question

Properties of long-run competitive equilibrium with free entry include:

answer

All of these are properties of long-run competitive equilibrium.

question

If the import supply curve is upward-sloping:

answer

a tariff or quota can increase domestic aggregate surplus

question

Properties of long-run competitive equilibrium with free entry include:

answer

firms earning zero profits

question

The market demand function for ice cream is Qd = 10 - 2P and the market supply function for ice cream is Qs = 4P - 2, where both quantities are measured in millions of gallons per year. What is the aggregate surplus at the competitive market equilibrium?

answer

$13.5 million

question

Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. What is the new long-run equilibrium price?

answer

$20 per unit

question

The market demand function for wheat is Qd = 10 - 2P and the market supply function is Qs = 4P - 2, both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a price floor to achieve their goal. What is the size of the aggregate surplus?

answer

$12 billion

question

Suppose the domestic market demand function in a certain market where Q is measured in thousands of units is Qd = 20 - 2.5P, and the domestic market supply function is Qs = 2.5P - 7.5. Suppose further that the world price for the good in question is $3.40 per unit. Under conditions of free trade, how much consumer surplus will there be?

answer

$26,450

question

Suppose the domestic market demand function in a certain market where Q is measured in thousands of units is Qd = 20 - 2.5P, and the domestic market supply function is Qs = 2.5P - 7.5. Suppose further that the world price for the good in question is $3.40 per unit. Under conditions of free trade, how much producer surplus will there be?

answer

$200

question

Suppose Julia and Zach are the only consumers of milk. Julia's demand for milk is defined as QdJulia = 12 - 3P at prices below $4 and zero for prices above $4. Zach's demand for milk is defined as QdZach = 10 - 2P at prices below $5 and zero for prices above $5. Market demand when price is $4 is:

answer

QdMarket = 22 - 5P.

question

The market demand function for ice cream is Qd = 10 - 2P and the market supply function for ice cream is Qs = 4P - 2, where both quantities are measured in millions of gallons per year. What is the producer surplus at the competitive market equilibrium?

answer

$4.5 million

question

Milky Moo and Mega Cow are the only sellers of milk. Milky Moo's supply function is QsMMoo = 12P - 6 at prices above $0.50 and zero at prices below $0.50. Mega Cow's supply function is QsMCow = 9P - 3 at prices above $0.33 and zero at prices below $0.33. At a price of $0.45:

answer

Mega Cow is the only supplier of milk

question

Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. What is the new long-run equilibrium quantity?

answer

100

question

The market demand function for wheat is Qd = 10 - 2P and the market supply function is Qs = 4P - 2, both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a voluntary production reduction program to achieve their goal. What is the size of the producer surplus?

answer

$12.5 million

question

Suppose the market demand function for ice cream is Qd = 10 - 2P and the market supply function for ice cream is Qs = 4P - 2, both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The deadweight loss due to the tax is:

answer

$2.83 million

question

Suppose the market demand function for ice cream is Qd = 10 - 2P and the market supply function for ice cream is Qs = 4P - 2, both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The price paid by buyers with the tax is:

answer

$2.33

question

Any market that we are studying and the markets for the related inputs must all be in equilibrium at the same time. This leads to:

answer

general equilibrium effects

question

In a perfectly competitive market, an increase in demand will lead to a long-run increase in the product's price:

answer

if the increase in demand for inputs drives up the price of inputs

question

Suppose the domestic market demand function in a certain market where Q is measured in thousands of units is Qd = 20 - 2.5P, and the domestic market supply function is Qs = 2.5P - 7.5. Suppose further that the world price for the good in question is $3.40 per unit. If the government places a $1.20 tariff on imported units of this good, by how much is consumer surplus reduced?

answer

12,000

question

A voluntary production reduction program:

answer

offers firms incentives to reduce their production voluntarily.

question

In a perfectly competitive market, an increase in demand will lead to a long-run increase in the product's price:

answer

if the increase in demand for inputs drives up the price of inputs

question

The market demand function for wheat is Qd = 10 - 2P and the market supply function is Qs = 4P - 2, both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a price floor to achieve their goal. What is the size of the producer surplus?

answer

$8 billion

question

Suppose a multi-product monopolist sells two complementary goods, A and B. Annual market demand for good A is QdA = 600 - 25PA - 12PB. Each time a consumer buys A, his demand for B is QdB = 4 - 0.4PB. The marginal cost of good A is a constant $4, and the marginal cost of good B is a constant $0.50. Suppose the price of good B is $5. If the monopolist considers the effect of additional sales of A on the sales of good B, how many units of good A will it produce?

answer

332.5

question

Suppose a monopoly firm has an annual demand function of Qd = 20,000 - 250P, annual variable costs of VC = 16Q + 0.002Q2 and marginal cost of MC = 16 + 0.004Q, where Q is the annual quantity of output. In addition, the firm has an avoidable fixed cost of $25,000 per year. If this firm maximizes its profit, what is the value of the deadweight loss caused by this monopoly?

answer

$30,250

question

A firm's markup:

answer

is the amount by which its price exceeds its marginal cost, expressed as a percentage of its price

question

Suppose Kate's Great Crete (KGC) has annual variable costs of VC = 30Q + 0.0025Q2 and marginal costs of MC = 30 + 0.005Q, where Q is the number of cubic yards of concrete it produces per year. In addition, it has an avoidable fixed cost of $50,000 per year. KGC's demand function is Qd = 20,000 - 400P. What is KGC's total revenue function?

answer

TR = 50Q - 0.0025Q^2

question

With a price floor:

answer

producer surplus will increase if profits increase

question

A tariff

answer

...

question

Suppose Julia and Zach are the only consumers of milk. Julia's demand for milk is defined as QdJulia = 12 - 3P at prices below $4 and zero for prices above $4. Zach's demand for milk is defined as QdZach = 10 - 2P at prices below $5 and zero for prices above $5. In this case, the market demand curve for milk is:

answer

kinked at a quantity of 2 units

question

Suppose a firm has a variable cost function VC = 20Q with avoidable fixed cost of $50,000. What kind of firm is this?

