Microecon: Ch. 14, Microecon: Ch. 15, Microecon: Unit 3 Exam, Microecon: Ch. 16
Mario's Pizza is the only pizza place in Sorrento City. The graph shows the market demand curve for pizza in Sorrento City. Mario's Pizza is a perfect price discriminator. What is the marginal revenue from the 20th pizza sold in an hour? The marginal revenue from the 20th pizza sold in an hour is _______.
$15
is the only theme park in the nation. The graph shows its demand curve and marginal cost curve. Happyland is regulated to produce the efficient output. Draw a point at the firm's output and price when it produces the efficient quantity. Draw a shape to show the consumer surplus. Label it CS. What is the consumer surplus? Consumer surplus equals $enter your response here.
$2,450 triangle in the top left section
In 2018, Max taught music and earned $20,000. On January 1, 2019, he quit teaching and started a catering business. The information on the right describes his first year in the new business. What are Max's explicit costs, implicit costs, and economic profit in 2019? Max's explicit costs are _______ and his implicit costs are _______. Max's economic profit in 2019 is_______ dollars.
$3,000; $56,120 5,880
In 2018, Nicole taught music and earned $40,000. On January 1, 2019, she quit teaching and started a Web site design business. The information on the right describes her first year in the new business. What are Nicole's explicit costs, implicit costs, and economic profit in 2019? Nicole's explicit costs are _______ and her implicit costs are _______.
$5,500; $65,600 ( -$6100 (the sum of the explicit and implicit costs, minus the economic profit in the first year. in this case 65,000 - (5,500+65,600) = -$6100)
The table shows the cost structure of a firm selling bottles of water in a perfectly competitive market. What is the quantity and price at the firm's shutdown point? The firm's shutdown point occurs at a quantity of enter your response here bottles of water per week and the market price is $enter your response here a bottle .
(whereever equilibrium point is); (cost of equilibrium point) 300; 3.5
Hiro's bus ticket and sandwich budget is $20 a week. The price of a bus ticket is $2 and the price of a sandwich is $5. What is the relative price of a bus ticket? Explain your answer. The relative price of a bus ticket is _______ because _______.
0.40 sandwich per bus ticket; Hiro must give up 0.40 sandwich to get 1 bus ticket
Oakdale, a small isolated town, has one psychiatrist. For a 45-minute consultation, the psychiatrist charges a man twice as much as a woman. If the psychiatrist decided to charge everyone the maximum price that he or she would be willing to pay, what would be the consumer surplus? Would the market for psychiatric services in Oakdale be efficient? If the psychiatrist decided to charge everyone the maximum price that he or she would be willing to pay, the consumer surplus would equal $enter your response here. If the psychiatrist decided to charge everyone the maximum price that he or she would be willing to pay, the market for psychiatric services would be _______.
0; efficient because no deadweight loss is created
The table below shows the market demand schedule for toys and the graph shows the short-run cost curves of a toy producer. There are 1,000 identical toy producers. Price Quantity demanded (dollars per toy) (thousands of toys per week) 24 1,000 21 1,500 18 2,000 15 2,500 12 3,000 At what market prices would the firm shut down temporarily? What is the market price of a toy in long-run equilibrium? How many firms will be in the toy market in the long run? The firm will shut down temporarily if the market price is below $enter your response here per toy.
12; 15; 1667
Township is a small, isolated community served by one newspaper that can meet the market demand at a lower cost than two or more newspapers could. The Township Gazette is the only source of news. The graph shows the marginal cost of printing the Township Gazette and the market demand for it. The Township Gazette is a profit-maximizing, single-price monopoly. What is the efficient number of copies of the Township Gazette and what is the price at which the efficient number of copies could be sold? The efficient number of copies of the Township Gazette is enter your response here and the price at which this number could be sold is enter your response here cents a copy.
