MicroEcon Exam 3
b
Which of the following statements is NOT correct? a. The government may use antitrust laws to break up an existing company to improve competition. b. The government may break up a natural monopoly to lower the price charged to customers. c. Private ownership is typically preferred to public ownership. d. Sometimes the best strategy is for the government to do nothing about monopoly inefficiency because the "fix" may be worse than the problem.
i, iv only
Which of the following statements is correct for a monopolist? (i) The firm maximizes profits by equating marginal revenue with marginal cost. (ii) The firm maximizes profits by equating price with marginal cost. (iii) Demand equals marginal revenue. (iv) Average revenue equals price.
number, size
Which of these assumptions is often realistic for a firm in the short run? The firm can vary the _________ of workers it employs but not the ______ of its factory.
marginal, above, variable
Which of these curves is the competitive firm's short-run supply curve? the ________ cost curve ________ average ________ cost
fall, short
A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will ____ in the _____ run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.
average variable cost is $2.50 (1200-200/400)
A firm produces 400 units of output at a total cost of $1,200. If fixed costs are $200,
-75.40 (300*45)-(301*44.60)
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
smaller, competitive
A monopoly is an inefficient way to produce a product because it produces a ___________ level of output than would be produced in a ___________ market.
fixed, +, quantity
Average total cost equals (________ costs _ variable costs) divided by ________ produced
demand, do not
Critics of advertising argue that advertising creates ______ for products that people otherwise _____ _____ want or need.
monopolistic, competitive
Due to the nature of the patent laws on pharmaceuticals, the market for such drugs switches from _____________ to ___________ once the patent runs out
less, 100
For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. It follows that the firm's profit-maximizing level of output is ______ than _____ units.
price, marginal
For a monopolistically competitive firm, at the profit-maximizing quantity of output, _____ exceeds _____ cost.
decreasing, increase
If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then ___________ output would ___________ the firm's profit.
monopolist
In the short run, a firm in a monopolistically competitive market operates much like a _______________
decrease, increase
Joe's Juice Shop operates in a monopolistically competitive market. Joe's is currently producing where its average total cost is minimized. In the long run we would expect Joe's output to ____________ and average total cost to ____________.
total, rises, increased
Marginal cost tells us the amount by which ________ cost ________ when output is ________ by one unit.
price, marginal
Monopolistic competition is considered inefficient because _______ exceeds _______ cost.
shut down, short, long
Mrs. Smith operates a business in a competitive market. The current market price is $7.50. At her profit- maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should _____ _____ in both the _____ run and _____ run.
minus total cost
Profit is defined as total revenue
all of the above
Round-trip airline tickets are usually cheaper if you stay over a Saturday night before you fly back. What is the reason for this price discrepancy? a. Airlines are practicing imperfect price discrimination to raise their profits. b. Airlines charge a different rate based on the different nature of peoples' travel needs. c. Airlines are attempting to charge people based on their willingness to pay.
i, iii only
Suppose a competitive market is comprised of firms that face identical cost curves. The firms experience an increase in demand that results in positive profits for the firms. Which of the following events are then most likely to occur? (i) New firms will enter the market. (ii) In the short run, price will rise; in the long run, price will rise further. (iii) In the long run, all firms will be producing at their efficient scale.
$25,000 (50*500)
The Three Amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $50. Each dog be sold for a price of $65. The Three Amigo's total costs area is ________
equals
The firm will make the most profits if it produces the quantity of output at which marginal revenue ________ marginal cost.
marginal, increase, labor
The marginal product of labor is equal to the __________ in output obtained from a one unit _________ in _________
4 Units (4*15=60)
The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing level of production
demand, tangent, total cost
When a profit-maximizing firm in a monopolistically competitive market is producing the long-run equilibrium quantity, its ___________ curve will be ____________ to its average _______ ________ curve.
benefits, consumer, producer
When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent a transfer of ________ from the ________ to the ________.
Buyers, price, takers.
Which of the following is a characteristic of a perfectly competitive market?________ and sellers are ________ ________
copyright, invented
Which of the following is an example of a barrier to entry? Larry obtains a _________ for the new computer game that he ___________.
10 units (240-230)
if 3 workers = 230 output, and 4 workers = 240 output, what is marginal product?
upward, enter
in the long run the market supply could be ________ sloping if the cost of production rises as new firms ________ the market.
subtract bottom output from the one above
to calculate numbers of workers when diminishing marginal product begins:
