question
The monopoly supply curve is the
portion of marginal costs curve where marginal costs exceed the minimum value of average variable costs.
result of market power and production costs.
same as the competitive market supply curve.
none of the above
portion of marginal costs curve where marginal costs exceed the minimum value of average variable costs.
result of market power and production costs.
same as the competitive market supply curve.
none of the above
answer
none of the above
question
Which of the following explains why a monopolist may have higher costs than an equivalent competitive firm?
The monopolist may incur costs in lobbying the government to grant its monopoly privilege.
If the monopolist has its profits limited by regulation, it may choose to spend more money, thus raising costs, instead of reducing its revenue.
Monopolists typically spend more on customer service than competitive firms.
Both A and B are correct.
Both A and C are correct
The monopolist may incur costs in lobbying the government to grant its monopoly privilege.
If the monopolist has its profits limited by regulation, it may choose to spend more money, thus raising costs, instead of reducing its revenue.
Monopolists typically spend more on customer service than competitive firms.
Both A and B are correct.
Both A and C are correct
answer
Both A and B are correct.
question
Which of the following is true at the output level where P=MC?
The monopolist is not maximizing profit and should increase output.
The monopolist is not maximizing profit and should decrease output.
The monopolist is maximizing profit.
The monopolist is earning a positive profit.
The monopolist is not maximizing profit and should increase output.
The monopolist is not maximizing profit and should decrease output.
The monopolist is maximizing profit.
The monopolist is earning a positive profit.
answer
The monopolist is not maximizing profit and should decrease output.
question
Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. What is the profit maximizing price?
$10.00
$52.50
$95.00
$5.00
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. What is the profit maximizing price?
$10.00
$52.50
$95.00
$5.00
answer
$52.50
question
Figure 10.2
Refer to Figure 10.2. At output Qm, and assuming that the monopoly has set her price to maximize profit, the consumer surplus is:
CDE.
ADEG.
0DEQm.
BDEF.
none of the above
Refer to Figure 10.2. At output Qm, and assuming that the monopoly has set her price to maximize profit, the consumer surplus is:
CDE.
ADEG.
0DEQm.
BDEF.
none of the above
answer
CDE.
question
The monopolist has no supply curve because
the monopolist's marginal cost curve changes considerably over time.
although there is only a single seller at the current price, it is impossible to know how many sellers would be in the market at higher prices.
the relationship between price and quantity depends on both marginal cost and average cost.
the quantity supplied at any particular price depends on the monopolist's demand curve.
there is a single seller in the market.
the monopolist's marginal cost curve changes considerably over time.
although there is only a single seller at the current price, it is impossible to know how many sellers would be in the market at higher prices.
the relationship between price and quantity depends on both marginal cost and average cost.
the quantity supplied at any particular price depends on the monopolist's demand curve.
there is a single seller in the market.
answer
the quantity supplied at any particular price depends on the monopolist's demand curve.
question
Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. What is the profit maximizing level of output?
90
95
100
0
none of the above
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. What is the profit maximizing level of output?
90
95
100
0
none of the above
answer
95
question
When the demand curve is downward sloping, marginal revenue is
equal to price.
equal to average revenue.
less than price.
more than price.
equal to price.
equal to average revenue.
less than price.
more than price.
answer
less than price.
question
Suppose that the competitive market for rice in Japan was suddenly monopolized. The effect of such a change would be:
to decrease the price of rice to the Japanese people.
to decrease the consumer surplus of Japanese rice consumers.
a welfare gain for the Japanese people.
increase the consumption of rice by the Japanese people.
to decrease the producer surplus of Japanese rice producers.
to decrease the price of rice to the Japanese people.
to decrease the consumer surplus of Japanese rice consumers.
a welfare gain for the Japanese people.
increase the consumption of rice by the Japanese people.
to decrease the producer surplus of Japanese rice producers.
answer
to decrease the consumer surplus of Japanese rice consumers
question
Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the
firm's output does not maximize profit, but we cannot conclude whether the output is too large or too small.
firm's output is larger than the profit maximizing quantity.
firm's output is smaller than the profit maximizing quantity.
firm is maximizing profit.
firm's output does not maximize profit, but we cannot conclude whether the output is too large or too small.
firm's output is larger than the profit maximizing quantity.
firm's output is smaller than the profit maximizing quantity.
firm is maximizing profit.
answer
firm's output is smaller than the profit maximizing quantity.
question
Which of the following is true at the output level where P=MC?
The monopolist is earning a positive profit.
The monopolist is not maximizing profit and should increase output.
The monopolist is not maximizing profit and should decrease output.
The monopolist is maximizing profit.
The monopolist is earning a positive profit.
The monopolist is not maximizing profit and should increase output.
The monopolist is not maximizing profit and should decrease output.
The monopolist is maximizing profit.
answer
The monopolist is not maximizing profit and should decrease output.
question
Which of the following explains why a monopolist may have higher costs than an equivalent competitive firm?
The monopolist may incur costs in lobbying the government to grant its monopoly privilege.
If the monopolist has its profits limited by regulation, it may choose to spend more money, thus raising costs, instead of reducing its revenue.
Monopolists typically spend more on customer service than competitive firms.
Both A and B are correct.
Both A and C are correct
The monopolist may incur costs in lobbying the government to grant its monopoly privilege.
If the monopolist has its profits limited by regulation, it may choose to spend more money, thus raising costs, instead of reducing its revenue.
Monopolists typically spend more on customer service than competitive firms.
Both A and B are correct.
Both A and C are correct
answer
Both A and B are correct.
question
The monopolist that maximizes profit
does not impose a cost on society because the selling price is above marginal cost.
does not impose a cost on society because price is equal to marginal cost.
imposes a cost on society because the selling price is above marginal cost.
imposes a cost on society because the selling price is equal to marginal cost.
does not impose a cost on society because the selling price is above marginal cost.
does not impose a cost on society because price is equal to marginal cost.
imposes a cost on society because the selling price is above marginal cost.
imposes a cost on society because the selling price is equal to marginal cost.
answer
imposes a cost on society because the selling price is above marginal cost.
question
Use the following two statements to answer this question:
I. For a monopolist, at every output level, average revenue is equal to price.
II. For a monopolist, at every output level, marginal revenue is equal to price.
I is true, and II is false.
Both I and II are false.
I is false, and II is true.
Both I and II are true.
Statements I and II could either be true or false depending upon demand.
I. For a monopolist, at every output level, average revenue is equal to price.
II. For a monopolist, at every output level, marginal revenue is equal to price.
I is true, and II is false.
Both I and II are false.
I is false, and II is true.
Both I and II are true.
Statements I and II could either be true or false depending upon demand.
answer
I is true, and II is false.
question
The monopoly supply curve is the
portion of marginal costs curve where marginal costs exceed the minimum value of average variable costs.
result of market power and production costs.
same as the competitive market supply curve.
none of the above
portion of marginal costs curve where marginal costs exceed the minimum value of average variable costs.
result of market power and production costs.
same as the competitive market supply curve.
none of the above
answer
none of the above
question
Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. What is the profit maximizing level of output?
90
95
100
0
none of the above
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. What is the profit maximizing level of output?