150 70
Judy hires students to mow lawns at $350 per student per week. She leases equipment that costs $350 per week. The table gives Judy's total product schedule. Suppose Judy mows 18 lawns a week. Calculate her total cost, average total cost, and marginal cost. Total cost is $enter your response here a week when Judy mows 18 lawns a week. When Judy mows 18 lawns a week, average total cost is $enter your response here a house. When Judy mows 18 lawns a week, marginal cost is $enter your response here a house.
1750 97.22 58.33
Fogg's Adventure Holidays is a single-price monopoly. The table gives the demand schedule for holidays (columns 1 and 2) and Fogg's total cost schedule (columns 2 and 3). What is Fogg's profit-maximizing output and profit-maximizing price, and what is Fogg's economic profit? >>> Remember that the amounts in the table are given in thousands of dollars. >>> Answer to 2 decimal places. Fogg's profit-maximizing number of holidays is enter your response here a month. Fogg's profit-maximizing price of a holiday is _____ dollars. When Fogg's produces the profit-maximizing output and changes the profit-maximizing price, economic profit is _____ dollars.
2.0; 210,000; 140,000
Hotel Nemo is the only under-sea hotel in the nation. The table sets out the demand schedule for hotel rooms and the cost schedule for running the hotel. What is Hotel Nemo's profit-maximizing price, output and economic profit if it charges a single price for all rooms? Hotel Nemo's profit-maximizing output is enter your response here rooms a night. Hotel Nemo's profit-maximizing price is $enter your response here a room. When Hotel Nemo produces the profit-maximizing output and charges the profit-maximizing price, economic profit is $enter your response here.
200 8 -600
Tiny is a small, isolated community served by one newspaper that can meet the market demand at a lower cost than two or more newspapers could. The Tiny Intelligencer is the only source of news. The graph shows the marginal cost of printing the Tiny Intelligencer and the market demand for it. The Tiny Intelligencer is a profit-maximizing, single-price monopoly. What is the efficient number of copies of the Tiny Intelligencer and what is the price at which the efficient number of copies could be sold? The efficient number of copies of the Tiny Intelligencer is enter your response here and the price at which this number could be sold is enter your response here cents a copy.
250, 50 (where the lines intersect)
The table shows Jerry's total utility from burgers and magazines. The price of a burger is $2, the price of a magazine is $4, and Jerry has $12 a week to spend. What quantities of burgers and magazines maximize Jerry's utility? Jerry maximizes his total utility when he buys _____ burgers and _____ magazines a week.
2; 2
Rose growing is perfectly competitive and all growers have the same costs. The market price is $22 a bunch and each grower maximizes profit by producing 1,600 bunches a week. Average total cost is $15 a bunch and average variable cost is $13 a bunch. Minimum average variable cost is $5 a bunch. What is the price at the grower's shutdown point? The price at the grower's shutdown point is $enter your response here a bunch.
5 (whatever the minimum average variable cost is)
When Erin has $25 to spend, she sees 2 movies at $10 a movie ticket and buys 1 six-pack of soda. What is the price of soda? If her budget for soda and movies increase to $50, what is the change in the relative price of a movie ticket? How does her marginal utility per dollar from movies change? The price of a six-pack of soda is $enter your response here. If Erin's budget increases and she has $50 to spend on soda and movie tickets, the relative price of a movie ticket _______. If Erin's budget increases and she has $50 to spend on soda and movie tickets, the relative price of a movie ticket _______. If Erin's budget increases, the marginal utility per dollar from movies _______.
5; does not change; decreases
Sarah has $27.00 a week to spend on coffee and soda. The price of a cup of coffee is $1.50, the price of a can of soda is $1.50. Suppose the price of a can of soda remains at $1.50 but the price of a cup of coffee rises to $2.25. Draw Sarah's budget line after the price rise. Label it. If Sarah buys 9 cans of soda, what is the maximum number of cups of coffee she can buy after the price of a cup of coffee rises to $2.25? Sarah can _____ cups of coffee a week. Has the relative price of a cup of coffee changed? The new relative price of a cup of coffee is _____. When the price of a cup of coffee rises to $2.25, the relative price of a can of soda increases.