answer

This firm is a natural monopoly because as Q rises, AC falls

question

A monopsonist:

answer

faces an upward-sloping supply curve and by lowering the quantity he buys, he can pay less

question

With free entry:

answer

the long run market supply curve is horizontal at the market price

question

The market demand function for ice cream is Qd = 10 - 2P and the market supply function for ice cream is Qs = 4P - 2, where both quantities are measured in millions of gallons per year. What is the consumer surplus at the competitive market equilibrium?

answer

$9 million

question

The incidence of a tax:

answer

falls entirely on suppliers if demand is perfectly elastic.

question

Suppose the domestic market demand function in a certain market where Q is measured in thousands of units is Qd = 20 - 2.5P, and the domestic market supply function is Qs = 2.5P - 7.5. Suppose further that the world price for the good in question is $3.40 per unit. Under conditions of free trade, how much consumer surplus will there be?

answer

$26,450

question

Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. What is the market equilibrium price?

answer

$20 per gallon

question

Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, what is each of the active firms' profit per unit in the short run equilibrium?

answer

$3.67 per unit

question

A subsidy:

answer

reduces the amount that buyers pay and increases the amount that sellers receive for a good.

question

Graphically, market supply for a product

answer

is the horizontal sum of the individual supply curves

question

Suppose the market demand function for ice cream is Qd = 10 - 2P and the market supply function for ice cream is Qs = 4P - 2, both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The consumer surplus with the tax is

answer

$7.11 million

question

In a perfectly competitive market:

answer

firms produce the quantity for which marginal cost equals price.

question

Suppose that, in the long run, a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. What is the efficient scale of production?

answer

5 gallons per day

question

The market demand function for wheat is Qd = 10 - 2P and the market supply function is Qs = 4P - 2, both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a voluntary production reduction program to achieve their goal. What is the size of the consumer surplus?

answer

$4 billion

question

Milky Moo and Mega Cow are the only sellers of milk. Milky Moo's supply function is QsMMoo = 12P - 6 at prices above $0.50 and zero at prices below $0.50. Mega Cow's supply function is QsMCow = 9P - 3 at prices above $0.33 and zero at prices below $0.33. In this case, the market supply curve for milk is:

answer

kinked at 1.5 units

question

The deadweight loss from a tax

answer

is zero when demand is perfectly inelastic.

question

Suppose that, in the long run, a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run, there is free entry into the market. What is the dairy's total cost function?

answer

TC = 2Q^2 + 50

question

The market demand function for wheat is Qd = 10 - 2P and the market supply function is Qs = 4P - 2, both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a price support program to achieve their goal. How much wheat must the government buy?

answer

6 billion bushels per year

question

Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, what is the short run equilibrium price?

answer

$24 per unit

question

A sales tax is an example of:

answer

an ad valorem tax

question

The deadweight loss of taxation:

answer

is the lost aggregate surplus due to a tax.

question

In a perfectly competitive market, an increase in demand will lead to a long-run increase in the product's price:

answer

if the increase in demand for inputs drives up the price of inputs.

question

The short and long run market supply curves:

answer

may differ because the set of firms that are able to produce in a market may change

question

A price support program:

answer

raises the market price by making purchases of a good, thereby increasing demand.

question

Suppose Kate's Great Crete (KGC) has annual variable costs of VC = 30Q + 0.0025Q2 and marginal costs of MC = 30 + 0.005Q, where Q is the number of cubic yards of concrete it produces per year. In addition, it has an avoidable fixed cost of $50,000 per year. KGC's demand function is Qd = 20,000 - 400P. What is the profit maximizing sales price?

answer

$45

question

Suppose Kate's Great Crete (KGC) has annual variable costs of VC = 30Q + 0.0025Q2 and marginal costs of MC = 30 + 0.005Q, where Q is the number of cubic yards of concrete it produces per year. In addition, it has an avoidable fixed cost of $50,000 per year. KGC's demand function is Qd = 20,000 - 400P. What is the profit maximizing sales quantity?

answer

2,000

question

A market with two sellers is called a

answer

Duopoly

question

Under monopolistic competition, firms produce ________ products and have long-run profits that are ________ (net of fixed costs).

answer

differentiated; close to zero

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. Suppose Kate enters the market first and chooses her output before Alice. What is the difference in Alice's profit when Kate enters the market first, compared to when they simultaneously select their outputs?

answer

When Kate enters the market first, Alice's profit is $3,888.89 lower.

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. Suppose Kate enters the market first and chooses her output before Alice. What is the difference in Kate's profit when she enters the market first compared to when Kate and Alice choose their outputs simultaneously?

answer

When Kate enters the market first, her profit is $1,111.11 higher.

question

Suppose Kate's Great Crete (KGC) has annual variable costs of VC = 30Q + 0.0025Q2 and marginal costs of MC = 30 + 0.005Q, where Q is the number of cubic yards of concrete it produces per year. In addition, it has an avoidable fixed cost of $50,000 per year. KGC's demand function is Qd = 20,000 - 400P. What is KGC's total cost function?

answer

TC = 50,000 + 30Q + 0.0025Q2

question

The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 200, where W is the annual wage of a coal miner and Q is the number of people who would accept employment as a coal miner. What is the coal mine's marginal expenditure function?

answer

ME = 100Q + 10,000

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. Which of the following best represents Alice's inverse residual demand function?

answer

P(QA) = (100 - 0.005QK) - 0.005QA

question

Because the monopolist doesn't pay attention to the willingness to pay of inframarginal consumers:

answer

there can sometimes be a difference between what level of product quality is profitable for the monopolist and what level of product quality maximizes aggregate surplus

question

Suppose Kate's Great Crete (KGC) has annual variable costs of VC = 30Q + 0.0025Q2 and marginal costs of MC = 30 + 0.005Q, where Q is the number of cubic yards of concrete it produces per year. In addition, it has an avoidable fixed cost of $50,000 per year. KGC's demand function is Qd = 20,000 - 400P. What is KGC's average cost function?

