Econ. 102- Final

Refer to Figure 8.3. The marginal cost of the 10th basketball is

$2

Refer to Figure 8.8. If this farmer is producing the profit-maximizing level of output, her profit is

$3,000

Total cost is calculated as...

The sum of total fixed cost and total variable cost.

If an individual perfectly competitive firm charges a price below the industry equilibrium price, it will

sell all that it produces but gain less revenue than competing firms will.

SCENARIO 9.1: Amy borrowed $20,000 from her parents to open a bagel shop. She pays her parents a 5% yearly return on the money they lent her. Her other yearly fixed costs equal $9,000. Her variable costs equal $30,000. In her first year, Amy sold 40,000 dozen at a price of $1.50 per dozen. 7) Refer to Scenario 9.1. Amy's profit is A) $0. B) $20,000. C) $30,000. D) $50,000.

B) $20,000.

SCENARIO 9.1: Amy borrowed $20,000 from her parents to open a bagel shop. She pays her parents a 5% yearly return on the money they lent her. Her other yearly fixed costs equal $9,000. Her variable costs equal $30,000. In her first year, Amy sold 40,000 dozen at a price of $1.50 per dozen. 6) Refer to Scenario 9.1. Amy's total costs equal A) $39,000. B) $40,000. C) $50,000. D) $59,000.

B) $40,000.

A decrease in the wage rate will change A) only the amount of labor hired. B) the amount of labor employed, and it may also change the amount of other inputs employed. C) the price the firm charges for the product, but it will not affect the demand for any of the inputs. D) the firm's profit-maximizing level output, but not its usage of inputs.

B) the amount of labor employed, and it may also change the amount of other inputs employed.

An example of intangible capital is A) a vacation house. B) a flower garden. C) a book. D) a trained apprenticeship program.

D) a trained apprenticeship program.

The feature that distinguishes monopolistic competition from perfect competition is that monopolistically competitive firms are A) large relative to the market. B) price takers. C) able to block the entry of other firms. D) able to differentiate their products.

D) able to differentiate their products.

Suppose there is a permanent shift of consumer preferences away from pretzels and toward potato chips. The most likely result would be A) in the short run, economic losses in the potato chip market. B) in the long run, a fall in the supply of potato chips. C) in the short run, a rise in the price of pretzels. D) short-run profits in the potato chip market increase.

D) short-run profits in the potato chip market increase.

Refer to Figure 8.3. If the total fixed cost is $50, then average total cost of producing 10 basketballs is

$8

Refer to Figure 8.8. What is the total cost of producing the profit maximizing level of output?

$9,000

Refer to Figure 8.8. This farmer's profit-maximizing level of output is ________ units of output.

1,000

Refer to Table 11.1. If the interest rate is 9%, Nashbar Bicycle's total investment would be A) $200,000. B) $300,000. C) $900,000. D) $1,100,000.

D) $1,100,000.

SCENARIO 9.1: Amy borrowed $20,000 from her parents to open a bagel shop. She pays her parents a 5% yearly return on the money they lent her. Her other yearly fixed costs equal $9,000. Her variable costs equal $30,000. In her first year, Amy sold 40,000 dozen at a price of $1.50 per dozen. 5) Refer to Scenario 9.1. Amy's total fixed costs equal A) $1,000. B) $9,000. C) $10,000. D) $21,000.

$10,000

Refer to Figure 8.8. If the market price of soybeans falls to $8, then to maximize profits this farmer should produce

700 bushels of soybeans.

If the interest rate is 10%, the current market value of $1 to be delivered in one year is A) $0.91. B) $0.99. C) $1.00. D) $1.10.

A) $0.91.

You use $2,000 of your own money to start a dog-sitting service. During the first year you earn a 10% return on your investment. If the current interest rate is 7%, you earn an economic profit of A) $60. B) $140. C) $200. D) $340.

A) $60.

