ECON102 final micro

Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units at $1.75 per unit. The monopolist will produce and sell the fifth unit if its marginal cost is:

$.75 or less.

If you operated a small bakery, which of the following would be a variable cost in the short run A. Baking ovens. B. Interest on business loans. C. Annual lease payment for use of the building. D. Baking supplies (flour, salt, etc.).

D. Baking supplies (flour, salt, etc.).

In the short run, a purely competitive firm will always make an economic profit if: A. P = ATC. B. P > AVC. C. P = MC. D. P > ATC.

D. P > ATC

The supply curve of a pure monopolist:

does not exist because prices are not "given" to a monopolist.

Output | MargRev | MargCost 0 -- -- 1 16 10 2 16 9 3 16 13 4 16 17 5 16 21 Assuming total fixed costs equal to zero, the firm's

economic profit is $16

Economic profits are calculated by subtracting:

explicit and implicit costs from total revenue.

If a pure monopolist is producing at that output where P = ATC, then:

its economic profits will be zero.

A natural monopoly occurs when

long-run average costs decline continuously through the range of demand

In the short run, the individual competitive firm's supply curve is that segment of the

marginal cost curve lying above the average variable cost curve

Pure monopolists may obtain economic profits in the long run because

of barriers to entry.

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits by:

reducing output and raising price

inputs of labor | total product 0 0 1 8 2 18 3 25 4 30 5 33 6 34 7 32 Marginal product becomes negative with the hiring of the ______ unit of labor

seventh

A pure monopolist

will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output.

Which of the following is correct? A. There is no relationship between MP and MC. B. When AP is rising MC is falling, and when AP is falling MC is rising. C. When MP is rising MC is rising, and when MP is falling MC is falling. D. When MP is rising MC is falling, and when MP is falling MC is rising.

D. When MP is rising MC is falling, and when MP is falling MC is rising

Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation: A. should close down in the short run. B. is maximizing its profits. C. is realizing a loss of $60. D. is realizing an economic profit of $40.

D. is realizing an economic profit of $40.

The MR = MC rule:

applies both to pure monopoly and pure competition.

In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs:

are $1,250.

Allocative efficiency is achieved when the production of a good occurs where

P = MC.

Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and has average variable costs of $150. The firm's total fixed costs are:

$5,000.

Output | MargRev | MargCost 0 -- -- 1 16 10 2 16 9 3 16 13 4 16 17 5 16 21 The firm's profit-maximizing level of output would be

3

Output | MargRev | MargCost 0 -- -- 1 16 10 2 16 9 3 16 13 4 16 17 5 16 21 At the profit-maximizing output, the firm's total revenue is:

48

inputs of labor | total product 0 0 1 8 2 18 3 25 4 30 5 33 6 34 7 32 The average product (AP) when two units of labor are hired is

9

Which of the following is most likely to be an implicit cost for Company X A. Forgone rent from the building owned and used by Company X. B. Rental payments on IBM equipment. C. Payments for raw materials purchased from Company Y. D. Transportation costs paid to a nearby trucking firm.

A. Forgone rent from the building owned and used by Company X

Which of the following will not hold true for a competitive firm in long-run equilibrium? A. P equals AFC. B. P equals minimum ATC. C. MC equals minimum ATC. D. P equals MC.

A. P equals AFC.

If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to: A. increase, output to increase, price to decrease, and profits to decrease. B. increase, output to increase, price to increase, and profits to decrease. C. decrease, output to decrease, price to increase, and profits to increase. D. increase, output to decrease, price to decrease, and profits to decrease.

B. increase, output to increase, price to increase, and profits to decrease.

If a firm increases all of its inputs by 10 percent and its output increases by 15 percent, then: A. it is encountering diseconomies of scale. B. it is encountering economies of scale. C. the law of diminishing returns is taking hold. D. the firm's long-run ATC curve will be rising.

B. it is encountering economies of scale

If a purely competitive firm is producing at the MR = MC output and earning an economic profit, then: A. the selling price for this firm is above the market equilibrium price. B. new firms will enter this market. C. some existing firms in this market will leave. D. there must be price fixing by the industry's firms.

B. new firms will enter this market.

Long-run competitive equilibrium: A. is realized only in constant-cost industries. B. will never change once it is realized. C. is not economically efficient. D. results in zero economic profits

D. results in zero economic profits

The total output of a firm will be at a maximum where

MP is zero

What do economies of scale, the ownership of essential raw materials, and patents have in common?

They are all barriers to entry.

A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing:

an economic profit that could be increased by producing more output.

Economists would describe the U.S. automobile industry as

an oligopoly

As output increases, total variable cost

increases at a decreasing rate and then at an increasing rate

The marginal revenue curve for a monopolist

becomes negative when output increases beyond some particular level.

Which of the following best expresses the law of diminishing returns? A. Because large-scale production allows the realization of economies of scale, the real costs of production vary directly with the level of output. B. Population growth automatically adjusts to that level at which the average product per worker will be at a maximum. C. As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra or marginal output will decline. D. Proportionate increases in the inputs of all resources will result in a less-than-proportionate increase in total output.

c. As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra or marginal output will decline.

Assume a firm closes down in the short run and produces no output. Under these conditions: A. TVC is positive, but TFC and TC are zero. B. TFC is positive, but TVC and TC are zero. C. TFC and TC are positive, but TVC is zero. D. TFC, TVC, and TC will all be positive.

c. TFC and TC are positive, but TVC is zero

For most producing firms A. marginal cost rises as output is carried to a certain level, and then begins to decline. B. total costs rise as output is carried to a certain level, and then begin to decline. C. average total costs decline as output is carried to a certain level, and then begin to rise. D. average total costs rise as output is carried to a certain level, and then begin to decline.

c. average total costs decline as output is carried to a certain level, and then begin to rise.

Suppose you find that the price of your product is less than minimum AVC. You should:

close down because, by producing, your losses will exceed your total fixed costs.

To economists, the main difference between the short run and the long run is that

in the long run all resources are variable, while in the short run at least one resource is fixed.

The pure monopolist's demand curve is relatively elastic:

in the price range where marginal revenue is positive.

A pure monopolist should never produce in the

inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price.

The nondiscriminating pure monopolist's demand curve:

is the industry demand curve.

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating

marginal revenue and marginal cost.

An industry comprised of 40 firms, none of which has more than 3 percent of the total market for a differentiated product, is an example of

monopolistic competition

When total product is increasing at an increasing rate, marginal product is

positive and increasing

A pure monopolist is selling six units at a price of $12. If the marginal revenue of the seventh unit is $5, then the:

price of the seventh unit is $11.

In comparing the changes in TVC and TC associated with an additional unit of output, we find that

the changes in TC and TVC are equal

The term productive efficiency refers to

the production of a good at the lowest average total cost.

inputs of labor | total product 0 0 1 8 2 18 3 25 4 30 5 33 6 34 7 32 Diminishing returns begin to occur with the hiring of the ______ unit of labor

third

An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are:

underallocated because price exceeds marginal cost.