6 1.5 cans of soda decreases
A natural monopoly cans Mt. McKinley air, a unique clean air that has no substitutes. The graph illustrates the demand curve for this clean air. 048121601020304050Quantity (thousands of cans per year)Price and cost (cents per can)D interactive graph >>> Draw only the objects specified in the question Draw the monopoly's marginal revenue curve and label it. If the marginal cost is 10 cents a can, draw the monopoly's marginal cost curve and label it. Draw a point at the monopoly's profit-maximizing quantity and price. How many cans a year does the monopoly sell and what is the price of a can? The monopoly sells enter your response here cans a year and the price is enter your response here cents a can.
6,000 25
The table shows some cost data for Lila's Nails which operates in a perfectly competitive market. At a market price of $52.67 a box, what quantity does Lila's produce and what is the firm's economic profit in the short run? When the market price is $52.67 a box, Lila produces enter your response here boxes of nails.
6; 0
The table shows some cost data for Marie's Firewood which operates in a perfectly competitive market. At a market price of $43.33 a bundle, what quantity does Marie's produce and what is the firm's economic profit in the short run? When the market price is $43.33 a bundle, Marie produces enter your response here bundles of firewood. When Marie produces 6 bundles of firewood, Marie's economic profit is $enter your response here.
6; 0
Tom's Nice Nails is a manicuring business in a perfectly competitive market in Ithaca. The table shows Tom's total costs. In the long run, what is the price of a manicure and how many manicures does Tom sell an hour? What is Tom's economic profit in the long run? In long-run equilibrium, the price of a manicure is $enter your response here.
77.5; 4; 0
The graph shows the demand and cost conditions facing a perfectly competitive industry. If the industry is taken over by a monopoly, what is the deadweight loss that results from the behavior of the monopoly? The deadweight loss that results from the behavior of the monopoly is $enter your response here per year.
82500
Which of the following is an example of a price-discriminating monopoly?
IMAX charges $6 per movie ticket for children younger than 8, and $8.50 per movie ticket for adults.
Which of the following illustrates economies of scale, diseconomies of scale, and constant returns to scale? Liza's average total cost changes from $4.50 to $2.20 when she increases salad production from 7 to 9 an hour. Sam's average total cost changes from $1.30 to $2.80 when he increases smoothie production from 5 to 8 gallons an hour. Tina's average total cost remains at $3 when she increases pizza production from 12 to 13 an hour.
Liza faces economies of scale; Sam faces diseconomies of scale; Tina faces constant returns to scale.
Which of the following are examples of short run and long run decisions?
Starbucks' has hired more labor to meet the increasing demand. Starbucks' has opened another store to meet the increasing demand.
The table below shows the costs incurred at Pippa's partridge farm.
To find TC, add the initial TC and the TVC for each quantity of labor. 60 + 90 = 150 To find AFC, take ATC and subtract AVC 17.15 - 12.86 = 4.29 To find AVC, take ATC and subtract AFC 13.75 - 2.50 = 11.25 To find ATC, add AFC and AVC 1.94 + 11.61 = 13.55 To find MC, take the change of TVC (for one unit) over the change of TP (for one unit) (360 - 270) / (31 - 24) = 90 / 7 = 12.86
Airlines seek new ways to save on fuel as costs soar Fuel is an airline's biggest single expense. In 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation aircraft, which have more fuel-efficient engines. Source: The New York Times, June 11, 2008 How does an increase in the price of fuel change an airline's total costs, average costs, and marginal cost?