A car manufacturing company adopts a new technology that, ceteris paribus, increases the productivity of capital. At the same time, workers unionize and demand higher wages. Assume that for this firm capital and labor are substitutable. Which of the following is most likely to occur? A) Capital will be substituted for labor. B) Labor will be substituted for capital. C) Output increases as do the prices of capital and labor. D) Output decreases as does the price of cars.

A) Capital will be substituted for labor.

The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $4.00 and its AFC is $3.00. What should Taste Freeze do? A) Continue to produce because price exceeds AVC. B) Shut down and produce zero sandwiches because price is less than ATC. C) Decrease production so that AVC will decrease. D) Increase production so that AFC will decrease.

A) Continue to produce because price exceeds AVC.

A condition in which no change is possible that will make some members of society better off without making some other members of society worse off is called A) Pareto optimality. B) partial equilibrium. C) general equilibrium. D) market failure.

A) Pareto optimality.

It is essential to establish specific criteria to judge the performance of any economic system. Two such criteria are A) efficiency and equity. B) profit opportunities and technological progress. C) efficiency and profit opportunities. D) technological progress and achieving general equilibrium

A) efficiency and equity.

Refer to Table 11.1. If the interest rate is 20%, Nashbar Bicycle should A) fund only the purchase of new notebook computers for its sales staff. B) fund all of the projects except for the purchase of new notebook computers for its sales staff. C) fund all of the projects. D) not fund any of the projects.

A) fund only the purchase of new notebook computers for its sales staff.

The government uses ________ figures contained in the Herfindahl-Hirschman Index (HHI) to help determine whether or not it will challenge a proposed merger. A) market share B) firm size C) barriers to entry D) profit

A) market share

Monopolistic competition differs from perfect competition primarily because in A) monopolistic competition, firms can differentiate their products. B) perfect competition, firms can differentiate their products. C) monopolistic competition, entry into the industry is blocked. D) monopolistic competition, there are relatively few barriers to entry.

A) monopolistic competition, firms can differentiate their products.

The demand for Ben & Jerry's ice cream will likely be ________ the demand for dessert. A) more price elastic than B) less price elastic than C) equally price elastic as D) indeterminate from the given information.

A) more price elastic than

If TR > TC, a firm would ________ in the short run and ________ in the long run. A) operate; expand B) operate; contract C) shut down; expand D) shut down; contract

A) operate; expand

Refer to Table 10.1. The marginal revenue product of the ________ worker is $150. A) second B) third C) fourth D) fifth

A) second

Perfectly competitive firms

A) sell homogeneous products. B) are price takers. C) are small relative to the size of the market. D) All of the above are correct.

4) Refer to Table 14.2. Firm Aʹs dominant strategy is A) to advertise. B) to not advertise. C) dependent on what Firm B does. D) indeterminate from this information, as no information is provided on Firm Aʹs risk preference.

A) to advertise.

A new technology is developed for producing microwave ovens that reduces production costs by 10%. Which of the following is the most likely consequence of this technological change? A) Firms will continue to operate efficiently as long as no firm adopts this new technology. B) Firms must adopt this new technology to remain efficient. C) This new technology will not affect efficiency, but it will change the equilibrium price and quantity for this industry. D) If firms do not adopt this new technology, then the economy will remain in general equilibrium, because firms will not change their price and output decisions

B) Firms must adopt this new technology to remain efficient.

The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $8.00 and its AFC is $3.00. What should Taste Freeze do? A) Continue to produce because price exceeds AFC. B) Shut down and produce zero sandwiches because price is less than AVC. C) Decrease production so that AVC will decrease. D) Increase production so that AFC will decrease.

B) Shut down and produce zero sandwiches because price is less than AVC.

In an imperfectly competitive industry, A) a single firm has no control over the price of its output. B) a single firm has some control over the price of its output. C) a single firm will be able to sell all of its output at whatever price it wants to charge. D) the government will always regulate the output price.

B) a single firm has some control over the price of its output.

An oligopoly is an industry market structure with A) a single firm in which the entry of new firms is blocked. B) a small number of firms each large enough to impact the market price of its output. C) many firms each able to differentiate their product. D) many firms each too small to impact the market price.