answer

AC = (50,000/Q) + 30 + 0.0025Q

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. Which of the following best represents Kate's inverse residual demand function?

answer

P(QK) = (100 - 0.005QA) - 0.005QK

question

Firms engage in tacit collusion when:

answer

they collude without communicating, sustaining a price above the noncooperative price that would arise in a single competitive interaction

question

Suppose a multi-product monopolist sells two complementary goods, A and B. Annual market demand for good A is QdA = 600 - 25PA - 12PB. Each time a consumer buys A, his demand for B is QdB = 4 - 0.4PB. The marginal cost of good A is a constant $4, and the marginal cost of good B is a constant $0.50. Suppose the price of good B is $5. If the monopolist ignores the effect of additional sales of A on the sales of good B, how many units of good A will it produce?

answer

220

question

The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 200, where W is the annual wage of a coal miner and Q is the number of people who would accept employment as a coal miner. What is the inverse supply function for coal miners?

answer

W = 50Qs + 10,000

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. Suppose Kate enters the market first and chooses her output before Alice. What is Kate's profit?

answer

$10,000

question

Suppose a monopoly firm has an annual demand function of Qd = 20,000 - 250P, annual variable costs of VC = 16Q + 0.002Q2 and marginal cost of MC = 16 + 0.004Q, where Q is the annual quantity of output. In addition, the firm has an avoidable fixed cost of $25,000 per year. If this firm maximizes its profit, what is the value of aggregate surplus?

answer

$217,000

question

The typical test applied for merger approval under U.S. antitrust law requires that

answer

prices not rise

question

Suppose the daily demand for Coke and Pepsi in a small city are given by QC = 90 - 100PC + 400(PP - PC) and QP = 90 - 100PP + 400(PC - PP), where QC and QP are the number of cans Coke and Pepsi sell, respectively, in thousands per day. PC and PP are the prices of a can of Coke and Pepsi, respectively, measured in dollars. The marginal cost is $0.45 per can for both Coke and Pepsi. What is Pepsi's best response function?

answer

PP = 0.315 + 0.4PC

question

A residual demand curve

answer

shows the relationship between a firm's output and the market price given the outputs of the firm's rivals.

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. Suppose Kate enters the market first and chooses her output before Alice. What is Kate's profit maximizing output?

answer

2,000

question

A monopolist's profit maximizing price depends upon:

answer

the elasticity of demand

question

In a market for homogenous goods:

answer

firms sell identical products

question

Suppose the daily demand for Coke and Pepsi in a small city are given by QC = 90 - 100PC + 400(PP - PC) and QP = 90 - 100PP + 400(PC - PP), where QC and QP are the number of cans Coke and Pepsi sell, respectively, in thousands per day. PC and PP are the prices of a can of Coke and Pepsi, respectively, measured in dollars. The marginal cost is $0.45 per can for both Coke and Pepsi. If PP = $0.75, what is Coke's demand function?

answer

QC = 390 - 500PC

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. What is the difference in the deadweight loss compared to a monopoly in this market?

answer

A monopoly would create $5,555.56 more deadweight loss

question

Suppose a firm has a variable cost function VC = 20Q with avoidable fixed cost of $50,000. For regulators, the first-best regulated price is ______; the second-best regulated price is ____.

answer

$80; $105

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. If Alice produces 5,000 cubic yards per year, what is Kate's inverse demand function?

answer

P = 75 - 0.005QK

question

Suppose the daily demand for Coke and Pepsi in a small city are given by QC = 90 - 100PC + 400(PP - PC) and QP = 90 - 100PP + 400(PC - PP), where QC and QP are the number of cans Coke and Pepsi sell, respectively, in thousands per day. PC and PP are the prices of a can of Coke and Pepsi, respectively, measured in dollars. The marginal cost is $0.45 per can for both Coke and Pepsi. What is Pepsi's inverse demand function?

answer

PP = (0.18 + 0.8PC) - 0.002QP

question

A loss leader:

answer

is a product that is sold at a price below its direct marginal cost to encourage sales of a complementary good

question

As products become more differentiated:

answer

consumers are less willing to switch in response to price changes and competition becomes less intense.

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. Which of the following gives Kate's best response function?

answer

QK = 2,000 - 0.5QA

question

A firm's markup over its marginal cost is greater:

answer

the less elastic is the demand curve

question

As products become less differentiated:

answer

consumers are more willing to switch in response to price changes and competition becomes more intense.

question

A firm has market power:

answer

when it can profitably charge a price that is above its marginal cost.

question

Suppose a firm has a variable cost function VC = 20Q with avoidable fixed cost of $50,000. What is the firm's average cost function?

answer

AC = (50,000/Q) + 20

question

The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 400 and Qd = 500 - 0.02W, where W is the annual wage of a coal miner and Q is the number of coal miners. What is the deadweight loss due to the monopsony in the coal miners market?

answer

$13,889

question

Suppose that a firm uses both labor (L) and capital (K) as inputs. The firm's long-run production function is Q = F(L,K) = 4√L√K. The firm has _____ units of capital. If the firm uses an efficient production method and hires _____ workers, it can produce _____ units of output.

answer

225; 225; 900

question

Suppose that a firm uses both labor (L) and capital (K) as inputs. The firm's long-run production function is Q = F(L,K) = 5√L√K. If the firm has 100 units of capital, what is its short-run production function?

answer

Q = F(L) = 50√L

question

Suppose that MPL = 100 and MPK = 80. If W = 25 and R = 20, then a firm

answer

is producing its output at the lowest possible cost.

question

The Cobb-Douglas production function F(L,K) = ALαKβ will exhibit decreasing returns to scale when:

answer

α + β < 1.