90
95
100
0
none of the above
answer
95
question
The monopolist has no supply curve because
there is a single seller in the market.
the relationship between price and quantity depends on both marginal cost and average cost.
the quantity supplied at any particular price depends on the monopolist's demand curve.
the monopolist's marginal cost curve changes considerably over time.
although there is only a single seller at the current price, it is impossible to know how many sellers would be in the market at higher prices.
there is a single seller in the market.
the relationship between price and quantity depends on both marginal cost and average cost.
the quantity supplied at any particular price depends on the monopolist's demand curve.
the monopolist's marginal cost curve changes considerably over time.
although there is only a single seller at the current price, it is impossible to know how many sellers would be in the market at higher prices.
answer
the quantity supplied at any particular price depends on the monopolist's demand curve.
question
Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. How much profit does the monopolist earn?
$4987.50
$5.00
$4512.50
$475.00
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. How much profit does the monopolist earn?
$4987.50
$5.00
$4512.50
$475.00
answer
$4512.50
question
Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue, total cost, and marginal cost curve for macadamia nuts are given as follows:
P = 360 - 4Q
MR = 360 - 8Q
TC = 2Q^2
MC = 4Q
What is the maximum amount that Maui Macadamia would be willing to spend in order to maintain its monopoly through rent seeking?
5,400
0
1,800
10,800
P = 360 - 4Q
MR = 360 - 8Q
TC = 2Q^2
MC = 4Q
What is the maximum amount that Maui Macadamia would be willing to spend in order to maintain its monopoly through rent seeking?
5,400
0
1,800
10,800
answer
5400
question
Suppose that the competitive market for rice in Japan was suddenly monopolized. The effect of such a change would be:
to decrease the consumer surplus of Japanese rice consumers.
to decrease the producer surplus of Japanese rice producers.
to decrease the price of rice to the Japanese people.
a welfare gain for the Japanese people.
increase the consumption of rice by the Japanese people
to decrease the consumer surplus of Japanese rice consumers.
to decrease the producer surplus of Japanese rice producers.
to decrease the price of rice to the Japanese people.
a welfare gain for the Japanese people.
increase the consumption of rice by the Japanese people
answer
to decrease the consumer surplus of Japanese rice consumers.
question
Which of the following theories explains why the number of firms in a market does not determine the level of competition in that market?
The theory of contestable markets
The theory of derived demand
The theory of natural monopoly
Predatory pricing theory
The theory of contestable markets
The theory of derived demand
The theory of natural monopoly
Predatory pricing theory
answer
The theory of contestable markets
question
For the monopolist shown below, the profit maximizing level of output is:
Q2.
Q4.
Q3.
Q1.
Q5.
Q2.
Q4.
Q3.
Q1.
Q5.
answer
q1
question
Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. What is the profit maximizing price?
$10.00
$52.50
$5.00
$95.00
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. What is the profit maximizing price?
$10.00
$52.50
$5.00
$95.00
answer
$52.50
question
When the demand curve is downward sloping, marginal revenue is
less than price.
equal to average revenue.
equal to price.
more than price.
less than price.
equal to average revenue.
equal to price.
more than price.
answer
less than price.
question
Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the
firm's output is larger than the profit maximizing quantity.
firm is maximizing profit.
firm's output is smaller than the profit maximizing quantity.
firm's output does not maximize profit, but we cannot conclude whether the output is too large or too small.
firm's output is larger than the profit maximizing quantity.
firm is maximizing profit.
firm's output is smaller than the profit maximizing quantity.
firm's output does not maximize profit, but we cannot conclude whether the output is too large or too small.
answer
firm's output is smaller than the profit maximizing quantity.
question
Which of the following might cause a firm to face a downward sloping demand curve even in the absence of coercive barriers to entry?
If the product is an inferior good
If there is a large number of competing firms
If transaction costs are positive
If the average cost curve is above the price at every quantity
If the product is an inferior good
If there is a large number of competing firms
If transaction costs are positive
If the average cost curve is above the price at every quantity
answer
If transaction costs are positive
question
Scenario 10.2:
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. How much profit does the monopolist earn?
$5.00
$475.00
$4512.50
$4987.50
A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q = 200 - 2P
MR = 100 - Q
TC = 5Q
MC = 5
Refer to Scenario 10.2. How much profit does the monopolist earn?
$5.00
$475.00
$4512.50
$4987.50
answer
$4512.50
question
When a firm charges each customer the maximum price that the customer is willing to pay, the firm
engages in second-degree price discrimination.
engages in first-degree price discrimination.
charges the average reservation price.
engages in a discrete pricing strategy.
engages in second-degree price discrimination.
engages in first-degree price discrimination.
charges the average reservation price.
engages in a discrete pricing strategy.
answer
engages in first-degree price discrimination
question
A movie monopolist sells to students and adults. The demand function for students is Picture and the demand function for adults is Picture . The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. What price per ticket does the theater charge students to maximize profits?
$4
$7
$6
$12
$4
$7
$6
$12
answer
$4
question
A movie monopolist sells to students and adults. The demand function for students is Picture and the demand function for adults is Picture . The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. How many tickets does the theater sell to adults to maximize profits?
2500
500
200
600
2500
500
200
600
answer
500
question
A movie monopolist sells to students and adults. The demand function for students is Qds= 600-100P and the demand function for adults is Qds=1200-100P. The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. What is the monopolist's producer surplus from both students and adults?
$2900
$2500
$2100
$4900
$2900
$2500
$2100
$4900
answer
2900
question
A movie monopolist sells to students and adults. The demand function for students is Picture and the demand function for adults is Picture . The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. What price per ticket does the theater charge adults to maximize profits?
$4
$7
$6
$12
$4
$7
$6
$12
answer
$7
question
A movie monopolist sells to students and adults. The demand function for students is ?Picture?and the demand function for adults is ?Picture?. The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. What is the monopolist's producer surplus from adults?
$400
$2400
$2500
$0
$400
$2400
$2500
$0
answer
$2500
question
Suppose that the marginal cost of an additional ton of steel produced by a Japanese firm is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan, which of the following will be correct?
The Japanese firm will sell steel at a lower price abroad than they will charge domestic users.
Insufficient information exists to determine whether the price or quantity will be higher or lower abroad.
The Japanese firm will sell more steel in Japan than they will sell abroad.
The Japanese firm will sell steel at a higher price abroad than they will charge domestic users.
The Japanese firm will sell more steel abroad than they will sell in Japan.
The Japanese firm will sell steel at a lower price abroad than they will charge domestic users.
Insufficient information exists to determine whether the price or quantity will be higher or lower abroad.
The Japanese firm will sell more steel in Japan than they will sell abroad.
The Japanese firm will sell steel at a higher price abroad than they will charge domestic users.
The Japanese firm will sell more steel abroad than they will sell in Japan.
answer
The Japanese firm will sell steel at a lower price abroad than they will charge domestic users.
question
A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing
first-degree price discrimination.
fourth-degree price discrimination.
second-degree price discrimination.
fifth-degree price discrimination.
third-degree price discrimination.
first-degree price discrimination.
fourth-degree price discrimination.
second-degree price discrimination.
fifth-degree price discrimination.
third-degree price discrimination.
answer
third-degree price discrimination
question
Rather than charging a single price to all customers, a firm charges a HIGHER price to men and a LOWER price to women. By engaging in this practice, the firm:
is attempting to convert producer surplus into consumer surplus.
is engaging in an illegal activity that is prohibited by the Sherman Antitrust Act.
is trying to reduce its costs and therefore increase its profit.
is attempting to convert consumer surplus into producer surplus.
