question
Andre is a house painter. He can paint three houses per week. He is considering hiring his friend Henry. Together, Andre and Henry can paint five houses per week. What is Henry's marginal product?
answer
2 houses
question
Rachel crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Erika to help her. Together, Rachel and Erika can bottle and sell seven cases per week. What is Erika's marginal product?
answer
3 cases
question
Which of these assumptions is often realistic for a firm in the short run?
answer
The firm can vary the number of workers it employs but not the size of its factory.
question
Average total cost is very high when a small amount of output is produced because
answer
average fixed cost is high.
question
Refer to Figure above. Quantity B represents the output level where the firm
answer
minimizes average variable costs.
question
Quantity C represents the output level where the firm
answer
produces at the efficient scale.
question
Lillyanne's Lunchcart is a small street vendor business. If Lillyanne makes 15 bagels in her first hour of business and incurs a total cost of $16.50, her average total cost per bagel is
answer
$1.10
question
Lauren opened a yoga studio where she teaches classes and sells yoga clothing. Fixed costs for Lauren's yoga studio include the cost of the
(i)
tank tops.
(ii)
wages paid to the other yoga instructors.
(iii)
lease on the studio space.
(iv)
insurance that the landlord requires Sonia to carry for the studio.
(i)
tank tops.
(ii)
wages paid to the other yoga instructors.
(iii)
lease on the studio space.
(iv)
insurance that the landlord requires Sonia to carry for the studio.
answer
(iii) and (iv) only
question
Suppose Tia started up a small lemonade stand business last month. Variable costs for Tia's lemonade stand now include the cost of a. lemons and sugar.
b. paper cups.
c. the wages paid to her hourly workers.
d. All of the above are correct.
b. paper cups.
c. the wages paid to her hourly workers.
d. All of the above are correct.
answer
All of the above are correct.
question
Ellie's Elegant Earrings produces pairs of earrings for its mail order catalogue business. Each pair is shipped in a separate box. She rents a small room for $150 a week in the downtown business district that serves as her factory. She can hire workers for $275 a week. There are no implicit costs. Refer to Table above. What is the total cost associated with making 890 boxes of earrings per week?
answer
$1,250
question
The average-fixed-cost curve
answer
is always decreasing
question
Diseconomies of scale occur when
answer
long-run average total costs rise as output increases
question
Consider the following table of long-run total cost for four different firms:
Refer to Table above. Which firm has economies of scale over the entire range of output?
Refer to Table above. Which firm has economies of scale over the entire range of output?
answer
Firm 1 only
question
Sarah's Café sells gourmet bagels. In the long run, the café incurs a total cost of $500 to produce 1,000 bagels. If Sarah's Café exhibits economies of scale between 1,000 and 2,000 bagels, the long-run average total cost for 1,500 bagels is
answer
lower than $0.50
question
A firm in a competitive market has the following cost structure:
If the market price is $8, how many units of output should the firm produce to maximize profit?
If the market price is $8, how many units of output should the firm produce to maximize profit?
answer
6 units
question
Wild Goose Airlines flies between Baton Rouge and Seattle. The company rents airplanes on a year-long contract at a cost that averages $600 per flight. Other costs (fuel, flight attendants, etc.) amount to $550 per flight. Currently, Wild Goose's revenues are $1,000 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profit, Wild Goose Airlines should
answer
continue flying until the lease expires and then drop the run.
question
Refer to Figure above. The firm earns a positive economic profit in the short run if the market price is
answer
above $6.30.
question
Refer to Figure above. If the market price is $10, what is the firm's total cost?
answer
$35
question
Refer to Figure above. If the market price is $10, what is the firm's total revenue?
answer
$50
question
Refer to Figure above. The firm will earn zero economic profit if the market price is
answer
$6
question
Refer to Table above. At which level of production will the firm maximize profit?
answer
3 units
question
Refer to Table above. If the firm produces the profit-maximizing level of production, how much profit will the firm earn?
