question
(b) marginal product of a variable input must eventually decline.
answer
The law of diminishing returns implies
(a) marginal product is always diminishing.
(b) marginal product of a variable input must eventually decline.
(c) marginal product of a fixed input must eventually decline.
(d) total product must eventually decline.
(a) marginal product is always diminishing.
(b) marginal product of a variable input must eventually decline.
(c) marginal product of a fixed input must eventually decline.
(d) total product must eventually decline.
question
(b) marginal costs are unchanged
Changes in fixed factor prices are just changed in sunk costs and don't affect decision making on the margin.
Changes in fixed factor prices are just changed in sunk costs and don't affect decision making on the margin.
answer
In general, if the price of a fixed factor of pro duction increases,
(a) price falls.
(b) marginal costs are unchanged.(c) marginal costs increase.
(d) the firm will increase output.
(a) price falls.
(b) marginal costs are unchanged.(c) marginal costs increase.
(d) the firm will increase output.
question
(b) decrease production.
answer
A firm in a perfectly competitive industry faces an output price is $8 and the firm is producing 77units with a marginal cost of $11. The firm should
(a) lower its price.
(b) decrease production.
(c) increase production.
(d) raise its price.
(a) lower its price.
(b) decrease production.
(c) increase production.
(d) raise its price.
question
(c) All firms act as price takers
answer
According to the definition used in class a competitive market is one where
(a) Marginal cost is low
(b) Firms spend a large fraction of revenue on advertising
(c) All firms act as price takers
(d) Many customers are highly price conscious
(a) Marginal cost is low
(b) Firms spend a large fraction of revenue on advertising
(c) All firms act as price takers
(d) Many customers are highly price conscious
question
(c) The equilibrium price is always close to marginal cost
answer
In highly competitive markets
(a) Price markups over marginal costs are large
(b) Entry is usually very difficult
(c) The equilibrium price is always close to marginal cost
(d) Profits are usually high because of large advertising expenditures
(a) Price markups over marginal costs are large
(b) Entry is usually very difficult
(c) The equilibrium price is always close to marginal cost
(d) Profits are usually high because of large advertising expenditures
question
(b) it cannot cover its variable costs
answer
A firm wants to shut down in the short run (that is, pro duce Q?= 0) when
(a) it cannot cover its xed costs
(b) it cannot cover its variable costs
(c) it cannot cover its total costs
(d) it can adjust its fixed inputs
(a) it cannot cover its xed costs
(b) it cannot cover its variable costs
(c) it cannot cover its total costs
(d) it can adjust its fixed inputs
question
(c) it cannot cover its total costs
answer
A firm wants to shut down in the long run (market exit) when
(a) it cannot cover its xed costs
(b) it cannot cover its variable costs
(c) it cannot cover its total costs
(d) it can adjust its fixed inputs
(a) it cannot cover its xed costs
(b) it cannot cover its variable costs
(c) it cannot cover its total costs
(d) it can adjust its fixed inputs
question
(d) $51,000
15,000+3,000*12
15,000+3,000*12
answer
Christina was the business manager for a real estate firm earning an annual salary of $40,000. Then Christina decided to become a consultant. Christina hired an administrative assistant at $15,000 per year and rents office space (utilities included) for $3,000 per month. Christina earned $100,000 in total revenue the first year.
What is Christina's direct annual cost?(a) $15,000
(b) $12,000
(c) $36,000
(d) $51,000
What is Christina's direct annual cost?(a) $15,000
(b) $12,000
(c) $36,000
(d) $51,000
question
(d) $40,000
answer
What is Christina's annual opportunity cost?
(a) $15,000
(b) $18,000
(c) $36,000
(d) $40,000
(a) $15,000
(b) $18,000
(c) $36,000
(d) $40,000
question
(d) $49,000
answer
Christina's accounting prot is _______.
(a) $100,000
(b) $9,000
(c) $64,000
(d) $49,000
(a) $100,000
(b) $9,000
(c) $64,000
(d) $49,000
question
(b) $9,000
answer
Christina's economic prot is _______.
(a) $100,000
(b) $9,000
(c) $64,000
(d) $49,000
(a) $100,000
(b) $9,000
(c) $64,000
(d) $49,000
question
(c) all go to Duke because if it didn't, another firm could hire Duke away.
answer
Duke is a particularly highly skilled negotiator operating in a perfectly competitive market. The law firm that hires Duke is able to collect twice as much revenue per hour of Duke's time than it can from any other negotiator in town. The increased revenue will
(a) be evenly split between Duke and the law firm to maximize surplus.
(b) all go to the law firm because the firm bears the risk of running the business.(c) all go to Duke because if it didn't, another firm could hire Duke away.
