Microeconomics Ch 13, 14, 15 quiz

A market structure with barriers to entry is

A monopoly

Average total cost (ATC) is calculated as follows:

ATC= (Total Cost)/(quantity of output)

A long-run supply curve is flatter than a short-run supply curve because

Firms can enter and exit a market more easily in the long run than in the short run

Explicit costs

Enter into the accountants and economists measurement of a firms profit

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. Quantity: 0, 1, 2, 3, 4 Total Revenue: $0, 13, 26, 39, 52 For this firm, the average revenue is

$13

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. Quantity: 0, 1, 2, 3, 4 Total Revenue: $0, 13, 26, 39, 52 For this firm, the marginal revenue is

$13

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. Quantity: 0, 1, 2, 3, 4 Total Revenue: $0, 13, 26, 39, 52 For this firm, the price is

$13

Scenario 13-10 Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each. An economist would calculate the total cost for one photo frame to be

$15

Scenario 13-10 Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each. An economist would calculate the total profit for one photo frame to be

$15

If Danielle sells 300 wrist bands for $0.50 each, her total revenues are

$150

Scenario 15-4 Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolists marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal costs and average total costs of $10. The profit-maximizing monopolist will earn profits of

$1600

Consider a profit-maximizing monopoly pricing under the following conditions. The profit-maximizing quantity is 40 units, the profit-maximizing price is $160, and the marginal cost of the 40th unit is $120. If the good were produced in a perfectly competitive market, the equilibrium quantity would be 50, and the equilibrium price would be $150. The demand curve and marginal cost curves are linear. What is the value of the deadweight loss created by the monopolist?

$200

Scenario 13-10 Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each. An accountant would calculate the total profit for one photo frame to be

$25

A firm had a fixed cost of $300 in its first year of operation. When the firm produces 99 units of output, its total costs are $4,000. The marginal cost of producing the 100th unit of output is $700. What is the total cost of producing 100 units.

$4,700

Scenario 13-10 Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each. An accountant would calculate the total cost for one photo frame to be

$5

Scenario 15-4 Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolists marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal costs and average total costs of $10. The profit-maximizing monopolist will charge a price of

$50

Scenario 15-4 Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolists marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal costs and average total costs of $10. The profit-maximizing monopolist will have a deadweight loss of

$800

Granting a pharmaceutical company a patent for a new medicine will lead to (i) a product that is priced higher than it would be without the exclusive rights (ii) incentives for pharmaceutical companies to invest in research and development (iii) higher quantities of output than without the patent

(i) and (ii) only

For a firm in a perfectly competitive market, the price of the good is always

Equal to marginal revenue

A market is competitive if (i) firms have the flexibility to price their own product (ii) each buyer is small compared to the market (iii) each seller is small compared to the market

(ii) and (iii) only

economic welfare is generally measured by (I) profit (ii) total surplus (iii) the price consumers pay for the product

(ii) only

Frank owns a dog-grooming business. Which of the following costs would be implicit costs? (i) dog shampoo (ii) rent in the storefront (iii) wages Frank could earn as a substitute elementary-school teacher (iv) interest that franks money was earning before he spent his savings to set up the dog-grooming business

(iii) and (iv) only

Monopolies are inefficient because they (I) eliminate barriers to entry (ii) price their product at a level where marginal revenue exceeds marginal cost (iii) restrict output below the socially efficient level of production

(iii) only

Scenario 15-4 Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolists marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal costs and average total costs of $10. The profit-maximizing monopolist will produce an output level of

40 units

Bubba is a shrimp who can catch 4,000 pounds of shrimp per year. Bubba is considering hiring his cousin Bobby to work for him. Bobby can catch 3,000 pounds of shrimp per year. If Bubba hires Bobby, what will be the total output of his shrimp business?

7,000 pounds

Eldin is a house painter. He can print three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy?

8 houses

A firms opportunity cost of production are equal to its

Explicit costs + implicit costs

Foregone investment opportunities are an example of

An implicit cost

A firm produces 400 units of output at a total cost of $1,200. If total variable costs are $1,000,

Average fixed cost is 50 cents

If marginal cost is equal to average total cost, then

Average total cost is minimized

A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100,

Average variable cost is $3.

