Micro Quiz Review

Use the figure on the right to answer this question. If the firm is maximizing profit, it will produce___ units and make an economic profit of____.

1200; $3600 (intersection of marginal cost and marginal revenue (MR revenue subtracted by the line right below for the price)

The above tables give some production and cost information for Flaming Fernando's a restaurant that sells Fiery Frijoles. What is the average variable cost of producing 1000 frijole?

$2

The marginal cost curve intersects the _____ curves at their _____ points

average total cost and average variable cost; minimum

The market demand curve in a perfectly competitive market is______ and the demand curve for a perfectly competitive firm's output is _____.

downward sloping, horizontal

If Henry, a perfectly competitive lime grower in Southern California, can sell his limes at a price greater than his average total cost, Henry will

earn an economic profit

In the long run, if 1000 units are produced at a cost of $8000 and 1200 units at a cost of $9200, then over this range of output there are

economies of scale

A perfectly competitive firm will maximize profit when the quantity produced is such that

firm's marginal revenue is equal to its marginal cost

Which of the following is false?

fixed costs increase in the long run

For a single- price monopoly, price is

greater than marginal revenue

If new firms enter a perfectly competitive industry, the market supply

increases

As output increases, average total cost decreases

initially and then starts to increase

If a perfectly competitive firm finds that the price exceeds its ATC, then the firm

is earning an economic profit

A monopoly

is not protected by barriers to entry AND faces a downward-sloping demand curve

If perfectly competitive firms are maximizing their profit and are making an economic profit, the market _____ in a short-run equilibrium and ____ in a long-run equilibrium

is; is not

To produce more output in the short run, a firm must employ more of

its variable resources

In the short run, a perfectly competitive firm________ earn an economic profit and ________ incur an economic loss.

might; might

If a monopoly wants to sell a larger quantity, it must

set a lower price

The main source of economies of scale are

specialization of resources such as labor and capital

A single price monopoly has marginal revenue and marginal cost equal to $19 and 15 units of output where the price on the demand curve is $38. What is the firm's total revenue?

$570, (price x quantity)

To produce 10 shirts, the total cost is $80; to produce 11 shirts, the total cost is $99. The average total cost of the 11th shirt is equal to

$9

Use the figure above to answer the question. Consider a perfectly competitive firm in a short run equilibrium. Figure______ shows a firm in bad times because the firm makes a(n)_____.

C; economic loss of $3 per unit (the graph shows the ATC way above the MR and connecting with the MC above the MR

Monopolies are inefficient because, at the profit- maximizing output level

MB does not equal MC

To maximize its profit, a perfectly competitive firm produces so that ____ and a single-price monopoly produces so that ____.

MR=MC; MR=MC

Which of the following is always true for a single-price monopolist?

P>MR

Average total cost is equal to

average fixed cost + average variable cost AND total cost/ quantity

A single price monopoly has marginal cost of $23 and marginal revenue of $28. Which of the following is definitely correct?

To increase profit, it should produce more

What is a monopoly?

a firm that is the only seller of a good or service that does not have a close substitute

Which of the following firms is most likely to be a monopoly>

a local distributer natural gas

A firm that is a price taker faces

a perfectly elastic demand curve

Herb's Inc has a large share of its market and is tempted to collude with the few firms that are in its market. Herb's operates in

an oligopoly

Which of the following describes a barrier to entry?

anything that protects a firm from the arrival of new competitors

Patents

are a legal barrier to entry

A group of firms acting together to limit output, raise price, and increase economic profit is called a

cartel

A single price monopoly transfers

consumer surplus to producers

If a perfectly competitive seller is maximizing profit and is making zero economic profit, which of the following will this seller do?

continue at the current output, making zero economic output

A perfectly competitive firm is producing at the quantity where marginal cost is $6 and average total cost is $4. The price of the good is $5. To maximize its profit, this firm should

decrease its output

As a typical firm increases its output, its marginal cost

decreases at first then increases

Assume someone organizes all farms in the nation into a monopoly. Which of the following occurs? i. Consumer surplus decreases ii. economic profit increases iii. a deadweight loss is created

i, ii and iii

If a perfectly competitive firm is maximizing its profit and is earning an economic profit, which of the following is correct? i. price = marginal revenue ii. marginal revenue equals marginal cost iii. price is greater than average total cost

i, ii and iii

Collusion results when a group of firms i. act separately to limit, output, lower prices, and decrease economic profits ii. act together to limit output, raise prices, and increase economic profits iii. in the United States legally fix prices

ii only

Compared to a perfectly competitive industry, a single-price monopoly produces

less output

The long run is a time period that is

long enough to change the size of the firm's plant and all other inputs

If firms in a perfectly competitive industry are earning an economic profit, then in the _____ firms will _____ the industry.

long run, enter

The above figure shows three possible average total cost curves. If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC, each produce 30 units, and the market price of the good is $16 per unit, then the firms

make zero economic profit and firms neither enter nor exit the industry

Diseconomies of scale can occur as a result of which of the following?

management difficulties as the firm increases its size

A firm maximizes its profit by producing the amount of output such that

marginal revenue equals marginal cost

Suppose that each of​ 8,000 firms in a perfectly competitive industry produces​ 1,000 units of a good and maximizes profits when the price of the good is​ $10. If there is a permanent increase in​ demand, in the short run each firm produces​ ________ 1,000 units and in the long run the number of firms is​ ________ 8,000.

more than; more than

A single-price monopoly is producing an output level where marginal revenue is $15, marginal cost is $13, and price is $20. The monopoly is

not maximizing its profit and should increase output to increase its profit

Which of the following is found ONLY in oligopoly?

one firms actions affect another firm's profit

A monopoly is a market with

one supplier

The short-run average total cost, average variable cost, and marginal cost curves are all U-shaped because of i. constant total fixed cost ii. increasing and then decreasing marginal returns as more labor is hired iii. economics and diseconomics of scale as the plant size increases

only ii

If firms in a perfectly competitive industry are earning an economic profit and new firms enter the industry, then

the existing firms' economic profit decreases

If firms in an oligopolistic industry successfully collude and form a cartel, what price and output will result?

the monopoly price and output

The price charged by a perfectly competitive firm is

the same as the market price

The market supply in the short run for the perfectly competitive industry is

the sum of the supply schedules of all firms

An increase in the price of labor (a variable resource) shifts

the variable cost curves upward but leaves the fixed cost curves unchanged

Chuck owns a factory that produces leather footballs. His total fixed cost equaled $86,000 last year. His total equaled $286,000 last year. Hence Chuck's

total variable cost equaled $200,000

If a firm does not produce any output its

total variable cost must be zero

The graph shows long-run costs for a firm. The firm experiences economies of scale

up until 1000 units are produced (the section of the graph on a downward slope)

Because the amount of labor a firm employs can be changed, the cost of labor is known as

variable cost

If firm in a perfectly competitive market faces an equilibrium, price of $5, its marginal revenue

will also be $5