Econ 202: Exam #2 (Gonzalez) - Assignment Essays

question

Short and Long Run: Which of the following statements about the Short and Long run of a firm is false?

answer

In the short run there are no fixed costs.

question

Marginal Cost: Which of the following is true about the concept marginal cost?

answer

Marginal cost is used by firms when deciding on how much to produce to maximize profit.

question

Relation between marginal and average total cost. Average total cost is surely decreasing if:

answer

Marginal cost is lower than average total cost

question

Average total cost: Which of the following is true about average total cost?

answer

Average total cost falls when the firm increases quantity and the quantity is SMALL because the increase in quantity allows the firm to spread fixed cost over more units and, at least for a while, marginal cost is falling.

question

Costs and Scale: Which of the following statements about scale is true?

answer

Firms experience economies of scale when an increase in their scale allows them to produce at a lower cost.

question

Monopoly: Which of the following statements about monopolies is true?

answer

In a monopoly, marginal revenue is smaller than price.

question

Monopolistic competition and oligopoly: Which of the following statements is false?

answer

Sellers must sell an identical good for a market to be an oligopoly.

question

Monopolistic competition: Which of the following statements is true about monopolistic competition?

answer

Monopolistic competition firms face a downward sloping demand and follow the same process to maximize profits as monopolists.

question

Collusion in Oligopolies: Which of the following statements is true about collusion in oligopolies?

answer

Collusion is easier to sustain if the opportunity for collusion will repeat itself in the future and firms care sufficiently about future profits.

question

Assume the following data: If the marginal product of machines that would wash cars is 200 per day and the rent for the machines is $80, what will the firm do?

answer

Not change the number of machines or workers.

question

A profit-maximizing monopolist produces where marginal cost is equal to?

answer

Marginal Revenue

question

For a firm, the short-run is defined as being?

answer

A period of time in which at least one of the firms inputs is unchangeable.

question

The marginal product of labor (MPL) can be defined as which of the following?

answer

The change in output level as the result of hiring another worker.

question

Which of the following is a characteristic of perfect competition?

answer

Easy entry for firms

question

Price Discrimination: Which of the following is true about price discrimination?

answer

2nd degree price discrimination is based on product differentiation and setting prices for different varieties so that each buyer self-selects into buying the variety the monopolist wants it to buy.

question

Which of the following statements is not not true about competitive firms?

answer

They have an incentive to sell below the market price in order to sell more units.

question

One of the differences between explicit and implicit costs is that?

answer

Implicit costs do not require a direct monetary outlay, whereas explicit costs do.

question

Which of the following is an example of an implicit cost?

answer

(ii) and (iii) only

question

If a monopoly faces a demand curve that is downward-sloping, then marginal revenue will be which of the following?

answer

Must be equal to price

question

Which of the following statements is true about first degree price discrimination?

answer

Monopolists make more units of the good if they don't price discriminate.

question

Which of the following is NOT an example of 3rd degree price discrimination?

answer

Coupons for peanut butter

question

What is a Monopoly?

answer

A single firm in a market

question

Allocative Efficiency:

answer

The "right" amount of a good is being Produced / Consumed.

question

Technical Efficiency:

answer

Production takes place at minimized average total cost.

question

Is a monopoly efficient or inefficient?

answer

Monopolies are Technically and Allocatively inefficient.

question

Price Discrimination:

answer

Is the practice of selling the same good for higher prices to those willing to pay more.

question

3 types of price discrimination:

answer

1st degree
2nd degree
3rd degree

question

Profit maximization in monopolistic competition is similar to that in monopoly. But is demand likely to be the same?

answer

No, demand is smaller and more elastic

question

The restaurant market in Oxford is monopolistically competitive. If restaurants in Oxford are all making positive economic profits, what do you expect will happen?

answer

New restaurants will open until there is no more economic profit to be made.

question

What will happen to the demand for each existing restaurant as new restaurants enter the market?

answer

Demand will decrease

question

Cartel:

answer

A group of producers colluding with each other.

question

If American thinks Delta is going to honor the collusive agreement to charge the monopoly price, it should ____. If it thinks that Delta is going to lower its price, it should ____.