answer
$6
question
Which of the following represents the firm's long-run condition for exiting a market?
answer
exit if P < ATC
question
Which of the following represents the firm's short-run condition for shutting down?
answer
shut down if TR < VC
question
Refer to Figure above. If the price is $4.50 in the short run, what will happen in the long run?
answer
Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry.
question
Suppose that the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost. Then the firm will
answer
earn zero profits
question
Refer to Figure above. In response to the situation represented by the figure, we would expect
a. new firms to enter the market.
b. this firm's profit to move from its current value toward a positive value.
c. some of the firms that are currently in the market to exit.
d. None of the above are correct.
a. new firms to enter the market.
b. this firm's profit to move from its current value toward a positive value.
c. some of the firms that are currently in the market to exit.
d. None of the above are correct.
answer
None of the above are correct.
question
Generic drugs can enter the market after the patent runs out on a patented drug. What happens next in the market?
answer
Price decreases, and total surplus increases
question
Suppose promoters at a concert know that 100 adults are willing to pay $12 for admission to the concert on a weekend. Suppose the promoters also know that 200 students are willing to pay $8 for admission on a weekend. The cost of operating the concert on a weekend is $2,000. How much profit will the concert earn if it engages in price discrimination?
answer
$800
question
As the sole producer of a good in the market, a monopolist can alter the price of its good
(i)
without affecting the quantity sold.
(ii)
without affecting its average total cost.
(iii)
by adjusting the quantity it supplies to the market.
(i)
without affecting the quantity sold.
(ii)
without affecting its average total cost.
(iii)
by adjusting the quantity it supplies to the market.
answer
(iii) only
question
Only two firms, Acme and Ultima, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $8 and zero fixed cost. Refer to Table above. Acme and Ultima agree to maximize joint profits. However, while Acme produces the agreed upon amount, Ultima breaks the agreement and produces 5 more than agreed. How much profit does Acme make?
answer
$140
question
The firm has total fixed costs of $9 and a constant marginal cost of $3 per unit. The firm will maximize profit with
answer
15 units of output.
question
Which area shows the deadweight loss from monopoly?
answer
J+H
question
Which of the following is true in a long-run equilibrium,
answer
only a perfectly competitive firm operates at its efficient scale.
question
The primary reason that economists criticize monopolists is because they
answer
produce less than the socially efficient level of output.
question
In the case of a typical natural monopoly, average total cost (ATC) is
answer
declining, often because fixed costs are very large.
question
Refer to Figure above. Which curve shows the marginal cost curve for a monopoly firm?
answer
D.
question
A monopolist can maximize profits by
a. producing an output level where marginal revenue equals marginal cost.
b. charging a price that is greater than marginal revenue.
c. earning a profit of (P - MC) x Q.
d. Both a and b are correct.
a. producing an output level where marginal revenue equals marginal cost.
b. charging a price that is greater than marginal revenue.
c. earning a profit of (P - MC) x Q.
d. Both a and b are correct.
answer
Both a and b are correct
question
Refer to Figure above. If there are no fixed costs of production, monopoly profit with perfect price discrimination equals
answer
$6,250.
question
Based on what we have learned in class, what must a monopolist do in order to sell more of a good?
answer
lower its price.
question
Refer to Figure above. As the figure is drawn, the firm is in
answer
a short-run equilibrium as well as a long-run equilibrium.
question
Refer to Figure above. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to
answer
$1,562.50.
question
If a monopolist practices perfect price discrimination, then that company
answer
creates no deadweight loss.
question
Which of the following statements are true about a monopolistically competitive firm?
a. It has the usual deadweight loss of monopoly pricing.
b. It experiences a zero profit in a long-run equilibrium.
c. It is said to have excess capacity.
d. All of the above are correct.
a. It has the usual deadweight loss of monopoly pricing.
b. It experiences a zero profit in a long-run equilibrium.
c. It is said to have excess capacity.
d. All of the above are correct.
answer
All of the above are correct.