question

Suppose that a firm uses both labor (L) and capital (K) as inputs. The firm's long-run production function is Q = F(L,K) = 8√L√K. The firm has _____ units of capital. If the firm uses an efficient production method and hires _____ workers, it can produce _____ units of output.

answer

225; 100; 1,200

question

Refer to Figure 7.1. What is the marginal product of the 25th worker?

answer

2 units of output

question

A firm's ______ connects all the input combinations with the same price.

answer

isocost line

question

______ occur when a single firm can produce two or more products more cheaply than can two separate firms.

answer

Economies of scope

question

The cost associated with foregoing the opportunity to employ a resource in its best alternative use is called:

answer

an opportunity cost

question

Diseconomies of scope occur when

answer

producing two products in a single firm is more expensive than producing them in separate firms

question

The cost of using capital is equal to the market rental price as long as

answer

a well-functioning rental market for capital exists

question

Suppose a manager is deciding how to allocate workers between two plants. The marginal product of labor in plant 1 is 10 units of output. The marginal product of labor in plant 2 is 14 units of labor. What should the manager do?

answer

Reallocate workers from plant 1 to plant 2, because MPL is greater in plant 2 than in plant 1

question

_____ are resources that are fully used up in the production process.

answer

materials

question

Suppose a firm has a Cobb-Douglas weekly production function Q = F(L, K) = 25L0.5K0.5, where L is the number of workers and K is units of capital. The wage rate is $900 per week, and a unit of capital costs $400 per week. Assuming no fixed costs, what is the firm's total cost of production if it uses least-cost input combination to produce 675 units of output?

answer

$32,400

question

From 1970 to 1984, the productivity of the Lockeed Company increased as the company produced more airplanes. According to the text, Lockeed's experience can best be described as:

answer

learning-by-doing

question

Suppose a firm has a weekly cost function of C(Q) = 8Q + (Q2/100) and a marginal cost function of MC = 8 + (Q/50). Suppose the firm also has an avoidable fixed cost of $225. What is the efficient scale of production, and what is the minimum average cost?

answer

Qe = 106; AC = $10.95

question

______ identifies all of the input combinations that efficiently produce a given amount of output.

answer

isoquant

question

A firm that experiences economies of scale has a ______ average cost curve.

answer

negatively-sloped

question

If the least-cost input combination doesn't include all inputs, it's called:

answer

a boundary solution

question

Refer to Table 8.1. Assume the wage rate is $10 and the firm has $1,000 in unavoidable fixed cost. What is the average cost of producing 65 units of output?

answer

$16

question

Suppose a firm uses 200 units of capital and 1,000 workers to produce 10,000 units of output. When the firm employs 3,000 workers and uses 600 units of capital, output increases to 45,000 units. This firm exhibits:

answer

increasing returns to scale.

question

Isocost lines associated with ______ total cost lie ______ the origin.

answer

higher; farther from

question

In the short run:

answer

at least one input is fixed.

question

Refer to Figure 7.2. Which of the following statements is true?

answer

The curve labeled A represents the MPL.

question

Refer to Figure 7.7. A technological improvement is best represented by:

answer

a movement from point a to point b.

question

Suppose that MPL = 50 and MPK = 30. If W = 25 and R = 10, then a firm:

answer

could reduce costs by employing more capital and less labor.

question

Which of the following is a short-run decision?

answer

Because of an increase in enrollment, the economics department hires two new professors.

question

Refer to Table 7.1. Diminishing returns set in with the ______ worker.

answer

5th

question

Suppose a firm's short-run production function is given by Q = F(L) = 4L. If the wage rate is $12 and the firm has sunk costs of $300, then the firm's variable cost function is:

answer

VC(Q) = $3Q.

question

The marginal product of labor is defined as:

answer

the additional output produced by the last ∆L units of labor hired.

question

Which of the following statements is true?

answer

Competitive firms will respond more to changes in output prices over the long run than they will over the short run because short-run marginal cost is lower than long-run marginal cost.

question

Consider the Cobb-Douglas production function F(L,K)=ALαKβFL,K=ALαKβ. Which of the following statements is true?

answer

Increases in α increase labor's productivity and raise MRTSLK.

question

Isoquants are the ______ created by the ______.

answer

contour lines; production function

question

Refer to Figure 8.6, which shows just three of a firm's various possible short-run average cost curves. Suppose the firm increases its output from 130 units to 160 units. Which of the following statements is

answer

The average cost of producing the 160 units would be $80 if the firm expected the increase in production to be permanent.

question

A firm has increasing returns to scale if:

answer

a proportional change in the use of all inputs produces a more than proportional change in output.

question

When the price of an input _____, a firm's least-cost production method never uses ______ of that input and usually employs _____.

answer

decreases; less; more

question

If marginal cost is ______ average cost, then average cost will _____.

answer

greater than; increase

question

If technological change is factor neutral, then the firm's isoquants:

answer

do not change in appearance.

question

With ______ returns to scale, production is most efficient if there is ______

answer

increasing; a single producer

question

Which of the following is the formula for the marginal product of labor?

answer

[F(L) - F(L - ∆L)]/∆L

question

According to the Law of Diminishing Marginal Returns, as additional units of one input are employed as all other inputs are held constant, total output will eventually ______.

answer

increase at a decreasing rate

question

The strategy whereby a firm makes most of its own inputs is called:

answer

vertical integration

question

Suppose the marginal rate of technical substitution for labor with capital is 5, the marginal product of labor is 8, and the marginal product of capital is 4. Assuming the law of diminishing marginal product applies to both labor and capital, this firm:

answer

could reduce costs by using fewer workers and more capital

question

A firm's ______ cost is equal to the sum of the ______ costs of the individual units it produces.

answer

variable; marginal

question

The slope of an isocost line is equal to:

answer

-(wage rate/rental rate of capital)

question

The typical test applied for merger approval under U.S. antitrust law requires that:

answer

prices not rise

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. If Kate produces 10,000 cubic yards per year, what is Alice's inverse demand function?

