ECON 202 chapter 9,,10,11,12 - Assignment Essays

question

Harvey quit his job at State University, where he earned $50,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $7,000 a year. To start the business, he cashed in $80,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 12,000 units of software at $70 for each unit. Of the $70 per unit, $52 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

The explicit costs of Harvey's firm in the first year were

answer

$624,000

question

The amount of calendar time associated with the long run

answer

varies from industry to industry.

question

Which is most likely to be a long-run adjustment for a firm that manufactures cars on an assembly-line basis?

answer

a switch in production to a redesigned and retooled facility

question

If economic profits in an industry are zero and implicit costs are greater than zero, then

answer

accounting profits are greater than zero

question

Which of the following represents a long-run adjustment?

answer

Unable to meet foreign competition, a U.S. watch manufacturer sells one of its branch plants.

question

The total output of a firm will be at a maximum where

answer

MP is zero.

question

The total product curve graphically shows how much

answer

output the firm can produce with various quantities of its variable input.

question

Refer to the short-run production and cost data. The curves of Figures A and B suggest that

answer

marginal cost reaches a minimum where marginal product is at its maximum.

question

When total product is increasing at a decreasing rate, marginal product is

answer

positive and decreasing.

question

The first, second, and third workers employed by a firm add 24, 18, and 9 units to total product, respectively. Therefore, we can conclude that

answer

marginal product of the third worker is 9.

question

The marginal cost curve would intersect the average variable cost curve at about

answer

4 units of output.

question

Refer to the provided graph. If the firm is producing at Q1, the area 0BEQ1 represents

answer

total variable costs.

question

Refer to the graph. Which one of the following would cause a move from point b on short-run average total cost curve ATC1 to point e on short-run average cost curve ATC2?

answer

an increase in the wage rate

question

In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs

answer

are $1,250.

question

Refer to the provided graph. If the firm is producing at Q1, the area BADE represents

answer

total fixed costs.

question

If there are 10 plants producing the total domestic consumption of a product and each plant is operating at minimum efficient scale, then each plant accounts for what percentage of domestic consumption?

answer

10 percent

question

Refer to the diagram. For output level Q, per unit costs of B are

answer

attainable and imply least-cost production of this level of output.

question

If the long-run average total cost curve for a firm is horizontal in the relevant range of production, then it indicates that there

answer

are constant returns to scale.

question

In the long run,

answer

all costs are variable costs.

question

If an industry's long-run average total cost curve has an extended range of constant returns to scale, this implies that

answer

both relatively small and relatively large firms can be viable in the industry.

question

Introduction of the Verson Stamping Machine helped firms in the automobile industry

answer

achieve greater economies of scale.

question

When the Defense Department ordered 132 new airplanes, the cost per plane was estimated to be $580 million. A cut in the order to 75 planes increased the per plane cost to $800 million. This change in per unit cost can be explained by

answer

the loss of economies of scale.

question

When the price of gasoline increases significantly, the delivery companies like UPS, FedEx, and the USPS all find

answer

their TVC curves shifting up.

question

Chris is preparing for a comprehensive course exam by reading a textbook with chapters of equal length and difficulty. The number of chapters she can comprehend and master when studying is: (1) hour one, 1.5 chapters; (2) hour two, 2.0 chapters; (3) hour three, 1.5 chapters; (4) hour four, 1 chapter; (5) hour five, 0 chapters. Diminishing marginal returns to studying sets in for Chris after hour

answer

two.

question

(Consider This) A fast-food company spends millions of dollars to develop and promote a new hamburger on their menu only to find that consumers won't buy it because they don't like the taste. From an economic perspective, the company should

answer

pull the hamburger off the menu and treat the development and promotion expenditures as a sunk cost.

question

Economists would describe the U.S. automobile industry as

answer

an oligopoly.

question

The soft drink and automobile industries would be examples of which market model?

answer

oligopoly

question

n which market model would there be a unique product for which there are no close substitutes?

answer

pure monopoly

question

There would be some control over price within rather narrow limits in which market model?

answer

monopolistic competition

question

In a purely competitive industry, each firm

answer

can easily enter or exit the industry.

question

Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product?

answer

Firms produce a homogeneous product.

question

Which idea is inconsistent with pure competition?

answer

product differentiation

question

A purely competitive seller is

answer

a "price taker."

question

Xavier produces and sells tomatoes in a purely competitive market. This implies that Xavier's marginal revenue from an extra unit of tomatoes is always equal to the

answer

unit price.