question
The table shows the town of Rauston's demand schedule for milk. For simplicity, assume the town's milk seller(s) incur no costs in selling milk. Refer to Table above. Suppose there are exactly two sellers of milk in Rauston: Tellon and Bandstop. If Tellon sells 150 gallons and Bandstop sells 200 gallons, then
answer
Tellon's profit is $450 and Bandstop's profit is $600.
question
Suppose that a monopolist's marginal costs increase by $1 for every level of production, then the monopoly price will
answer
rise by less than $1.
question
Refer to Figure above. A profit-maximizing monopolist would earn profits of
answer
$120., $126.
question
What is the name for a group of firms that act collectively to maximize total profits?
answer
cartel
question
Refer to figure above. Which price will a monopolist firm choose to maximize profit?
answer
P5.
question
Refer to Table above. If a monopolist faces a constant marginal cost of $5, how much output should the firm produce in order to equate marginal revenue with marginal cost?
answer
4 units
question
Refer to Figure above. If Anne produces only lemonade, she can produce
answer
400 pitchers per day
question
The graph shows all combinations of ham and cheese (in pounds) that the nation of Bovinovia could produce in a given month, which equals 240 hours of production. Refer to Figure above. Which of the following combinations of ham and cheese could Bovinovia produce in 240 hours?
answer
225 pounds of ham and 140 pounds of cheese
question
Assume that Kenya and Spain can switch between producing toothbrushes and producing hairbrushes at a constant rate. Refer to Table above. Which of the following represents Kenya and Spain's production possibilities frontiers when each country has 60 minutes of machine time available?
answer
Zimbabwe Portugal
question
Assume that Maria and Manuel can switch between producing mixers and producing toasters at a constant rate. Refer to Table above. Which of the following combinations of blenders and toasters could Manuel not produce in 80 hours?
answer
6 blenders and 5 toasters.
question
Assume that Australia has a comparative advantage in fish and Japan has a comparative advantage in cars. Also assume that Japan has an absolute advantage in both fish and cars. If these two countries specialize and trade so as to maximize the benefits of specialization and trade, then
a. Australia will produce more fish than it would produce in the absence of trade.
b. the two countries' combined output of both goods will be higher than it would be in the absence of trade.
c. All of the above are correct.
d. Japan will produce more cars than it would produce in the absence of trade.
a. Australia will produce more fish than it would produce in the absence of trade.
b. the two countries' combined output of both goods will be higher than it would be in the absence of trade.
c. All of the above are correct.
d. Japan will produce more cars than it would produce in the absence of trade.
answer
All of the above are correct.
question
Refer to Figure above. Suppose Bolivia decides to increase its production of emeralds by 2. What is the opportunity cost of this decision?
answer
60 rubies
question
Suppose Shakia is willing to trade 4 poems to Jordan for each novel that Jordan writes and sends to Shakia. Which of the following combinations of novels and poems could Jordan then consume, assuming Jordan specializes in novel production and Shakia specializes in poem production?
answer
2 novels and 8 poems
question
Refer to Figure above. Without trade, Kazakhstan produced and consumed 12 bolts and 36 nails and Tajikistan produced and consumed 14 bolts and 24 nails. Then, each country agreed to specialize in the production of the good in which it has a comparative advantage and trade 16 bolts for 38 nails. As a result, Kazakhstan gained
answer
2 bolts and 2 nails and Tajikistan gained 2 bolts and 18 nails.
question
Assume that Dominican Republic and Sweden can switch between producing refrigerators and producing TVs at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Refer to Table above. Assume that the Dominican Republic and Norway each has 4 days available for production. Originally, each country divided its time equally between the production of refrigerators and TVs. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of refrigerators increased by
answer
24
question
Refer to Figure above. With trade, the equilibrium price of and the equilibrium quantity of pineapples demanded in Canada are
answer
P1 and Q2.
question
Refer to Figure above. Consumer surplus after trade is
answer
$8,100.
