question
if the demand curve faced by an individual firm is perfectly elastic, the firm must be an....?
answer
perfectly competitive firm
question
in deciding what to buy to maximize utility the consumer should choose the good with?
answer
highest marginal utility per dollar spent
question
The sole proprietor of the Milwaukee Machine Company generates an annual accounting profit of $78,000. She has a standing salary offer of $35,000 a year to work for a large corporation. If she had invested her capital outside her own company, she estimates it would have returned $22,000 this year. What is the sole proprietor's economic profit?
answer
21000
35000+22000=57000
78000-57000=21000
35000+22000=57000
78000-57000=21000
question
marginal utility is equal to?
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Change in total utility divided by change in quantity consumed
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a perfectly competitive firm does not try to sell more of its product by lowering its price below the market price because?
answer
it can sell at it wants to at the market price.
question
if the firm is producing at Q1, the area 0BEQ1 represents the
answer
total variable cost
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the marginal revenue generated by the pure monopoly from selling the third unit of output is?
answer
$3
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if you know that when a firm produces 8 units of output, average fixed cost is $12:50 and average variable cost is &81.25, then the total cost associated with this output level is?
answer
750.00
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at the long run-equilibrium level of output, this firms total revenue is
answer
$400
question
which best expresses the law of diminishing marginal utility?
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the more of a product is consumed, the smaller is the marginal utility received from the product
question
which of the following is an assumption of the decision-making process followed by consumers to maximize utility?
answer
the consumer considers the prices of the products
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monetary payments a firm makes to pay for resources are called?
answer
explicit costs
question
Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10% interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 each. Of the $75, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.
answer
60,000
question
the decision-making making process followed by consumers to maximize utility assumes that?
answer
consumers behave rationally, attempting to maximize their satisfaction.
question
the demand curve faced by a pure monopoly is
answer
downward sloping
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One argument for having the government regulate natural monopolies is that without regulation?
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these monopolies produce at a level where price is greater than marginal cost.
question
a pure monopoly will generate an economic profit whenever?
answer
total revenue is greater than total cost
question
one feature of pure monopoly is that the firm is
answer
a price maker
question
if marginal cost exceeds average total cost in the short run, then which is likely to be true?
answer
AVERAGE TOTAL COST IS INCREASING
question
What is the meaning of the phrase "dilemma of regulation"?
answer
The competitive price achieves allocative efficiency but may produce economic losses; the normal profit price yields a normal profit but may not be allocatively efficient.
question
Fixed costs are those costs that are?
answer
independent of the amount of output a firm produces in the short run.
question
which of the following would be an implicit cost for a firm?
answer
the cost of wages foregone by the owner of the firm
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natural monopolies result from
answer
extensive economies of scale in production
question
Oscar makes purchases of an existing product (X) such that the marginal utility of the last unit he consumes is 10 utils and the price is $5. He also tries a new product (Y) and the marginal utility of the last unit he consumes is 8 utils and the price is $1. The equal marginal principle suggests that Oscar should?
answer
Increase his consumption of product Y and decrease his consumption of product X
question
children who dislike Brussels sprouts exemplify the notion that the marginal utility of Brussels sprouts is?
answer
negative
question
if a product has a diminishing, but positive, marginal utility, then total utility?
answer
will increase at the diminishing rate
question
total utility is best defined as the?
answer
total satisfaction received from consuming a good, service, or combination of goods and services
question
Which of the following is characteristic of a perfectly competitive firm's demand curve?
answer
price and marginal revenue are equal at all levels of output
question
the satisfaction or happiness one gets from consuming a good or service is called?
answer
utility
question
Assume that Clara purchases a combination of products Y and Z such that, after she is done spending her limited income, MUy/Py = 25 and MUz/Pz= 15. Based on the equal marginal principle, Clara
answer
should have purchased more Y and less Z
question
If the short-run average variable cost of production for a firm is decreasing, then it follows that
answer
average variable cost must be greater than marginal cost
question
Assume that product Alpha and product Beta are both priced at $1 per unit and that Ellie has $20 to spend on Alpha and Beta. She buys 8 units of Alpha and 12 units of Beta. The marginal utilities of the last unit of Alpha and Beta that she purchases are 40 utils and 20 utils, respectively. This indicates that?
answer
in order to maximize utility, Ellie should buy more Alpha and less Beta
question
Round Things, Inc.'s production process exhibits economies of scale. Currently its long-run average total cost is $1/unit. If Round Things doubles its use of all inputs, its new long-run average total cost will be
answer
less than $1/unit
question
Alex has allocated his income in such a way that the marginal utility of the last unit of product X he consumes is 40 utils and that of the last unit of Y is 16 utils. If the unit price of X is $5, then the price of Y must be
answer
$2 per unit
question
the utility of a good or service?
answer
is the satisfaction or happiness one receives from consuming it
question
Price discrimination is more common in service industries because
answer
lower price buyers will find it virtually impossible to resell the products of such industries to high price buyers.
question
a perfectly competitive firm is trying to maximize profits in the short run will expand output?