question

The demand schedule or curve confronted by the individual, purely competitive firm is

answer

perfectly elastic.

question

In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is

answer

equal to the price.

question

Marginal revenue is the

answer

change in total revenue associated with the sale of one more unit of output.

question

Assume the price of a product sold by a purely competitive firm is $6. Given the data in the accompanying table, at what output level is total profit highest in the short run?

answer

40.

question

The table gives data for a purely competitive, profit-maximizing firm. Based on this information, in the short run how much is this firm earning in economic profit (or losing, as reflected by negative numbers)?

answer

$28.

question

Curve (1) in the diagram is a purely competitive firm's

answer

total economic profit curve.

question

Which of the output levels in the accompanying graph is the profit-maximizing output level for this firm?

answer

question

(Consider This) An otherwise unprofitable motel located on a largely abandoned roadway might be able to stay open for several years by

answer

reducing or eliminating its annual maintenance expenses.

question

Refer to the accompanying diagram. The firm will shut down at any price less than

answer

P1.

question

A purely competitive seller should produce (rather than shut down) in the short run

answer

if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost.

question

To maximize profits, the firm whose data is shown in the graph should produce the quantity

answer

0C.

question

The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit, each must have an average total cost of

answer

$3.

question

At what price will the firm shown in the accompanying graph make just a normal profit?

answer

question

The accompanying table gives cost data for a firm that is selling in a purely competitive market. Which of the following tables gives the firm's short-run supply schedule?

answer

price : 50,42,36,32,20,13 Qs: 11,10,9,8,6,0

question

The first table shows cost data for a single firm. Now suppose that there are 600 identical firms in this industry, each with the same cost data. Suppose, too, that the demand curve for this industry is as shown in the second table.

answer

an economic profit of $155.

question

The accompanying graph shows short-run cost curves for a competitive firm. At what price would the firm face the same profit or loss whether it chooses to produce or not?

answer

question

When a purely competitive firm is in long-run equilibrium,

answer

price equals marginal cost.

question

Which of the following distinguishes the short run from the long run in pure competition?

answer

Firms can enter and exit the market in the long run but not in the short run.

question

Refer to the diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. Which of the following is correct?

answer

The diagrams portray short-run equilibrium but not long-run equilibrium.

question

Karlee's Kreations sells handbags in a purely competitive market. Karlee's is currently breaking even. Based on this information, we can conclude that Karlee's Kreations

answer

may be operating in either short-run or long-run equilibrium.

question

The MR = MC rule applies

answer

in both the short run and the long run.

question

Refer to the diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. The predicted long-run adjustments in this industry might be offset by

answer

a technological improvement in production methods.

question

Refer to the accompanying graphs for a competitive market in the short run. Which of the following statements is true?

answer

The representative firm is experiencing economic losses.

question

The accompanying graphs are for a purely competitive market in the short run. The graphs suggest that in the long run, assuming no changes in the given information, the market

answer

supply curve will shift to the right.

question

The accompanying graphs are for a purely competitive market in the short run. The graphs suggest that as long run adjustments consequently occur, the firms in the industry will find that

answer

profits will decrease.

question

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then

answer

new firms will enter this market.

question

Suppose losses cause industry X to contract and, as a result, the prices of relevant inputs decline. Industry X is

answer

an increasing-cost industry.

question

A long-run supply curve that is downward sloping indicates that the firms' ATC curves

answer

shift down when the industry expands.

question

The provided graph depicts long-run supply for

answer

an increasing-cost industry.

question

If the long-run supply curve of a purely competitive industry slopes upward, this implies that the prices of relevant resources

answer

rise as the industry expands.

question

The long-run supply curve would be upward sloping if

answer

resource prices fall as industry production contracts.

question

Allocative efficiency is achieved when the production of a good occurs where

answer

P = MC.

question

The accompanying graph represents the purely competitive market for a product. When the market is at equilibrium, the consumer surplus would be represented by the area

answer

question

The accompanying graph shows the long-run supply and demand curves in a purely competitive market. We know that when this market reaches equilibrium, the marginal

answer

cost equals marginal benefit.

question

Refer to the diagram. By producing at output level Q,

answer

both productive and allocative efficiency are achieved.

question

If the price of bottled water is $1.50 and the marginal cost of producing it is $2.00,

answer

resources are being overallocated to bottled water.

question

(Consider This) The average life expectancy of a U.S. business is approximately

answer

10.2 years.

question

The process by which new firms and new products replace existing dominant firms and products is called

answer

creative destruction.

