Microeconomics Final (Units 5-7)

Refer to the below data. The average fixed cost of producing 3 units of output is:

$8

Refer to the below data. The marginal cost of producing the sixth unit of output is:

$8

The above diagram shows the short-run average total cost curves for five different plant sizes of a firm. The shape of each individual curve reflects:

increasing marginal product, followed by diminishing marginal product.

Refer to the below data. The marginal product of the fourth worker:

is 5.

Refer to the above diagram. At output level Q average fixed cost:

is measured by both QF and ED

A monopoly is an inefficient way to produce a product because

it produces a smaller level of output than would be produced in a competitive market.

If a firm decides to produce no output in the short run, its costs will be:

its fixed costs.

Refer to the below diagram. At P3, this firm will:

produce 40 units and incur a loss.

Refer to the below diagram. At P2, this firm will:

produce 44 units and earn only a 0 profit.

If firms are losing money in a purely competitive industry, then in the long run this situation will shift the industry:

Supply curve to the left, and the market price will increase

If firms enter a purely competitive industry, then in the long run this change will shift the industry:

Supply curve to the right, and the market price will decrease

Refer to the below graphs. Which statement is true?

The firm is experiencing economic losses

A production function describes

how a firm turns inputs into output.

To economists, the main difference between the short run and the long run is that:

in the long run all resources are variable, while in the short run at least one resource is fixed.

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic

in the short run but not in the long run.

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $4,500. The marginal cost of producing the 101st unit of output is $300. What is the total cost of producing 101 units?

$,4,800

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its profit is

$1,600.

The diagram depicts the market situation for a monopoly pastry shop called Bearclaws. Refer to Figure 15-22. Based upon the information shown, what price will Bearclaws charge to maximize profits?

$14.

Refer to the below data. The average total cost of producing 3 units of output is:

$16

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were:

$200,000 and its economic profits were zero.

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $3,500. When it produces 101 units of output, its total costs are $3,750. What is the marginal cost of producing the 101st unit of output?

$250

A firm in a competitive market has the following cost structure: What is the lowest price at which this firm might choose to operate?

$3

Refer to the below data. The total variable cost of producing 5 units is:

$37.

When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?

$80

When a profit-maximizing firm is earning profits, those profits can be identified by

(P - ATC) × Q.

Refer to the below diagram. At the profit-maximizing output, total revenue will be:

0AHE.

Refer to the above diagram. At output level Q total cost is:

0BEQ plus BCDE.

Refer to the below diagram. At the profit-maximizing output, total variable cost is equal to:

0CFE.

Refer to the below graph. The profit-maximizing monopolist in it will set its price at:

0J

Refer to the below data. The marginal product of the sixth worker is:

15 units of output.

Based on the graph below, what is the difference between the perfectly competitive equilibrium level of output and the pure monopolist equilibrium level of output?

20

Refer to Table 13-7. ​What is total output when 1 worker is hired?

40

The table below shows the price and cost information for a firm that operates in a perfectly competitive market. Refer to Table 14-17. Based upon this information, the profit maximizing output level is

5 units.

Based on the diagram below, what is the difference between the perfectly competitive level of output and the pure monopolist level of output?

50

Which of the following curves is not U-shaped?

AFC

Refer to the below diagram. At output level Q total fixed cost is:

BCDE.

Refer to the below diagram. At the profit-maximizing output, total fixed cost is equal to:

BCFG

Suppose that a monopolist calculates that at present output and sales, marginal cost is $1.00 and marginal revenue is $2.00. He or she could maximize profits by:

Decreasing price and increasing output

Refer to the below diagram. To maximize profit this firm will produce:

E units at price A.

Which of the following definitions is correct?

Economic profit = accounting profit - implicit costs.

Refer to the below graph. This monopolist: (Image not found, refer to google doc) https://docs.google.com/document/d/1MDSFFOIbHRCONgTx6jxGWjnwcxTzvd8BUOLhirzT4rk/edit?usp=sharing

Has a loss per unit equal to DE

The profit-maximizing monopolist will usually set a price:

In the elastic portion of the demand curve

Suppose that a monopolist calculates that at present output and sales levels, marginal revenue is $1.00 and marginal cost is $2.00. He or she could maximize profits or minimize losses by:

Increasing price and decreasing output

Suppose a firm in a competitive industry has the following cost curves: Refer to Figure 14-13. If the price is $2 in the short run, what will happen in the long run?

Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.

Suppose a firm in a competitive industry has the following cost curves: Refer to Figure 14-13. If the price is $3.50 in the short run, what will happen in the long run?

Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.

Suppose the market for wheat is perfectly competitive. Fed up with low prices, a wheat grower in Texas decides he won't take his output to market and, instead, dumps all his wheat into the Red River. What happens to the market price of wheat?

It doesn't change.

Refer to Figure 15-11. Which area represents the deadweight loss from monopoly?

J+H

In the above figure, curves 1, 2, 3, and 4 represent the:

MC, ATC, AVC, and AFC curves respectively.

Which is true with respect to the demand of a monopolist?

Marginal revenue is less than price

Authors are allowed to be monopolists in the sale of their books in order to

None of the above is correct.

Refer to the below diagram. At output level Q total variable cost is:

OBEQ.