answer

lower the price; lower the price

question

Collusion:

answer

People or companies that would typically compete but who conspire to gain an unfair market advantage.

question

More Competition...

answer

reduces price discrimination

question

Suppose that, in the short-run, existing firms are making a profit. Which of the following is NOT an effect that occurs as part of the adjustment to long-run equilibrium?

answer

Price increases

question

Explicit Costs:

answer

require a payment of money at some point.

question

Implicit Costs:

answer

the profit of investing somewhere else that the owners give up.

question

Short and long run: Which of the following statements about the short and long run of a firm is true?

answer

In the long run, if a firm wants to change how much it produces, it can change all inputs accordingly.

question

Marginal cost. Which of the following is false about the concept of marginal cost?

answer

Marginal cost is the change in fixed cost when production increases by one unit.

question

Relation between marginal and average total cost. Average total cost is surely increasing if:

answer

Marginal cost is larger than average total cost.

question

Marginal cost As the quantity produced by a firm increases, marginal cost eventually increases because...

answer

of diminishing, or decreasing, marginal product of labor.

question

Average total cost. Which of the following is not true about average total cost?

answer

Average total cost falls when the firm increases quantity and the quantity is large because the increase in quantity allows the firm to spread fixed cost over more units and, at least for a while, marginal cost is falling.

question

Choosing the right combination of labor and capital. At a firm's current choice of labor and capital, the marginal product of an hour of labor is 30 units of output, and the wage is $15/hour. The marginal product of a robot that can perform similar tasks is 60 units of output/hour, and the capital cost of the robot is $20/hour. If the firm wants to minimize costs of production but produce the same amount, it should?

answer

Hire fewer workers and buy more robots.

question

Changing the combinations of labor/capital. iSmartphone, a producer of smartphones, is currently getting rid of some of its production line machines and hiring more workers with a view on producing the same amount of smartphones. Which of the following could explain why they are doing this?

answer

Workers entering the labor market are more skilled (and thus more productive) than previous workers.

question

Costs and scale. Which of the following statements about scale is false?

answer

A factory has total costs of $4,500 when output is 750 units and $6,000 when output is 1,000 units. For this range of output, the factory exhibits diseconomies of scale.

question

Causes for economies of scale. At a bakery, which of the following operating characteristics might result in economies of scale?

answer

A giant mixer container costs twice as much to operate as a small one, but can mix 6 times as much dough in the same time.

question

Competitive markets. Which of the following is a characteristic of a competitive market?

answer

Buyers and sellers are price takers.

question

Competitive markets. Which of the following statements about competitive markets is false?

answer

Marginal revenue is smaller than price.

question

Shutdown and exit decisions Electric Co have total costs of $25,000,000 per year, variable cost of $2,000,000, and total revenue of $3,000,000. In light of this information Electric Co should?

answer

stay open in the short run and exit in the long run.

question

Short-run adjustments in perfect competition Suppose that a competitive market is initially in its long-run equilibrium and the market demand decreases. Which of the following events is not part of the short-run adjustment process?

answer

Some firms exit the market

question

Long-run adjustments in perfect competition Again consider the scenario outlined in the previous question (demand decreases). Which of the following is not part of the long-run adjustment back to equilibrium?

answer

The market as a whole goes back to producing the same quantity as in the initial equilibrium (before demand changed).

question

Profit calculation Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane's accounting and economic profits are?

answer

accounting = $184,000; economic = -$39,000

question

Monopoly Which of the following statements about monopolies is not true?

answer

there are no barriers to entry in monopolies.

question

Monopoly vs competition Which of the following is true about the comparison between competitive markets and monopolies?

answer

Monopolies charge a markup over marginal cost, competitive markets do not.

question

Efficiency of monopolies Which of the following statements on the efficiency of monopolies is not true?

answer

Monopolies are economically efficient even though they are technically and allocatively inefficient.

question

1st degree price discrimination Again consider figure 2. How many units would the monopolist sell if it could practice first degree price discrimination?

answer

question

Price discrimination Which of the following is not true about price discrimination?

answer

3rd degree price discrimination consists of charging each consumer the exact amount that they are willing to pay.

