Principles of Microeconomics final exam

How long do patents​ last?

20 years from the date the patent is filed with the government.

According to the table, what is the average total cost of producing 550 pizzas?

$5.00

Diseconomies of scale are occurring over the range of ___ units to ___ units.

400, 700

A market is perfectly competitive if

A. it has many buyers and many sellers, all of whom are selling identical products, with no barriers to new firms entering the market.

Is zero economic profit inevitable in the long run for monopolistically competitive​ firms? In the long​ run, monopolistically competitive firms

A. may continue to earn profit by convincing consumers their products are different.

Consider a pair of Gap Jeans. Is the consumption of Gap Jeans rival and excludable? The consumption of Gap Jeans is

A. rival and excludable

Marginal analysis

Analysis that involves comparing marginal benefits and marginal costs is called marginal analysis.

Suppose a common resource—wood in a public forest—is being overused because residents consider the benefits of gaining firewood or wood for building but do not account for the cost of deforestation when chopping down trees. What could be done to prevent wood in the forest from being​ overused? To prevent overuse of the common​ resource,

B. the government could impose restrictions on access to wood in the forest.

Does the market system result in allocative​ efficiency? In the long​ run, perfect competition

C. results in allocative efficiency because firms produce where price equals marginal cost.

A form of market structure studied by economists is monopoly. When is a firm a​ monopoly, or are monopolies only theoretical concepts that do not​ exist?

D. A firm is a monopoly if it can ignore the other firms' prices.

Positive analysis

analysis concerned with what is. Economists mostly perform positive analysis.

Normative analysis

analysis concerned with what ought to be

Suppose a new recreational neighborhood park would cost​ $20,000, including opportunity​ costs, to construct and maintain. If​ built, the park would be a public good. For​ simplicity, assume the neighborhood park would be used by three​ families, each of whom would derive a marginal benefit equivalent to​ $8,000 from the park. Should the neighborhood park be​ built? It would ______ for the park to be built. If left to the private​ market, without private bargaining or government​ intervention, would the park be​ built? Without private bargaining or government​ intervention, the park _____ be built.

be optimal would not

Suppose the figure to the right illustrates the market for toilet​ paper, where S1 represents the marginal private cost of production and D1 represents the marginal private benefit from consumption. Companies that produce toilet paper bleach the paper to make it white. Some paper plants discharge the bleach into rivers and​ lakes, causing substantial environmental damage. Assume that S2 represents the marginal social cost of producing toilet paper​ (incorporating the​ externality). What could the government do to internalize the​ externality? In the presence of a negative​ externality, the government could ___ toilet paper production. In​ particular, the government should set a Pigovian tax of ​$___ per ton of toilet paper produced.

tax $225

Trade-off:

the idea that, because of scarcity, producing more of one good or service means producing less of another good or service.

Technology

the processes a firm uses to produce goods and services

When graphing a conventional short-run production function, we place ______ on the horizontal axis and _____ on the vertical axis.

the variable input, output.

according to the data in the table, what is the marginal cost of producing the 640th pizza?

$43.33

Suppose the United States has two​ utilities, Commonweath Utilities and Consolidated Electric. Both produce 20 million tons of sulfur dioxide pollution per year.​ However, the marginal cost of reducing a ton of pollution for Consolidated Electric is ​$375 per ton and the marginal cost of reducing a ton of pollution for Commonwealth Utilities is ​$450 per ton. The​ government's goal is to cut sulfur dioxide pollution in half​ (by 20 million tons per​ year). If the government issues 10 million tradable pollution permits to each​ utility, what will be the cost of eliminating half of the pollution to​ society? Using a cap-and-trade system of tradable emission allowances will eliminate half of the sulfur dioxide pollution at a cost of ​$___ million per year. If the permits are not​ tradable, what will be the cost of eliminating half of the​ pollution? If permits cannot be​ traded, then the cost of the pollution reduction will be ​$____ million per year.