When the cost of fuel increases, total fixed cost _______ and total variable cost _______. does not change; increases When the cost of fuel increases, total cost _______. increases When the cost of fuel increases, average fixed cost _______ and average variable cost _______. does not change; increases When the cost of fuel increases, average total cost _______, and marginal cost _______. increases; increases
The National Collegiate Athletic Association (NCAA) controls the market for college athletes. It sets the amounts paid to these athletes below what they would be in a competitive market and ensures that colleges do not violate the rules that it lays down. Is the NCAA a natural monopoly, a legal monopoly, or neither? The NCAA is _______.
a legal monopoly that oversees all college athletics in areas such as rule making and national championships
Before 1991, the eight Ivy League colleges (Brown, Columbia, Cornell, Dartmouth, Harvard, Princeton, the University of Pennsylvania, and Yale), along with MIT, shared information and agreed on rules for setting their prices of education (price equals tuition minus scholarship). Since 1991, these schools have set their prices in competition with each other. How did the market for an Ivy League education change before and after 1991? Before 1991, the Ivy League schools _______. After 1991, tuition at the Ivy League schools _______ and the number of students _______.
acted as a monopoly and charged the monopoly tuition became competitive and tuition rose; increased, decreased, or remained the same
Total cost is the cost of _____ by a firm. Total fixed cost is the cost of the _____ - the cost of _____, _____, and _____. Total variable cost is the cost of the _____ - the cost of _____.
all the factors of production used; firm's fixed factors of production; land, capital; entrepreneurship; firm's variable factor of production; labor
How is the long-run average cost curve derived? The long-run average cost curve traces out the lowest possible _______ of producing each output.
average total cost
Sammie's Shiny Shoes is a firm that operates in a competitive market. The number of firms in the shoe-shining market increases. What decision will Sammie's make in the short run? In the short run, Sammie's will _______.
cut back on the number of shoes he shines
Paying for gas forces painful sacrifices With the average gas price hitting $3.70 a gallon, many people cut back on other things, such as meals-to-go at the grocery store and shopping. Source: CNNMoney, May 4, 2011 Consider Robyn who buys only two goods: gasoline and meals-to-go. As the gas price rises, what happens to Robyn's consumption possibilities and the relative price of a meal-to-go? As the gas price rises, Robyn's consumption possibilities _______, and the relative price of a meal-to-go _______.
decrease; decreases
Diminishing marginal rate of substitution is the general tendency for the marginal rate of substitution to _____ as the consumer moves down along the indifference curve, _____ consumption of the good measured on the x-axis and _____ consumption of the good measured along the y-axis.
decrease; increasing; decreasing
Solar and wind got so cheap, so fast Solar panels and wind turbines are more efficient than they used to be and they cost less to produce. Source: The Atlantic, December 2, 2015 How do the facts reported in the news clip affect the short-run and long-run average total cost of producing electricity? How do they affect the marginal cost of producing electricity? The decrease in the production cost of solar panels and wind turbines _______. With greater efficiency in producing electricity using solar panels and wind turbines, the marginal cost of producing electricity _______.
decreases the average fixed cost, average total cost, and long-run average cost of producing electricity may decrease although marginal cost is already close to zero before using the more efficient equipment
Airlines seek new ways to save on fuel as costs soar Fuel is an airline's biggest single expense. In 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation aircraft, which have more fuel-efficient engines. Source: The New York Times, June 11, 2008 How does a technological advance that makes airplane engines more fuel efficient change an airline's average variable cost, marginal cost, and average total cost? A technological advance that makes an airplane engine more fuel efficient _______ an airline's average variable cost and _______ an airline's marginal cost. The airplane engines that are more fuel efficient cost more than the previous engines. At lower levels of output, average total cost _______. At higher levels of output, average total cost _______.
decreases; decreases increases; decreases
Jim spends all his income on apartment rent, food, clothing, and vacations. He gets a pay raise from $3,000 a month to $4,000 a month. At the same time, airfares and other vacation-related expenses increase by 50 percent. How has Jim's budget in terms of airfares and other vacation-related expenses changed? Is Jim better off or worse off in his new situation? Jim's real income in terms of airfares and other vacation-related expenses _______. Jim is _______.