answer

P = 50 - 0.005QA

question

Monopolistic competition occurs in a market with free entry:

when there are only a few firms, each producing a unique product, prices above marginal cost and earns zero profit net of fixed costs.

when there is a large number of firms, each producing an identical product, prices above marginal cost and earns zero profit net of its fixed costs.

when there is a large number of firms, each of which produces a unique product, prices above marginal cost and earns zero profit net of its fixed costs.

when there is a large number of firms, each of which produces a unique product, prices above marginal cost and earns a positive profit net of its fixed costs.

when there are only a few firms, each producing a unique product, prices above marginal cost and earns zero profit net of fixed costs.

when there is a large number of firms, each producing an identical product, prices above marginal cost and earns zero profit net of its fixed costs.

when there is a large number of firms, each of which produces a unique product, prices above marginal cost and earns zero profit net of its fixed costs.

when there is a large number of firms, each of which produces a unique product, prices above marginal cost and earns a positive profit net of its fixed costs.

answer

when there is a large number of firms, each of which produces a unique product, prices above marginal cost and earns zero profit net of its fixed costs.

question

An individual firm's best response:

answer

is the firm's most profitable choice given the actions of its rivals

question

The more elastic is the demand for a product:

answer

the closer is marginal revenue to the price

question

The difference between a monopsonist's marginal expenditure and that of a price taker is:

answer

the price increase effect

question

Suppose the demand in a certain duopoly market with homogenous goods is Qd = 8,000 - 100P. The two firms in the market are firm V and firm W, and the marginal cost of producing the goods in question is equal to $25. Which of the following describes the Nash equilibrium in this market?

answer

One of the firms charges a price higher than $25, and one of the firms charges a price lower than $25

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. How much does Kate produce in the Nash equilibrium?

answer

1,333.33

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. What is Kate's marginal revenue function?

answer

MR = 100 - 0.005QA - 0.01QK

question

Which of the following is NOT a reason why collusion may be hard to sustain?

The potential profits from collusion can be so high as to create an incentive not to undercut.

Firms observe their rivals' prices only imperfectly.

Marginal costs, and therefore agreed-upon prices, may differ among firms or products.

Prices wars in practice may not conform to the predictions of the Bertrand model.

The potential profits from collusion can be so high as to create an incentive not to undercut.

Firms observe their rivals' prices only imperfectly.

Marginal costs, and therefore agreed-upon prices, may differ among firms or products.

Prices wars in practice may not conform to the predictions of the Bertrand model.

answer

Firms observe their rivals' prices only imperfectly.

question

The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 400 and Qd = 500 - 0.02W, where W is the annual wage of a coal miner and Q is the number of coal miners. What is the profit maximizing number of coal miners for the coal mine to hire?

answer

33.33

question

At the Nash equilibrium of an oligopoly market:

answer

each firm is making a profit-maximizing choice given the choices of its rivals

question

When a monopolist maximizes its profit by selling a positive amount:

answer

its marginal revenue must equal its marginal cost at that quantity

question

All else equal, in which oligopolistic market below would one expect the markup to be the smallest?

answer

An oligopolistic market with inelastic demand and a greater number of firms

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. How much profit does each producer earn in the Nash equilibrium?

answer

$8,888.89

question

A firm's Lerner Index:

is the amount by which its average cost exceeds its marginal cost.

is the value of its profit.

is the amount by which its price exceeds its marginal cost, expressed as a percentage of its price.

is the amount by which its marginal cost exceeds its average cost.

is the amount by which its average cost exceeds its marginal cost.

is the value of its profit.

is the amount by which its price exceeds its marginal cost, expressed as a percentage of its price.

is the amount by which its marginal cost exceeds its average cost.

answer

is the amount by which its price exceeds its marginal cost, expressed as a percentage of its price

question

The deadweight loss from monopoly pricing is:

answer

the amount by which aggregate surplus falls short of its maximum possible value, which is attained in a perfectly competitive market.

question

The ________ consumers make decisions about whether to purchase that ________ affected by small changes in price or quality, therefore a quality improvement for these consumers is not profitable.

answer

inframarginal; are not

question

A residual demand curve:

answer

shows the relationship between a firm's output and the market price given the outputs of the firm's rivals.

question

In the infinitely-repeated Bertrand model:

answer

firms play the Bertrand pricing game over and over, with no definite end.

question

The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 400, where W is the annual wage of a coal miner and Q is the number of people who would accept employment as a coal miner. What is the coal mine's marginal expenditure when it hires 100 coal miners?

answer

$30,000

question

Under monopolistic competition, firms have prices ________ marginal cost and long-run profits that are ________ (net of fixed costs).

answer

above; close to zero

question

Which of the following is NOT a reason why collusion may be hard to sustain?

answer

Firms observe their rivals' prices only imperfectly.

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. How much does Alice produce in the Nash equilibrium?

answer

1,333.33

question

The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 200 and Qd = 500 - 0.02W, where W is the annual wage of a coal miner and Q is the number of coal miners. What is the inverse demand function for coal miners?

answer

W = 25,000 - 50Q

question

Kate's Great Crete (KGC) is a local monopolist of ready-mix concrete. Its annual demand function is Q = 20,000 - 400P, where P is the price, in dollars, of a cubic yard of concrete and Q is the number of cubic yards sold per year. What is KGC's marginal revenue when it sells 5,000 cubic years of concrete per year?

answer

$25

question

The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 400, where W is the annual wage of a coal miner and Q is the number of people who would accept employment as a coal miner. What is the coal mine's marginal expenditure when it hires 150 coal miners?

answer

$35,000

question

Suppose the daily demand for Coke and Pepsi in a small city are given by QC = 90 - 100PC + 400(PP - PC) and QP = 90 - 100PP + 400(PC - PP), where QC and QP are the number of cans Coke and Pepsi sell, respectively, in thousands per day. PC and PP are the prices of a can of Coke and Pepsi, respectively, measured in dollars. The marginal cost is $0.45 per can for both Coke and Pepsi. If PC = $0.60, what is Pepsi's demand function?