$7500 million $8250 million

in analyzing markets, we generally assume

1. People are rational 2. People respond to economic incentives 3. Optimal decisions are made at the margin

Suppose the figure to the right illustrates the marginal cost and marginal benefit from reducing sulfur dioxide pollution. Suppose also that the United States is currently generating 12.5 million tons of pollution per year. What is the optimal level of pollution​ reduction? The optimal level of pollution reduction is ___ million tons per year.

10 million tons

What happens if a perfectly competitive industry becomes a​ monopoly? Suppose the demand curve in the figure is market demand and the corresponding market supply curve represents the marginal cost of production. Compared to perfect​ competition, a​ profit-maximizing monopoly would decrease output by ____ units. In​ addition, a monopoly would raise price by ​$___

3 units $3

Suppose the figure to the right represents the market for a particular brand of​ shampoo, such as​ L'Oreal, Lancome, or Maybelline. Assume the market is monopolistically competitive and is in​ long-run equilibrium. How much excess capacity does the firm​ have? The monopolistically competitive​ firm's excess capacity is ___ thousand bottles of shampoo. ​ ​Instead, suppose the market is perfectly competitive and is in​ long-run equilibrium​ (with the same cost structure as that illustrated in the​ figure.) How much excess capacity does the firm​ have? The perfectly competitive​ firm's excess capacity is ___ thousand bottles of shampoo.

4 thousand bottles 0 thousand bottles

If the number of people in a publishing company does not go up or down with the quantity of books it publishes, then how should we categorize the salaries and benefits paid to these employees?

As a part of fixed cost

What factors under the control of owners and managers make a firm successful and allow it to earn economic​ profits? Owners and managers control some of the factors that make a firm successful such as

B. the firm's ability to produce its product at a lower average cost than competitors.

How do property rights affect externalities and market failure?

B. Externalities and market failure will result from the difficulty of enforcing property rights.

In England during the Middle​ Ages, each village had an area of​ pasture, known as a​ commons, on which any family in the village was allowed to graze its cows or sheep without charge. Was the common land used​ optimally?

B. Grazing created a negative​ externality, resulting in the commons being overused.

Give an example of a public franchise and an example of a public enterprise. An example of a public franchise is

B. a firm that is the​ sole, government-designated provider of natural gas​, and an example of a public enterprise is the government directly providing water.

What must be true for the Coase Theorem to​ hold? For the Coase Theorem to​ hold,

C. all parties to an agreement must be willing to accept a reasonable agreement.

What is occurring from the origin up until point A in this graph?

Output increases at an increasing rate

Market economies

Tend to be more efficient than centrally-planned economies. They promote productive and allocative efficiency.

Equity

The fair distribution of economic benefits.

What is the fixed cost of production (per month)?

The fixed cost of production is $2800.

Common resources

The market tends to overuse common resources.

Voluntary exchange

a situation that occurs in markets when both the buyer and the seller of a product are made better off by the transaction.

The downward sloping part of the long run average total cost curve is where the firm is achieving:

economies of scale

capital

manufactured goods that are used to produce other goods and services

Describe a​ monopoly's demand curve. A​ monopoly's demand curve

E. is the same as the demand curve for the product.

What is the​ government's policy on collusion in the United​ States? Explain the rationale for this policy. In the United States

C. the government makes collusion illegal with antitrust laws because monopolies reduce economic efficiency.

Consider the market for trees in a public forest​, illustrated in the figure to the​ right, where S1 is marginal private cost and D1 is marginal private benefit. Trees are an example of a common resource. Suppose that the use of trees in a public forest generates a negative externality of ​$75 per unit. If​ so, then according to the​ figure, the optimal quantity of trees in a public forest for society is ___ units.