question
The figure below illustrates a tariff. On the graph, Q represents quantity and P represents price. Refer to Figure above. Government revenue raised by the tariff is represented by the area
answer
E
question
Refer to Figure above. The tariff
answer
increases producer surplus by the area C and decreases consumer surplus by the area C + D + E + F.
question
Refer to Figure above. The tariff
answer
increases producer surplus by the area C, decreases consumer surplus by the area C + D + E + F, and decreases total surplus by the area D + F.
question
Refer to Figure above. The deadweight loss created by the tariff is represented by the area
answer
D + F
question
Refer to Figure above. The area C + D + E + F represents
answer
the decrease in consumer surplus caused by the tariff.
question
Refer to Figure above. The imposition of a tariff on beef
answer
decreases the number of beef imported by 200.
question
Joe is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Joe gave up is counted as part of the shrimp business's
answer
implicit costs
question
Anya has decided to start her own hair-styling salon. To purchase the necessary equipment, Anya withdrew $10,000 from her savings account, which was earning 3% interest, and borrowed an additional $5,000 from the bank at an interest rate of 8%. What is Anya's annual opportunity cost of the financial capital that has been invested in the business?
answer
$700
question
Erika owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each.
What are Erika's total economic costs per glass?
What are Erika's total economic costs per glass?
answer
$0.18
question
If a firm uses labor to produce output, the firm's production function depicts the relationship between
answer
the number of workers and the quantity of output.
question
Jenny grows pumpkins. If Jenny plants no seeds on her farm, she gets no harvest. If she plants 1 bag of seeds, she gets 500 pumpkins. If she plants 2 bags, she gets 800 pumpkins. If she plants 3 bags, she gets 900 pumpkins. A bag of seeds costs $100, and seeds are her only cost.
Jenny's production function exhibits
Jenny's production function exhibits
answer
decreasing marginal product.
question
Quantity C represents the output level where the firm
answer
produces at the efficient scale
question
For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?
answer
the cost of the steel that is used in producing automobiles
question
Refer to Table above. What is the value of C?
answer
$100
question
Sarah's Café sells gourmet bagels. In the long run, the café incurs a total cost of $500 to produce 1,000 bagels. If Sarah's Café exhibits economies of scale between 1,000 and 2,000 bagels, the long-run average total cost for 1,500 bagels is
answer
lower than $0.50.
question
A seller in a competitive market can
answer
sell all he wants at the going price, so he has little reason to charge less.
question
Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML
answer
can choose quantity of butter that it produces but not the price at which it sells its butter.
question
Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total revenues from the sale are $500. Which of the following statements is correct?
(i)
Marginal revenue equals $5.
(ii)
Average revenue equals $5.
(iii)
Price equals $5.
(i)
Marginal revenue equals $5.
(ii)
Average revenue equals $5.
(iii)
Price equals $5.
answer
(i), (ii), and (iii)
question
Which of the following industries is least likely to exhibit the characteristic of free entry?
answer
satellite radio
question
If the market price is $16, this firm will
answer
produce 5 units of output in the short run and face competition from new market entrants in the long run.
question
A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its
answer
variable costs.
question
A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will
answer
rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium.
question
Refer to Figure above. If the price is $3.50 in the short run, what will happen in the long run?
answer
Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.
question
Suppose that some firms in a competitive industry are earning zero economic profits, while others are experiencing losses. All else equal, in the long run, we would expect the number of firms in the industry to
answer
decrease
question
Refer to Figure above. Assume that the market starts in equilibrium at point W in panel (b). An increase in demand from D0 to D1 will result in
answer
an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z.
question
A firm that is a natural monopoly
answer
is not likely to be concerned about new entrants eroding its monopoly power.
question
Exclusive ownership of a key resource
answer
is a potential but rare cause of a monopoly.
question
Which of the following is not an example of a barrier to entry?
answer
A college student starts a part-time tutoring business
question
Refer to Figure above. Based upon the information shown, how many units will MuffinHaus produce to maximize profits?
answer
70.
question
Refer to Figure above. Based upon the information shown, what price will MuffinHaus charge to maximize profits?
answer
$14.
question
Refer to Figure above. A profit-maximizing monopolist would earn profits of
answer
$120., $126.
question
Refer to Table above. If a monopolist faces a constant marginal cost of $5, how much output should the firm produce in order to maximize profit?
answer
4 units
question
What is the marginal revenue from the sale of the 4th unit?
answer
-$3
question
Which of the following statements is true?
