Microeconomics midterm 2

Consider a firm with the following cost information :ATC=$15, AVC=$12, and MC=$15. If we know that this firm has decided to produce Q=20 by following the rule to maximize profits or minimize losses, then the price of the output is

$15

If a fishing boat owner brings 10,000 fish to market and the market price is $8 per fish; If the average variable cost of 10,000 fish is $4 and the fixed cost of the bat is $20,000, what is her profit

$20,000

At a price of $5, 24 units of the good would be sold; at a price of $4.95, 25 units of output would be sold. The marginal revenue of the 25th unit output is:

$3.75

Tara buys three music cassettes when the price is $10 and two cassettes when the price is $14. Her price elasticity of demand is:

0.83

Which of the following is not associated with the monopoly market structure?

A few sellers

Which of the following is the best example of the income effect?

Joe buys more apples when the price of apples decreases so that his real income increases, and he can buy more apples

The profit-maximizing output level for a monopolist is where the

MR=MC

Using the rule that focuses on the marginal approach to maximizing profits, a monopolist charges a price where the

MR=MC

Monopolists are criticized because they are inefficient. What is meant by this statement?

Monopolists usually don't produce at the minimum of the ATC

Which of the following firms are likely yo operate as a natural monopoly?

Telephone company, Electric company, Water company

A monopolist face a downward sloping demand curve that is equal to which of the following?

The market demanded curve

If mr. smith thinks the last dollar spend on shirts yields 10 units of satisfaction, the last dollar spend on cola yields 8 units of satisfaction, and Smith is a utility-maximizing consumer, he should

decrease his spending on cola and increase his spending on shirts.

If demand for automobile is price elastic, then when price increases, total revenue:

decreases

Generally speaking, as more of a particular good is purchased, a consumer's marginal utility ____ and total utility ____.

decreases; increases

If the price elasticity of supply for Pizza is 1.5, then supply is:

elastic

A measure of sensitivity or responsiveness to changes in price or income is called

elasticity

If demand for beer is price inelastic, then the price elasticity will be

less then one

To maximize its profits, a monopoly should produce the quantity where its marginal cost equals its:

marginal revenue

If automobiles and auto insurance are complements, then their cross-elasticity coefficient will be:

negative

A monopolist can earn an economic profit only when:

price is greater then average total cost

Which of the following correctly describes price discrimination?

selling the same product to different people for different prices

Monopoly is a market structure characterized by a :

single firm that is not a price taker

An increase in the consumption of a good resulting from a reduction in price that makes the good cheaper in relation to other goods is called the

substitution effect

If an excise tax is placed on a product that has a perfectly elastic demand, then:

the entire tax will be paid by the producer

A monopoly is

the only seller of a good for which there are no good substitutes in a market with high barriers to entry