decreases; either better or worse off depending on how he allocated his budget
Sheema's subway ticket and gallon of gasoline budget is $36 a week. The price of a subway ticket is $3 and the price of a gallon of gasoline is $4. If the price of a gallon of gasoline falls to $2.00, how does the relative price of a subway ticket change? If the price of a gallon of gasoline falls to $2.00, the relative price of a subway ticket _______.
doubles because the relative price of a subway ticket equals the price of a subway ticket divided by the price of a gallon of gasoline
Warner grows pumpkins. When Warner leases 1 field for $60 a day and capital for $40 a day, his average total cost curve is ATC1. When Warner leases 2 fields for $120 a day and capital for $80 a day, his average total cost curve is ATC2. Over what output range will Warner use 1 field? 2 fields? Draw a point on Warner's average cost curve such that he will use 1 field to grow any smaller quantity and 2 fields to grow any larger quantity.
draw the point where the two lines intersect How are Warner's ATC curves used to make his long-run average cost curve? Warner's long-run average cost curve is _______. made up of the segments of his ATC1 and ATC2 curves that have the higher average total cost
The graph shows the short-run cost curves of a toy producer. The market has 1,000 identical toy producers. At a market price of $12 a toy, how many toys does the firm produce and what is its economic profit in the short run? How will the number of firms in the market change in the long run? At a market price of $12 a toy, the firm produces _______ toys a week. At a market price of $12 a toy, the firm's economic profit in the short run is equal to _______. In the long run, firms _______ the market.
either 1000 or zero; negative total fixed cost; exit
Tom will maximize his total utility if he buys the quantities of pasta and milk at which _______.
he spends all of his budget and his marginal utility per dollar from pasta and milk are equal
Money in the tank Two gas stations on opposite sides of the road: Rutter's Farm Store and Sheetz gas station. Rutter's doesn't even have to look across the road to know when Sheetz changes its price for a gallon of gas. When Sheetz raises prices, Rutter's pumps are busy. When Sheetz lowers prices, there's not a car in sight. Both gas stations survive but each has no control over price. Source: The Mining Journal, May 24, 2008 Describe the elasticity of demand that each of these gas stations faces. Each of the gas stations in the news clip faces a demand that is _______.
highly elastic
Salon is a single-price monopoly. The table gives Minnie's demand schedule. Price (dollars per haircut) Quantity (haircuts per hour) 15 0 14 1 13 2 12 3 11 4 10 5 Draw the following points on the demand curve to show the quantity demanded 1) when the price of a haircut is $15. Label it 1. 2) when the price of a haircut is $10. Label it 2. Draw the demand curve through the points. Label it D. Draw the following points on the marginal revenue curve 1) when the quantity increases from 0 to 1. Label it 3. 2) when the quantity increases from 4 to 5. Label it 4. Draw the marginal revenue curve through the points. Extend it to the y-axis and label it MR.
https://imgur.com/vteCZCI
A firm's minimum average variable cost of $25 a backpack occurs when the firm produces 4 backpacks a day. Draw the firm's supply curve. Label the supply curve below $25 a backpack S0. Label the supply curve above $25 a backpack S1. Which of the following describes a firm's supply curve? A firm's supply curve _______.
includes the marginal cost curve at all points above minimum average variable cost graph: for S0 (0,0)-(0,25)] for S1 three point curve: (4,25)-(6,30)-(8,45)
The table gives the total product schedule for Flora's Flower Shoppe. If Flora's increases the number of workers she hires from 2 to 3, does average product increase or decrease? If Flora's increases the number of workers she hires from 3 to 4, does average product increase or decrease? If Flora's increases the number of workers she hires from 2 to 3, average product _______. If Flora's increases the number of workers she hires from 3 to 4, average product _______. Labor, Output 0, 0 1, 50 2, 120 3, 190 4, 230 5, 150
increases; decreases
GM cuts jobs at its Australian manufacturing unit GM will cut 500 jobs, or about 12%
increases; increases
If marginal cost exceeds average total cost and output increases, how do average total cost and average variable cost change? If marginal cost exceeds average total cost and output increases, average total cost _______ and average variable cost _______.