4 units

Consider the consumption of electricity. What type of good is electricity​? Electricity is

A. a quasi-public good.

Is the loss in efficiency due to market power large or​ small? Explain. The loss in efficiency due to market power is

A. small because firms with substantial market power are rare.

The Department of Justice and the Federal Trade Commission must define the relevant market when determining whether to allow a merger. How do economists identify the relevant​ market? The relevant market has been identified if

B. a price increase results in higher​ profits; otherwise, the market is too narrow.

The five competitive forces model suggests the threat from potential entrants affects industry competition. How might an existing firm deter entry of new​ firms? An existing firm might

B. build a larger store to produce more output.

What effect might market power have on technological​ change? Market power results in

B. economic profits that can be spent on research to develop new products.

How might transaction costs affect private solutions to externality​ problems? Transaction costs

B. may make private solutions to reduce negative externalities no longer feasible.

To have a​ monopoly, barriers to entering the market must be so high that no other firms can enter. Do network externalites create or remove barriers to​ entry? Explain. Network externalities

C. create barriers to entry because if a firm can attract enough customers​ initially, it can attract additional customers as its​ product's value increases by more people using​ it, which attracts even more customers.

Governments often have the potential to influence whether firms are monopolies. How might the government affect whether a firm is a​ monopoly? The government could

C. grant a patent to a firm, giving it the exclusive right to produce a product.

Suppose the figure to the right illustrates the marginal cost and marginal benefit from reducing sulfur dioxide pollution. How could the government use a command-and-control approach to reduce pollution to the optimal level for​ society? The government could

C. limit sulfur dioxide pollution to a particular quantity per year.

Suppose the production of electricity by a utility generates pollution that harms others. Suppose also that Coase bargaining can occur between the utility and the victims of pollution but that the utility has not been legally liable for the damages from its pollution. How would making the utility legally liable for the damages from its pollution affect pollution​ reduction? If the electric utility and the people suffering the effects of the​ utility's pollution can​ bargain, then making the utility legally liable for the damages from its pollution will

C. not change the amount of pollution reduction because the marginal benefit and marginal cost of pollution reduction will not change.

Is the monopoly a natural monopoly? The firm Suppose 18 units of output are supplied in the market. How much lower is the average total cost of production for one firm compared to two​ firms?

D. is a natural monopoly because it can supply the entire market at lower average total cost than can two or more firms. One firm can supply 18 units of output for $1 less per unit in average total cost than two firms. ​

Suppose the government requires each firm to reduce sulfur dioxide emissions by an equal amount such that total emissions are reduced by 7.0 million tons per year. Is this approach necessarily economically​ efficient? This​ command-and-control approach

D. is not efficient because firms can have different costs of reducing pollution.

How might society solve problems associated with externalities and market failure? If an externality is​ present, resulting in market​ failure, then

D. private solutions may reduce or correct market failure.

Which of the following is an example of a transaction cost associated with negotiating the reduction of a negative​ externality? An example of a transaction cost is

D. the cost associated with monitoring an agreement to reduce a negative externality.

Many firms might like to be monopolies because such firms earn economic profits in the long run. What might cause a​ monopoly? A firm is likely to be a monopoly if

D. the government blocks the entry of more than one firm into a market.

How do externalities affect​ markets? If a positive externality in consumption is present in a​ market, then

D. the private benefit from consumption will be different than the social benefit from consumption.

Why does the government issue​ patents? The government issues patents

D. to encourage firms to spend money on the research and development necessary to create new products.

For many​ years, the Aluminum Company of America (Alcoa) essentially operated as a monopoly. What made this company a monopoly? The Aluminum Company of America (Alcoa) was essentially a monopoly because

E. it had almost exclusive control of the​ world's supply of bauxite​, used to make aluminum.

Which are more economically​ efficient, perfectly competitive markets or​ monopolies? Compared to​ monopolies, perfectly competitive markets are

E. more economically efficient because they result in more economic surplus.

How do externalities in the production of electricity result in market failure? Because of externalities, the market for electricity will

E. provide too much electricity.

According to the graph, which level of output represents the minimum efficient scale in bookselling?

20,000 books

Consider a market with two​ firms, Target and​ Wal-Mart, that sell CDs in their music department. Both stores must choose whether to charge a high price ​($25​) or a low price ​($15​) for the new Miley Cyrus CD. These price strategies with corresponding profits are depicted in the payoff matrix.​ Target's profits are in red and​ Wal-Mart's are in blue. ​Target's dominant strategy is to pick a price of $____ . Wal-Mart's dominant strategy is to pick a price of $____.

