econ exam 3

The unregulated, single-price monopoly shown in the figure above makes a total economic profit of A) $16. B) $4. C) $24. D) $8

$8

Which of the following is FALSE? A) In the long run, both the amount of capital and labor used by the firm can be changed. B) Long-run average variable costs equal long-run average total costs. C) Fixed costs increase in the long run. D) As a firm produces more output, eventually it experiences diseconomies of scale.

Fixed costs increase in the long run.

Which of the following is not necessarily true for a profit-maximizing single-price monopolist? A) P > MR B) MR = MC C) P > ATC D) P > MC

P > ATC

A monopoly can price discriminate between two groups of consumers if each group has ________. A) the same willingness to pay B) a large consumer surplus C) a different willingness to pay D) the ability to resell the good to the other group

a different willingness to pay

Compared to a similar perfectly competitive industry, a single-price monopoly A) creates a deadweight loss and decreases consumer surplus. B) produces more output. C) is more efficient because there is no wasteful competition. D) creates a deadweight loss and decreases economic profit.

creates a deadweight loss and decreases consumer surplus

The average total cost curve eventually slopes upwards because of the A) reductions in average fixed costs. B) law of diminishing returns. C) increase in capital costs. D) decrease in labor costs.

law of diminishing returns

A perfectly competitive firm shuts down if the price of its product is A) less than its minimum average variable cost. B) less than its minimum total cost. C) greater than its maximum variable cost. D) greater than its minimum average variable cost.

less than its minimum average variable cost.

A perfectly competitive firm that is producing a positive quantity of a good maximizes its economic profit if it produces so that A) average total cost = average variable cost. B) average revenue = average total cost. C) marginal revenue = marginal cost. D) total revenue = total cost.

marginal revenue = marginal cost.

When the marginal product curve is downward sloping, the average product curve A) might be either upward or downward sloping. B) must be horizontal. C) must also be downward sloping. D) must be upward sloping.

might be either upward or downward sloping.

Which curve intersects the AVC curve at its minimum point? A) the AFC curve B) the MC curve C) the ATC curve D) the MP curve

the MC curve

the short run is a period in which A) the quantity of at least one factor of production is fixed. B) prices and wages are fixed. C) the amount of output is fixed. D) nothing the firm does can be altered.

the quantity of at least one factor of production is fixed.

The above figure illustrates a firm's total revenue and total cost curves. Which one of the following statements is FALSE? A) Economic profit is the vertical distance between the total revenue curve and the total cost curve. B) At an output above Q3 the firm incurs an economic loss. C) At output Q1 the firm makes zero economic profit. D) At output Q2 the firm incurs an economic loss

At output Q2 the firm incurs an economic loss

Electric utility companies have built larger and larger electric generating stations and, as a result, the long-run average cost of producing each kilowatt hour decreased. This is an example of A) constant returns to cost. B) increasing returns to cost. C) diseconomies of scale. D) economies of scale.

economies of scale

For a single-price monopoly, marginal revenue is ________ when demand is elastic and is ________ when demand is inelastic. A) positive; positive B) positive; negative C) negative; negative D) negative; positive

positive; negative

A perfectly competitive firm's marginal revenue exceeds its marginal cost at its current output. To increase its profit, the firm will A) raise its price. B) increase its output. C) lower its price. D) decrease its output.

increase its output.

27) In the above figure, economies of scale are present up to an output level of A) 10,000 pounds of coffee. B) 15,000 pounds of coffee. C) 5,000 pounds of coffee. D) 13,000 pounds of coffee.

10,000 pounds of coffee.

In a diagram with the total cost curve and the total variable cost curve, as output increases, the vertical distance between these two curves A) increases. B) gets smaller and then bigger again. C) decreases. D) is constant.

is constant

In the above figure, the firm's total economic profit is equal to A) $60. B) $150. C) MR - MC. D) $200

60

Based on the cost data in the above table, the long-run average cost (LRAC) is lowest when output is A) 40. B) 80. C) 20. D) Long-run average cost is constant at all levels of output

80

Which of the following statements regarding the long-term equilibrium is TRUE? A) Entry and exit stop when firms are making an economic profit. B) Firms leave a market if they are making zero economic profit. C) Entry and exit stop when firms make zero economic profit. D) As new firms enter a market, each existing firm increases the quantity it produces

Entry and exit stop when firms make zero economic profit.