Both A and C are correct.
is attempting to convert producer surplus into consumer surplus.
is engaging in an illegal activity that is prohibited by the Sherman Antitrust Act.
is trying to reduce its costs and therefore increase its profit.
is attempting to convert consumer surplus into producer surplus.
Both A and C are correct.
answer
is attempting to convert consumer surplus into producer surplus. CS-->PS
question
A movie monopolist sells to students and adults. The demand function for students is Picture and the demand function for adults is Picture . The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. How many tickets does the theater sell to students to maximize profits?
2500
500
200
600
2500
500
200
600
answer
200
question
A monopolist can perfectly price discriminate
When it can distinguish consumers with a high versus low willingness to pay
When it offers a menu of alternatives, designed so that different customers will make different choices based on their willingness to pay
If it knows perfectly the customer's willingness to pay for each unit its sells and can charge a different price for each unit
When it cannot distinguish consumers with a high versus low willingness to pay
When it can distinguish consumers with a high versus low willingness to pay
When it offers a menu of alternatives, designed so that different customers will make different choices based on their willingness to pay
If it knows perfectly the customer's willingness to pay for each unit its sells and can charge a different price for each unit
When it cannot distinguish consumers with a high versus low willingness to pay
answer
If it knows perfectly the customer's willingness to pay for each unit its sells and can charge a different price for each unit
question
A firm is charging a different price for each unit purchased by a consumer. This is called
first-degree price discrimination.
fifth-degree price discrimination.
third-degree price discrimination.
fourth-degree price discrimination.
second-degree price discrimination
first-degree price discrimination.
fifth-degree price discrimination.
third-degree price discrimination.
fourth-degree price discrimination.
second-degree price discrimination
answer
first-degree price discrimination.
question
Under perfect price discrimination, consumer surplus
is less than zero.
is maximized.
is greater than zero.
equals zero.
is less than zero.
is maximized.
is greater than zero.
equals zero.
answer
equals zero.
question
A movie monopolist sells to students and adults. The demand function for students is Picture and the demand function for adults is Picture . The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. How many tickets does the theater sell to adults to maximize profits?
2500
500
200
600
2500
500
200
600
answer
500
question
A movie monopolist sells to students and adults. The demand function for students is Picture and the demand function for adults is Picture . The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. How many tickets does the theater sell to students to maximize profits?
2500
500
200
600
2500
500
200
600
answer
200
question
A movie monopolist sells to students and adults. The demand function for students is Picture and the demand function for adults is Picture . The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. What price per ticket does the theater charge adults to maximize profits?
$4
$7
$6
$12
$4
$7
$6
$12
answer
$7
question
A movie monopolist sells to students and adults. The demand function for students is Qds=600-100P and the demand function for adults is Qda=1200-100P. The marginal cost is $2 per ticket. Suppose the movie theater cannot price discriminate. What is the monopolist's producer surplus from both students and adults?
$2500
$4950
$2450
$50
$2500
$4950
$2450
$50
answer
$2450
question
A movie monopolist sells to students and adults. The demand function for students is ?Picture?and the demand function for adults is ?Picture?. The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. What is the monopolist's producer surplus from adults?
$400
$2400
$2500
$0
$400
$2400
$2500
$0
answer
2500
question
Suppose that the marginal cost of an additional ton of steel produced by a Japanese firm is the same whether the steel is set aside for domestic use or exported abroad. If the price elasticity of demand for steel is greater abroad than it is in Japan, which of the following will be correct?
The Japanese firm will sell steel at a higher price abroad than they will charge domestic users.
The Japanese firm will sell more steel abroad than they will sell in Japan.
The Japanese firm will sell steel at a lower price abroad than they will charge domestic users.
Insufficient information exists to determine whether the price or quantity will be higher or lower abroad.
The Japanese firm will sell more steel in Japan than they will sell abroad.
The Japanese firm will sell steel at a higher price abroad than they will charge domestic users.
The Japanese firm will sell more steel abroad than they will sell in Japan.
The Japanese firm will sell steel at a lower price abroad than they will charge domestic users.
Insufficient information exists to determine whether the price or quantity will be higher or lower abroad.
The Japanese firm will sell more steel in Japan than they will sell abroad.
answer
The Japanese firm will sell steel at a lower price abroad than they will charge domestic users.
question
Bindy, an 18-year-old high school graduate, and Luciana, a 40-year-old college graduate, just purchased identical hot new sports cars. Acme Insurance charges a higher rate to insure Bindy than Luciana. This practice is an example of:
collusion.
bundling.
price discrimination.
two-part tariff.
none of the above
collusion.
bundling.
price discrimination.
two-part tariff.
none of the above
answer
none of the above
question
A movie monopolist sells to students and adults. The demand function for students is ?Picture?and the demand function for adults is ?Picture?. The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. What is the monopolist's producer surplus from students?
$400
$2400
$2500
$0
$400
$2400
$2500
$0
answer
$400
question
A movie monopolist sells to students and adults. The demand function for students is Picture and the demand function for adults is Picture . The marginal cost is $2 per ticket. Suppose the movie theater can price discriminate. What price per ticket does the theater charge students to maximize profits?
$4
$7
$6
$12
$4
$7
$6
$12
answer
$4
question
A movie monopolist sells to students and adults. The demand function for students is ?Picture?and the demand function for adults is ?Picture?. The marginal cost is $2 per ticket. What is the difference in the monopolist's profit when it is able to price discriminate and when it cannot?
$2500
$450
$0
$50
$2500
$450
$0
$50
answer
$450
question
Rare earth metals are used to manufacture some important electronic components in popular products like cell phones. These metals are not really rare, but they are expensive to extract from the ground. What happens to the market for the rare earth metals if these extraction cost increase?
A) Supply curves shifts leftward
B)Demand curve shifts leftward
C)Demand curve shifts rightward
D)Supply curve shifts rightward
A) Supply curves shifts leftward
B)Demand curve shifts leftward
C)Demand curve shifts rightward
D)Supply curve shifts rightward
answer
A) Supply curves shifts leftward
question
A firm engaging in two-part pricing with only one customer should set the entry fee equal to
A) price
B) marginal cost
C) marginal revenue
D) consumer surplus
A) price
B) marginal cost
C) marginal revenue
D) consumer surplus
answer
D) consumer surplus
question
If the inverse demand curve a monopoly faces is p=100-2Q and MC is constant at 16, then profit maximization
A) is achieved only by shutting down in the short run
B) is achieved when 21 units are produced
C) is achieved by setting price equal to 21
D) cannot be determined solely from the information provided
A) is achieved only by shutting down in the short run
B) is achieved when 21 units are produced
C) is achieved by setting price equal to 21
D) cannot be determined solely from the information provided
answer
B) is achieved when 21 units are produced
question
If the average product of labor equals the marginal product of labor, then
A) the marginal product of labor is at a maximum
B) the average product of labor is at a maximum
C) Both A and B above
D) Neither A nor B above
A) the marginal product of labor is at a maximum
B) the average product of labor is at a maximum
C) Both A and B above
D) Neither A nor B above
answer
B) the average product of labor is at a maximum
question
Joe's income is $500 the price of food (F) is $2 per unit and the price of shelter (S) is $100. Which of the following represents his budget constraint?