$15 $15

One measure of the extent of competition in an industry is the concentration ratio. What level of concentration indicates that an industry is an​ oligopoly? Most economists believe that a​ four-firm concentration ratio of greater than ___ percent indicates that an industry is an oligopoly.

40 percent

What is the Nash equilibrium for this game?

D. The Nash equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a high output.

The production function is the relationship between

D. the inputs employed by a firm and the maximum output it can produce with those inputs.

Suppose the market for cotton is perfectly competitive and that input prices increase as the industry expands. Characterize the​ industry's long-run supply curve. The cotton​ industry's long-run supply curve will be

E. upward sloping because the​long-run average cost of production will be increasing.

The De Beers Company of South Africa has faced limited competition in the market for diamonds. What barrier has kept new firms from entering the market for diamonds​?

E. has had almost exclusive ownership of diamond mines​, which is a key input.

Many firms advertise. What effect does advertising have on firm​ profits? One possible effect of advertising is to

E. increase profits by making the demand curve for the product more inelastic.

costs that change with the level of output are known as:

variable costs

Suppose the figure to the right represents the market for a particular brand of​ shampoo, such as​ L'Oreal, Lancome, or Maybelline. Assume the market is monopolistically competitive. What is the​ firm's profit-maximizing price and​ quantity? The monopolistically competitive​ firm's profit-maximizing quantity is ___ thousand bottles of​ shampoo, and its​ profit-maximizing price is ​___ per bottle. What are the​ firm's profits? Profit equals ​___ thousand.

10 thousand bottles $2 per bottle Profit equals $2 thousand.

Which of the following is an example of a trademarked name that has become so widely used for a type of product that it is no longer associated with the product of a specific​ company?

E. aspirin

The marginal cost of production shows the change in a​ firm's total cost from producing one more unit of a good or service. What is the shape of the marginal cost​ curve? ​Graphically, the marginal cost curve is

B. a U shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling.

How do firms use​ marketing? A firm might use marketing to

B. advertise their product

Based on the relationship between average total cost and marginal cost, which of the curves appears to be average total cost?

Curve 2

The figure to the right represents the cost structure for a perfectly competitive firm with its average total cost​ (ATC) curve, average variable​ (AVC) curve, and marginal cost​ (MC) curve. Fixed costs are​ $50.00. Suppose the market price is ​$22.00 per unit. Characterize the​ firm's profit. If the firm produces​ output, then it will ______ In the short run, the firm should

Experience losses. C. continue to produce because price is greater than the average variable cost

According to the table, which of the following are implicit costs?

Forgone salary and foregone interest

Consider a production process where flowers are grown​ (the output) using gardeners​ (labor) and greenhouses​ (capital). The quantity of flowers grown per day with various combinations of labor and capital are shown in the table below. Suppose that each gardener is paid ​$180 per day and the greenhouse is rented for ​$300 per day. Fill in total cost in the table below. ​(Enter your responses as​ integers.)

Labor 0 = $300 Labor 1 = 480 Labor 2 = 660 Labor 3 = 840 Labor 4 = 1020 Labor 5 = 1200

Farmer Jones grows oranges in Florida. Suppose the market for oranges is perfectly competitive and that the market price for a crate of oranges is ​$10 per crate. Fill in total​ revenue, average​ revenue, and marginal revenue in the table below. ​

TR = 0, 10, 20, 30, 40, 50 AR = - , 10, 10, 10, 10, 10 MR = - , 10, 10, 10, 10, 10

Suppose a farmer in Georgia begins to grow peaches. He uses​ $1,000,000 in savings to purchase​ land, he rents equipment for ​$50,000 a​ year, and he pays workers ​$130,000 in wages. In​ return, he produces 150,000 baskets of peaches per​ year, which sell for ​$3.00 each. Suppose the interest rate on savings is 5 percent and that the farmer could otherwise have earned ​$35,000 as a shoe salesman. What is the​ farmer's economic​ profit? What is the farmer's accounting profit?