Which of the following can create a monopoly? I. high prices II. public franchise III. patent IV. government license A) I and III B) I, II and III C) II, III and IV D) I and II

II, III and IV

Which of the following is TRUE for a profit maximizing monopolist? A) In the short run, the firm can make an economic profit even if its marginal cost is less than its average variable cost. B) In the long run, the firm's economic profit equals zero. C) Marginal cost is always less than average total cost. D) In the short run, the firm will shut down if its marginal cost is less than its average variable cost.

In the short run, the firm can make an economic profit even if its marginal cost is less than its average variable cost.

A single-price monopoly's demand curve lies A) above its marginal revenue curve. B) on top of its total revenue curve. C) below its marginal revenue curve. D) on top of its marginal revenue curve.

above its marginal revenue curve

A firm's long-run average cost curve A) is U-shaped. B) tells the firm which plant size to use and which quantity of labor to use to minimize the cost of producing any level of output. C) shows the lowest attainable average total cost of producing any level of output when both capital and labor are variable. D) all of the above

all of the above

An example of a variable factor of production in the short run is A) a building. B) capital equipment. C) land. D) an employee.

an employee

Which of the following shifts the AVC curve upward at Barney's Bagel Bakery? A) an increase in the hourly wage that Barney pays his workers B) a decrease in the hourly wage that Barney pays his workers C) an increase in the fixed amount of liability insurance premiums that Barney pays for his business D) Both answers A and C are correct

an increase in the hourly wage that Barney pays his workers

In the market depicted in the above figure, if a single-price monopoly maximizes its profit, which area shows the deadweight loss? A) area IJH B) area FHIL C) area GHJM D) area LJK

area LJK

The range of output over which a firm's average variable cost is decreasing is the same as the range over which its A) marginal cost is increasing. B) average product is decreasing. C) average fixed cost is decreasing. D) average product is increasing.

average product is increasing.

When a firm is considered to be a "price taker" that means that the firm A) can charge any price that it wants to charge, that is, "take" any price it wants. B) cannot influence the market price of the good that it sells. C) will accept ("take") the lowest price that its customers offer. D) pays a fixed price for all of its inputs.

cannot influence the market price of the good that it sells.

To maximize profit, the monopolist produces on the ________ portion of its demand where ________. A) elastic; P = MC B) inelastic; P = MC C) inelastic; MR = MC D) elastic; MR = MC

elastic; MR = MC

In perfect competition, the marginal revenue of an individual firm A) is zero. B) exceeds the price of the product. C) is positive but less than the price of the product. D) equals the price of the product.

equals the price of the product.

A price discriminating monopolist A) has a lower marginal cost than that incurred by a single-price monopolist. B) makes zero economic profit in the long run. C) makes a smaller economic profit than that earned by the single-price monopolist. D) produces more output than that produced by a single-price monopolist.

produces more output than that produced by a single-price monopolist.

In perfect competition, ________. A) firms in the market have advantages over firms that plan to enter the market B) there are restrictions on entry into the market C) there are many firms that sell identical products D) only firms know their competitors' prices

there are many firms that sell identical products

The average total cost curves for Plant 1, ATC0, and Plant 2, ATC1, are shown in the figure above. Over what range of output is it efficient to operate Plant 1? A) 0-25 B) greater than 25 C) 0-20 D) 20-25

0-25

In the short run, a perfectly competitive firm A) always makes an economic profit. B) can either make an economic profit, incur an economic loss, or make zero economic profit. C) produces at any price. D) never incurs an economic loss larger than its average fixed costs.

can either make an economic profit, incur an economic loss, or make zero economic profit.

A firm's average total cost is $60, its average variable cost is $30, and its total fixed cost is $600. Its output is A) 40 units. B) 50 units. C) 20 units. D) 30 units.

20 units

In the above figure, the firm will produce A) 15 units. B) 20 units. C) 5 units. D) 0 units.

20 units

Dustin's copy shop can use four alternative plants. The figure above shows the average total cost curves for Plant 1 (ATC1), Plant 2 (ATC2), Plant 3 (ATC3), and Plant 4 (ATC4).What is Dustin's long-run average cost if the output is 3,000 copies per day? A) 3.7 cents per copy B) 8.5 cents per copy C) 5.0 cents per copy D) More information is needed to determine the long-run average cost

3.7 cents per copy

For the unregulated, single-price monopoly shown in the figure above, when its profit is maximized, output will be A) 6 units per year and the price will be $4. B) 4 units per year and the price will be $6. C) 4 units per year and the price will be $4. D) None of the above answers is correct.