A) 500=100F+2S
B) S=500-2F
C) 500=2F+100S
D) All of the above
A) 500=100F+2S
B) S=500-2F
C) 500=2F+100S
D) All of the above
answer
C) 500=2F+100S
question
Figure 8.2 with SRMC, SAC, LRMC, LRAC
Refer to Figure 8.2. As the competitive industry, not just the firm in question, moves toward long-run equilibrium, the firm will be forced to operate at what level of output?
A) 38
B) 64
C) 50
D) 34
E) 22
Refer to Figure 8.2. As the competitive industry, not just the firm in question, moves toward long-run equilibrium, the firm will be forced to operate at what level of output?
A) 38
B) 64
C) 50
D) 34
E) 22
answer
C) 50
question
Refer to figure 8.2. When this competitive industry is at long-run equilibrium, what will the price be?
A)$80
B)$70
C)$71
D)$60
E)$64
A)$80
B)$70
C)$71
D)$60
E)$64
answer
D) $60
question
Scenario 4.1
Daniel derives utility from only two goods, cake (Qc) and donuts (Qd). The marginal utility that Daniel receives from cake (MUc) and donut (MUd) are givens as follows:
MUc=Qd
MUd=Qc
Daniel has an income of $240 and the price of cake (Pc) and donuts (Pd) are both $3.
See scenario 4.1 What quantity Qc will maximize Daniel's utility given the information above?
A) 40
B) 24
C) 60
D) 0
E) None of the above
Daniel derives utility from only two goods, cake (Qc) and donuts (Qd). The marginal utility that Daniel receives from cake (MUc) and donut (MUd) are givens as follows:
MUc=Qd
MUd=Qc
Daniel has an income of $240 and the price of cake (Pc) and donuts (Pd) are both $3.
See scenario 4.1 What quantity Qc will maximize Daniel's utility given the information above?
A) 40
B) 24
C) 60
D) 0
E) None of the above
answer
A) 40
question
An increasing-cost industry is so named because of the positive slope of which curve?
A) Each firm's long-run average cost curve
B) Each firm's short-run marginal cost curve
C) Each firm's long-run marginal cost curve
D) The industry's long-run supply curve
E) Each firm's short-run average cost curve
A) Each firm's long-run average cost curve
B) Each firm's short-run marginal cost curve
C) Each firm's long-run marginal cost curve
D) The industry's long-run supply curve
E) Each firm's short-run average cost curve
answer
D) The industry's long-run supply curve
question
The demand curve facing a perfectly competitive firm is
A) perfectly vertical
B) the same as the market demand curve
C) downward-sloping and more flat than the market demand curve
D) downward-sloping and less flat than the market demand curve
E) perfectly horizontal
A) perfectly vertical
B) the same as the market demand curve
C) downward-sloping and more flat than the market demand curve
D) downward-sloping and less flat than the market demand curve
E) perfectly horizontal
answer
E) perfectly horizontal
question
Stores such as Costco and Sam's Club require an annual membership before you can shop there.
A) tie-in sale
B) anti-competitive behavior
C) two part pricing
D) price gouging
A) tie-in sale
B) anti-competitive behavior
C) two part pricing
D) price gouging
answer
two part pricing
question
A consumer prefers market basket A to market basket B, and prefers market basket B to market basket C. Therefore A is preferred to C. The assumption that leads to this conclusion is
A) completeness
B) all goods are good
C) assumption of rationality
D) transitivity
E) diminishing MRS
A) completeness
B) all goods are good
C) assumption of rationality
D) transitivity
E) diminishing MRS
answer
D) transitivity
question
Which of the following is true concerning the income effect of a decrease in price?
A) It will lead to an increase in consumption only for an inferior good
B) It always will lead to an increase in consumption
C) It will lead to an increase in consumption only for a Giffen good.
D) It will lead to an increase in consumption only for a normal good
A) It will lead to an increase in consumption only for an inferior good
B) It always will lead to an increase in consumption
C) It will lead to an increase in consumption only for a Giffen good.
D) It will lead to an increase in consumption only for a normal good
answer
D) It will lead to an increase in consumption only for a normal good
question
Which of the following describes the Giffen good case? When the price of the good,
A) falls, the income effect is in the opposite direction to the substitution effect, and consumption falls.
B) falls, the income effect is in opposite direction to the substitution effect and consumption rises
C) falls, the income effect is in the same direction as the substitution effect and consumption rises
D) rises, the income effect is opposite to and greater than the substitution effect, and consumption falls.
E) Both A and D are correct
A) falls, the income effect is in the opposite direction to the substitution effect, and consumption falls.
B) falls, the income effect is in opposite direction to the substitution effect and consumption rises
C) falls, the income effect is in the same direction as the substitution effect and consumption rises
D) rises, the income effect is opposite to and greater than the substitution effect, and consumption falls.
E) Both A and D are correct
answer
A) falls, the income effect is in the opposite direction to the substitution effect and consumption falls
question
If two indifference curves were to intersect at a point, this would violate the assumption of
A) completeness
B) transitivity
C) Both A and B above
D) none of the above
A) completeness
B) transitivity
C) Both A and B above
D) none of the above
answer
B transitivity
question
The change in the quantity demanded of a good resulting from a change in relative price with the level of satisfaction held constant is called the ______ effect.
A) Giffen
B) income
C) real price
D) substitution
A) Giffen
B) income
C) real price
D) substitution
answer
D) Substitution
question
When the isocost line is tangent to the isoquant then
A) the firm is producing that level of output at minimum cost
B) the firm has achieved the right economies of scale
C) MPL=MPK
D) all of above
A) the firm is producing that level of output at minimum cost
B) the firm has achieved the right economies of scale
C) MPL=MPK
D) all of above
answer
A) The firm is producing that level of output at minimum cost
question
If a profit-maximizing firm finds that, at its current level of production, MR<MC it will
A) shut down
B) decrease output
C) increase output
D) operate at a loss
A) shut down
B) decrease output
C) increase output
D) operate at a loss
answer
B) decrease output
question
The price of good A goes up. As a result, the demand for good B shifts to the left. From this we can infer that
A) good B is used to produce good A
B) goods A and B are complements
C) goods A is used to produce good B
D) goods A and B are substitutes
E) none of the above
A) good B is used to produce good A
B) goods A and B are complements
C) goods A is used to produce good B
D) goods A and B are substitutes
E) none of the above
answer
B) goods A and B are complements
question
The above figure shows four different markets with changes in either the supply curve of the demand curve (where subscript 1 indicates the demand or supply curve before the change and subscript 2 indicates the demand or supply curve after the change). Which graph best illustrates the market for tea after severe weather destroys a large portion of the coffee crop?
answer
Graph A which has one supply curve and two demand curves. demand one is to the left of demand two
question
The total cost (TC) of producing computer software diskettes (Q) is given as TC=200+5Q. What is the variable cost?