The peach farmer earns economic profit of $185000 The peach farmer earns accounting profit of ​$270000

Which of these costs are affected by the level of output produced?

Variable costs

According to the table of data, when do diminishing returns in the production of pizzas begin?

When the third worker is hired

minimum efficient scale is the level of output at which:

all economies of scale have been exhausted

the short run is a period of time where_______ while the long run is a period of time where _________.

at least one input is fixed, all inputs are variable

a manufacturing process that makes extensive use of robotics would be considered a ______ manufacturing process.

capital intensive

The figure to the right illustrates the​ long-run average cost curve for a company that makes motors. Suppose the company produces 16 thousand motors per month. Is it experiencing economies of​ scale, diseconomies of​ scale, or constant returns to​ scale? If the company produces 16 thousand​ motors, then it experiences ________ At what level of output does the firm experience the minimum efficient​ scale? The minimum efficient scale occurs when the firm produces ____ thousand motors.

diseconomies of scale. 5

In the short-run, the cost that is independent of the amount of output produced is called

fixed cost

The relationship between the inputs used by the firm and the maximum output it can produce is known as the:

production function

Suppose a pizza parlor has the following production costs: $3.00 in labor per pizza, $4.00 in ingredients per pizza, $0.90 in electricity per pizza, $2,500 in restaurant rent per month, and $300 in insurance per month. Assume the pizza parlor produces 6,000 pizzas per month. What is the variable cost of production (per month)?

the variable cost of production is $47400

According to the graph, which of the following is more likely to occur when moving from point A to point B?

Diminishing returns

What​ "forces" does the five competitive forces model​ address? The competitive forces in the five competitive forces model does not include

A. technological change.

The supply curve for a firm in a perfectly competitive market in the short run is

A. that firm's marginal cost curve for prices at or above average variable cost.

Suppose a firm introduces a significantly different version of an old product. How might that firm use brand management? Such a firm might use brand management to

A. to postpone the time when they will no longer be able to earn economic profits.

What effect might the government have on​ oligopolies? In​ oligopolies, the government might

B. impose barriers to entry with a quota to limit foreign competition.

economies of scale occur

when a firm's long-run average costs decrease with output

The figure to the right represents the cost structure for a perfectly competitive wheat farmer with her average total cost​ (ATC) curve and marginal cost​ (MC) curve. At what market price will the wheat farmer break​ even? The wheat farmer will break even at a price of ​$____ per bushel. If the market price for wheat were indeed ​$3 per​ bushel, should the wheat farmer exit the industry in the long​ run? In the long​ run, the wheat farmer

$3 per bushel. C. should continue to produce wheat because breaking even is as high a return as she could earn elsewhere.

Consider a market with two​ firms, Hewlett-Packard​ (HP) and​ Dell, that sell printers. Both companies must choose whether to charge a high price ​($450​) or a low price ​($350​) for their printers. These price strategies with corresponding profits are depicted in the payoff matrix to the right.​ HP's profits are in red and​ Dell's are in blue. Suppose HP and Dell are initially at the​ game's Nash equilibrium. ​Then, HP and Dell advertise that they will match any lower price of their competitors. For​ example, if HP charges ​$350​, then Dell will match that price and also charge ​$350. What effect will matching prices have on profits​ (relative to the Nash equilibrium without price​ matching)? Assuming HP and Dell can coordinate to maximize​ profits, HP's profit will change by ​$____ and​ Dell's profit will change by ___ ​

$55 55

The five competitive forces model suggests the bargaining power of buyers may affect industry competition. Which of the following is an example of a way buyers might affect an​ industry?