answer

QP = 330 - 500PP

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. How much more profit would a monopolist earn compared to the combined profit earned by the two duopoly firms together in the Nash equilibrium?

answer

$2,222.22

question

A strategic pre-commitment occurs when a firm:

answer

commits to some actions before rivals take theirs, with the aim of increasing its future competitive profit.

question

The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 200, where W is the annual wage of a coal miner and Q is the number of people who would accept employment as a coal miner. What is the coal mine's marginal expenditure when it hires 100 coal miners?

answer

$20,000

question

A firm has market power:

answer

when it can profitably charge a price that is above its marginal cost

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. What is the market price in the Nash equilibrium?

answer

$86.67

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. What is the amount of the deadweight loss?

answer

$4,444.44

question

The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 200, where W is the annual wage of a coal miner and Q is the number of people who would accept employment as a coal miner. What is the coal mine's marginal expenditure when it hires 150 coal miners?

answer

$25,000

question

An oligopoly market is:

answer

a market with a few sellers

question

Suppose Kate's Great Crete (KGC) has annual variable costs of VC = 30Q + 0.0025Q2 and marginal costs of MC = 30 + 0.005Q, where Q is the number of cubic yards of concrete it produces per year. In addition, it has an avoidable fixed cost of $50,000 per year. KGC's demand function is Qd = 20,000 - 400P. What is KGC's profit at the profit maximizing sales price?

answer

- $30,000

question

One of the most notable features of the main provisions of the Sherman Act is that they are:

answer

vague

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. Which of the following gives Alice's best response function?

answer

QA = 2,000 - 0.5QK

question

A firm's price-cost margin:

answer

is the amount by which its price exceeds its marginal cost, expressed as a percentage of its price

question

Suppose the daily demand for Coke and Pepsi in a small city are given by QC = 90 - 100PC + 400(PP - PC) and QP = 90 - 100PP + 400(PC - PP), where QC and QP are the number of cans Coke and Pepsi sell, respectively, in thousands per day. PC and PP are the prices of a can of Coke and Pepsi, respectively, measured in dollars. The marginal cost is $0.45 per can for both Coke and Pepsi. What is the Nash equilibrium price for Coke?

answer

$0.53

question

The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of miners is Qs = 0.02W - 200 and Qd = 500 - 0.02W, where W is the annual wage of a coal miner and Q is the number of coal miners. What is the profit maximizing number of coal miners for the coal mine to hire?

answer

100

question

Suppose the market demand function in a certain market where Q is measured in thousands of units is Qd = 20 - 2.5P, and the market supply function is Qs = 2.5P - 7.5. How much deadweight loss would there be in this market if the quantity bought and sold was 5,000 units?

answer

$62.50

question

Suppose the domestic market demand function in a certain market where Q is measured in thousands of units is Qd = 20 - 2.5P, and the domestic market supply function is Qs = 2.5P - 7.5. Suppose further that the world price for the good in question is $3.40 per unit. If the government places a $1.20 tariff on imported units of this good, how much revenue does the tariff generate?

answer

$5,400

question

Aggregate surplus:

answer

is the sum of consumer and producer surpluses.

question

Suppose the market demand function for ice cream is Qd = 10 - 2P and the market supply function for ice cream is Qs = 4P - 2, both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The producer surplus after the tax is:

answer

$3.56 million.

question

Suppose the market demand function for ice cream is Qd = 10 - 2P and the market supply function for ice cream is Qs = 4P - 2, both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The government revenue raised by the tax is:

answer

$2.67 million.

question

Milky Moo and Mega Cow are the only sellers of milk. Milky Moo's supply function is QsMMoo = 12P - 6 at prices above $0.50 and zero at prices below $0.50. Mega Cow's supply function is QsMCow = 9P - 3 at prices above $0.33 and zero at prices below $0.33. At a price of $2.00, the market supply of milk is:

answer

QsMarket = 21P - 9

question

Milky Moo and Mega Cow are the only sellers of milk. Milky Moo's supply function is QsMMoo = 12P - 6 at prices above $0.50 and zero at prices below $0.50. Mega Cow's supply function is QsMCow = 9P - 3 at prices above $0.33 and zero at prices below $0.33. At a price of $2.00:

answer

the market supply of milk is 33 units

question

Suppose the market demand function in a certain market where Q is measured in thousands of units is Qd = 20 - 2.5P, and the market supply function is Qs = 2.5P - 7.5. How much deadweight loss would there be in this market if the quantity bought and sold was 8,500 units?

answer

$2025

question

Suppose the domestic market demand function in a certain market where Q is measured in thousands of units is Qd = 20 - 2.5P, and the domestic market supply function is Qs = 2.5P - 7.5. Suppose further that the world price for the good in question is $3.40 per unit. How much deadweight loss would be caused by a $1.20 tariff on imported units of this good

answer

$3,600

question

The market demand function for wheat is Qd = 10 - 2P and the market supply function is Qs = 4P - 2, both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a voluntary production reduction program to achieve their goal. What is the size of the deadweight loss from the program?

answer

$1.5 billion

question

A voluntary production reduction program

answer

offers firms incentives to reduce their production voluntarily

question

Suppose the market demand function for ice cream is Qd = 10 - 2P and the market supply function for ice cream is Qs = 4P - 2, both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The aggregate surplus with the tax is:

answer

$13.50 million

question

Characteristics of a perfectly competitive market include:

product homogeneity

the absence of transaction costs

many sellers, each with a very small market share

All of these are characteristics of a perfectly competitive market

product homogeneity

the absence of transaction costs

many sellers, each with a very small market share

All of these are characteristics of a perfectly competitive market

answer

All of these are characteristics of a perfectly competitive market

question

Suppose Julia and Zach are the only consumers of milk. Julia's demand for milk is defined as QdJulia = 12 - 3P at prices below $4 and zero for prices above $4. Zach's demand for milk is defined as QdZach = 10 - 2P at prices below $5 and zero for prices above $5. If the market price for milk is $4.50, market demand is

answer

1 units of milk

question

When the government implements a price support program:

it may end up buying a lot of the good, for which it has little or no use.

the goal is to increase the market price of the good.

the deadweight loss created can be larger than that created by a price floor.

