Econ 101: Exam 3 (Diagram questions)

C) marginal

(Figure: A Firm's Cost Curves) Look at the figure A Firm's Cost Curves. The curve labeled V represents the firm's _____ cost curve. A) total B) average total C) marginal D) average variable

B) average total

(Figure: A Firm's Cost Curves) Look at the figure A Firm's Cost Curves. The curve labeled W represents the firm's _____ cost curve. A) average fixed B) average total C) average variable D) total variable

B) $12.

(Figure: A Profit-Maximizing Monopoly Firm) Look at the figure A Profit-Maximizing Monopoly Firm. This firm's profit per unit is: A) $5. B) $12. C) $15. D) $20.

C) 3; total fixed costs

(Figure: Cost Curves for Corn Producers) Look at the figure Cost Curves for Corn Producers. The market for corn is perfectly competitive. If the price of a bushel of corn is $10, then in the short run the farmer will produce _____ bushels of corn and take an economic loss equal to _____. A) 0; average fixed costs B) 0; total variable costs C) 3; total fixed costs D) 3; $22 per bushel

A) 4 bushels; profit; $0

(Figure: Cost Curves for Corn Producers) Look at the figure Cost Curves for Corn Producers. The market for corn is perfectly competitive. If the price of a bushel of corn is $14, in the short run, the farmer will produce _____ of corn and earn an economic _____ equal to _____. A) 4 bushels; profit; $0 B) 4 bushels; profit; just less than $80 per bushel C) 2 bushels; profit; $0 D) 2 bushels; loss; just more than $80 per bushel

B) 0; loss; total fixed costs

(Figure: Cost Curves for Corn Producers) Look at the figure Cost Curves for Corn Producers. The market for corn is perfectly competitive. If the price of a bushel of corn is $4, in the short run the farmer will produce _____ bushels of corn and earn an economic _____ equal to _____. A) 0; loss; average fixed costs B) 0; loss; total fixed costs C) 3; loss; $30 per bushel D) 3; profit; $20 per bushel

A) increases; increases

(Figure: Costs and Profits for Tomato Producers) Look at the figure Costs and Profits for Tomato Producers. The market for tomatoes is perfectly competitive. The market price of a bushel of tomatoes is $18. If the market price increases to $20, the farmer's marginal revenue _____ and the profit-maximizing output _____. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases

A) $40.

(Figure: Demand, Revenue, and Cost Curves) Look at the figure Demand, Revenue, and Cost Curves. Figglenuts-R-Us is a monopolist in the figglenut market. If the government wanted to regulate Figglenuts-R-Us such that the entire deadweight loss would be eliminated in the short run, it would impose a price ceiling of: A) $40. B) $46. C) $50. D) $65.

B) ATC2.

(Figure: Long-Run and Short-Run Average Cost Curves) Look at the figure Long-Run and Short-Run Average Cost Curves. If a firm faced the long-run average total cost curve shown in the figure and it expected to produce 100,000 units of the good in the long run, the firm should build the plant associated with: A) ATC1. B) ATC2. C) ATC3. D) ATC1 or ATC2.

D) bigger; diseconomies

(Figure: Long-Run and Short-Run Average Cost Curves) Look at the figure Long-Run and Short-Run Average Cost Curves. If a firm is producing at point C on the ATC2 but anticipates increasing output to 225,000 units in the long run, the firm will build a _____ plant and have _____ of scale. A) smaller; economies B) smaller; diseconomies C) bigger; economies D) bigger; diseconomies

C) $80

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $20. If the cable company is a monopoly, how much is deadweight loss when the monopolist maximizes profit? A) $0 B) $20 C) $80 D) $160

C) q2; incur a loss

(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm in the Short Run. If the market price is P3, the firm will produce quantity _____ and _____ in the short run. A) q2; make a profit B) q1; break even C) q2; incur a loss D) q4; incur a loss

B) q3; make a profit

(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm in the Short Run. If the market price is P4, the firm will produce quantity _____ and _____ in the short run. A) q1; break even B) q3; make a profit C) q4; break even D) q5; lose fixed costs

B) there will be economic profits and firms will enter the industry in the long run.

(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm in the Short Run. If the market price is P4: A) firms will leave the industry and the price will fall in the long run. B) there will be economic profits and firms will enter the industry in the long run. C) the market supply curve will shift to the left and price will fall in the long run. D) the firm will produce q4.

C) shut down

(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm in the Short Run. If the market price is less than P2, the firm will _____ in the short run. A) produce q1 and break even B) produce q1 and incur a loss C) shut down D) produce q3 and make a profit

B) $400

(Table: Demand and Total Cost) Look at the table Demand and Total Cost. Lenoia runs a natural monopoly firm producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. To maximize profits, Lenoia should charge a price of: A) $350. B) $400. C) $450. D) $500.