(d) be split, with 75% going to Duke and 25% going to the law firm.
(a) be evenly split between Duke and the law firm to maximize surplus.
(b) all go to the law firm because the firm bears the risk of running the business.(c) all go to Duke because if it didn't, another firm could hire Duke away.
(d) be split, with 75% going to Duke and 25% going to the law firm.
question
(c) the other companies will also move to the low wage country in order to remain in the industry.
answer
Suppose several United States software design companies compete with each other in a perfectly competitive environment. If one company decides to move some of its offices to a low-wage country in order to reduce operating costs
(a) the other companies will still be able to remain profitable while operating solely in the United States.
(b) the company that moves to the lower-wage country will earn positive economic profits in the long run because it will keep a cost advantage.
(c) the other companies will also move to the low wage country in order to remain in the industry.
(d) only the first company to move will charge a lower price than the companies remaining in the United States.
(a) the other companies will still be able to remain profitable while operating solely in the United States.
(b) the company that moves to the lower-wage country will earn positive economic profits in the long run because it will keep a cost advantage.
(c) the other companies will also move to the low wage country in order to remain in the industry.
(d) only the first company to move will charge a lower price than the companies remaining in the United States.
question
(d) As more houses get produced, the marginal cost of making the next house rises.
A falling marginal product of a worker means making a house is more expensive, since you need e.g. 5 workers for the first house but 10 for the 5th and you have to pay more wages to build the 5th house!
A falling marginal product of a worker means making a house is more expensive, since you need e.g. 5 workers for the first house but 10 for the 5th and you have to pay more wages to build the 5th house!
answer
Consider a firm producing affordable housing for a city, operating as a perfectly competitive firm (pricetaker). To build these houses, the firm needs to use materials (wood, aluminum, etc) and workers. All workers are identical in their ability to produce houses. As the firm hires more workers, the marginal product of each additional worker falls because there are only a limited set of tools to work with.Which of the following statements is a result of this decreasing marginal product of workers?
(a) The firm will lose money and want to exit the market if it has fixed costs.
(b) The firm will stop making houses when the marginal revenue of production falls below 0.
(c) The hourly wage paid to each additional worker will fall.
(d) As more houses get produced, the marginal cost of making the next house rises.
(a) The firm will lose money and want to exit the market if it has fixed costs.
(b) The firm will stop making houses when the marginal revenue of production falls below 0.
(c) The hourly wage paid to each additional worker will fall.
(d) As more houses get produced, the marginal cost of making the next house rises.
question
(b) 1; 0
answer
Consider a firm that makes tractors, operating in a perfectly competitive market. The firm owns 5 production lines, and each line can make 1 tractor per hour. Each production line requires 1 worker to operate it at all times, additional workers don't help a production line move any faster, and each worker can only work on 1 production line. The marginal product of hiring the first worker is ____tractors per hour, while the marginal product of hiring the 6th worker is ____ tractors per hour.
(a) 5; 5
(b) 1; 0
(c) 5; 0
(d) 1; 1
(a) 5; 5
(b) 1; 0
(c) 5; 0
(d) 1; 1
question
(b) Maker; close substitute
answer
In a market in which a firm exercises monopoly power, that firm is said to be a price _____ and sells goods or services for which there is no ______.
(a) Taker; close substitute
(b) Maker; close substitute
(c) Taker; close complement
(d) Maker; close complement
(a) Taker; close substitute
(b) Maker; close substitute
(c) Taker; close complement
(d) Maker; close complement
question
(d) All of the ab ove are true.
answer
A profit maximizing single price monopolist produces an output where
(a) MR=MC
(b) MR<P
(c) demand is elastic.(d) All of the ab ove are true.
(a) MR=MC
(b) MR<P
(c) demand is elastic.(d) All of the ab ove are true.
question
(d) The monopolist does not have a supply curve.
Recall a supply curve has a horizontal interpretation as an amount produced for any given output price. Since a monopolist chooses the output price, it's not clear how to even decline its supply curve. It does, however, have a marginal cost curve.
Recall a supply curve has a horizontal interpretation as an amount produced for any given output price. Since a monopolist chooses the output price, it's not clear how to even decline its supply curve. It does, however, have a marginal cost curve.
answer
A profit maximizing monopolist's supply curve
(a) is less than under Perfect Competition
(b) is greater than under Perfect Competition
(c) is the same as under Perfect Competition
(d) The monopolist does not have a supply curve.
(a) is less than under Perfect Competition
(b) is greater than under Perfect Competition
(c) is the same as under Perfect Competition
(d) The monopolist does not have a supply curve.
question
(d) produces less than the socially efficient amount.
answer
The reason economists often consider monopolies socially undesirable is that the monopolist:
(a) earns excessive profits.