question

So-called creative destruction leads to all of the following except

answer

benefits to everyone in society.

question

(Consider This) The fact that the life expectancy of a U.S. business is rather short—just 10.2 years—is a reflection of the consequences of

answer

competition and creative destruction.

question

(Consider This) Approximately what percentage of start-up firms in the United States go bankrupt within the first two years?

answer

question

A market where there are many firms, but one firm dominates and has the bulk (85 percent) of sales in the market, is called a

answer

near-monopoly.

question

Which phrase would be most characteristic of pure monopoly?

answer

sole seller

question

One feature of pure monopoly is that the firm is

answer

a price maker.

question

Barriers to entering an industry

answer

are the basis for monopoly.

question

Which of the following is not a barrier to entry?

answer

X-inefficiency

question

Barriers to entry

answer

can result from government regulation.

question

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that

answer

total revenue is increasing

question

The table shows the demand schedule facing Nina, a monopolist selling baskets. If Nina had no production costs, what price would she charge to maximize profits?

answer

$10

question

Refer to the graphs of D and MR for a monopolist. We know that to maximize profits the firm will set a price

answer

above P2.

question

For a pure monopolist, the relationship between total revenue and marginal revenue is such that

answer

marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing.

question

To maximize profit, a pure monopolist must

answer

maximize the difference between total revenue and total cost.

question

In the short-run equilibrium, a monopolist's profits

answer

may be positive, negative, or zero.

question

If profits are maximized (or losses minimized), which of the following conditions is common to both unregulated monopoly and pure competition?

answer

MR = MC

question

The supply curve for a monopolist is

answer

nonexistent.

question

Refer to the diagrams. If $4 is Firm B's profit-maximizing price, its

answer

MC must be zero.

question

Society suffers a deadweight loss in a pure-monopoly market because

answer

output is less, while price is more, than is socially optimal.

question

Refer to the diagrams. With the industry structures represented by diagram

answer

(A), there will be only a normal profit in the long run, while in (B) an economic profit can persist.

question

In which one of the following market models is X-inefficiency least likely to be present?

answer

pure competition

question

At its profit-maximizing output, the nondiscriminating pure monopolist whose information is in the accompanying table

answer

earns an economic profit of $30.

question

Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. Which of the following conditions of price discrimination explains why this occurs?

answer

Concession items could be bought by people in the low-price group and transferred to members of the high-price group.

question

Based on the accompanying table, this nondiscriminating pure monopolist should set its price at

answer

$200.

question

A price-discriminating monopolist will follow a system where

answer

buyers with inelastic demand are charged higher prices than buyers with elastic demand.

question

Refer to the cost and demand curves for a pure monopolist. Suppose that this monopoly is subjected to a regulatory commission. If the commission seeks to achieve the most efficient allocation of resources for this industry, it should set the socially optimal price at

answer

P2.

question

The problem with adopting a fair-return pricing policy for a natural monopoly is that

answer

it is not allocatively efficient.

question

What is the meaning of the phrase "dilemma of regulation"?

answer

The socially optimal price achieves allocative efficiency but may produce economic losses; the fair-return price yields a normal profit but may not be allocatively efficient.

1 of 100

question

answer

$624,000

question

The amount of calendar time associated with the long run

answer

varies from industry to industry.

question

Which is most likely to be a long-run adjustment for a firm that manufactures cars on an assembly-line basis?

answer

a switch in production to a redesigned and retooled facility

question

If economic profits in an industry are zero and implicit costs are greater than zero, then

answer

accounting profits are greater than zero

question

Which of the following represents a long-run adjustment?

answer

Unable to meet foreign competition, a U.S. watch manufacturer sells one of its branch plants.

question

The total output of a firm will be at a maximum where

answer

MP is zero.

question

The total product curve graphically shows how much

answer

output the firm can produce with various quantities of its variable input.

question

Refer to the short-run production and cost data. The curves of Figures A and B suggest that

answer

marginal cost reaches a minimum where marginal product is at its maximum.

question

When total product is increasing at a decreasing rate, marginal product is

answer

positive and decreasing.

question

The first, second, and third workers employed by a firm add 24, 18, and 9 units to total product, respectively. Therefore, we can conclude that

answer

marginal product of the third worker is 9.

question

The marginal cost curve would intersect the average variable cost curve at about

answer

4 units of output.

question

Refer to the provided graph. If the firm is producing at Q1, the area 0BEQ1 represents

answer

total variable costs.

