Econ 101- Midterm 3 Practice

are indistinguishable from generic products

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

has many competitors

In both perfect competition and monopolistic competition, each firm

economies of scale because average total cost is falling as output rises

In the long run a company that produces and sells candy bars incurs total costs of $1,200 when output is 2,400 candy bars and $1,400 when output is 2,900 candy bars. The candy bar company exhibits

implicit costs

As a general rule, when accountants calculate profit they account for explicit costs but usually ignore

some firms will exit from the market

Phil sells duck calls in a perfectly competitive market. If duck calls sell for $10 each and average total cost per unit is $11 at the profit-maximizing output level, then in the long run

the marginal firm will earn zero economic profit

Regardless of the cost structure of firms in a competitive market, in the long run

Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.

Which of the following is not a difference between monopolies and perfectly competitive markets?

the marginal cost curve eventually rises with the quantity of output

Which of the following statements is correct?

more firms will enter the market

Willie's Wading Adventures sells hip waders for fishing and duck hunting in a perfectly competitive market. If hip waders sell for $100 each and average total cost per unit is $95 at the profit-maximizing output level, then in the long run

profit is positive in the long run

. Among the following situations, which one is least likely to apply to a monopolistically competitive firm?

does not exist

. The supply curve for the monopolist

$4,200

A firm has a fixed cost of $700 in its first year of operation. When the firm produces 99 units of output, its total costs are $4,000. The marginal cost of producing the 100th unit of output is $200. What is the total cost of producing 100 units?

$25

A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. Price Quantity $30 1 $26 2 $22 3 $18 4 $14 5 $10 6 $6 7 If the firm has a constant marginal cost of $7 per unit, how much profit will the firm earn at the profit-maximizing level of output?

total revenue minus the explicit cost of producing goods and services TR-EC=AP

Accounting profit is equal to

marginal cost is greater than average total cost MC > ATC

Average total cost is increasing whenever

shut down if P<AVC

Competitive firms that earn a loss in the short run should

the $30,000 per year salary paid to the company's bookkeeper

For a construction company that builds houses, which of the following costs would be a fixed cost?

eliminate consumer surplus/ maximize profits/ eliminate deadweight loss

If a monopolist can practice perfect price discrimination, the monopolist will

new firms will enter the market

If firms in a monopolistically competitive market are earning positive profits, then

in the short run firms will continue to operate, but in the long run firms will leave the market

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.50 and AVC = $4.50

firms can enter or exit the market without restrictions

In a monopolistically competitive market

monopolistic competition

In which of the following markets is economic profit driven to zero in the long run?

$15,000

Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $150,000, and her expenses for the business were $15,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet sitting. She used to earn $10,000 per year from pet sitting. Assume that she incurred no costs for her pet sitting business. Julia's explicit costs are?

27 units of output

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 5, Q = 125) and (L = 6, Q = 152). Then the marginal product of the 6th worker is

brand names can consumers to perceive differences that do not really exist

Piper consumes Ragu spaghetti sauce exclusively. She claims that there is a clear taste difference and that competing brands of spaghetti sauce leave an unsavory taste in her mouth. However, in a blind taste test, Piper is found to prefer generic store-brand spaghetti sauce to Ragu spaghetti sauce eight out of ten times. The results of Piper's taste test would reinforce claims by critics of brand names that

Total revenue is greater than variable cost TR > VR

Quantity Total Revenue Total Cost 0 $0 $5 1 $8 $9 2 $16 $14 3 $24 $20 4 $32 $27 5 $40 $35 6 $48 $44 7 $56 $54 8 $64 $65 9 $72 $72 Refer to Table. If the firm produces 3 units of output

(i) and (ii) only

Suppose a competitive market is comprised of firms that face identical cost curves. The firms experience an increase in demand that results in positive profits for the firms. Which of the following events are then most likely to occur? (i) New firms will enter the market. (ii) In the short run, price will rise; in the long run, price will rise further. (iii) In the long run, all firms will be producing at their efficient scale

labor to be variable and capital to be fixed

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers

because the company would sell so few diamonds that it would earn higher profits by selling at lower price

Suppose that the DeBeers company faces very little competition from other firms in the wholesale diamond market. Why isn't the price of wholesale diamonds $10,000 per carat?

marginal cost curve intersects those curves

The minimum points of the average variable cost and average total cost curves occur where the

product differentiation

Which of the following conditions distinguishes monopolistic competition from perfect competition?

a monopoly

A market structure with barriers to entry is