question

2nd degree price discrimination Bonovia Airlines (BA) offers two types of tickets to Cropitia - business and economy. High value consumers are willing to pay $700 for business and $500 for economy. Low value consumers are willing to pay $400 for business and $350 for economy. If BA wants high value consumers to buy business tickets and low value consumers to buy economy tickets while maximizing profit, what prices should it set for the two tickets?

answer

$350 for economy; $550 for business

question

Monopolistic competition and oligopoly Which of the following statements is true?

answer

There are many sellers in monopolistic competition

question

Monopolistic competition Which of the following statements is not true about monopolistic competition?

answer

There is no markup in markets of monopolistic competition

question

Collusion in oligopolies Which of the following statements is not true about collusion in oligopolies?

answer

Colluding firms never have an incentive to "cheat" on their agreement to collude.

1 of 61

question

Short and Long Run: Which of the following statements about the Short and Long run of a firm is false?

answer

In the short run there are no fixed costs.

question

Marginal Cost: Which of the following is true about the concept marginal cost?

answer

Marginal cost is used by firms when deciding on how much to produce to maximize profit.

question

Relation between marginal and average total cost. Average total cost is surely decreasing if:

answer

Marginal cost is lower than average total cost

question

Average total cost: Which of the following is true about average total cost?

answer

question

Costs and Scale: Which of the following statements about scale is true?

answer

Firms experience economies of scale when an increase in their scale allows them to produce at a lower cost.

question

Monopoly: Which of the following statements about monopolies is true?

answer

In a monopoly, marginal revenue is smaller than price.

question

Monopolistic competition and oligopoly: Which of the following statements is false?

answer

Sellers must sell an identical good for a market to be an oligopoly.

question

Monopolistic competition: Which of the following statements is true about monopolistic competition?

answer

Monopolistic competition firms face a downward sloping demand and follow the same process to maximize profits as monopolists.

question

Collusion in Oligopolies: Which of the following statements is true about collusion in oligopolies?

answer

Collusion is easier to sustain if the opportunity for collusion will repeat itself in the future and firms care sufficiently about future profits.

question

Assume the following data: If the marginal product of machines that would wash cars is 200 per day and the rent for the machines is $80, what will the firm do?

answer

Not change the number of machines or workers.

question

A profit-maximizing monopolist produces where marginal cost is equal to?

answer

Marginal Revenue

question

For a firm, the short-run is defined as being?

answer

A period of time in which at least one of the firms inputs is unchangeable.

question

The marginal product of labor (MPL) can be defined as which of the following?

answer

The change in output level as the result of hiring another worker.

question

Which of the following is a characteristic of perfect competition?

answer

Easy entry for firms

question

Price Discrimination: Which of the following is true about price discrimination?

answer

2nd degree price discrimination is based on product differentiation and setting prices for different varieties so that each buyer self-selects into buying the variety the monopolist wants it to buy.

question

Which of the following statements is not not true about competitive firms?

answer

They have an incentive to sell below the market price in order to sell more units.

question

One of the differences between explicit and implicit costs is that?

answer

Implicit costs do not require a direct monetary outlay, whereas explicit costs do.

question

Which of the following is an example of an implicit cost?

answer

(ii) and (iii) only

question

If a monopoly faces a demand curve that is downward-sloping, then marginal revenue will be which of the following?

answer

Must be equal to price

question

Which of the following statements is true about first degree price discrimination?

answer

Monopolists make more units of the good if they don't price discriminate.

question

Which of the following is NOT an example of 3rd degree price discrimination?

answer

Coupons for peanut butter

question

What is a Monopoly?

answer

A single firm in a market

question

Allocative Efficiency:

answer

The "right" amount of a good is being Produced / Consumed.

question

Technical Efficiency:

answer

Production takes place at minimized average total cost.

question

Is a monopoly efficient or inefficient?

answer

Monopolies are Technically and Allocatively inefficient.

question

Price Discrimination:

answer

Is the practice of selling the same good for higher prices to those willing to pay more.

question

3 types of price discrimination:

answer

1st degree
2nd degree
3rd degree

question

Profit maximization in monopolistic competition is similar to that in monopoly. But is demand likely to be the same?

