Econ Exam 3

Assume a certain firm in a competitive market is producing Q=1,000 units of output. At Q=1,000, the firms marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. At Q=1,000 the firms profits equal

$1,000

Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business in Florida operates in a perfectly competitive industry. If Victor would have would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc, where he used to earn $75,000 per year. What is Victors opportunity costs of operating his new business?

$175,000

The information below applies to a competitive firm that sells its output for $40 per unit. - When the firm produces and sells 150 units of output, its average total cost is $24.50. -When the firm produces and sells 151 units of output, its average total cost is $24.55. When the firm produces 150 units of output, its total cost is

$3,675.00

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost

When an industry is a natural monopoly

A large number of firms will lead to a higher average total cost

Adibok knows that it produces and sells high quality athletic shoes. Wurkout knows that it produces and sells low quality athletic shoes. According to the signaling theory of advertising,

Adibok has an incentive to spend a large amount of money on advertising for its athletic shoes, but Wurkout does not.

A firm produces 400 units of output at a total cost of $1,200. If total variable costs are $1,000,

Average fixed cost if 50 cents

Price discrimination

Can maximize profits if the seller can prevent the resale of goods between customers

Which of the following statements regarding a competitive firm is correct?

For all firms, average revenue equals the price of the good.

Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's

Implicit costs

Implicit Costs

Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur

A key characteristic of a competitive market is that

Producers sell nearly identical products

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Reduced efficiency of local lodging markets

Which of the following represents the firms short-run condition for shutting down?

Shut down if TR < VC

Which of the following is a necessary characteristic of a monopoly

The firm is the sole seller of its product

A government-created monopoly arises when

The government gives a firm the exclusive right to sell some good or service

The competitive firms long-run supply curve is that portion of the marginal cost curve that lies above average

Total cost

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

Upward sloping

A market structure with only few sellers, each offering similar or identical products, is known as

oligopoly

The intersection of a firms marginal revenue and marginal cost curves determines the level of output at which

profit is maximized

The long-run market supply curve in a competitive market will

typically be more elastic than the short-run supply curve.

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly

will experience a loss

A monopolist can sell 300 units of output for $45 per unit. Alternatively, it can sell 301 units of output for $44.60 per unit. The marginal revenue of the 301st unit of output is

-$75.40.