increases; increases
Airlines seek new ways to save on fuel as costs soar Fuel is an airline's biggest single expense. In 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation aircraft, which have more fuel-efficient engines. Source: The New York Times, June 11, 2008 How does a technological advance that makes airplane engines more fuel efficient change an airline's total product, marginal product, and average product? A technological advance that makes an airplane engine more fuel efficient _______ an airline's total product and _______ an airline's marginal product. An airline's average product _______.
increases; increases increases
Happyland is the only theme park in the nation. The table sets out the demand schedule for passes and the cost schedule for running the theme park. At the market equilibrium, no children under 10 years old visit the theme park. Happyland offers children a discount of 50 percent, which brings in more families. How will this discount change the consumer surplus and producer surplus? Will Happyland be more efficient by offering the discount to children? This discount _______ consumer surplus and _______ producer surplus. Happyland is _______ efficient.
increases; increases more
Maryland farmers turn from tobacco to flowers Maryland tobacco farmers will be subsidized if they switch from growing tobacco to growing crops such as flowers and organic vegetables. Source: The New York Times, February 25, 2001 How does offering farmers a payment to exit tobacco growing influence the opportunity cost of growing tobacco? What is the opportunity cost of using the equipment owned by a tobacco farmer? Offering farmers a payment to exit tobacco growing _______ the opportunity cost of growing tobacco. The opportunity cost of using the equipment owned by a tobacco farmer is _______.
increases; the next best alternative forgone, which could be the production of flowers and organic vegetables
The household is maximizing its utility. Then the market price of one of the goods it buys falls. What is the initial effect on the marginal utility per dollar from this good? What happens as the household adjusts its expenditure to restore maximum utility? Initially, the marginal utility per dollar from this good _______ and as the household adjusts its expenditure to restore maximum utility _______ increases.
increases; the quantity the household buys of this good
Tulip growing is a perfectly competitive industry and all tulip growers have the same cost curves. The market price of tulips is $11 a bunch, and each grower maximizes profit by producing 1,600 bunches a week. The average total cost of producing tulips is $20 a bunch. Minimum average variable cost is $9 a bunch, and the minimum average total cost is $12 a bunch. What is a tulip grower's economic profit in the short run and how does the number of tulip growers change in the long run? In the short run, each grower is ▼ incurring an economic lossmaking an economic profit of $enter your response here a week. >>> Answer with a positive number. Because firms in the industry are _______, some firms will _______ the market in the long run.
incurring an economic loss of 14400 incurring an economic loss; exit decrease
Apple Music could match Spotify subscribers by 2016 Apple Music is expected to have 16 million paid subscribers by the end of 2016. Spotify has 20 million paid subscribers. Source: Newsweek, December 18, 2015 Data: The price of a downloaded song is fixed per song while the price of a streaming subscripts is fixed independent of the number of songs streamed. How does the marginal utility of a downloaded song compare with that of a streamed song? The marginal utility of a downloaded song _______.
is greater than the marginal utility of a streamed song
Water is more valuable than diamonds. What does this tells us about the markets for water and diamonds? Water is cheap and brings a _______. Diamonds are expensive and bring a _______.
large consumer surplus; small consumer surplus
Monopolistic competition is a market in which a _____ number of firms compete by making similar but slightly _____ products.
large; different
In what direction does the market supply curve shift and what is the change in the market price when some firms exit an industry in which firms are incurring economic losses? When some firms exit an industry in which firms are incurring economic losses, the market supply curve shifts _______ and the market price _______.
leftward; rises
Deal raises monopoly concerns A deal between United Continental and Air Canada looks like an "effective merger" of all of their Canadian and U.S. operations. The deal would create a monopoly on 10 major high-demand, transborder routes and substantially reduce competition on nine others. Prices would be higher and choice restricted. Source: CBC News, June 27, 2011 What type of monopoly would be created on the 10 major, high demand routes? With higher prices and restricted choice, what would be the barrier to entry? A _______ monopoly would be created on the 10 major high-demand routes. With higher prices and restricted choice, the barrier to entry would be _______.