All of these occur as a result of a price support program.

it may end up buying a lot of the good, for which it has little or no use.

the goal is to increase the market price of the good.

the deadweight loss created can be larger than that created by a price floor.

All of these occur as a result of a price support program.

answer

All of these occur as a result of a price support program

question

All of the following statements are true regarding voluntary production reduction programs EXCEPT

answer

they are an attempt to protect consumers from high prices

question

Each of the following is implied if we say that transactions costs are absent EXCEPT:

answer

sellers do not charge a markup over marginal cost

question

The market demand function for wheat is Qd = 10 - 2P and the market supply function is Qs = 4P - 2, both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a price floor to achieve their goal. How much wheat goes to waste under the program?

answer

6 billion bushels per year

question

Milky Moo and Mega Cow are the only sellers of milk. Milky Moo's supply function is QsMMoo = 12P - 6 at prices above $0.50 and zero at prices below $0.50. Mega Cow's supply function is QsMCow = 9P - 3 at prices above $0.33 and zero at prices below $0.33. At a price of $0.45:

answer

the market supply of milk is between 1 and 2 units

question

Suppose that, in the long run, a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. The long run market supply curve is:

answer

horizontal at $20 per gallon

question

The market supply curve for a product:

answer

will lie to the right of all of the individual supply curves for a product

question

Milky Moo and Mega Cow are the only sellers of milk. Milky Moo's supply function is QsMMoo = 12P - 6 at prices above $0.50 and zero at prices below $0.50. Mega Cow's supply function is QsMCow = 9P - 3 at prices above $0.33 and zero at prices below $0.33. In this case, the market supply curve for milk is

answer

kinked at a price of $0.50

question

Characteristics of a perfectly competitive market include:

answer

many sellers, each with a small market share

question

The deadweight loss from a tax:

answer

is zero when demand is perfectly inelastic.

question

Graphically, market demand for a product:

answer

is the horizontal sum of the individual demand curves

question

Suppose the domestic market demand function in a certain market where Q is measured in thousands of units is Qd = 20 - 2.5P, and the domestic market supply function is Qs = 2.5P - 7.5. Suppose further that the world price for the good in question is $3.40 per unit. If the government places a $1.20 tariff on imported units of this good, by how much is producer surplus increased?

answer

$3000

question

When the government implements a price support program:

the deadweight loss created can be larger than that created by a price floor.

the goal is to increase the market price of the good.

All of these occur as a result of a price support program.

it may end up buying a lot of the good, for which it has little or no use.

the deadweight loss created can be larger than that created by a price floor.

the goal is to increase the market price of the good.

All of these occur as a result of a price support program.

it may end up buying a lot of the good, for which it has little or no use.

answer

All of these occur as a result of a price support program.

question

Suppose the domestic market demand function in a certain market where Q is measured in thousands of units is Qd = 20 - 2.5P, and the domestic market supply function is Qs = 2.5P - 7.5. Suppose further that the world price for the good in question is $3.40 per unit. How much deadweight loss would be caused by a $1.20 tariff on imported units of this good?

answer

$3,600

question

The market demand function for wheat is Qd = 10 - 2P and the market supply function is Qs = 4P - 2, both measured in billions of bushels per year. Suppose the government wants to increase the price of wheat to $3/bushel and they impose a voluntary production reduction program to achieve their goal. How much would the government have to pay farmers?

answer

$4.5 billion

question

A production quota program:

answer

is a way to raise prices without causing the overproduction that occurs under a price support program.

question

Some causes for deadweight loss are:

preferences

taxation

government subsidies

consumption

sunk costs

elasticity of demand

price floors

income

preferences

taxation

government subsidies

consumption

sunk costs

elasticity of demand

price floors

income

answer

taxation

government subsidies

price floors

government subsidies

price floors

question

Deadweight loss is:

answer

a cost to society due to an inefficient allocation of resources

question

Avoidable fixed costs:

answer

affect whether the firm chooses to produce q=0

because...the general rule is that Sunk costs and Unavoidable fixed costs do not affect any decision making. The reason is that there is nothing you can do to avoid paying them. The only kind of fixed cost where there is a possibility that it may not have to be paid, is the Avoidable fixed cost, and it is not paid only when you choose to produce q=0.

In this instance the cost that we are considering is Avoidable fixed costs and so the right answer is affect whether the firm chooses to produce q=0.

because...the general rule is that Sunk costs and Unavoidable fixed costs do not affect any decision making. The reason is that there is nothing you can do to avoid paying them. The only kind of fixed cost where there is a possibility that it may not have to be paid, is the Avoidable fixed cost, and it is not paid only when you choose to produce q=0.

In this instance the cost that we are considering is Avoidable fixed costs and so the right answer is affect whether the firm chooses to produce q=0.