question

Refer to the graph. Which one of the following would cause a move from point b on short-run average total cost curve ATC1 to point e on short-run average cost curve ATC2?

answer

an increase in the wage rate

question

In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs

answer

are $1,250.

question

Refer to the provided graph. If the firm is producing at Q1, the area BADE represents

answer

total fixed costs.

question

answer

10 percent

question

Refer to the diagram. For output level Q, per unit costs of B are

answer

attainable and imply least-cost production of this level of output.

question

If the long-run average total cost curve for a firm is horizontal in the relevant range of production, then it indicates that there

answer

are constant returns to scale.

question

In the long run,

answer

all costs are variable costs.

question

If an industry's long-run average total cost curve has an extended range of constant returns to scale, this implies that

answer

both relatively small and relatively large firms can be viable in the industry.

question

Introduction of the Verson Stamping Machine helped firms in the automobile industry

answer

achieve greater economies of scale.

question

answer

the loss of economies of scale.

question

When the price of gasoline increases significantly, the delivery companies like UPS, FedEx, and the USPS all find

answer

their TVC curves shifting up.

question

answer

two.

question

answer

pull the hamburger off the menu and treat the development and promotion expenditures as a sunk cost.

question

Economists would describe the U.S. automobile industry as

answer

an oligopoly.

question

The soft drink and automobile industries would be examples of which market model?

answer

oligopoly

question

n which market model would there be a unique product for which there are no close substitutes?

answer

pure monopoly

question

There would be some control over price within rather narrow limits in which market model?

answer

monopolistic competition

question

In a purely competitive industry, each firm

answer

can easily enter or exit the industry.

question

Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product?

answer

Firms produce a homogeneous product.

question

Which idea is inconsistent with pure competition?

answer

product differentiation

question

A purely competitive seller is

answer

a "price taker."

question

Xavier produces and sells tomatoes in a purely competitive market. This implies that Xavier's marginal revenue from an extra unit of tomatoes is always equal to the

answer

unit price.

question

The demand schedule or curve confronted by the individual, purely competitive firm is

answer

perfectly elastic.

question

In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is

answer

equal to the price.

question

Marginal revenue is the

answer

change in total revenue associated with the sale of one more unit of output.

question

Assume the price of a product sold by a purely competitive firm is $6. Given the data in the accompanying table, at what output level is total profit highest in the short run?

answer

40.

question

answer

$28.

question

Curve (1) in the diagram is a purely competitive firm's

answer

total economic profit curve.

question

Which of the output levels in the accompanying graph is the profit-maximizing output level for this firm?

answer

question

(Consider This) An otherwise unprofitable motel located on a largely abandoned roadway might be able to stay open for several years by

answer

reducing or eliminating its annual maintenance expenses.

question

Refer to the accompanying diagram. The firm will shut down at any price less than

answer

P1.

question

A purely competitive seller should produce (rather than shut down) in the short run

answer

if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost.

question

To maximize profits, the firm whose data is shown in the graph should produce the quantity

answer

0C.

question

answer

$3.

question

At what price will the firm shown in the accompanying graph make just a normal profit?

answer

question

The accompanying table gives cost data for a firm that is selling in a purely competitive market. Which of the following tables gives the firm's short-run supply schedule?

answer

price : 50,42,36,32,20,13 Qs: 11,10,9,8,6,0

question

answer

an economic profit of $155.

question

The accompanying graph shows short-run cost curves for a competitive firm. At what price would the firm face the same profit or loss whether it chooses to produce or not?

answer

question

When a purely competitive firm is in long-run equilibrium,

answer

price equals marginal cost.

question

Which of the following distinguishes the short run from the long run in pure competition?

answer

Firms can enter and exit the market in the long run but not in the short run.

question

Refer to the diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. Which of the following is correct?

answer

The diagrams portray short-run equilibrium but not long-run equilibrium.

question

Karlee's Kreations sells handbags in a purely competitive market. Karlee's is currently breaking even. Based on this information, we can conclude that Karlee's Kreations

answer

may be operating in either short-run or long-run equilibrium.

question

The MR = MC rule applies

answer

in both the short run and the long run.

question

Refer to the diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. The predicted long-run adjustments in this industry might be offset by

answer

a technological improvement in production methods.

question

Refer to the accompanying graphs for a competitive market in the short run. Which of the following statements is true?

answer

The representative firm is experiencing economic losses.

question

The accompanying graphs are for a purely competitive market in the short run. The graphs suggest that in the long run, assuming no changes in the given information, the market

answer

supply curve will shift to the right.