(b) can charge any price it wants.
(c) exploits the inelastic nature of demand.
(d) produces less than the socially efficient amount.
(a) earns excessive profits.
(b) can charge any price it wants.
(c) exploits the inelastic nature of demand.
(d) produces less than the socially efficient amount.
question
(b) increase output and price somewhere above $10
answer
A single price monopoly is producing an output level of 100 units where MC=$5 and MR=$8. At this output, total costs are $800, variable costs are $600, and the marginal consumer's reservation value is $10. This firm should
(a) increase output and price somewhere below $10
(b) increase output and price somewhere above $10
(c) decrease output and price somewhere below $10
(d) decrease output and price somewhere above $10
(a) increase output and price somewhere below $10
(b) increase output and price somewhere above $10
(c) decrease output and price somewhere below $10
(d) decrease output and price somewhere above $10
question
(b) $200
answer
A single price monopoly is producing an output level of 100 units where MC=$5 and MR=$5. At this output, total costs are $800, variable costs are $600, and at 100 units produced the marginal consumer's reservation value is $10. What is the firm's accounting profit?
(a) $500
(b) $200
(c) -$300
(d) -$200, the firm should shut down
(a) $500
(b) $200
(c) -$300
(d) -$200, the firm should shut down
question
(a) -$1,000.
answer
A monopolistic firm faces a demand curve such that it can sell 10 prefabricated garages per week at $10,000 each, but if it restricts its output to 9 per week it can sell these at $11,000 each. The marginal revenue of the tenth unit of sales p er week is:1
(a) -$1,000.
(b) $9,000.
(c) $10,000.
(d) $1,000.
(a) -$1,000.
(b) $9,000.
(c) $10,000.
(d) $1,000.
question
(b) without patent protection the market may not exist.
answer
The best economic reason to protect the market power of a firm through patent protection is that
(a) high profits are important to the strength of a nation's economy.
(b) without patent protection the market may not exist.(c) creating a monopolist will improve the allocation of resources in the economy.
(d) it is important to continue to employ lawyers.
(a) high profits are important to the strength of a nation's economy.
(b) without patent protection the market may not exist.(c) creating a monopolist will improve the allocation of resources in the economy.
(d) it is important to continue to employ lawyers.
question
(c) an accounting profit that could be increased by producing more output.
MR>MC means output should increase.
MR>MC means output should increase.
answer
A monopolist is producing 10 units of output such that total costs are $40, P = $5, MC = $2, and MR= $3. This firm is realizing:
(a) an accounting loss that could be reduced by producing more output.
(b) a accounting loss that could be reduced by producing less output.
(c) an accounting profit that could be increased by producing more output.
(d) an accounting profit that could be increased by producing less output.
(a) an accounting loss that could be reduced by producing more output.
(b) a accounting loss that could be reduced by producing less output.
(c) an accounting profit that could be increased by producing more output.
(d) an accounting profit that could be increased by producing less output.
question
(c) the grant of an exclusive license to sell.
answer
In exchange for a share in the revenues earned on campus, State U has granted CheapFizz the exclusive right to sell soft drinks in the student union and in vending machines on campus. Prior to the deal, three soft drink companies sold beverages on campus; now no other soft drink company is allowed to sell its products on campus or at university events.
CheapFizz now has market power due to
(a) the economies of scale gained by having more sales on campus.
(b) the grant of a patent.
(c) the grant of an exclusive license to sell.
(d) network economies caused by all students consuming their product.
CheapFizz now has market power due to
(a) the economies of scale gained by having more sales on campus.
(b) the grant of a patent.
(c) the grant of an exclusive license to sell.
(d) network economies caused by all students consuming their product.
question
(d) more than 75 cents because other firms must exit the market.
answer
Prior to the deal, a 12-ounce can of CheapFizz sold for 75 cents. After the deal you would expect a 12-ounce can of CheapFizz to sell for
(a) 75 cents because that is the market price.
(b) less than 75 cents because CheapFizz will have greater volume and so can sell for a lower price,(c) more than 75 cents because demand for CheapFizz will shift to the left.
(d) more than 75 cents because other firms must exit the market.
(a) 75 cents because that is the market price.
(b) less than 75 cents because CheapFizz will have greater volume and so can sell for a lower price,(c) more than 75 cents because demand for CheapFizz will shift to the left.
(d) more than 75 cents because other firms must exit the market.
question
(c) State U and CheapFizz
answer
The beneciaries of this deal are _______.
(a) the students
(b) State U
(c) State U and CheapFizz
(d) CheapFizz
(a) the students
(b) State U
(c) State U and CheapFizz
(d) CheapFizz
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