answer

No, demand is smaller and more elastic

question

The restaurant market in Oxford is monopolistically competitive. If restaurants in Oxford are all making positive economic profits, what do you expect will happen?

answer

New restaurants will open until there is no more economic profit to be made.

question

What will happen to the demand for each existing restaurant as new restaurants enter the market?

answer

Demand will decrease

question

Cartel:

answer

A group of producers colluding with each other.

question

If American thinks Delta is going to honor the collusive agreement to charge the monopoly price, it should ____. If it thinks that Delta is going to lower its price, it should ____.

answer

lower the price; lower the price

question

Collusion:

answer

People or companies that would typically compete but who conspire to gain an unfair market advantage.

question

More Competition...

answer

reduces price discrimination

question

Suppose that, in the short-run, existing firms are making a profit. Which of the following is NOT an effect that occurs as part of the adjustment to long-run equilibrium?

answer

Price increases

question

Explicit Costs:

answer

require a payment of money at some point.

question

Implicit Costs:

answer

the profit of investing somewhere else that the owners give up.

question

Short and long run: Which of the following statements about the short and long run of a firm is true?

answer

In the long run, if a firm wants to change how much it produces, it can change all inputs accordingly.

question

Marginal cost. Which of the following is false about the concept of marginal cost?

answer

Marginal cost is the change in fixed cost when production increases by one unit.

question

Relation between marginal and average total cost. Average total cost is surely increasing if:

answer

Marginal cost is larger than average total cost.

question

Marginal cost As the quantity produced by a firm increases, marginal cost eventually increases because...

answer

of diminishing, or decreasing, marginal product of labor.

question

Average total cost. Which of the following is not true about average total cost?

answer

question

answer

Hire fewer workers and buy more robots.

question

answer

Workers entering the labor market are more skilled (and thus more productive) than previous workers.

question

Costs and scale. Which of the following statements about scale is false?

answer

A factory has total costs of $4,500 when output is 750 units and $6,000 when output is 1,000 units. For this range of output, the factory exhibits diseconomies of scale.

question

Causes for economies of scale. At a bakery, which of the following operating characteristics might result in economies of scale?

answer

A giant mixer container costs twice as much to operate as a small one, but can mix 6 times as much dough in the same time.

question

Competitive markets. Which of the following is a characteristic of a competitive market?

answer

Buyers and sellers are price takers.

question

Competitive markets. Which of the following statements about competitive markets is false?

answer

Marginal revenue is smaller than price.

question

Shutdown and exit decisions Electric Co have total costs of $25,000,000 per year, variable cost of $2,000,000, and total revenue of $3,000,000. In light of this information Electric Co should?

answer

stay open in the short run and exit in the long run.

question

answer

Some firms exit the market

question

answer

The market as a whole goes back to producing the same quantity as in the initial equilibrium (before demand changed).

question

answer

accounting = $184,000; economic = -$39,000

question

Monopoly Which of the following statements about monopolies is not true?

answer

there are no barriers to entry in monopolies.

question

Monopoly vs competition Which of the following is true about the comparison between competitive markets and monopolies?

answer

Monopolies charge a markup over marginal cost, competitive markets do not.

question

Efficiency of monopolies Which of the following statements on the efficiency of monopolies is not true?

answer

Monopolies are economically efficient even though they are technically and allocatively inefficient.

question

1st degree price discrimination Again consider figure 2. How many units would the monopolist sell if it could practice first degree price discrimination?

answer

question

Price discrimination Which of the following is not true about price discrimination?

answer

3rd degree price discrimination consists of charging each consumer the exact amount that they are willing to pay.

question

answer

$350 for economy; $550 for business

question

Monopolistic competition and oligopoly Which of the following statements is true?

answer

There are many sellers in monopolistic competition

question

Monopolistic competition Which of the following statements is not true about monopolistic competition?

answer

There is no markup in markets of monopolistic competition

question

Collusion in oligopolies Which of the following statements is not true about collusion in oligopolies?

answer

Colluding firms never have an incentive to "cheat" on their agreement to collude.

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