A) 5+(200/Q)
B) 5Q
C) 5
D) 200
E) none of the above
A) 5+(200/Q)
B) 5Q
C) 5
D) 200
E) none of the above
answer
B) 5Q
question
If we take the production function and hold the level of output constant, allowing the amounts of capital and labor to vary, the curve that is traced out is called
A) the total product
B) the average product
C) the marginal product
D) an isoquant
E) none of the above
A) the total product
B) the average product
C) the marginal product
D) an isoquant
E) none of the above
answer
D) an isoquant
question
The curve in the diagram below is called
clothing (units per week) on y axis,
food (units per week) on x axis
3 linear lines coming from one point on the y axis to 3 different points
A) the demand curve
B) the Engel curve
C) the price-consumption curve
D) the income-consumption curve
E) none of the above
clothing (units per week) on y axis,
food (units per week) on x axis
3 linear lines coming from one point on the y axis to 3 different points
A) the demand curve
B) the Engel curve
C) the price-consumption curve
D) the income-consumption curve
E) none of the above
answer
C) the price-consumption curve
question
Scenario 10.8
Adriana is a monopolist producing green calculators. The average and marginal cost curves and average and marginal revenue curves for her product are given as follows:
AC=Q+(10000/Q)
MC=2Q
AR=30-(Q/2)
MR=30-Q
Refer to scenario 10.8. Suppose that a government regulatory agency sets Adriana's price where average revenue equals average cost. How much profit will Adriana make?
A) She will lose money and will go out of business
B) She will make positive profit
C) She will earn zero profit
D) none of the above
Adriana is a monopolist producing green calculators. The average and marginal cost curves and average and marginal revenue curves for her product are given as follows:
AC=Q+(10000/Q)
MC=2Q
AR=30-(Q/2)
MR=30-Q
Refer to scenario 10.8. Suppose that a government regulatory agency sets Adriana's price where average revenue equals average cost. How much profit will Adriana make?
A) She will lose money and will go out of business
B) She will make positive profit
C) She will earn zero profit
D) none of the above
answer
C) She will earn zero profit
question
Figure 6.2. K on y axis, L on x axis. one supply curve lines 3 curves to the right on it.
Refer to figure 6.2. The situation pictured is one of
A) constant returns to scale, because the line through the origin is linear
B) increasing returns to scale, because the isoquants are convex
c) decreasing returns to scale, because doubling inputs results in less than double the amount of output
d) decreasing returns to scale, because the isoquants are convex
e) increasing returns to scale, because doubling inputs results in more than double the amount of output
Refer to figure 6.2. The situation pictured is one of
A) constant returns to scale, because the line through the origin is linear
B) increasing returns to scale, because the isoquants are convex
c) decreasing returns to scale, because doubling inputs results in less than double the amount of output
d) decreasing returns to scale, because the isoquants are convex
e) increasing returns to scale, because doubling inputs results in more than double the amount of output
answer
E) increasing returns to scale, because doubling inputs results in more than double the amount of output
question
The formula for economic profit includes
A) only implicit costs
B) both implicit and explicit costs
C) only explicit costs
D) whatever management wishes to report the shareholders
A) only implicit costs
B) both implicit and explicit costs
C) only explicit costs
D) whatever management wishes to report the shareholders
answer
B) both implicit and explicit costs
question
Johnny has allocated $30 toward coffee and tea and feels that coffee and tea are perfect substitutes. Due to differences in caffeine levels, his MRS for coffee with tea equals 2. If coffee and tea sell for the same price, Johnny will
A) spend all $30 on tea
B) spend all $30 on coffee
C) spend $20 on coffee and $10 on tea
D) be indifferent between any bundle of coffee and tea costing $30
A) spend all $30 on tea
B) spend all $30 on coffee
C) spend $20 on coffee and $10 on tea
D) be indifferent between any bundle of coffee and tea costing $30
answer
B) spend all $30 on coffee
question
The above figure shows the market for a particular good. If the market is controlled by a perfect price discriminating monopoly, consumer surplus equals
A) A+B+C
B) zero
C) C
D) A
A) A+B+C
B) zero
C) C
D) A
answer
B) zero
question
When a firm charges each customer the maximum price that the customer is willing to pay, the firm
A) engages in a discrete pricing strategy
B) engages in second-degree price discrimination
C) engages in first-degree price discrimination
D) charges the average reservation price
A) engages in a discrete pricing strategy
B) engages in second-degree price discrimination
C) engages in first-degree price discrimination
D) charges the average reservation price
answer
C) engages in first degree price discrimination
question
Assume that beer is a normal good. If the price of beer rises, then the substitution effect results in the person buying ____ of the good and the income effect results in the person buying ____ of the good.
A) more, more
B) more, less
C) less, more
D) less, less
A) more, more
B) more, less
C) less, more
D) less, less
answer
D) less, less
question
Diminishing marginal rate of substitution can be seen when indifference curves
A) cross
B) are downward sloping
C) are convex
D) become flatter as we move down and to the right
A) cross
B) are downward sloping
C) are convex
D) become flatter as we move down and to the right
answer
D) become flatter as we move down and to the right
question
In the relevant price range a demand curve for a Giffen good would be
A) Upward sloping
B) downward sloping
C) vertical
d) horizontal
A) Upward sloping
B) downward sloping
C) vertical
d) horizontal
answer
A) upward sloping
question
A doctor charges two different prices for medical services and the price level depends on the patients' income such that wealthy patients are charged more than poorer ones. This pricing scheme represents a form of
A) third-degree price discrimination
B) pricing at each consumer's reservation price
C) second-degree price discrimination
D) first-degree price discrimination
A) third-degree price discrimination
B) pricing at each consumer's reservation price
C) second-degree price discrimination
D) first-degree price discrimination
answer
A) third-degree price discrimination
question
Labor Output
1 10
2 18
3 24
4 28
5 30 .
The above figure shows the short run production function for Albert's Pretzels. The law of diminishing marginals returns
A) first appears with the fifth worker
B) is refuted by this evidence
C) has not yet appeared for any of the levels of labor
D) appears with the second worker
1 10
2 18
3 24
4 28
5 30 .
The above figure shows the short run production function for Albert's Pretzels. The law of diminishing marginals returns
A) first appears with the fifth worker
B) is refuted by this evidence
C) has not yet appeared for any of the levels of labor
D) appears with the second worker
answer
d) appears with the second worker
question
Alvin's preferences for good x and good y are shown in the diagram below.
Figure 3.1
Good Y on y axis, Good X on X axis.
4 straight downward sloping lines parallel to each other.
Based on Figure 3.1, it can be inferred that:
A) Alvin regards good X and good Y as perfect substitutes
B) Alvin will never purchase any of good Y
C) Alvin regards good X and good Y as perfect complements
D) Alvin does not consider good X as "good"
E) none of the above
Figure 3.1
Good Y on y axis, Good X on X axis.
4 straight downward sloping lines parallel to each other.
Based on Figure 3.1, it can be inferred that:
A) Alvin regards good X and good Y as perfect substitutes
B) Alvin will never purchase any of good Y
C) Alvin regards good X and good Y as perfect complements
D) Alvin does not consider good X as "good"
E) none of the above
answer
A) Alvin regards good X and good Y as perfect substitutes
question
Marginal product crosses the horizontal axis ( is equal to zero) at the point where
A) total product is maximized
B) diminishing returns set in
C) average product is maximized
D) output per worker reaches a maximum
E) all of the above are true
A) total product is maximized
B) diminishing returns set in
C) average product is maximized
D) output per worker reaches a maximum
E) all of the above are true
answer
A) total product is maximized
question
Which of the following would shift the demand curve for new textbooks to the right?
