Exam #2 Micro

Refer to the above data. Creamy Crisp's implicit costs, including a normal profit are: A. $136,000. B. $150,000. C. $94,000. D. $156,000.

A. $136,000.

Refer to the above data. Creamy Crisp's total economic costs (explicit + implicit costs, including a normal profit) are: A. $286,000. B. $150,000. C. $94,000. D. $156,000.

A. $286,000.

Refer to the above diagram. At output level Q total variable cost is: A. 0BEQ. B. BCDE. C. 0CDQ. D. 0AFQ.

A. 0BEQ.

14. Oligopolistic industries are characterized by: A. a few dominant firms and substantial entry barriers.

A. a few dominant firms and substantial entry barriers.

15) When patents on new medications expire, the market for those drugs: A. change from being monopolistic to being competitive

A. change from being monopolistic to being competitive.

Which of the following is most likely to be a variable cost? A. fuel and power payments B. interest on business loans C. rental payments on IBM equipment D. real estate taxes

A. fuel and power payments

6) An unprofitable motel will stay open in the short-run if: A. price (average nightly room rate) exceeds average variable cost.

A. price (average nightly room rate) exceeds average variable cost.

8) Oil wells and seasonal resorts will often shut down temporarily because: A. prices for their output temporarily fall below their average variable costs of production.

A. prices for their output temporarily fall below their average variable costs of production.

15. In which of the following market models do demand and marginal revenue diverge? A. pure monopoly, oligopoly, and monopolistic competition

A. pure monopoly, oligopoly, and monopolistic competition

12) Refer to the above diagram. At output level Q2: A. resources are overallocated to this product and productive efficiency is not realized.

A. resources are overallocated to this product and productive efficiency is not realized.

3. Refer to the above data. Creamy Crisp's explicit costs are: A. $286,000. B. $150,000. C. $94,000. D. $156,000.

B. $150,000.

Refer to the above diagram. At output level Q total fixed cost is: A. 0BEQ. B. BCDE. C. 0BEQ 0AFQ. D. 0CDQ.

B. BCDE.

2. What do economies of scale, the ownership of essential raw materials, and patents have in common? A. They must all be present before price discrimination can be practiced. B. They are all barriers to entry.

B. They are all barriers to entry.

10) Refer to the above diagram. If this competitive firm produces output Q, it will: A. suffer an economic loss. B. earn a normal profit.

B. earn a normal profit.

5) In the short run the individual competitive firm's supply curve is that segment of the: A. average variable cost curve lying below the marginal cost curve. B. marginal cost curve lying above the average variable cost curve.

B. marginal cost curve lying above the average variable cost curve.

13) Assume that society places a higher value on the last unit of X produced than the value of the resources used to produce that unit. With no spillovers, this information means that: A. total cost is greater than total revenue. B. price is greater than marginal cost.

B. price is greater than marginal cost.

12. In the long run a monopolistically competitive firm: A. earns an economic profit. B. produces where P = ATC.

B. produces where p=ATC

10. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic: A. loss of $320. B. profit of $480.

B. profit of $480.

7) An otherwise unprofitable motel located on a largely abandoned roadway might be able to stay open for several years by: A. increasing its nightly room rates. B. reducing or eliminating its annual maintenance expenses.

B. reducing or eliminating its annual maintenance expenses.

11) Refer to the above diagram. At output level Q1: A. resources are overallocated to this product and productive efficiency is not realized. B. resources are underallocated to this product and productive efficiency is not realized.

B. resources are underallocated to this product and productive efficiency is not realized.

Refer to the above diagram. The vertical distance between ATC and AVC reflects: A. the law of diminishing returns. B. the average fixed cost at each level of output. C. marginal cost at each level of output. D. the presence of economies of scale.

B. the average fixed cost at each level of output.

9) The above diagram portrays: A. a competitive firm that should shut down in the short run. B. the equilibrium position of a competitive firm in the long run.

B. the equilibrium position of a competitive firm in the long run.

1) If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue: A. may be either greater or less than $5. B. will also be $5. C. will be less than $5. D. will be greater than $5.

B. will also be $5.

16. Which of the following is an illustration of differentiated oligopoly? A. the aluminum industry B. the steel industry C. the soft drink industry

C

Refer to the above data. Creamy Crisp's accounting profit is: A. $150,000. B. $380,000. C. $230,000. D. $294,000.

C. $230,000.

Refer to the above diagram. At output level Q total cost is: A. 0BEQ. B. BCDE. C. 0BEQ plus BCDE. D. 0AFQ plus BCDE.