A. GM has significant bargaining power in the tire market, which reduces the profitability.

Your company incurs a cost for fire insurance​, ​which, in the short​ run, is fixed. What happens to this cost in the long​ run? In the long​ run, the cost of fire insurance

A. becomes a variable cost

How does the​ long-run equilibrium for a monopolistically competitive market differ from the​ long-run equilibrium for a perfectly competitive​ market? One way in which monopolistically competitive markets and perfectly competitive markets differ is that in​ long-run equilibrium, monopolistically competitive firms

A. do not produce at minimum average total cost.

Consider the market for oil. Suppose for simplicity that there are only two oil producing countries—Saudi Arabia and Kuwait. Both countries must choose whether to produce a low output or a high output. These output strategies with corresponding profits are depicted in the payoff matrix​ -- Kuwait's profits are in red and Saudi​ Arabia's are in blue. Suppose the two countries form a cartel. What is the cooperative equilibrium?

B. The cooperative equilibrium is for Saudi Arabia to produce a low output and Kuwait to produce a low output.

Suppose Securitex is a small firm that has developed a new​ anti-theft device for automobiles. Securitex currently sells its device online and earns profit of ​$16 million per year. GM is considering installing​ Securitex's system on its automobiles. The two firms​ first, however, must bargain over what price GM will pay Securitex for its software. GM chooses how much to offer Securitex for its system and then Securitex chooses whether to accept the offer and install its system on​ GM's automobiles. The strategies and corresponding profits for GM​ (GM) and Securitex​ (SX) are depicted in the decision tree to the right. Profits are in​ millions, and​ GM's payoffs represent the additional profit it can earn on its automobiles with​ Securitex's anti-theft system. What is the​ subgame-perfect equilibrium?

B. The​ subgame-perfect equilibrium is for GM to offer a high price and for Securitex to accept the offer.

Is the cooperative equilibrium likely to​ occur? The cooperative equilibrium

B. is unlikely to occur because charging $4.50 is not a dominant strategy.

Suppose the market for​ fast-food value meals is monopolistically​ competitive, with many restaurants selling their own brand of food. Assume the restaurants in the industry behave optimally by maximizing profit. The figure represents the market for one monopolistically competitive​ firm's value meals. How will this figure change as the market moves toward​ long-run equilibrium? In the long​ run,

B. the demand curve will shift to the left and become more elastic because the firms are currently making profit.

Perfectly competitive firms should produce the quantity where

B. the difference between total revenue and total cost is as large as possible.

Technology is

B. the processes a firm uses to turn inputs into outputs of goods and services.

Assume the market for oranges is perfectly competitive. If the demand for oranges​ increases, will the market supply additional​ oranges? If the demand for oranges​ increases, then the market

B. will supply additional oranges because producers seek the highest return on their investments.

According to the graph, over what range of output do we find constant returns to scale in bookselling?

Between 20,000 and 40,000 books

According to the graph, what size bookstore is more likely to experience diseconomies of scale?

Bookstores that sell more than 80,000 books per month

How is game theory used in​ economics? In​ economics,

D. the rules of the game include matters beyond a firm's control​, a strategy is a firm's actions to achieve a goal​, and the payoffs are profits.

Firms must typically purchase inputs from suppliers to produce output. What effect might suppliers have on an​ industry?

C. If an input is specialized, then the supplier is likely to have the bargaining power to limit a​ firm's profits.

In the short run,

C. at least one of the​ firm's inputs is​ fixed, while in the long​ run, the firm is able to vary all its​ inputs, adopt new​ technology, and change the size of its physical plant.

Encyclopedia Britannica is an encyclopedia publisher who sells printed encyclopedias. In the​ 1990s, encyclopedias began to be sold electronically. What effect did electronic encyclopedias have on Encyclopedia​ Britannica? Electronic encyclopedias

C. served as a superior product to heavy, bulky, and expensive printed encyclopedias.

Do consumers benefit in any way from monopolistic competition relative to perfect​ competition? Compared to perfect​ competition, when a consumer purchases a product from a monopolistically competitive​ firm, the consumer benefits from purchasing a product

C. that is more closely suited to their tastes.

Which of the following is a threat to a trademarked company​ name? Trademarked brands are threatened by

C. their names becoming so widely used for a type of product that they no longer are associated with a specific company.

Suppose that last semester your semester GPA was 1.60 and your resulting cumulative GPA was 2.73. ​Next, suppose that this semester your semester GPA will be 2.20. If​ so, then your cumulative GPA

