towns, the TVA provides the only source of electricity. The market structure for electricity in these towns is:

monopoly

Being open to international trade helps a country foster competition for all the following reasons EXCEPT that there will be:

more bias toward domestic production

The less work people do, all other things equal, the:

more leisure they have

In the United States, the top brands of kitchen appliances include Samsung and LG, which are South Korean companies, and General Electric and Whirlpool, which are American companies. Without international trade, General Electric and Whirlpool would have ______ market power, and American consumers would face ______ prices.

more; higher

Average cost is:

total cost divided by quantity

When segmenting your market demand into groups, base them on _____ and ________ characteristics.

verifiable; difficult-to-change

The marginal revenue product is calculated as:

MP(little L) x P

Mr. Parker sells 10 bottles of wine per week at $50 per bottle. He can sell 11 bottles per week if he lowers the price to $45 per bottle. The output effect of the sale of an additional bottle would be _____, whereas the discount effect of the sale of an additional bottle would be ______.

$45; -$50

The Mile End Deli serves traditional delicatessen food in Brooklyn, New York. Which cost is MOST likely fixed at the deli?

the chairs customers sit on

A Nash equilibrium is an equilibrium in which:

the choice that each player makes is a best response to the choices other players are making.

How can price discrimination improve efficiency compared to a situation in which a company must charge a single price?

the company's output is where marginal cost equals the last customer's marginal benefit

The demand curve for a monopoly is:

the market demand curve

when a seller uses group pricing, members of the same group pay:

the same price for a product

David's financial planner tells him that he made a profit of $31,300 running a ballroom dance studio in Sacramento. David's wife, an actuary, claims David lost $31,300 running his ballet dance studio. This means his wife is claiming that he incurred _____ in ______ costs.

$62,600; implicit opportunity

Liana gives up a salary of $80,000 per year at the Kellogg food manufacturing company to start her health food manufacturing company. She invests $50,000 of her savings in her company, savings that had been earning her $4,000 per year in interest. During Liana's first year in the health food business, total revenue is $300,000, and her explicit financial costs are $225,000. What is Liana's accounting profit from her first year in business?

$75,000

Suppose a local Home Depot has explicit financial costs of $2 million per year and implicit opportunity costs of $44,000 per year. If the store earned an economic profit of $50,000 last year, its accounting profit was:

$94,000

In the labor market for computer programmers, the labor demand curve represents:

employers looking to hire programmers

Which market type has the largest number of firms?

perfect competition

The demand curve for a monopoly is:

above the marginal revenue curve

You decide to start a house-painting business next summer. When you hire employees, you are involved in a(n) ________ market, and when you and your employees paint the houses, you are involved in a(n) ______ market.

factor; output

Many hotel chains offer discounts to AAA members. This is an example of _______ that is _______ in the United States.

price discrimination; legal

_____ markets do not necessarily lead to efficient outcomes, whereas _____ markets tend to yield efficient outcomes.

strategic interactions in; competitive

Which scenario BEST illustrates an oligopolistic industry?

The Coca-Cola Company and PepsiCo (the companies that make Coke and Pepsi, respectively) sell most of the soft drinks consumed around the world.

Sellers in a market will become less profitable when:

new sellers enter the market

How does output for a seller who has market power compare to output for a seller who does not have market power, assuming both follow the Rational Rule for Sellers?

Output is higher for the seller without market power than the one with market power.

Which of these will NOT happen when the wages of pharmacists fall?

The supply curve for pharmacists will shift to the left

You apply for a job, using a 3D printer to make coffee mugs, that pays $15 an hour. The mugs sell for $4 each. Part of the hiring process is to demonstrate how good you are at making the mugs. You make an average of 5 acceptable mugs per hour. Will you get the job?

Yes, since your marginal revenue product is at least as large as your marginal cost.

A firm's demand curve for labor will shift because of:

a change in the demand for a firm's product.

Ever since Giselle's company developed its new product ten years ago, Giselle has managed its production with little turnover in workers. During that time, the company's average cost has fallen by 30%, due to the refinement of its production methods, thereby achieving greater efficiency. Other rival companies have not achieved such low costs. The advantage that Giselle's company now has over rivals stems from _____ achieved through ______.

a unique cost advantage; learning by doing

Economic profits encourage firms to _____ the industry, and losses encourage firms to _____ the industry

enter; exit

Price discrimination that involves charging different prices to different groups of people is called:

group pricing

You own an orange juice stand in a competitive market, and so you are a price-taking firm. Which event would MOST likely increase your market power?

you acquire exclusive rights to harvest oranges from all domestic citrus orchards.

The science that is useful in helping decision makers analyze their options when an individual's best choice may depend on what other people choose, and other people's best choices may depend on what the individual chooses, is _______.

game theory

When wages ________, if the substitution effect dominates, the quantity of labor supplied will ______.

increase; increase

Why would it be a bad idea for a retailer to use "wearing nail polish" as the basis for segmenting customers into groups for price discrimination?

people can easily switch from wearing nail polish to not wearing it.

In contrast to perfect competition, a monopoly:

produces less at a higher price

Which is NOT a government action that results in a barrier to entry in a product market?

prohibiting advertisers from making false claims

If American Airlines purchased all of its competitors to become a monopoly, all else equal, price will _____, and output will _____.

rise; fall

Kendrick, a recent high school graduate, is trying to decide between going to college or running his family's food catering business. Which would be an implicit opportunity cost of going to college?

the profit he would earn running the catering business

Samantha wants to practice price discrimination in her cupcake bakery. Which strategy should Samantha NOT use?

the same price for all consumers for all cupcakes available

Thomas works 55 hours per week as a legal-aid lawyer for the city of Chicago, and his wage is $35 per hour. If his wage increases to $70 per hour:

the substitution effect implies that he will work more.

The output in a market with market power is:

inefficient, since the marginal benefit to society of extra output exceeds the marginal cost.

As a rule, a profit-maximizing dance studio owner employs labor up to the point at which the marginal revenue product of the ______ unit of labor is ______ that factor's price (wage).

last; equal to

The local cinema offers students discounts during the week but not on Friday and Saturday nights, when it charges everyone the same price. The theater believes students are:

less price sensitive on weekends than on weekdays.

A firm in an oligopoly knows that its _____ affect its ______ and that the reactions of its rivals will affect it.

actions; rivals

Alena manages a small theme park. She hires one more custodian at $450 per week, making her park cleaner and more attractive. As a result of this improvement, ticket sales rise by 40 tickets per week. Tickets sell for $12. Use the Rational Rule for Employers to determine if hiring the extra custodian was a good move.

Yes, it was a good move because it added more to revenue than to cost.