B) a small number of firms each large enough to impact the market price of its output.

Of the following, ________ is the best example of an oligopolistic industry. A) grocery stores B) automobiles production C) electric power D) soybean farming

B) automobiles production

In monopolistic competition, firms can have some market power A) by virtue of size alone. B) by producing differentiated products. C) because of barriers to entry into the industry. D) because of barriers to exit from the industry.

B) by producing differentiated products.

1) Goods produced by the economic system that are used as inputs in the production of future goods and services are A) consumable goods. B) capital goods. C) tangible goods. D) depreciation goods.

B) capital goods.

The idea that the demand for auto workers stems from the demand for automobiles is A) the value of the marginal product of auto workers. B) derived demand. C) indirect demand. D) output demand.

B) derived demand.

Monopolies, oligopolies, and monopolistic competitive industries all A) earn positive profits in the long run. B) have market power. C) are completely unconstrained in their pricing. D) raise price and quantity over what would occur in perfect competition in order to maximize their profits.

B) have market power.

Suppose a policy change will generate $100,000 of benefits for low-income families and $120,000 of costs for high-income families. This change can best be described as A) Pareto efficient. B) inefficient. C) potentially efficient. D) equitable.

B) inefficient.

Salaries of NFL quarterbacks, like Tom Brady, are A) too high. B) related to the additional revenues team owners expect to enjoy as a result of having them on the team roster. C) the result of perfectly competitive markets. D) All of the above

B) related to the additional revenues team owners expect to enjoy as a result of having them on the team roster.

For a monopolist to sell more units of output, A) the price must be increased. B) the price must be reduced. C) demand must become more elastic. D) the other competing firms must sell fewer units

B) the price must be reduced.

Refer to Table 10.1. The marginal revenue product of the fourth worker is A) $5. B) $20. C) $100. D) $475.

C) $100.

Which of the following would be the most likely result if high-speed rail service were introduced to an area and made commuting from that area easier? A) The cost of living far from one's workplace would rise, and the value of land would increase. B) The cost of living far from one's workplace would rise, and the value of land would decrease. C) The cost of living far from one's workplace would drop, and the value of land would increase. D) The cost of living far from one's workplace would drop, and the value of land would decrease.

C) The cost of living far from one's workplace would drop, and the value of land would increase.

You value your economics textbook at $10. Someone else values it at $25, and that person is willing to pay you $20 for your textbook. Would selling your textbook to this person for $20 be Pareto efficient? A) No, because you did not receive the maximum amount the other person would have been willing to pay for the textbook. B) No, the person paid you $20 for the book so his net benefit was only $5, whereas your net benefit was $10. For this change to be Pareto efficient, each of you should have the same net benefit. C) Yes, because both of you are better off as a result of the trade. D) Yes, because even though you gain from the trade and he loses, there is the potential for you to compensate him for his loss.

C) Yes, because both of you are better off as a result of the trade.

Which of the following is LEAST likely to be considered a firm in an imperfectly competitive industry? A) a Burger King in Pittsburgh, Pa. B) Ohio Bell Telephone Company C) a wheat farmer in Kansas D) the only locally owned and operated bank in Severn, MD.

C) a wheat farmer in Kansas

Which of the following is NOT an example of price discrimination? A) airlines charging lower prices to travelers who stay over a Saturday night B) student discounts at movie theaters C) back-to-school sales D) discounted coffee for senior citizens at restaurants

C) back-to-school sales

Oligopolists must ________ to their strategy in order to determine their optimal strategy. A) anticipate the reaction of their customers B) anticipate the reaction of their rivals C) both A and B are correct. D) none of the above

C) both A and B are correct.

Monopolistic competition is an industry market structure with A) a single firm in which the entry of new firms is blocked. B) a small number of firms each large enough to impact the market price of its output. C) many firms each able to differentiate their product. D) many firms each too small to impact the market price of its output.

C) many firms each able to differentiate their product.