(i)
When a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price.
(ii)
When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.
(iii)
Average revenue is the same as price for both competitive and monopoly firms.
(i)
When a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price.
(ii)
When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.
(iii)
Average revenue is the same as price for both competitive and monopoly firms.
answer
(ii) and (iii) only
question
Which area shows the deadweight loss from monopoly?
answer
J+H
question
Which of the following statements is correct? Monopolies are socially inefficient because they
(i)charge a price above marginal cost.(ii)produce too little output.(iii)earn profits at the expense of consumers.(iv)maximize the market's total surplus.
(i)charge a price above marginal cost.(ii)produce too little output.(iii)earn profits at the expense of consumers.(iv)maximize the market's total surplus.
answer
(i) and (ii) only
question
Suppose executives at a natural history museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executives also know that 200 students are willing to pay $8 for admission on a weekday. The cost of operating the museum on a weekday is $2,000.
How much additional profit will the museum earn if it engages in price discrimination compared to charging each customer $8 for admission?
How much additional profit will the museum earn if it engages in price discrimination compared to charging each customer $8 for admission?
answer
$400
question
Which of the following is an example of price discrimination?
answer
Hotel rates for AAA members are lower than for nonmembers
question
Perfect price discrimination
a. All of the above are correct.
Correct
b. increases total surplus.
c. increases profits to the firm.
d. decreases consumer surplus.
a. All of the above are correct.
Correct
b. increases total surplus.
c. increases profits to the firm.
d. decreases consumer surplus.
answer
All of the above are correct.
question
A monopolistically competitive industry is characterized by
answer
many firms selling products that are similar but not identical.
question
Which of the following statements are true about a monopolistically competitive firm?
a. It has the usual deadweight loss of monopoly pricing.
b. It experiences a zero profit in a long-run equilibrium.
c. It is said to have excess capacity.
d. All of the above are correct.
a. It has the usual deadweight loss of monopoly pricing.
b. It experiences a zero profit in a long-run equilibrium.
c. It is said to have excess capacity.
d. All of the above are correct.
answer
All of the above are correct.
question
Refer to Figure 16-11. The graph depicts a monopolistically competitive firm in the short run. Which of the following explanations best describes the long run adjustment?
answer
More firms will enter this market and each firm will have a smaller share of the total market demand, shifting this firm's demand curve to the left
question
In a typical cartel agreement, the cartel maximizes profit when it
answer
behaves as a monopolist.
question
Only two firms, Acme and Ultima, sell a particular product. The table below shows the demand curve for their product. Each firm has the same constant marginal cost of $8 and zero fixed cost. Acme and Ultima agree to jointly maximize profits, and split the profit maximizing production and profits evenly. If Acme and Ultima each break the agreement and each produce 5 more than agreed upon, how much less profit does each make, compared to the profit at to the cartel output?
answer
$20
question
Figure 17-3. Hector and Bart are roommates. On a particular day, their apartment needs to be cleaned. Each person has to decide whether to take part in cleaning. At the end of the day, either the apartment will be completely clean (if one or both roommates take part in cleaning), or it will remain dirty (if neither roommate cleans). With happiness measured on a scale of 1 (very unhappy) to 10 (very happy), the possible outcomes are as follows: Refer to Figure 17-3. If this game is played only once, then the most likely outcome is that
answer
neither Hector nor Bart cleans.
question
The FTC's main case against Google in its 2020 anti-trust action is based primarily on the claim that,
answer
Google ties its web search engine to other products, such as Android OS
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