D. will decrease because your "marginal" GPA will be below your cumulative GPA.

Charles has decided to open a​ lawn-mowing company. To do​ so, he purchases mowing equipment for ​$3,000​, buys gasoline ​($2.00 in gas is required to mow each​ yard), and pays a helper ​$20.00 per yard. Prior to opening the lawn​ company, Charles earned ​$7,000 as a lifeguard at the neighborhood swimming pool. Assume the money he used to purchase the mowing equipment could otherwise have earned 1 percent per year in the bank and that the mowing equipment depreciates at 10 percent per year. Charles plans to mow 350 yards per year. What is Charles's implicit cost of production?

Charles's implicit cost of production is $7330 per year.

Based on the relationship between marginal and average product, which curve appears to be the average product curve?

Curve 2

For which of the following reason(s) may firms experience economies of scale: A. Both managers and workers may become more specialized and hence more productive as output expands. B. ​Firm's production may increase with a smaller proportional increase in at least one input. C. Large firms may be able to purchase inputs at lower costs than smaller​ competitors; they can also borrow money at a lower interest rate. D. All of the above.

D. All of the above

Suppose Best Buy is the only electronics store in a particular​ market, but RadioShack is thinking about entering the market. Best Buy chooses how much to produce first and then RadioShack chooses whether to enter the industry. The strategies and corresponding profits for Best Buy​ (BB) and RadioShack​ (RS) are depicted in the decision tree to the right. What will the firms​ do?

D. Best Buy will choose the large quantity and RadioShack will not enter.

How can the marginal cost be expressed mathematically? For​ example, if the total cost of producing three units of output is ​$2,285 and the total cost of producing four units of output is ​$3,231​, then the marginal cost of the fourth unit is ____

D. MC = change in TC/ change in Q , where TC is total cost and Q is output. $946

Profit for a perfectly competitive firm can be expressed as

D. Profit = (P * Q) - (ATC * Q), where P is price, Q is output, and ATC is average total cost.

Consider a market with two​ firms, Kellogg and​ Post, that sell breakfast cereals. Both companies must choose whether to charge a high price ​($4.50​) or a low price ​($3.50​) for their cereals. These price​ strategies, with corresponding​ profits, are depicted in the payoff matrix to the right.​ Kellogg's profits are in red and​ Post's are in blue. What is the cooperative equilibrium for this​ game?

D. The cooperative equilibrium is for Kellogg and Post to both choose a price of $4.50.

Does the production of flowers experience the effects of the law of diminishing returns?

D. The effects of the law of diminishing returns are experiences when the third worker is hired.

Which of the following is true of the relationship between the average product of labor and the marginal product of labor?

D. Whenever the marginal product of labor is less than the average product of labor, the average product of labor must be decreasing.

What determines entry and exit of firms in a perfectly competitive industry in the long​ run? In a perfectly competitive industry in the long​ run,

D. new firms will enter if existing firms are making a profit and existing firms will exit if they are experiencing losses.

Does the market system result in productive​ efficiency? In the long​ run, perfect competition

D. results in productive efficiency because firms enter and exit until they break even where price equals minimum average cost.

An example of technological change is A. being able to produce more output using the same inputs. B. being able to produce the same output using fewer inputs. C. a decline in the quantity of output that can be produced from a given quantity of inputs. D. both a and b. E. all of the above.

E. All of the above

What is the Nash equilibrium for this​ game?

E. The Nash equilibrium is for Target and​ Wal-Mart to both choose a price of $15.

Are monopolistically competitive firms efficient in​ long-run equilibrium? Monopolistically competitive firms

E. are not productively efficient because they do not produce at minimum average total cost and they are not allocatively efficient because they produce where price is greater than marginal cost.