A) $48.

(Table: Output and Costs) Look at the table Output and Costs. When output is 4, total variable cost equals: A) $48. B) $38. C) $58. D) $28.

B) 5

(Table: Soybean Cost) Look at the table Soybean Cost. If the market price of a bushel of soybeans is $15, how many bushels will the farmer produce to maximize short-run profit? A) 2 B) 5 C) 3 D) 7

C) $6

(Table: Soybean Cost) Look at the table Soybean Cost. If the market price of a bushel of soybeans is $15, what will be the farmer's short-run maximum profit? A) $75 B) $69 C) $6 D) $5

B) $13.50

(Table: Soybean Cost) Look at the table Soybean Cost. What is the break-even price for this farmer? A) $13.00 B) $13.50 C) $14.00 D) $14.50

A) $10

(Table: Soybean Cost) Look at the table Soybean Cost. What is the shut-down price for this farmer? A) $10 B) $11 C) $12 D) $13

D) eighth

(Table: Total Product and Marginal Product) Look at the table Total Product and Marginal Product. Negative marginal returns begin when the _____ worker is added. A) fifth B) sixth C) seventh D) eighth

A) 20

(Table: Total Product and Marginal Product) Look at the table Total Product and Marginal Product. The marginal product of the fourth worker is _____ units. A) 20 B) 22.5 C) 50 D) 90

B. This firm's fixed cost is $5.

A perfectly competitive firm has the following short run total cost: Calculate this firm's marginal cost and, for all output levels except zero, the firm's average variable cost and average total cost. Based on your calculations, choose the correct statement. A. The minimum MC is $5. B. This firm's fixed cost is $5. C. The minimum AVC is $5. D. The minimum ATC is $5.

D. 4,000 albums at $14 for each album

Download Records decides to release an album by the group Mary and the Little Lamb. It produces the album with no fixed cost, but the total cost of downloading an album to a CD and paying Mary her royalty is $6 per album. Download Records can act as a single price monopolist. Its marketing division finds that the demand schedule for the album is as shown in the accompanying table The marginal cost of producing each album is constant at $6. To maximize profit, what level of output should Download Records choose, and which price should it charge for each album?. A. 7,000 albums at $12 for each album B. 6,000 albums at $10 for each album C. 7,000 albums at $8 for each album D. 4,000 albums at $14 for each album

D. Ben would charge $6; 3 downloads would be sold.

Bob, Bill, Ben, and Brad Baxter have just made a documentary movie about their basketball team. They are thinking about making the movie available for download on the Internet, and they can act as a single price monopolist if they choose to. Each time the movie is downloaded, their Internet service provider charges them a fee of $4. The Baxter brothers are arguing about which price to charge customers per download. The accompanying table shows the demand schedule for their film. Ben wants to maximize profit. Which price would he choose? How many downloads would be sold? A. Ben would charge $8; 1 download would be sold. B. Ben would charge $0; 15 downloads would be sold. C. Ben would charge $4; 6 downloads would be sold. D. Ben would charge $6; 3 downloads would be sold.

A. Brad would charge $4; 6 downloads would be sold.

Bob, Bill, Ben, and Brad Baxter have just made a documentary movie about their basketball team. They are thinking about making the movie available for download on the Internet, and they can act as a single price monopolist if they choose to. Each time the movie is downloaded, their Internet service provider charges them a fee of $4. The Baxter brothers are arguing about which price to charge customers per download. The accompanying table shows the demand schedule for their film. Brad wants to charge the efficient price(i.e.,optimal pricing under perfect competition). Which price would he choose? How many downloads would be sold? A. Brad would charge $4; 6 downloads would be sold. B. Brad would charge $8; 1 download would be sold. C. Brad would charge $6; 3 downloads would be sold. D. Brad would charge $0; 15 downloads would be sold.

C. Triangle FRH

Consider an industry with the demand curve (D) and marginal cost curve (MC) shown in the accompanying diagram. Assume there is no fixed cost. If the industry is a single price monopoly, the monopolist's marginal revenue curve would be MR. Which area reflects the dead weight loss to society from single price monopoly? A. Rectangle BCGF B. Triangle FJK C. Triangle FRH D. Rectangle BEHF

D. Rectangle BEHF

Consider an industry with the demand curve (D) and marginal cost curve (MC) shown in the accompanying diagram. Assume there is no fixed cost. If the industry is a single price monopoly, the monopolist's marginal revenue curve would be MR. Which area reflects the single price monopolist's profit? A. Triangle AFB B. Triangle ARE C. Rectangle BCGF D. Rectangle BEHF