C. 0BEQ plus BCDE.

Refer to the above data. The marginal product of the sixth worker is: A. 180 units of output. B. 30 units of output. C. 15 units of output.

C. 15 units of output.

8. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be: A. $10. B. $13. C. $16.

C. 16

9. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be: A. 210. B. 180. C. 160.

C. 160

/Refer to the above data. The total variable cost of producing 5 units is: A. $61. B. $48. C. $37.

C. 37

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 (property), beyond some point the resulting extra output will decline.

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

14) Which of the following conditions is true for a purely competitive firm in long-run equilibrium? A. P > MC = minimum ATC. B. P > MC > minimum ATC. C. P = MC = minimum ATC.

C. P = MC = minimum ATC.

The basic difference between the short run and the long run is that: A. all costs are fixed in the short run, but all costs are variable in the long run. B. the law of diminishing returns applies in the long run, but not in the short run. C. at least one resource is fixed in the short run, while all resources are variable in the long run

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

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company? A. payments of wages to its office workers B. rent paid for the use of equipment owned by the Schultz Machinery Company C. depreciation charges on company-owned equipment D. economic profits resulting from current production

C. depreciation charges on company-owned equipment D. economic profits resulting from current production

11. An important similarity between a monopolistically competitive firm and a pure monopolist is that both: A. realize an economic profit in the long run. B. achieve allocative efficiency. C. face demand curves which are less than perfectly elastic.

C. face demand curves which are less than perfectly elastic.

4. When a firm is on the inelastic segment of its demand curve, it can: A. increase total revenue by reducing price. B. decrease total costs by decreasing price. C. increase profits by increasing price.

C. increase profits by increasing price.

Refer to the above diagram. At output level Q average fixed cost: A. is equal to EF. B. is equal to QE. C. is measured by both QF and ED. D. cannot be determined from the information given.

C. is measured by both QF and ED.

If a firm decides to produce no output in the short run, its costs will be: A. its marginal costs. B. its fixed plus its variable costs. C. its fixed costs.

C. its fixed costs.

7. Monopolistically competitive firms: A. realize normal profits in the short run but losses in the long run. B. incur persistent losses in both the short run and long run. C. may realize either profits or losses in the short run, but realize normal profits in the long run.

C. may realize either profits or losses in the short run, but realize normal profits in the long run.

6. The demand curve of a monopolistically competitive producer is: A. less elastic than that of either a pure monopolist or a pure competitor. B. less elastic than that of a pure monopolist, but more elastic than that of a pure competitor. C. more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.

C. more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.

1. Pure monopolists may obtain economic profits in the long run because: A. of advertising. B. marginal revenue is constant as sales increase. C. of barriers to entry.

C. of barriers to entry.

3. For an imperfectly competitive firm: A. total revenue is a straight, upsloping line because a firm's sales are independent of product price. B. the marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold. C. the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.

C. the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.

Refer to the above data. Diminishing marginal returns become evident with the addition of the: A. sixth worker. B. fourth worker. C. third worker. D. second worker.

C. third worker.

4) Firms seek to maximize: A. per unit profit. B. total revenue. C. total profit.

C. total profit.

5. A monopolistic firm has a sales schedule such that it can sell 10 prefabricated garages per week at $10,000 each, but if it restricts its output to 9 per week it can sell these at $11,000 each. The marginal revenue of the tenth unit of sales per week is: A. $1,000. B. $9,000. C. $10,000. D. $1,000.

D. 1000

Refer to the above data. The average total cost of producing 3 units of output is: A. $14. B. $12. C. $13.50. D. $16

D. 16

3) Refer to the above diagram, which pertains to a purely competitive firm. Curve C represents: A. total revenue and marginal revenue. B. marginal revenue only. C. total revenue and average revenue. D. average revenue and marginal revenue.

D. average revenue and marginal revenue.

Economic profits are calculated by subtracting: A. explicit costs from total revenue. B. implicit costs from total revenue. C. implicit costs from normal profits. D. explicit and implicit costs from total revenue.

D. explicit and implicit costs from total revenue.

2) Refer to the above diagram, which pertains to a purely competitive firm. Curve A represents: A. total revenue and marginal revenue. B. marginal revenue only. C. total revenue and average revenue. D. total revenue only.

D. total revenue only.

Refer to the above data. Average product is at a maximum when: A. five workers are hired. B. four workers are hired. C. three workers are hired. D. two workers are hired.

D. two workers are hired.