legal; the granting of landing slots and boarding gates
Wilbur's is the only septic service in a remote village. The graph shows the demand curve for the firm's service calls. Now suppose that there are 25 septic service companies, all able to produce these service calls at zero marginal cost and with zero fixed costs. How does the equilibrium price and quantity produced with 25 septic service companies compare to Wilbur's price and quantity produced? Draw the supply curve when there are 25 septic service companies. Label it. Draw a point at the equilibrium price and quantity. The monopoly price is _______ than the perfectly competitive price. The monopoly output is _______ than the perfectly competitive output.
line from (0,0) to (10,0) point where they intersect higher; less
Which of the following firms is most likely to be a monopoly?
local distributor of electricity
Rose growing is perfectly competitive and all growers have the same costs. The market price is $24 a bouquet and each grower maximizes profit by producing 1,500 bouquets a week. Average total cost is $23 a bouquet and average variable cost is $16 a bouquet. Minimum average variable cost is $8 a bouquet. What is the economic profit that each grower is making in the short run? In the short run, each grower is ▼ incurring an economic lossmaking an economic profit of $enter your response here a week.
making an economic profit of $1500 a week
Rhonda's Turkey Farm produced 700 turkeys last week. The marginal cost was $34 a turkey, average variable cost was $30 a turkey, and the market price was $32 a turkey. Did Rhonda maximize profit? If Rhonda did not maximize profit and if nothing has changed, will she increase or decrease the number of turkeys she produces to maximize her profit this week? Rhonda is _______ profit, so if nothing changes she will _______ the number of turkeys she produces to maximize her profit this week.
not maximizing; decrease
Nancy's Mink Farm produced 1,500 mink last week. The marginal cost was $28 a mink, average variable cost was $10 a mink, and the market price was $30 a mink. Did Nancy maximize profit? If Nancy did not maximize profit and if nothing has changed, will she increase or decrease the number of mink she produces to maximize her profit this week? Nancy is _______ profit, so if nothing changes she will _______ the number of mink she produces to maximize her profit this week.
not maximizing; increase
Rate of return regulation is a regulation that sets the _____ at a level that enables a firm to earn a specified target rate of return on its _____.
price; capital
A firm that is producing the quantity at which marginal cost exceeds both average total cost and the market price will increase its economic profit by _______.
producing a smaller quantity
Quebec losing hold over maple syrup industry to U.S. competition The Federation of Quebec Maple Syrup Producers tries to limit production and stockpiles a "strategic reserve" to keep the price of syrup high. But Quebec producers are feeling increased competition from Vermont, New York, and Maine, where market share has increased and is expected to increase further in 2017 and 2018. Source: The Globe and Mail, April 6, 2015 If the demand for maple syrup increases, what will happen to price, quantity, and the economic profit of a producer in the short run and in the long run? As a result of an increase in the demand for maple syrup, the price of maple syrup _______. The graph shows the revenue and cost curves for an individual producer in the maple syrup industry. Draw the marginal revenue curve if the price of maple syrup rises to $40 a gallon. Label it MR1. Draw a point to show the new equilibrium quantity and equilibrium price. Draw a shape that represents the economic profit or economic loss in the short run. Label it. In the long run, the price of maple syrup _______ and producers _______.
rises falls; make zero economic profit
The graph shows part of the total product curve for a firm that produces handbags. When do marginal returns begin to decrease? Marginal returns begin to decrease when the firm hires the _______ worker.