A fundamental source of monopoly market power arises from

Barriers to entry

If a firm experiences constant returns to scale at all output levels, then it's long-run average total cost curve would

Be horizontal

A monopoly can earn positive profits because it

Can maintain a price such that total revenues will exceed total costs

A monopoly

Can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits

In the long run a company that produces and sells kayaks incurs total costs of $15,000 when outputs is 30 kayaks and $20,000 when output is 40 kayaks. The kayak company exhibits

Constant returns to scale because average total cost is constant as output rises

For a monopoly market, total surplus can be defined as the value of the good to

Consumers minus the costs of producing the good

Implicit costs

Do not require an outlay of money by the firm

If a production function shows declining marginal product of an input as the quantity of the input increases, then the production function exhibits

Decreasing marginal product

If the total curve gets steeper as output increases, the firm is experiencing

Diminishing marginal product

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will

Fall in the short 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

Table 13-16 Listed in the table are the long-run tots costs for three different firms Quantity: 1, 2, 3, 4, 5 Firm A: 100, 100, 100, 100, 100 Firm B: 100, 200, 300, 400, 500 Firm C: 100, 300, 600, 1000, 1500 Which firm is experiencing constant returns to scale?

Firm B only

Table 13-16 Listed in the table are the long-run tots costs for three different firms Quantity: 1, 2, 3, 4, 5 Firm A: 100, 100, 100, 100, 100 Firm B: 100, 200, 300, 400, 500 Firm C: 100, 300, 600, 1000, 1500 Which firm is experiencing diseconomies of scale?

Firm C only

Competitive markets are characterized by

Free entry and exit by firms

In a competitive market, the actions of any single buyer or seller will

Have a negligible impact on the market price

In the short run, a firm that produces and sells house paint can adjust

How many workers to hire

A difference between explicit and implicit costs is that

Implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do

A firm had market power if it can

Influence the market price of the good it sells

In the long run,

Inputs that were fixed in the short run become variable

If marginal cost is below average total cost, then average total cost

Is falling

An example for an explicit cost of production would be the

Lease payments for the land on which a firms factory stands

Deadweight loss

Measures monopoly inefficiency

Profit is defined as total revenue

Minus total cost

When a firm's average total cost curve continually declines, the firm is a

Natural monopoly

For a firm in a competitive market, an increase in the quantity produced by the firm will result in

No charge in the products market price

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often

Not in the best interest of society, one that fails to maximize total economic well-being, and inefficient

Economic profit is equal to total revenue minus the

Opportunity cost of producing goods and services

Firms operating in competitive markets produce output levels where marginal revenue equals

Price, average revenue, and total revenue divided by output

A production function is a relationship between inputs and

Quantity of output

A seller is a competitive market can

Sell all he wants at the going price, so he has little reason to charge less

An example of an opportunity cost that is also an implicit cost is

The value of the business owners time

Accounting profit is equal to

Total revenue minus the explicit cost of producing goods and services

If the profit-maximizing quantity of production for a competitive firm occurs at a point where the firm's average total cost of production is falling as production increases, then the firm

Will have economic profit less than zero at the profit-maximizing quantity

Economies of scale arise when

Workers are able to specialize in a particular task

A market might have an upward-sloping long-run supply curve if

a. firms have different costs.

A firm that wants to achieve economies of scale could do so by

assigning limited tasks to its employees, so they can master those tasks.

For a monopoly, the socially efficient level of output occurs where

average revenue equals marginal cost

If marginal cost is greater than average total cost, then

average total cost is increasing.

The fundamental cause of monopoly is

barriers to entry

A firm that has little ability to influence market prices operates in a

competitive market

Average total cost tells us the

cost of a typical unit of output, if total cost is divided evenly over all the units produced

In the long run the market supply

could be upward sloping if the cost of production rises as new firms enter the market

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

double

For any competitive market, the supply curve is closely related to the

firms' costs of production in that market.

Exclusive ownership of a key resource

is a potential but rare cause of a monopoly.

Firms may experience diseconomies of scale when

large management structures are bureaucratic and inefficient

Constant returns to scale occur when a firms

long-run average total costs do not vary as output increases

Diseconomies of scale occur when

long-run average total costs rise as output increases

If marginal cost is rising,

marginal product must be falling

A key characteristic of a competitive market is that

producers sell nearly identical products.

A monopolist maximizes profits by

producing an output level where marginal revenue equals marginal cost

Diminishing marginal product suggests that the marginal

product of an extra worker is less than the previous worker's marginal product.

A total-cost curve shows the relationship between the

quantity of output produced and the total cost of production

In a market with 1,000 identical firms, the short-run market supply is the

sum of the quantities supplied by each of the 1,000 individual firms at each price.

In a perfectly competitive market, the market supply curve is

the horizontal sum of all the individual firms' supply curves.

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

the size of the factory is fixed

Marginal cost equals

the slope of the total cost curve

A natural monopoly arises when

there are economies of scale over the relevant range of output