4 units per year and the price will be $6.

Which of the following statements about a monopoly is FALSE? A) Monopolies have no barriers to entry or exit. B) A monopoly is the only producer of the good. C) The good produced by a monopoly has no close substitutes. D) None of the above; that is, all of the above answers are true statements about a monopoly.

Monopolies have no barriers to entry or exit.

In the short run, a perfectly competitive firm will make an economic profit as long as A) P > ATC. B) P > AFC. C) P > AVC. D) it maximizes its profit.

P > ATC.

Which of the following statements is CORRECT? A) As output increases, total cost and total fixed cost increase by the same amount. B) Total fixed cost plus total variable cost equals total cost. C) As output increases, total cost and total fixed cost increase but not necessarily by the same amount. D) As output increases, total cost increases and total fixed cost decreases.

Total fixed cost plus total variable cost equals total cost.

Which of the following statements is TRUE? A) When marginal product is less than average product, average product is decreasing. B) When marginal product is rising, average product is decreasing. C) When marginal product is falling, average product is decreasing. D) When marginal product is less than average product, average product is increasing.

When marginal product is less than average product, average product is decreasing.

The law of diminishing returns states that as a firm increases A) a variable input, given the quantity of fixed inputs, the firm's average total cost will eventually decrease. B) all the inputs is uses, the marginal product of each of these inputs always decreases. C) a variable input, with a given quantity of fixed inputs, the marginal product of the variable input eventually decreases. D) a variable input, with a given quantity of fixed inputs, the firm's marginal cost eventually decreases.

a variable input, with a given quantity of fixed inputs, the marginal product of the variable input eventually decreases

If a monopolist can perfectly price discriminate, it will A) charge the same price for each unit sold. B) produce until price elasticity of demand equals one. C) charge a different price for every unit sold. D) not be concerned with the market demand.

charge a different price for every unit sold.

As output increases, AVC approaches ATC because of A) decreasing average fixed cost. B) increasing marginal cost. C) diminishing marginal returns. D) diseconomies of scale.

decreasing average fixed cost.

Suppose firms in a perfectly competitive market are earning an economic profit. As new firms enter, the price ________ and the economic profit of each existing firm ________. A) rises; decreases B) falls; increases C) rises; increases D) falls; decreases

falls; decreases

A technological change that increases productivity ________ marginal product and ________ marginal cost. A) decreases; increases B) increases; increases C) decreases; decreases D) increases; decreases

increases; decreases

Increasing marginal returns to labor might occur at low levels of labor input because of A) increasing average costs. B) decreasing use of machinery and increasing use of technology. C) differing factor proportions. D) increasing specialization of tasks.

increasing specialization of tasks.

The figure above shows a perfectly competitive firm. The firm is operating; that is, the firm has not shut down. The firm is A) incurring an economic loss of $600. B) making zero economic profit. C) making an economic profit of $200. D) incurring a economic loss of $200.

incurring a economic loss of $200.

In perfect competition, the market demand for the good ________ perfectly elastic and the demand for the output of one firm ________ perfectly elastic. A) is; is B) is not; is C) is not; is not D) is; is not

is not; is

Compared to a single-price monopoly, a perfectly competitive market with the same costs produces ________ output and has a ________ price. A) more; higher B) more; lower C) less; higher D) less; lower

more; lower

The marginal product of labor is the increase in total product from a A) one dollar increase in the wage rate, while holding the price of other inputs constant. B) one percent increase in the wage rate, while also increasing the price of other inputs by one percent. C) one unit increase in the quantity of labor, while holding the quantity of other inputs constant. D) one unit increase in the quantity of labor, while also increasing the quantity of other inputs by one unit.

one unit increase in the quantity of labor, while holding the quantity of other inputs constant.

The figure above shows a perfectly competitive firm. In the short run, the firm will shut down A) always. B) only if the AVC of producing 10 units is more than $20. C) only if the AVC curve reaches its minimum before 10 units are produced. D) only if the AVC of producing 10 units is less than $20.

only if the AVC of producing 10 units is more than $20.

In the short run, a firm will A) not produce if its total revenue does not cover its total cost. B) produce and earn an economic profit if its total revenue is equal to its total cost. C) produce and break even if its total revenue covers its total fixed cost but not its total variable cost. D) produce and incur an economic loss if its total revenue covers its total variable cost but not its total cost.

produce and incur an economic loss if its total revenue covers its total variable cost but not its total cost.