sixth
The following statements give some information about six firms. a. Coca-Cola cuts its price below that of Pepsi-Cola in an attempt to increase profit. b. A single firm, protected by a barrier to entry, produces a personal service that has no close substitutes. c. A barrier to entry exists, but the good has some close substitutes. d. A museum offers discounts to students and seniors. e. A firm can sell any quantity it chooses at the going price. f. A firm experiences economies of scale even when it produces the quantity that meets the entire market demand. Which are natural monopolies and which are legal monopolies? Can any of them price discriminate? If so, why? The firm described in _______ is a natural monopoly. The firm described in _______ is a monopoly and it may be a legal monopoly.
statement f; statement b statement b; a personal service cannot be resold
A monopoly ______.
that produces a good that cannot be resold might choose to price discriminate
Joe runs a shoeshine stand at the airport. Joe has no skills, no job experience, and no alternative employment. Entrepreneurs in the shoeshine stand business earn $19,000 a year. Joe pays the rent of $2,500 a year, and his total revenue is $22,000 a year. He borrowed $1,100 at 10 percent a year to buy equipment. At the end of one year, Joe was offered $900 for his business and all its equipment. What are Joe's explicit costs, implicit costs, and economic profit? Joe's explicit costs are $_____.
the amount of rent plus the borrowed money * % per year (2,500 + (1,100 / 10) = 2610)
A firm's cost of production equals ______.
the costs of all resources used by the firm whether bought in the marketplace or owned by the firm
Corn hits record high price Corn prices have surged 80 percent in the past year, driven up by a global rush for grains to feed people and livestock and to make biofuel. Source: USA Today, June 26, 2008 Why did the price of corn surge? How did the marginal revenue, the marginal cost of producing corn, and the farm's economic profit change? The price of corn increased because _______. Marginal revenue and marginal cost _______. Economic profit in the short run _______.
the demand for corn increased increased; increased
The graph shows the demand curve for the good that a firm produces. How do we know that the firm is a perfectly competitive firm? We know that the firm is a perfectly competitive firm because _______.
the firm can vary the quantity it sells without affecting the price it receives for the good it produces
Petra leases a farmer's field and grows melons. She hires students to pick and pack the melons. The table sets out Petra's total product schedule. Over what range of numbers of students does marginal product increase? Marginal product increases when Petra hires _______.
the first, second, third, and fourth, students
Aaron hires students to paint houses in the summer. The table sets out Aaron's total product schedule. When does Aaron's marginal product decrease? Marginal product decreases when Aaron hires _______.
the fourth, fifth, and sixth students
Amal is maximizing his utility. Then the price of good A falls. How does Amal's new utility-maximizing situation differ from his original utility-maximizing situation? When Amal makes his new utility-maximizing choice _______.
the marginal utility from good A will be lower than before
Hiring spree at Tesla Motors Bay Area-based electric car maker Tesla is looking to hire 1,648 workers to expand its model lineup, build a battery factory, and develop self-driving cars. Source: CBS San Francisco, December 8, 2015 What are the effects of the expansion plan on Tesla's total fixed cost, total variable cost, short-run ATC curve, and LRAC curve? Building a battery factory will increase Tesla's _______. Hiring more workers will increase Tesla's _______. When Tesla builds a battery plant and increases output by expanding its model lineup and producing self-driving cars, _______.
total fixed cost; total variable cost it moves to the ATC curve associated with the increased plant and moves rightward along its LRAC curve
When does a long-run equilibrium occur in a perfectly competitive industry? In a perfectly competitive industry, a long-run equilibrium occurs _______.
when each firm is making zero economic profit and no frim has an incentive to enter the industry
An unregulated natural monopoly packages Alaskan moss, a unique health product that has no substitutes. The monopoly's total fixed cost is $11,000, and its marginal cost is 20 cents a bag. The graph illustrates the demand for Alaskan moss. If the regulator gets captured by the monopoly, what is the quantity that the monopoly wants to produce? If the regulator gets captured by the monopoly, then the monopoly wants the regulator to allow it to produce _____ bags a year.
where ever the lines intersect divided by two (for the quantity) then multiplied by 1000 (add three zeros)