question

The accompanying graphs are for a purely competitive market in the short run. The graphs suggest that as long run adjustments consequently occur, the firms in the industry will find that

answer

profits will decrease.

question

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then

answer

new firms will enter this market.

question

Suppose losses cause industry X to contract and, as a result, the prices of relevant inputs decline. Industry X is

answer

an increasing-cost industry.

question

A long-run supply curve that is downward sloping indicates that the firms' ATC curves

answer

shift down when the industry expands.

question

The provided graph depicts long-run supply for

answer

an increasing-cost industry.

question

If the long-run supply curve of a purely competitive industry slopes upward, this implies that the prices of relevant resources

answer

rise as the industry expands.

question

The long-run supply curve would be upward sloping if

answer

resource prices fall as industry production contracts.

question

Allocative efficiency is achieved when the production of a good occurs where

answer

P = MC.

question

The accompanying graph represents the purely competitive market for a product. When the market is at equilibrium, the consumer surplus would be represented by the area

answer

question

The accompanying graph shows the long-run supply and demand curves in a purely competitive market. We know that when this market reaches equilibrium, the marginal

answer

cost equals marginal benefit.

question

Refer to the diagram. By producing at output level Q,

answer

both productive and allocative efficiency are achieved.

question

If the price of bottled water is $1.50 and the marginal cost of producing it is $2.00,

answer

resources are being overallocated to bottled water.

question

(Consider This) The average life expectancy of a U.S. business is approximately

answer

10.2 years.

question

The process by which new firms and new products replace existing dominant firms and products is called

answer

creative destruction.

question

So-called creative destruction leads to all of the following except

answer

benefits to everyone in society.

question

(Consider This) The fact that the life expectancy of a U.S. business is rather short—just 10.2 years—is a reflection of the consequences of

answer

competition and creative destruction.

question

(Consider This) Approximately what percentage of start-up firms in the United States go bankrupt within the first two years?

answer

question

A market where there are many firms, but one firm dominates and has the bulk (85 percent) of sales in the market, is called a

answer

near-monopoly.

question

Which phrase would be most characteristic of pure monopoly?

answer

sole seller

question

One feature of pure monopoly is that the firm is

answer

a price maker.

question

Barriers to entering an industry

answer

are the basis for monopoly.

question

Which of the following is not a barrier to entry?

answer

X-inefficiency

question

Barriers to entry

answer

can result from government regulation.

question

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that

answer

total revenue is increasing

question

The table shows the demand schedule facing Nina, a monopolist selling baskets. If Nina had no production costs, what price would she charge to maximize profits?

answer

$10

question

Refer to the graphs of D and MR for a monopolist. We know that to maximize profits the firm will set a price

answer

above P2.

question

For a pure monopolist, the relationship between total revenue and marginal revenue is such that

answer

marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing.

question

To maximize profit, a pure monopolist must

answer

maximize the difference between total revenue and total cost.

question

In the short-run equilibrium, a monopolist's profits

answer

may be positive, negative, or zero.

question

If profits are maximized (or losses minimized), which of the following conditions is common to both unregulated monopoly and pure competition?

answer

MR = MC

question

The supply curve for a monopolist is

answer

nonexistent.

question

Refer to the diagrams. If $4 is Firm B's profit-maximizing price, its

answer

MC must be zero.

question

Society suffers a deadweight loss in a pure-monopoly market because

answer

output is less, while price is more, than is socially optimal.

question

Refer to the diagrams. With the industry structures represented by diagram

answer

(A), there will be only a normal profit in the long run, while in (B) an economic profit can persist.

question

In which one of the following market models is X-inefficiency least likely to be present?

answer

pure competition

question

At its profit-maximizing output, the nondiscriminating pure monopolist whose information is in the accompanying table

answer

earns an economic profit of $30.

question

answer

Concession items could be bought by people in the low-price group and transferred to members of the high-price group.

question

Based on the accompanying table, this nondiscriminating pure monopolist should set its price at

answer

$200.

question

A price-discriminating monopolist will follow a system where

answer

buyers with inelastic demand are charged higher prices than buyers with elastic demand.

question

answer

P2.

question

The problem with adopting a fair-return pricing policy for a natural monopoly is that

answer

it is not allocatively efficient.

question

What is the meaning of the phrase "dilemma of regulation"?

answer

The socially optimal price achieves allocative efficiency but may produce economic losses; the fair-return price yields a normal profit but may not be allocatively efficient.

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