Microeconomics exam 2 review questions
Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were:
$200,000 and its economic profits were $0
Refer to the diagram. At output level Q, total variable cost it
0 BEQ
Refer to the diagram. At the profit maximizing level of output, total cost will be
0 BHE
The total utility yielded by 4 units of X is
17 -total utility is the accumlation of marginal utility
Refer to the short-run data in the accompanying graph. The profit maximizing output for this firm
320 units
If the consumer has money income of $52 and the prices of J and K are $8 and $4 respectively, the consumer will maximize her utility by purchasing
4 units or J and 5 units of K
The first Pepsi yields Craig 18 units of utility and the second yield him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is
8 units of utility
Balin's burger Barn operates in a perfectly competitive market. Balin's is currently earning economic profits of $20,000 per year. Based on this information, we can conclude that
Balin's is operating in the short run, but not the long run
The law of diminishing marginal utility states that
Beyond some, additional units of product will yield less and less extra satisfaction to a consumer
To the economist, total cost includes
Explicit and implicit costs
Which of the following statements applies to a purely competitive producer?
It will not advertise its product
An unregulated pure monopolist will maximize profits by producing that output at which:
MR = MC
Units consumed/Total Utility/Marginal Utility -4/40/Z -(table in original document)
Marginal utility becomes negative beginning with the FOURTH UNIT
A consumer's demand for a product is downsloping because
Marginal utility diminishes as more of a product is consumed
Which if the following conditions is true for a purely competitive firm in the long-run equilibrium?
P = MC = minimum ATC
Refer to the diagram for a pure monopolist. Suppose a regulatory commission is created to determine a legal price for the monopoly. If the commission seeks to provide the monopolist with a "fair return," it will set price at
P1
Refer to the diagram for a pure monopolist. If a regulatory commission seeks to achieve the socially optimal allocation of resources to this line of production, it will set a price of
P2
The diagram, total product will be at maximum at
Q3 units of labor
Which of the following statements about utility is true?
Utility is difficult to measure quantitatively
The law of diminishing returns results in
a total product curve that eventually increase at a decreasing rate
for a purely competitive seller, price equals
all of these
According to the accompanying diagram, at the profit maximizing output, the firm will realize
an economic profit of ABGH
Refer to the diagram. At the profit maximizing level of output, the firm will realize
an economic profit of ABHJ
The budget line shift from ab to cd in the figure is consistent with
an increase in the price of M and a decrease in the price of N
If MU a/Pa = 100/$35 = MU b/Pb =300/? = MU c/Pc =400/?, the prices of the products B and C in consumer equilibrium
are $105 and $140, respectively
Which of the following is a characteristic of pure monopoly?
barriers to entry
To practice long-run price discrimination, a monopolist must
be able to separate buyers into different markets with different price elasticities.
Refer to the diagram. Diseconomies of scale
begin at output Q3
Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices
between P2 and P3
Marginal revenue is the
change in total revenue associated with the sale of one more unit of output
The graphs represent the demand for use of a local golf course for which there is no significant competition. (It has a local monopoly.) Pdenotes the price of a round of golf, and Qis the quantity of rounds "sold" each day. If the left graph represents the demand during weekdays and the right graph the weekend demand, this profit-maximizing golf course should
charge $7 for each round on weekdays and $10 during the weekend.
An indifference curve shows all
combinations of two products yielding the same total utility to a consumer
The provided graph represents
decreasing cost-industry: Firms may be paying lower prices for their inputs when the industry expands
the competitive firm depicted in this diagram produces output Q, it will
earn a normal profit
Refer to the diagram for a purely competitive producer. If product price is P3:
economic profits will be zero
the provided diagram, at the profit maximizing output, total profit is
efbc
Refer to the diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. In the long run we should expect
firms to leave the industry, market supply to fall, and product price to rise
For a purely competitive firm, total revenue
has all of these characteristics.
Refer to the diagram, where variable inputs of labor are being added to a constant amount of property resources. The total output of this firm will cease to expand
if a labor force in excess of Q 3 is employed
the accompanying diagram, demand is relatively elastic
in the P2 P4 price range
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 accompanying diagram, if price is reduced from P1 to P2, total revenue will
increase by C-A
Refer to the diagram. At output level Q, average fixed cost
is measured by both QF and ED
If total utility is increasing marginal utility
is positive but may be either increasing or decreasing
If a price-discriminating monopolist sells the same product in two markets but charges a higher price in market X and a lower price in market Y, the pricing difference indicates that demand is
less elastic in market X than in market Y.
A natural monopoly occurs when
long-run average costs decline continuously through the range of demand.
Refer to the diagram for a natural monopolist. If a regulatory commission were to set a maximum price of P3, the monopolist would
maximize profits
Suppose the MU x/Px exceeds MU y/Py. To maximize utility, the consumer who is spending all her money income should buy
more of X and less and/or less of Y
Mary says "You would have to pay me $50 to attend that pro wrestling event." For Mary, the marginal utility of the event is
negative
Refer to the diagram, where xy is the relevant budget line and I1, I2, and I3 are indifference curves. The equilibrium position for the consumer is at
point K (where the budget line meets in the middle of the I2 line)
Which of the following is a characteristic of a purely competitive seller's demand curve?
price and marginal revenue are equal at all levels of output
When a purely competitive firm is in long-run equilibrium
price equals marginal cost
Refer to the diagram. Suppose the budget line shifts so that the consumer's equilibrium changes from point A to point B. This means that the
price of Y has decreased
If the budget line shifts from BB to bb in the diagram, we can infer that the
price of Y has increased and the price of X has decreased
Which of the following is not a characteristic of pure competition?
pricing strategies by firms
Refer to the diagram for a natural monopolist. If a regulatory commission set a maximum price of P2, the monopolist would
produce output Q3and realize a normal profit.
At the profit maximizing level of output, a purely competitive firm will:
produce the quantity of output at which marginal cost equals price
Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting
profits were $0 and its economic losses were $500,000
Refer to the diagram for a non discriminating monopolist. Marginal revenue will be zero at output
q 2
The industry represented by the accompanying graph must be one where
resource prices fall when the industry contracts
Refer to the diagram. At output level Q2
resources are over-allocated to this product and productive efficiency is not realized.
Long-run competitive equilibrium
results in zero economic profits
the provided diagram, the short-run supply curve for this firm is the
segment of the MC curve lying to the right of output level h
If all of the firms in a competitive industry are legally required to meet new regulations that increase their costs of production:
supply of the product will decrease
Refer to the diagram for a purely competitive producer. The firm's short-run supply curve is
the bcd segment and above on the MC curve
In the diagram,
the consumer is indifferent between points A and B, but neither point maximizes his utility
Implicit and explicit costs are different in that
the former refer to non-expenditure costs and the latter to monetary payments
What do the economies of scale, the ownership of essential raw materials, and patents have in common?
they are all barriers to entry
At each point on an indifference curve...
total utility is the same
The diagram suggests that
when marginal product lies above average product, average product is rising.