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. Suppose Kate enters the market first and chooses her output before Alice. What is Alice's profit?

answer

$5,000

question

In the Cournot model of oligopoly:

answer

firms choose how much to produce simultaneously and the price clears the market given the total quantity produced

question

Which of the following is NOT a reason why a monopoly might be regulated?

answer

To reduce the inefficiency associated with profits

question

The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 400 and Qd = 500 - 0.02W, where W is the annual wage of a coal miner and Q is the number of coal miners. What wage must be paid at the profit maximizing quantity of coal miners?

answer

$21,667

question

Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. Suppose Kate enters the market first and chooses her output before Alice. Given market demand, what is the market price per cubic yard?

answer

$85

question

In a Bertrand model of oligopoly:

answer

firms produce homogenous products and set their prices simultaneously

question

The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 400, where W is the annual wage of a coal miner and Q is the number of people who would accept employment as a coal miner. What is the coal mine's marginal expenditure function?

answer

ME = 100Q + 20,000

question

Which of the following is not one of the laws that provides the foundation for antitrust policy in the U.S.?

answer

The Cargill Act

question

Significant market power exists in:

answer

monopoly markets and oligopoly markets

question

Kate's Great Crete (KGC) is a local monopolist of ready-mix concrete. Its annual demand function is Q = 20,000 - 400P, where P is the price, in dollars, of a cubic yard of concrete and Q is the number of cubic yards sold per year. What price does KGC charge per unit when it sells 5,000 cubic years of concrete per year?

answer

$37.50

question

As products become more differentiated

answer

consumers are less willing to switch in response to price changes and competition becomes less intense

question

The Solo Coal Mine is the only employer in the small town of Way out there. The market supply of coal miners is Qs = 0.02W - 200 and Qd = 500 - 0.02W, where W is the annual wage of a coal miner and Q is the number of coal miners. What is the deadweight loss in the market for coal miners due to the monopsony?

answer

$125,000

question

Kate's Great Crete (KGC) is a local monopolist of ready-mix concrete. Its annual demand function is Q = 20,000 - 400P, where P is the price, in dollars, of a cubic yard of concrete and Q is the number of cubic yards sold per year. What is KGC's marginal revenue function?

answer

MR = 50 - 0.005Q

question

Firms engage in explicit collusion when:

answer

they communicate to reach an agreement about the prices they will charge

question

For the Cobb-Douglas production function F(L,K) = ALαKβ, a technical change that increases the productivity of capital would be represented by:

answer

an increase in the value of β

question

Returns to scale is a ______ concept because ______

answer

long-run; it refers to changes in all of the firm's inputs

question

When the marginal product of an input is ______ than the average product, the marginal units of the input _____ the average product

answer

larger; raise

question

Refer to Figure 7.5. Which diagram represents isoquants for inputs that are perfect substitutes?

answer

C (Diagonal straight lines)

question

Refer to Figure 8.7. Which of the following statements is true?

answer

The technology represented in graph C will cause the firm to experience diseconomies of scale

question

Refer to Figure 8.5. If the wage rate is $5 and the rental rate of capital is $10, what is the lowest cost of producing 30 units of output?

answer

$345

question

Diseconomies of scope occur when:

answer

producing two products in a single firm is more expensive than producing them in separate firms

question

Refer to Figure 8.7. Which graph illustrates a firm that experiences economies of scale?

answer

A

question

A firm's ______ shows the least-cost input combinations at all possible levels of output for fixed input prices

answer

output expansion path

question

Two inputs ______ when they must be combined in a fixed ratio

answer

are perfect complements

question

Refer to Figure 8.1. Which graph best represents a total cost function?

answer

A

question

For the Cobb-Douglas production function F(L,K) = ALαKβ, a factor-neutral technical change would be represented by:

answer

an increase in the value of A

question

When the price of an input _____, a firm's least-cost production method never uses ______ of that input and usually employs _____

answer

decreases; less; more

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Refer to Figure 7.5. Which diagram represents isoquants for fixed-proportions technology?

answer

D (right angle lines)

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Suppose a firm's current total cost of production is $50,000 per week, the wage rate is $1,000 per week and the cost of capital is $2,500. Which of the following gives the general equation for the firm's isocost lines for total cost C?

answer

K = (C/2,500) - 0.4L

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A firm's _______ summarizes all of its possible methods of producing its output

answer

production technology

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Whenever a firm uses input X but not input Y, then at the chosen input combination:

answer

MRTSXY ≥ PX/PY

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A firm's ______ cost is equal to the sum of the ______ costs of the individual units it produces

answer

variable; marginal

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Refer to Figure 7.4. This isoquant exhibits:

answer

declining MRTSLK as we move to the southeast along the isoquant

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A firm's ______ shows the least-cost input combinations at all possible levels of output for fixed input prices.

answer

output expansion path

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The cost of using capital is equal to the market rental price as long as:

answer

a well-functioning rental market for capital exists

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Isocost lines associated with ______ total cost lie ______ the origin

answer

higher; farther from

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Suppose that the marginal product of a firm's labor is 10 units of output per hour. Also assume that the marginal product of the firm's capital is 30 units of output per hour. In this case, the marginal rate of technical substitution for labor with capital is:

answer

1/3

question

Which of the following is NOT a property of isoquants?

Isoquants may slope upward or downward.

Isoquants for the same technology never cross.

Isoquants curves are thin.

Higher-level isoquants lie farther from the origin.

Isoquants may slope upward or downward.

Isoquants for the same technology never cross.

Isoquants curves are thin.

Higher-level isoquants lie farther from the origin.

answer

Isoquants may slope upward or downward

question

Suppose a firm has a Cobb-Douglas weekly production function Q = F(L, K) = 25L0.5K0.5, where L is the number of workers and K is units of capital. The wage rate is $900 per week, and a unit of capital costs $400 per week. What is the least-cost input combination for producing 675 units of output?

answer

L = 18; K = 40.5

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Isoquants are the ______ created by the ______

answer

contour lines; production function

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Refer to Figure 7.2. With which worker does diminishing marginal returns set in?

answer

30th worker

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The productivity changes resulting from research and development would be best represented by:

answer

an upward shift of a firm's production function

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Refer to Table 7.1. What is the marginal product of the 6th worker?

answer

1 unit of output

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Suppose a firm has a production function given by Q = 2(2L)0.5K0.5. If the rental rate of capital is $100 per unit, the wage rate is $1,400 per week and the firm initially has 25 units of capital, what is the firm's short-run cost function?

answer

C(Q) = 2,500 + 7Q2

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Suppose that MPL = 100 and MPK = 80. If W = 25 and R = 20, then a firm:

answer

is producing its output at the lowest possible cost

question

The marginal cost curve:

answer

intersects the average cost curve from below at the efficient scale of production