Refer to the below diagram. This firm will earn a positive profit if product price is:

P1.

Refer to Figure 15-5. A profit-maximizing monopoly will charge a price of

P2.

Refer to the below diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is:

P2.

In the figure below: (Image not found, refer to google doc) https://docs.google.com/document/d/1MDSFFOIbHRCONgTx6jxGWjnwcxTzvd8BUOLhirzT4rk/edit?usp=sharing

Point B, where MR = MC, represents the point where the profit is maximized

A purely competitive firm, as shown below, will face what kind of change in profits over the long run, assuming industry demand is constant? (Image not found, refer to google doc) https://docs.google.com/document/d/1MDSFFOIbHRCONgTx6jxGWjnwcxTzvd8BUOLhirzT4rk/edit?usp=sharing

Profits will decrease

Refer to Figure 15-15. To maximize its profit, a monopolist would choose which of the following outcomes?

Q = 30 and P = 60

Refer to the below graphs. What will happen in the long run to industry supply and the equilibrium price of the product?

S will decrease, P will increase

Which of the following is correct?

When MP is rising MC is falling, and when MP is falling MC is rising.

Refer to the below graph. Assume the market is monopolistic competition. In the long run, the profits of one firm:

Will be 0.

Refer to the below diagram. At the profit-maximizing output, the firm will realize:

a profit of ABGH.

In the transition from the short run to the long run, the number of firms in a competitive industry is

able to adjust to market conditions.

Fixed cost is:

any cost which does not change when the firm changes its output.

A local playground equipment company plans to operate out of its current factory, which is estimated to last 30 years. All cost decisions it makes during the 30-year period

are short-run decisions.

Average total cost is very high when a small amount of output is produced because

average fixed cost is high.

A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100,

average variable cost is $3.

Refer to the below diagram for a purely competitive producer. The firm will produce at a loss at all prices:

between P2 and P3.

An individual firm in a perfectly competitive market:

cannot affect market price.

Refer to the below data. The profit-maximizing output for this firm:

cannot be determined from the information given.

Mrs. Smith operates a business in a competitive market. The current market price is $8.50. 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 both the short run and long run.

Refer to Figure 15-4. If the monopoly firm is currently producing Q3 units of output, then a decrease in output will necessarily cause profit to

decrease.

Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its

demand curve and its average total cost curve.

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters

diminishing marginal product.

The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.

downsloping, perfectly elastic

When new firms have an incentive to enter a competitive market, their entry will

drive down profits of existing firms in the market.

Refer to the below diagram for a purely competitive producer. If product price is P3:

economic profits will be zero.

As the firm in the above diagram expands from plant size #1 to plant size #3, it experiences:

economies of scale.

Refer to Figure 14-14. If the market starts in equilibrium at point Z in panel (b), a decrease in demand will ultimately lead to

fewer firms in the market.

Accounting profits are typically:

greater than economic profits because the former do not take implicit costs into account.

Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $200. In order to maximize profits, Laura should

make more than 20 wedding cakes per month.

If average total cost is declining, then:

marginal cost must be less than average total cost.

Refer to the above diagram. At output level Q:

marginal product is falling.

Mr. Rogers sells colored pencils. The colored-pencil industry is competitive. Mr. Rogers hires a business consultant to analyze his company's financial records. The consultant recommends that Mr. Rogers increase his production. The consultant must have concluded that Mr. Roger's

marginal revenue exceeds his marginal cost.

Because a monopolist must lower its price in order to sell another unit of output,

marginal revenue is less than price.

By comparing marginal revenue and marginal cost, a firm in a competitive market is able to adjust production to the level that achieves its objective, which we assume to be

maximizing profit.

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:

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

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium.

Refer to the below diagram. At P4, this firm will:

shut down in the short run.

Refer to the above diagram. The vertical distance between ATC and AVC reflects:

the average fixed cost at each level of output.

Refer to the below diagram for a purely competitive producer. The firm's short-run supply curve is:

the bcd segment and above on the MC curve.

The basic characteristic of the short run is that:

the firm does not have sufficient time to change the size of its plant.

If a variable input is added to some fixed input, beyond some point the resulting extra output will decline. This statement describes:

the law of diminishing product of labor.

An oligopoly is a market in which

there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market.

When price is greater than marginal cost for a firm in a competitive market,

there are opportunities to increase profit by increasing production.

Refer to the below data. Diminishing marginal product of labor become evident with the addition of the:

third worker.

In the above diagram curves 1, 2, and 3 represent: (Image not found, refer to google doc) https://docs.google.com/document/d/1MDSFFOIbHRCONgTx6jxGWjnwcxTzvd8BUOLhirzT4rk/edit?usp=sharing

total fixed cost, total variable cost, and total cost respectively.

Refer to the below data. When two workers are employed:

total product is 18.

A sunk cost is one that

was paid in the past and will not change regardless of the present decision.

Suppose that a firm in a competitive market has the following cost curves: Refer to Figure 14-1. If the market price is $6.30, the firm will earn

zero economic profits in the short run.

The table below shows the price and cost information for a firm that operates in a perfectly competitive market. ​Refer to Table 14-17. Using this information, determine the average variable cost (AVC) when Q = 5.

​$6.