A) An increase in the number of students attending college
B) A fall in the price of equivalent used textbooks
C) A fall in the price of paper used in publishing texts
D) A fall in the price of new textbooks
A) An increase in the number of students attending college
B) A fall in the price of equivalent used textbooks
C) A fall in the price of paper used in publishing texts
D) A fall in the price of new textbooks
answer
A) an increase in the number of students attending college
question
Scenario 10.9
Maui Macadamia inc. has a single price monopoly in the macadamia nut industry. The demand function, total cost function marginal revenue function, and marginal cost function for macadamia nuts are given as follows:
P=360-4Q
TC=2Q^2
MR=360-8Q
MC=4Q
Refer to Scenario 10.9 What is the profit maximizing level of output?
A) 30
B) 0
C) 60
D) 45
E) none of the above
Maui Macadamia inc. has a single price monopoly in the macadamia nut industry. The demand function, total cost function marginal revenue function, and marginal cost function for macadamia nuts are given as follows:
P=360-4Q
TC=2Q^2
MR=360-8Q
MC=4Q
Refer to Scenario 10.9 What is the profit maximizing level of output?
A) 30
B) 0
C) 60
D) 45
E) none of the above
answer
A) 30
question
Scenario 10.1. Barbara is a producer in a single monopoly industry. Her demand curve, total revenue curve, marginal revenue curve and total cost functions are given as follows:
Q=160-4P
TR=40Q-0.25Q^2
MR=40-0.5Q
TC=4Q
MC=4
Refer to Scenario 10.1. The price of her product will be:
A) 32
B) 42
C) 72
D) 4
E) 22
Q=160-4P
TR=40Q-0.25Q^2
MR=40-0.5Q
TC=4Q
MC=4
Refer to Scenario 10.1. The price of her product will be:
A) 32
B) 42
C) 72
D) 4
E) 22
answer
E) 22
question
Scenario 10.2
A single price monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q=200-2P
MR=100-Q
TC=5Q
MC=5
Refer to Senario 10.2. Suppose that a tax of $5 for each unit produced is imposed by state government. What is the profit maximizing level of output?
A) 95
B) 0
C)100
D) 90
E) none of the above
A single price monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q=200-2P
MR=100-Q
TC=5Q
MC=5
Refer to Senario 10.2. Suppose that a tax of $5 for each unit produced is imposed by state government. What is the profit maximizing level of output?
A) 95
B) 0
C)100
D) 90
E) none of the above
answer
D) 90
question
If two indifference curves were to intersect at a point, this would violate the assumption of
A) transitivity
B) completeness
C) both a and b above
D) none of the above
A) transitivity
B) completeness
C) both a and b above
D) none of the above
answer
A) transitivity
question
If a firm finds that, at its current level of production, MR>MC, it will
A)shut down
b) increase output
c) decrease output
d) earn greater profits than if MR=MC
A)shut down
b) increase output
c) decrease output
d) earn greater profits than if MR=MC
answer
B) increase output
question
The substitution effect can be measured holding ____ constant
A) utility
B) the price of one good
C) income
D) the price of all goods
A) utility
B) the price of one good
C) income
D) the price of all goods
answer
A) utility
question
The cross-price elasticity between a pair of complementary goods will be
A) zero
B) positive or zero depending upon the strength of the relationship
C) positive
D) negative
A) zero
B) positive or zero depending upon the strength of the relationship
C) positive
D) negative
answer
D) negative
question
Increasing returns to scale in production means
A) less than twice as much of all inputs are required to double output
B) more than twice as much of only one input is required to double output
C) isoquants must be linear
D) more than 10% as much of all inputs are required to increase output 10%
A) less than twice as much of all inputs are required to double output
B) more than twice as much of only one input is required to double output
C) isoquants must be linear
D) more than 10% as much of all inputs are required to increase output 10%
answer
A) less than twice as much of all inputs are required to double output
question
The market demand for wheat is Q=100-2P+1Pb+2Y. If the price of wheat, p, is $2, and the price of barley, pb is $3 and income, Y, is $1000, the income elasticity of wheat is
A) 2*(1000/2099)
B) 1/2 * (1000/2099)
C) 2
D) cannot be calculated from the information provided
A) 2*(1000/2099)
B) 1/2 * (1000/2099)
C) 2
D) cannot be calculated from the information provided
answer
A) 2*(1000/2099)
question
Which of the following is true concerning the income effect of a decrease in price?
A) It will lead to an increase in consumption only for a normal good.
B) It always will lead to an increase in consumption
C) It will lead to an increase in consumption only for an inferior good
D) It will lead to an increase in consumption only for a Giffen good.
A) It will lead to an increase in consumption only for a normal good.
B) It always will lead to an increase in consumption
C) It will lead to an increase in consumption only for an inferior good
D) It will lead to an increase in consumption only for a Giffen good.
answer
A) It will lead to an increase in consumption only for a normal good
question
An increase in the price of oil will
A) Shift the supply curve of oil to the left
B) shift the supply curve of oil to the right
C) leave the supply curve of oil unchanged
D) not enough information to answer the question
A) Shift the supply curve of oil to the left
B) shift the supply curve of oil to the right
C) leave the supply curve of oil unchanged
D) not enough information to answer the question
answer
C) leave the supply curve of oil unchanged
question
Joe's income is $500, the price of food (F) is $2 per unit and the price of shelter (S) is $100. Which of the following represents his budget constraint?
A)S=500+2F
B) 500=2F+100S
C)500=100F+2S
D) all of the above
A)S=500+2F
B) 500=2F+100S
C)500=100F+2S
D) all of the above
answer
B)500=2F+100S
question
A firm is charging a different price for each unit purchased by a consumer. This is called
answer
first-degree price discrimination
question
A doctor charges two different prices for medical services, and the price level depends on the patient's income such that wealthy patients are charged more than poorer ones. This pricing scheme represents a form of
answer
third-degree price discrimination
question
The cross price elasticity of demand for a good is the percentage change in the quantity demanded in response to a given percentage change in
answer
the price of another good
question
For a perfect first-degree price discriminator, marginal revenue is
answer
equal to the price paid for each unit of output
question
The supply curve for a competitive firm is
answer
its MC curve above the minimum point of the AVC curve
question
Suppose your utility function for food (F) and clothing (C) is u(F,C)=F+4C. If you reduce your clothing consumption by 2 units, how much do you have to increase your food consumption in order to maintain the same utility level?
answer
8 units
question
A firm employs 100 workers at a wage rate of $10 per hour, and 50 units of capital at a rate of $21 per hour. The marginal product of labor is 3 and the marginal product of capital is 5. The firm
answer
could reduce the cost of producing its current output level by employing more labor and less capital
question
When the price faced by a competitive firm was $5, the firm produced nothing in the short run. However, when the price rose to $10, the firm produced 100 tons of output. From this we can infer that
answer
the minimum value of the firm's average variable cost lies between $5 and $10
question
Assume that beer is a normal good. If the price of beer rises, then the substitution effect results in the person buying ___ of the good and the income effect results in the person buying ___ of the good.
answer
less, less
question
Scenario 10.7
The marginal revenue of green ink pads is given as follows: MR=2500-5Q
The marginal cost of green ink pads is 5Q
Refer to scenario 10.7. How many ink pads will be produced to maximize profits?
