Econ quiz 2 (micro)
(Table: Turkeys) Examine the table Turkeys. Trader Tom is a monopolist that sells fried turkeys for Thanksgiving dinner for a constant marginal and average cost of $10 per turkey. Assume that Tom has no fixed cost. Tom has 6 potential customers, each of which will buy at most one turkey if the price is just equal to or lower than their willingness to pay, which is shown in the table. If Tom acts as a single-price monopolist to maximize profits, how much is producer surplus?
$30
(Figure: The Gains from Trade) Examine the figure The Gains from Trade. What is the total surplus in this market when the demand curve is D1 and the market is in equilibrium?
$62.50
(Figure: The Perfectly Competitive Firm) Examine the figure The Perfectly Competitive Firm. The figure shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit. Given the market price, the firm's total revenue per day is:
$900.
(Figure: The Shrimp Market) Examine the figure The Shrimp Market. If the government wants to limit shrimp sales to 250 pounds, it can impose a _____ excise tax on sellers, and the total tax revenue generated will be _____.
$10; $2,500
(Figure: The Profit-Maximizing Output and Price) Examine the figure The ProfitMaximizing Output and Price. Assume that there are no fixed costs and AC = MC = $200. At the profit-maximizing output and price for a monopolist, producer surplus is:
$3,200.
(Figure: The Profit Maximizing Firm) Examine the figure The Profit Maximizing Firm. The figure shows the short-run cost curves for a firm operating in a perfectly competitive market. Curve M must cross curves N and O:
At their minimum points.
If a perfectly competitive firm is producing a quantity where MC < MR, then profit:
Can be increased by increasing production.
(Figure: A Market in Equilibrium) Examine the figure A Market in Equilibrium. At the equilibrium price, this market's producer surplus is equal to the area:
DIF.
6. All of these are examples of price discrimination EXCEPT: A) discounts for senior citizens at the movies. B) discounts for families with young children at motels. C) generally lower prices at Walmart than at Target. D) cheaper air fares if the traveler stays over a Saturday.
Generally lower prices at Walmart than at Target.
A good is likely to have an inelastic demand curve if the:
Good has few available substitutes.
If Trevor's local government gave him the exclusive right to sell breakfast bagels in his community, Trevor's monopoly would result from:
Government-created barriers.
. Gary's Gas and Frank's Fuel are the only two providers of gasoline in their small town. Gary and Frank decide to form a cartel to raise the price of gasoline. The total industry profits are highest when _____, and Gary's profits are highest when:
Neither firm cheats on the agreement; Gary cheats on the agreement and Frank does not cheat
(Figure: A Rock Climbing Shoe Monopoly) Examine the figure A Rock Climbing Shoe Monopoly. If the firm is regulated such that it earns zero economic profit, the firm will sell _____ pairs of shoes at a price of _____ per pair.
Q4; P3
An upper limit on the quantity of a good that can be bought and sold is a
Quota limit.
Paying a tax of $20 on an income of $100, a tax of $15 on an income of $200, and a tax of $12 on an income of $300 is an example of a:
Regressive tax.
In the short run, fixed costs:
Remain constant.
If a nation exports a good when the economy is opened to trade, the domestic price of the good will _____ and domestic consumption will _____ relative to the autarky price.
Rise; fall
Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, the market price will _____ and the output of a typical firm will _____.
Rise; rise.
The Herfindahl-Hirschman Index is a measure of concentration found by:
Squaring the percentage market share of each firm in the industry and then summing the squared market shares.
In monopolistic competition:
There is free entry and exit in the long run.
(Table: The Production Possibilities for Cars and Leather Boots) Examine the table The Production Possibilities for Cars and Leather Boots. Given the opportunity costs of production:
There is no basis for trade.
If all firms in an industry are price-takers, then:
An individual firm cannot alter the market price even if it doubles its output.
Japan, at the point at which it is currently producing, must give up the production of 75 computers to produce 25 additional cell phones. What is the opportunity cost of producing 3 computers?
1 cell phone
The demand curve facing a monopolist is:
Downward sloping.
(Figure: The Market for Lattes) Examine the figure The Market for Lattes. If the government assesses a tax of $0.75 on each latte, the price the consumer pays for a latte after the tax will:
Increase from $2 to $2.25.
The effect of international trade on U.S. factor markets is to:
Increase the wage of highly educated workers.
(Figure: Consumer Surplus IV) Examine the figure Consumer Surplus IV. In the figure, when the price falls from $30 to $25, consumer surplus _____ for a total consumer surplus of _____.
Increases by $15; $64
(Figure: Costs and Profits for Tomato Producers) Examine the figure Costs and Profits for Tomato Producers. The market for tomatoes is perfectly competitive, and an individual tomato farmer faces the cost curve shown in the figure. The market price of a bushel of tomatoes is $18. If the market price increases to $20, the farmer's marginal revenue _____ and the profit-maximizing output _____.
Increases; increases
Suppose that Rowan, Inc. builds a high-speed, magnetically powered transportation system from New York to Los Angeles, which is the only firm providing this service. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand. This monopoly would result from:
Increasing returns to scale.
Tacit collusion is more difficult if:
There are many firms in the industry.
. In perfect competition:
Price and marginal revenue are the same.
If Ford offers rebates on its most popular truck, and Chevy follows, this is an example of:
Price leadership.
(Figure: Demand for Notebook Computers) Examine the figure The Demand for Notebook Computers. The change in total revenue resulting from a change in price from P to T suggests that demand is:
Price-elastic.
In contrast to perfect competition, a monopoly:
Produces less at a higher price.
(Figure: Collusion) Examine the figure Collusion. In the figure, panel (c) gives the combined marginal revenue, demand, and marginal cost curves for an industry containing several firms. Panels (a) and (b) give marginal cost curves for two of those firms. The quantity of output produced by the industry with collusion is shown by:
T.
Quota limits cause:
The demand price to be greater than the supply price.
The price elasticity of a good will tend to be larger:
The longer the relevant time period.
The short-run individual supply curve of the firm is:
The portion of its marginal cost curve above average variable cost.
The burden of a tax imposed on a good falls at least partially on consumers if:
The price paid by consumers for the good increases.
If demand is elastic, then:
The quantity effect dominates the price effect, and a decrease in price causes total revenue to rise.
The difference between the demand price and the supply price at the quota limit is:
The quota rent.
Suppose the price elasticity of demand for oranges is 1.8. If a fall frost destroys one-third of the nation's orange crop, how will that affect total revenue from oranges, all other things unchanged?
Total revenue will fall.
(Figure: The Market for Roses) Examine the figure The Market for Roses. Assume that PA is the autarky price and PW is the world price. In the figure, consumer surplus without international trade would be area:
W.