Is the concentration ratio an accurate measure of the extent of​ competition? The​ four-firm concentration ratio

E. is flawed in that it does not measure competition between industries.

A firm might experience economies of scale because

E. large firms may be able to purchase inputs at lower costs than smaller competitors.

Suppose the figure to the right represents the market for a particular brand of soap such as​ Zest, Dove, or Ivory. Suppose also that the market is monopolistically competitive and the firm behaves optimally to maximize profit. In the long​ run, will new firms enter the market or will existing firms​ exit? In the long​ run,

E. new firms will enter because the firm is currently making profit.

How are games in game theory​ played? In game​ theory,

E. rules determine what actions are​ allowable, players employ strategies to attain their​ objectives, and payoffs are the results of the interaction among the​ players' strategies.

Suppose a local​ McDonald's hamburger restaurant raises the price of its cheeseburgers from​ $2.00 to​ $2.50. What will happen to the quantity of​ McDonald's cheeseburgers​ demanded? If​ McDonald's raises the price of​ it's cheeseburgers, then

E. some of​ McDonald's customers, but not all of​ them, will still demand​ McDonald's cheeseburgers because this restaurant may be closer to them.

which of the following are sometimes called accounting costs?

Explicit

The figure on the left represents the cost structure for a perfectly competitive wheat farmer with her average total cost​ (ATC) curve and marginal cost​ (MC) curve-this ​firm's cost curves are representative of most firms in the market. The figure on the right represents the market for wheat.

Firms in this market are currently making a profit. The long-run equilibrium price will be $4. In the long-run, firms will enter the market until the marginal firm is earning zero economic profit.

Next, fill in average total cost in the table.

Labor 1 = $12 Labor 2 = 5.5 Labor 3 = 5.25 Labor 4 = 5.67 Labor 5 = 6.32

Consider a production process where flowers are grown​ (the output) using gardeners​ (labor) and greenhouses​ (capital). The quantity of flowers grown per day with various combinations of labor and capital are shown in the table. Fill in the marginal product of labor in the table below. ​(Enter your responses as​ integers.)

Labor 1 = 40 Labor 2 = 80 Labor 3 = 40 Labor 4 = 20 Labor 5 = 10

What is the name for the additional output that a firm produces as a result of hiring one more worker?

Marginal product of labor

Why do oligopolies exist?

Oligopolies exist due to barriers to entry.

Which of the following is known as the highest-valued alternative that must be given up in order to engage in an activity?

Opportunity cost

Suppose a monopolistically competitive firm sells a particular brand of jeans. The quantities of jeans sold per day at various prices are shown in the table below. Fill in total revenue and marginal revenue in the table below. ​ The marginal revenue curve for this firm is ____ its demand curve.

TR = 0, 95, 180, 255, 320, 375 MR = - , 95, 85, 75, 65, 55 below

The figure illustrates the​ short-run cost curves for a company that produces cell phones. Identify the average total cost curve​ (ATC), the average variable cost curve​ (AVC), the average fixed cost curve​ (AFC), and the marginal cost curve​ (MC) in the figure.

The ATC curve is C3, the AVC curve is C2, the AFC curve is C1, and the MC curve is C4.

The figure represents the cost structure for a perfectly competitive firm with its average total cost​ (ATC) curve, average variable​ (AVC) curve, and marginal cost​ (MC) curve. Suppose the market price is ​$10.00 per unit. Will firms enter or exit the industry in the long​ run? If market price is ​$10.00​, then firms will ____ the market in the long run. What effect will firms exiting have on the market​ price? When firms exit​,

exit A. market supply will decrease, increasing price.

according to the graph, which change in output represents economies of scale in bookselling?

from 1,000 to 20,000 books sold per month

When the marginal product of labor is greater than the average product of labor, then the average product of labor must be:

increasing

Suppose Charles owns a​ lawn-mowing company. Assume that without​ workers, no yards are mowed. When he hires one​ worker, he is able to mow 2 yards per day. With two​ workers, he can mow 5 yards per​ day, and with three​ workers, he can mow 10 yards per day.

the marginal product of the first worker is 2 yards per day. the marginal product of the second worker is 3 yards per day. the marginal product of the third worker is 5 yards per day. the marginal product of labor potentially increases (from one to three workers) due to division of labor.