C. 2,000 albums at $18 per album

Download Records decides to release an album by the group Mary and the Little Lamb. It produces the album with no fixed cost, but the total cost of downloading an album to a CD and paying Mary her royalty is $6 per album. Download Records can act as a single price monopolist. Its marketing division finds that the demand schedule for the album is as shown in the accompanying table Mary renegotiates her contract and now needs to be paid a higher royalty per album. So the marginal cost rises to be constant at $14. To maximize profit, what level of output should Download Records choose, and which price should it charge for each album? A. 4,000 albums at $18 per album B. 6,000 albums at $18 per album C. 2,000 albums at $18 per album D. 4,000 albums at $16 per album

C. The AVC of a meal when 10 meals are produced is $20.

Kate's Katering provides catered meals, and the catered meals industry is perfectly competitive. Kate's machinery costs $100 per day and is the only fixed input. Her variable cost consists of the wages paid to the cooks and the food ingredients. The variable cost per day associated with each level of output is given in the accompanying table. Calculate the total cost, the average variable cost, the average total cost, and the marginal cost for each quantity of output. Use your calculations to choose the correct statement. A. In this example, MC always decreases as more meals are produced. B. In this example, ATC always decreases as more meals are produced. C. The AVC of a meal when 10 meals are produced is $20. D. The ATC of a meal when 10 meals are produced is $20.

B. Kate will incur a loss but should produce in the short run.

Kate's Katering provides catered meals, and the catered meals industry is perfectly competitive. Kate's machinery costs $100 per day and is the only fixed input. Her variable cost consists of the wages paid to the cooks and the food ingredients. The variable cost per day associated with each level of output is given in the accompanying table. Suppose that the price at which Kate can sell catered meals is $17 per meal. In the short run, will Kate earn a profit? In the short run, should she produce or shut down? A. Kate will break even and should continue to produce in the short run. B. Kate will incur a loss but should produce in the short run. C. Kate will incur a loss and should shut down in the short run. D. Kate will make a profit and should produce in the short run.

B. Kate will make a profit and should produce in the short run.

Kate's Katering provides catered meals, and the catered meals industry is perfectly competitive. Kate's machinery costs $100 per day and is the only fixed input. Her variable cost consists of the wages paid to the cooks and the food ingredients. The variable cost per day associated with each level of output is given in the accompanying table. Suppose that the price at which Kate can sell catered meals is $21 per meal. In the short run, will Kate earn a profit? If not, in the short run, should she produce or shut down? A. Kate will incur a loss but should produce in the short run. B. Kate will make a profit and should produce in the short run. C. Kate will incur a loss and should shut down in the short run. D. Kate will break even and should shut down in the short run.

B. $19.33, at an output quantity of 30 meals; $15 at an output of 20 meals

Kate's Katering provides catered meals, and the catered meals industry is perfectly competitive. Kate's machinery costs $100 per day and is the only fixed input. Her variable cost consists of the wages paid to the cooks and the food ingredients. The variable cost per day associated with each level of output is given in the accompanying table. The breakeven price is _____ and the shutdown price is ____. A. $20.00, at an output quantity of 30 meals; $15 at an output of 20 meals B. $19.33, at an output quantity of 30 meals; $15 at an output of 20 meals C. $16.00, at an output quantity of 30 meals; $20 at an output of 20 meals D. $19.33, at an output quantity of 20 meals; $15 at an output of 30 meals

D) 6

Table: Prices and Demand) Look at the table Prices and Demand. Professor Dumbledore has a monopoly on magic hats. The marginal cost of producing a hat is $18. Suppose Dumbledore can perfectly price-discriminate. How many hats will he produce? A) 3 B) 4 C) 5 D) 6

C. The firm will produce only if the price is greater than $4; at that price, the quantity supplied by all the firms in the industry will be 200.

There are 100 firms in this industry that all have costs identical to those of this firm. Given this information, choose the correct statement below. A. The firm will produce only if the price is greater than $6; at that price, the quantity supplied by all the firms in the industry will be 300. B. The firm will produce only if the price is greater than $6; at that price, the quantity supplied by all the firms in the industry will be 200. C. The firm will produce only if the price is greater than $4; at that price, the quantity supplied by all the firms in the industry will be 200. D. The firm will produce only if the price is greater than $4; at that price, the quantity supplied by all the firms in the industry will be 300.

D. The market price is $10 and each firm makes a profit of $16.

What is the equilibrium market price, and how much profit will each firm make? A. The market price is $12 and each firm makes a profit of $18. B. The market price is $10 and each firm makes a profit of $50. C. The market price is $10 and each firm makes a profit of $34. D. The market price is $10 and each firm makes a profit of $16.