(ECON 105) Test 4

The table above shows a the total product schedule of Piece a' Pi, a producer of pizza in a nearby college town. Suppose workers are paid $12 per hour and the price per pizza is $10. The value of marginal product of the fifth worker is ________ per hour.

$10

The figure above shows the market for airplanes. Suppose the airplane market is an oligopoly. According to the figure above, the price can range as high as ________ and as low as ________.

$13 million per plane; $1 million per plane

The above figure shows a restaurant engaged in monopolistic competition with other restaurants. The equilibrium price at this restaurant is ________ per meal.

$50

The figure above shows a firm's demand and marginal revenue curves and its cost curves. As long as the firm illustrated above remains open, it will set a price of ________ per month and it will ________.

$50; incur an economic loss

Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a single-price monopoly. The figure above shows the relevant demand and cost curves. When the market is perfectly competitive, the price of a pound of steak is

$8.

Which of the following four-firm concentration ratios would be the best indication of a perfectly competitive industry?

2 percent

Suppose the Busy Bee Caf is the monopoly producer of hamburgers in Hugo, Oklahoma. The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment. What quantity will the Busy Bee produce to maximize its profit?

20 hamburgers per hour

The graph shows the market for the two zipline firms that operate in a resort city. If the firms maximize profit and decide to collude, together they will produce ________ rides at a price of ________ per ride.

200; $50

In order to maximize its profit, a single-price monopoly produces the amount of output so that

MR = MC.

In the long-run, a firm in monopolistic competition produces at an output level where

P = ATC and MR = MC.

Which of the following is always true for a single-price monopolist?

P > MR

The women's dress industry is monopolistically competitive because each firm has

a very small market share.

The figure above shows the demand curve, marginal revenue curve, and marginal cost curve. The amount of consumer surplus when the market has a monopoly producer is ________ and the amount of consumer surplus when the market is perfectly competitive is ________.

abf; ace

Herb's Inc. has a large share of its market and is tempted to collude with the few firms that are in its market. Herb's operates in

an oligopoly.

If the Herfindahl-Hirschman Index in an industry is above 1,800, a merger that increases the Herfindahl-Hirschman Index by over 50 points will

be challenged by the government.

Assume someone organizes all farms in the nation into a single-price monopoly. As a result, the amount of food produced

decreases.

The demand for carpenters needed to build houses represents a

derived demand.

Of all the characteristics that lead to income inequality, the factor with the largest impact is

education.

The rule for employing a profit-maximizing amount of labor is to continue to hire additional workers until the additional worker's value of marginal product is

equal to the wage rate.

Game theory is the tool that economists use to analyze strategic behavior, which is behavior that takes into account the ________ behavior of others and the mutual recognition of ________.

expected; interdependence

If the demand for labor decreases, then the equilibrium wage rate ________ and the equilibrium quantity of labor ________.

falls; decreases

The good produced by a monopoly

has no close substitutes.

One reason why economists earn more than Taco Bell workers is because economists have a ________ value of marginal product of labor than Taco Bell workers.

higher

Compared to low-skilled workers, high-skilled workers have a ________ value of marginal product and ________ opportunity cost of obtaining their skills.

higher; a higher

Peyton is a personal trainer and works at several gyms in her neighborhood. Peyton's labor supply curve is shown above. Which of the following statements is true regarding Peyton's labor supply? i. Peyton is willing to supply more labor and give up leisure at wages between $50 and $75 per hour. ii. Peyton will not work for less than $30 per hour. iii. If the wage increases higher than $75 per hour, Peyton will choose to take more leisure.

i, ii and iii

Which of the following characteristics describe the market shown in the graph above? i. The market has easy entry and exit. ii. A firm in this type of market has many competitors. iii. The graph show the long run for this firm.

i, ii and iii

Differences in skills i. can arise partly from differences in education and/or partly from differences in on-the-job training. ii. can lead to large differences in earnings. iii. result in different demand curves for high-skilled and low-skilled labor.

i, ii, and iii

Firms in monopolistic competition compete on i. quality. ii. price. iii. marketing.

i, ii, and iii

Under the Clayton Act and its amendments, which of the following activities is illegal if it creates monopoly? i. contracts that require other goods to be bought from the same firm ii. contracts that prevent a buyer from reselling a product outside a specified area iii. becoming a director of a competing firm

i, ii, and iii

When weighing the efficiency of monopolistic competition, which of the following should be considered? i. the information provided by advertising ii. product variety iii. the extra cost of excess capacity

i, ii, and iii

Which of the following does antitrust law prohibit if it substantially lessens competition or creates a monopoly? i. acquiring a competitor's shares or assets ii. territorial confinement iii. becoming a director of a competing firm

i, ii, and iii

Which of the following is (are) an example of an income maintenance program? i. unemployment compensation ii. welfare programs iii. Social Security programs

i, ii, and iii

Which of the following is (are) prohibited if it substantially lessens competition or creates a monopoly? i. price discrimination ii. tying arrangements iii. exclusive dealing

i, ii, and iii

Which of the following is correct for a single-price monopoly? i. The firm can determine the quantity it produces and the price it charges. ii. It would never profitably produce output in the inelastic range of its demand. iii. Its marginal revenue is less than price.

i, ii, and iii

A tax is progressive if the average tax rate

increases as income increases.

If all households in a nation receive the same income, the nation's Lorenz curve

is a 45° line.

A firm's demand for labor curve is also

its value of marginal product of labor curve.

If the wage rate is above the equilibrium wage rate, the quantity of labor demanded is ________ the quantity of labor supplied.

less than

The possible alternatives for an oligopoly range from the monopoly case with ________ to the perfectly competitive case with ________.

low output; high output

Which of the following is the best example of a monopolistically competitive industry?

manufacturing of shirts

An industry with a large number of firms, differentiated products, and free entry and exit is called

monopolistic competition.

If the four-firm concentration ratio for the market for pizza is 28 percent, then this industry is best characterized as

monopolistic competition.

If the Boston Red Sox baseball team is currently charging a ticket price where its demand is inelastic, then the Red Sox's marginal revenue is

negative.

If firms in monopolistic competition are making economic profits, eventually

new firms enter the industry.

A Nash equilibrium in the duopoly game

occurs when each player takes the best possible action regardless of the strategy chosen by other firms.

A natural monopoly exists when

one firm can supply an entire market at a lower average total cost than can two or more firms.

To encourage invention and innovation, the government provides

patents.

A monopoly creates a deadweight loss because the monopoly

produces less than the efficient quantity.

In the market for land, an increase in demand ________ the equilibrium rent of land and ________ the equilibrium quantity.

raises; does not change

In the 1970s, when a gasoline price ceiling was imposed that was below the equilibrium price of gasoline, some gas stations required that buyers of gas also purchase other products sold at the station. This policy is an example of which of the following?

tying arrangements