The restaurant industry is an example of a(n) ________ industry. A) perfectly competitive B) monopolistic C) monopolistically competitive D) oligopolistic

C) monopolistically competitive

The demand facing a monopolistically competitive firm is ________ a monopolistic firm and ________ a perfectly competitive firm. A) as elastic as; less elastic than B) less elastic than; more elastic than C) more elastic than; less elastic than D) more elastic than; as elastic as

C) more elastic than; less elastic than

Relative to a monopolized industry, a competitively organized industry is more likely to produce A) more output, charges higher prices, and earns economic profits. B) more output, charges lower prices, and earns economic profits. C) more output, charges lower prices, and earns only a normal profit. D) less output, charges higher prices, and earns economic profits.

C) more output, charges lower prices, and earns only a normal profit.

A form of industry structure characterized by a few firms each large enough to influence market price is A) perfect competition. B) monopolistic competition. C) oligopoly. D) monopoly.

C) oligopoly.

Capital goods yield benefits A) as soon as the investment decision is made. B) before they are put to use. C) over their life span. D) in the present only.

C) over their life span.

An economist has estimated that the maintenance of a public park costs $25,000 a year and that the public park generates $30,000 a year in revenue for merchants near the park. From society's point of view, the maintenance of this park is A) inefficient because everyone in the community pays taxes to support the park, but only the merchants near the park benefit. B) inefficient because the additional revenues generated by the park are so low. C) potentially efficient because the value of the gains exceed the value of the costs. D) potentially efficient because no one would be made worse off as a result of maintaining the park.

C) potentially efficient because the value of the gains exceed the value of the costs.

Billy Bob's Fertilizer Engineers, a perfectly competitive firm, is incurring a loss, but the price is still above minimum average variable cost. Then in the short run this firm should ________, and in the long run, if there is no change in economic conditions, this firm should ________. A) shut down; exit the industry B) shut down; expand C) produce where MR = MC; exit the industry D) produce where MR = MC; expand

C) produce where MR = MC; exit the industry

In making labor supply decisions, households weigh A) the market wage against the value of market produced goods. B) the market wage against the value of their marginal product of labor. C) the market wage against the value of leisure and time spent in unpaid household production. D) child care costs.

C) the market wage against the value of leisure and time spent in unpaid household production.

A technological change in the production of cars will A) affect only the markets for inputs used to produce cars. B) affect only the way cars are produced. C) have no effect on consumers. D) affect input and output markets in the automobile industry and other related industries.

D) affect input and output markets in the automobile industry and other related industries.

Although patents are a ________, they also provide ________. A) collusive agreement; for free entry of new firms B) collusive agreement; an incentive for invention and innovation C) barrier to entry; for free entry of new firms D) barrier to entry; an incentive for invention and innovation

D) barrier to entry; an incentive for invention and innovation

The market in which households supply their savings to firms that demand funds in order to buy capital goods is the ________ market. A) money B) savings C) investment D) capital

D) capital

The airline industry is an example of a(n) ________ industry. A) perfectly competitive B) monopolistic C) monopolistically competitive D) oligopolistic

D) oligopolistic

Which one of the following is NOT a source of market failure? A) externalities B) public goods C) imperfect information D) price ceilings

D) price ceilings

There is a bill pending before the Kansas State Legislature that would prohibit private companies from selling health insurance and would make the state the single payer of health care bills. Private health insurance companies that have made above normal profits have spent large sums of money trying to prevent this bill from being passed into law. This is an example of A) government failure. B) collusion. C) an externality. D) rent-seeking behavior.

D) rent-seeking behavior.

Assume Dell Computer Company operates in a perfectly competitive market producing 5,000 computers per day. At this output level, price exceeds this firm's marginal cost. To maximize profits, Dell should

Increase their output

Assume Dell Computer Company operates in a perfectly competitive market producing 5,000 computers per day. At this output level, price equals this firm's marginal cost. To maximize profits, Dell should

make no adjustments as they are already maximizing their profits.

If a firm is producing where MR > MC,

the revenue gained by producing one more unit of output exceeds the cost incurred by doing so.

Profit-maximizing firms want to maximize the difference between

total revenue and total cost.