The marginal revenue of green ink pads is given as follows: MR=2500-5Q
The marginal cost of green ink pads is 5Q
Refer to scenario 10.7. How many ink pads will be produced to maximize profits?
answer
250
question
A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing
answer
third-degree price discrimination
question
At the profit maximizing level of output, what is the relationship between the total revenue (TR) and total cost (TC) curves?
answer
they must have the same slope
question
If average cost is decreasing
answer
marginal cost is less than average cost. MC<AC
question
Which of the following explains why a monopolist may have higher costs than an equivalent competitive firm?
A) the monopolist may incur costs in lobbying the government to grant its monopoly privilege
B) if the monopolist has its profits limited by regulation, it may choose to spend more money thus raising costs, instead of reducing its revenue
C) monopolists typically spend more on customer service than competitive firms
D) Both A and B are correct
E) Both A and C are correct
A) the monopolist may incur costs in lobbying the government to grant its monopoly privilege
B) if the monopolist has its profits limited by regulation, it may choose to spend more money thus raising costs, instead of reducing its revenue
C) monopolists typically spend more on customer service than competitive firms
D) Both A and B are correct
E) Both A and C are correct
answer
D) both a and b are correct
question
Suppose a market were currently at equilibrium. A rightward shift of the demand curve would cause
answer
an increase in both price and quantity
question
With capital on the vertical axis and labor on the horizontal axis, vertical isoquants imply that
answer
capital is not productive
question
A third-degree price discriminating monopolist can sell its output either in the local market or on an internet auction site (or both). After selling all of its output, the firm discovers that the marginal revenue earned in the local market was $20 while its marginal revenue on the internet auction site was $30. To maximize profits the firm should
answer
have sold less output in the local market and more on the internet auction site
question
Suppose the price of rice increases and you view rice as an inferior good. The substitution effect results in a ____ change in rice consumption and the income effect leads to a _____ change in rice consumption.
answer
negative, positive
question
As the manager of a firm, you calculate the marginal revenue is $152 and marginal cost is $200. You should
answer
reduce output until marginal revenue equals marginal cost
question
When the isocost line is tangent to the isoquant then
answer
the firm is producing that level of output at minimum cost
question
If x and y are perfect substitutes, which of the following assumptions about indifference curves is not satisfied?
answer
diminishing MRS
question
If a graph of a perfectly competitive firm shows that the MR=MC point occurs where MR is above AVC but below ATC
answer
the firm is earning negative profit, but will continue to produce where MR=MC in the short run
question
The price of a good is fixed at a certain level. At this price, Al's consumer surplus equals 8 and Ben's consumer surplus equals 15. By engaging in two-part pricing while retaining both customers, a monopolist could increase its profit by a maximum of
answer
16
question
Johnny has allocated $30 toward coffee and tea and feels that coffee and tea are perfect substitutes. Due to differences in caffeine levels, his MRS for coffee with tea equals 2. If coffee and tea sell for the same price, Johnny will
answer
spend all $30 on coffee
question
The above figure shows Bobby's indifference map for soda and juice. B1 indicates his original budget liine. B2 indicates his budget line resulting from a decrease in the price of soda. What change in quantity best represents his substitution effect?
answer
3
question
Assume that average product for six workers is fifteen. If the marginal product of the seventh workers is eighteen,
answer
average product is rising
question
Why do firms engage in price discrimination?
answer
to increase profits
question
When a firm charges each customer the maximum price that the customer is willing to pay, the firm
answer
engages in first-degree price discrimination
question
A firm's marginal cost can be thought of as the change in total cost if
answer
the firm produces one more unit of output
question
Suppose all individuals are identical, and their monthly demand for Internet access from a monopoly provider can be represented as p=5-(1/2)q where p is price in $ per hour and q is hours per month. The monopolist faces a constant marginal cost of $1. If the firm will charge a monthly access fee plus a per hour rate, the profit-maximizing monthly access fee will equal
answer
$16
question
Scenario 10.2
A single price monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q=200-2P
MR=100-Q
TC=5Q
MC=5
Refer to scenario 10.2. What is the profit maximizing price?
A single price monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product:
Q=200-2P
MR=100-Q
TC=5Q
MC=5
Refer to scenario 10.2. What is the profit maximizing price?
answer
$52.50
question
If a competitive firm is in short-run equilibrium, then
A) economic profits will be negative
B) economic profits will be positive
C) profits equal zero
D) all of the above are possible in the short-run
A) economic profits will be negative
B) economic profits will be positive
C) profits equal zero
D) all of the above are possible in the short-run
answer
D) all of the above are possible in the short run
question
When the demand curve is downward sloping, marginal revenue is
A) equal to average revenue
B) less than price
C) equal to price
D) more than price
A) equal to average revenue
B) less than price
C) equal to price
D) more than price
answer
less than price
question
Alvin's preferences for goods x and y are shown in the diagram below
good y on y axis, good x on x axis. graph shows 4 parallel downward sloping lines
Refer to figure 3.1. Which assumption concerning preferences do Alvin's indifference curves violate?
good y on y axis, good x on x axis. graph shows 4 parallel downward sloping lines
Refer to figure 3.1. Which assumption concerning preferences do Alvin's indifference curves violate?
answer
Diminishing marginal rates of substitution
question
The substitution effect of a price change for product X is the change in consumption of X associated with a change in
answer
the price of X, with the level of utility held constant
question
The marginal product of an input is
answer
the addition to total output due to the addition of the last unit of an input, holding all other inputs constant
question
Which of the following will NOT cause a rightward shift in the demand curve for beer?
A) a change in the price of beer
B) a health study indicating positive health benefits of moderate beer consumption
C) an increase in the price of French wine ( a substitute)
D) a decrease in the price of potato chips (a complement)
E) none of the above
A) a change in the price of beer
B) a health study indicating positive health benefits of moderate beer consumption
C) an increase in the price of French wine ( a substitute)
D) a decrease in the price of potato chips (a complement)
E) none of the above
answer
A) a change in the price of beer
question
Under perfect price discrimination, consumer surplus
answer
equals zero
question
A demand curve of the form: Q=a-bP, where a and b are positive real numbers;
A) is an upward sloping straight ine
B) has a constant price elasticity of demand
C) is a parabolic curve
D) is a downward sloping straight line
A) is an upward sloping straight ine
B) has a constant price elasticity of demand
C) is a parabolic curve
D) is a downward sloping straight line
answer
is a downward sloping straight line
question
Suppose you only consumer rice and bananas. Can both of these goods be Giffen goods in your consumption?
answer
No, at least one of the goods must be normal
question
If the demand curve for orange juice is expressed as Q=2000-500P, where Q is measured in gallons and p is measured in dollars, then at the price of $3, price elasticity of demand equals
answer
-3
question
The monopoly maximizes profit by setting
answer
marginal revenue equal to marginal cost. MR=MC
question
A firm sells an identical product to two groups of consumers, A and B. The firm has decided that third-degree price discrimination is feasible and wishes to set prices that maximizes profits. Which of the following best describes the price and output strategy that will maximize profits?
answer
MR A=MR B=MC
question
When the price of a good changes, the income effect can be found by comparing the equilibrium quantities purchased
answer
on the new budget line and a hypothetical budget line that is a shift back to the original indifference curve parallel to the new budget line.
question
graph with juice on y axis, snacks on x axis. 3 lines with indifference curves coming from 20 on y axis.