answer
as long as marginal revenue is greater than marginal cost
question
If all resources used in the production of a product are increased by 20% and total output increases by 20%, then the firm must be experiencing?
answer
constant returns to scale
question
A consumer with a limited income will maximize utility when each good is purchased in amounts such that the
answer
marginal utility per dollar spent on each of the final choices in a bundle is equal
question
which of the following defines marginal utility?
answer
the additional satisfaction or happiness received from the consumption of an additional unit of a good or service
question
One defining characteristic of pure monopoly is that the
answer
monopoly produces a product with no close substitutes.
question
Which of the following is not a necessary characteristic of a perfectly competitive industry?
answer
the industry or market demand is highly elastic
question
the long-run perfectly competitive equilibrium
answer
results in normal profits
question
The lowest point on a perfectly competitive firm's short-run supply curve corresponds to the minimum point on its
answer
average variable cost curve
question
Assume that Oscar is maximizing his total utility and that the equal marginal principle holds by the time he is done allocating his budget.If MUa/Pa = 100/$35, MUb/Pb = 300/?, and MUc/Pc = 400/?, the prices of products B and C
answer
must be $105 and $140, respectively
question
For a pure monopoly to sell a quantity of 10 units, the price must be $8. Marginal revenue (MR) at this output level will be
answer
less than $8
question
One major barrier to entry under pure monopoly arises from
answer
ownership of essential resource
question
If the price of product X increases, then the resulting decline in the amount purchased will
answer
increase the marginal utility of the last unit consumed of this good
question
Which of the following statements is correct?
answer
When marginal utility is positive, an increase in the quantity consumed will increase total utility.
question
Which of the following is not an assumption of the decision-making process followed by consumers to maximize utility?
answer
the consumer does not consider the prices of the products
question
Which of the following constitutes an implicit cost to the Asarta Manufacturing Company
answer
Foregone interest income from using savings to pay for operating expenses
question
A perfectly competitive firm should continue to operate even at a loss in the short run if
answer
it can cover its variable costs of production.
question
In perfect competition, if the market price of the product is initially higher than the minimum average total cost faced by the firms, then
answer
other firms will enter the industry and the industry supply will increase
question
The law of diminishing marginal returns in a manufacturing plant of a fixed capacity implies that, eventually, employing
answer
one more worker will decrease the average product per worker.
question
A pure monopoly is not allocatively efficient because at the profit-maximizing level of output
answer
P > MC.
question
Barriers to entering an industry
answer
are characteristic of a pure monopoly
question
When diminishing marginal utility starts happening as a person consumes more and more of a given good
answer
total utility will increase at a diminishing rate.
question
Which is necessarily true for a perfectly competitive firm in short-run equilibrium?
answer
Marginal revenue minus marginal cost equals zero.
question
Price discrimination for concessions at ball parks is not applied to adults and children because
answer
there can be exchange of the products from children, who could buy them at a lower price, to adults
question
Which of the following statements about price discrimination is correct?
answer
Successful price discrimination will provide the firm with more total profits than if it did not discriminate
question
Betty is maximizing her satisfaction from spending her budget on two items, movie rentals and music downloads. If the marginal utility she receives from the last movie rental is twice that from the last music download, what is the price of a movie rental if the price of a music download is $0.80?
answer
$1.60
question
If the marginal cost curve is below the average variable cost curve
answer
both average total cost and average variable cost are decreasing
question
At the profit-maximizing level of output for a pure monopoly
answer
price is greater than marginal cost.
question
If the long-run average total cost curve for a firm is horizontal in a relevant range of production, then it indicates that there
answer
are constant returns to scale.
question
The economic incentive for price discrimination is based upon
answer
differences among buyers' elasticities of demand.
question
The utility from a specific product is
answer
a measure of one's preference or taste for it.
question
If the marginal cost curve is above the average total cost curve
answer
average total cost is increasing.
question
What is the most likely reason that the market for electricity is not perfectly competitive?
answer
- there are not a lot of sellers in the market
- it is not easy to enter or exit the industry as a suppliers
- it is not easy to enter or exit the industry as a suppliers
question
Which of the following scenarios best represents the pricing behavior of a monopolist
answer
Our Drugs Inc. produces where its marginal revenue is equal to its marginal cost and prices on its downward-sloping demand curve, such that the market for its product clears knowing it will not face competition due to patents it holds on its products.
question
A price-discriminating monopolist can increase profits by:
answer
charging a higher price to those with less elastic demand and a lower price to those with more elastic demand than it would if it could not price discriminate.
question
Which of the following goods is both nonrival and nonexcludable?
answer
The light from a lighthouse at a harbor entrance
question
Which of the following costs is an explicit cost for you?
answer
You hire a worker who could have received the same wage working for your competitor.
question
Which of the following markets is most likely to be perfectly competitive?
answer
the market for mushrooms
question
Which of the following goods is nonexcludable
answer
A tuna in the ocean
question
Which of the following goods is nonrival
answer
a soccer match in a stadium
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