The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks. As the price of snacks rises, Bobby's utility
A) increases
B) decreases
C) stays the same
D) might change, but there is not enough information to determine
The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks. As the price of snacks rises, Bobby's utility
A) increases
B) decreases
C) stays the same
D) might change, but there is not enough information to determine
answer
B) decreases
question
To find the profit maximizing level of output, a firm finds the output level where
A) price equals marginal revenue
B) marginal revenue equals average total cost
C) price equals average revenue
D) all of the above
E) none of the above
A) price equals marginal revenue
B) marginal revenue equals average total cost
C) price equals average revenue
D) all of the above
E) none of the above
answer
E) none of the above
question
Marginal revenue, graphically, is
A) the slope of a line from the origin to a point on the total revenue curve
B) the slope of the total revenue curve at a given point
C) the horizontal intercept of a line tangent to the total revenue curve at a given point
D) the slope of a line from the origin to the end of the total revenue curve
E) the vertical intercept of a line tangent to the total revenue curve at a given point
A) the slope of a line from the origin to a point on the total revenue curve
B) the slope of the total revenue curve at a given point
C) the horizontal intercept of a line tangent to the total revenue curve at a given point
D) the slope of a line from the origin to the end of the total revenue curve
E) the vertical intercept of a line tangent to the total revenue curve at a given point
answer
B) the slope of the total revenue curve at a given point
question
Scenario 10.9
Maui Macadamia Inc. has a single price monopoly in the macadamia nut industry. The demand function, total cost function, marginal revenue function, and marginal cost function for macadamia nuts are given as follows:
P=360-4Q
TC=2Q^2
MR=360-8Q
MC=4Q
Refer to scenario 10.9. At the profit maximizing level of output, what is the level of consumer surplus?
A) 4800
B) 0
C) 3600
D) 2700
E) 1800
Maui Macadamia Inc. has a single price monopoly in the macadamia nut industry. The demand function, total cost function, marginal revenue function, and marginal cost function for macadamia nuts are given as follows:
P=360-4Q
TC=2Q^2
MR=360-8Q
MC=4Q
Refer to scenario 10.9. At the profit maximizing level of output, what is the level of consumer surplus?
A) 4800
B) 0
C) 3600
D) 2700
E) 1800
answer
E) 1800
question
The Average Product of Labor is
answer
the ratio of output to the number of units of labor used to produce that output
question
To simplify our consumption models, suppose U.S. consumers only purchase food and all other goods where food is plotted along the horizontal axis of the indifference map. If the U.S. Congress passes an economic stimulus package that pays $300 to each person, how does this affect the budget line for each consumer?
answer
A) parallel outward (rightward) shift
question
Suppose that once a well is dug, water flows out of it continuously without any additional effort. Customers collect their water and pay a per gallon fee when they leave the site of the well. In the short run, the competitive firm in this market
A) will shut down
B) has no fixed costs
C) has no variable costs
A) will shut down
B) has no fixed costs
C) has no variable costs
answer
C) has no variable costs
question
If the inverse demand curve a monopoly faces is p=100-2Q, then profit maximization
A) is achieved when 25 units are produced
B) is achieved only by shutting down in the short run
C) is achieved by setting price equal to 25
D) cannot be determined solely from the information provided
A) is achieved when 25 units are produced
B) is achieved only by shutting down in the short run
C) is achieved by setting price equal to 25
D) cannot be determined solely from the information provided
answer
cannot be determined solely from the information provided
question
If capital is measured on the vertical axis and labor is measured on the horizontal axis, the negative of the slope of an isoquant can be interpreted as the
A) marginal product of capital
B) marginal product of labor
C) rate at which the firm can replace capital with labor without changing the output rate
D) average rate at which the firm can replace capital with labor without changing its costs
A) marginal product of capital
B) marginal product of labor
C) rate at which the firm can replace capital with labor without changing the output rate
D) average rate at which the firm can replace capital with labor without changing its costs
answer
rate at which the firm can replace capital with labor without changing the output rate
question
Refer to Figure 8.2. As the competitive industry, not just the firm in question, moves toward long-run equilibrium, the firm will be forced to operate at what level of output?
answer
A) 50
question
An increase in the price of a good causes
A) a parallel rightward shift of the budget line
B) a rightward shift of the demand curve for that good
C) an increase in the consumption of that good
D) a change in the slope of the budget line
A) a parallel rightward shift of the budget line
B) a rightward shift of the demand curve for that good
C) an increase in the consumption of that good
D) a change in the slope of the budget line
answer
D) a change in the slope of the budget line
question
If current output is LESS than the profit-maximizing output, which must be true?
A) marginal revenue is less than marginal cost
B) average revenue is greater than average cost
C) marginal revenue is greater than marginal cost
D) total revenue is less than total cost
E) average revenue is less than average cost
A) marginal revenue is less than marginal cost
B) average revenue is greater than average cost
C) marginal revenue is greater than marginal cost
D) total revenue is less than total cost
E) average revenue is less than average cost
answer
C) marginal revenue is greater than marginal cost MR>MC
question
The curve which shows combinations of inputs that yield the same output is called a(n)
A) isoquant curve
B) isocost curve
C) production function
D) production possibilities frontier
A) isoquant curve
B) isocost curve
C) production function
D) production possibilities frontier
answer
A) isoquant curve
question
If a market is controlled by a perfect price-discriminating monopoly, then
A) a larger deadweight loss is generated compared with single price monopoly
B) consumer surplus is the same as under perfect competition
C) output is less than that of single-price monopoly
D) there is no consumer surplus
A) a larger deadweight loss is generated compared with single price monopoly
B) consumer surplus is the same as under perfect competition
C) output is less than that of single-price monopoly
D) there is no consumer surplus
answer
D) there is no consumer surplus
question
The cross price elasticity of demand for a good is the percentage change in the quantity demanded in response to a given percentage change in
A) the price of another good
B) the price of that good
C) income
D) the quantity demanded of another good
A) the price of another good
B) the price of that good
C) income
D) the quantity demanded of another good
answer
A) the price of another good
question
The above figure shows a graph of the market for pizzas in a large town. No pizzas will be supplied unless the price is above
demand line
14 on y axis (p)
140 on x axis (Q)
supply
5 on y axis (P)
intersection at (60, 8)
demand line
14 on y axis (p)
140 on x axis (Q)
supply
5 on y axis (P)
intersection at (60, 8)
answer
$5
question
Producer Surplus equation
answer
second degree price discrimination:
PS=TR-VC
TR=PQ
VC=MC*total units sometimes
or just derivative of cost function
PS=PQ+PQ-(MC*total units)
perfect price discrimination:
if given cost equation and inverse demand func,
find MC of cost func. set MC=demand func and solve for Q*. plug 0 in for Q in inverse demand func to find P.
plug 0 in for Q in MC func to find MC.
PS=Q*(P-MC)(0.5)
PS=TR-VC
TR=PQ
VC=MC*total units sometimes
or just derivative of cost function
PS=PQ+PQ-(MC*total units)
perfect price discrimination:
if given cost equation and inverse demand func,
find MC of cost func. set MC=demand func and solve for Q*. plug 0 in for Q in inverse demand func to find P.
plug 0 in for Q in MC func to find MC.
PS=Q*(P-MC)(0.5)
question
Which of the following will cause the price of beer to rise?
A shift to the right in the demand curve for beer
A shift to the left in the supply curve of beer
both A and B
none of the above
A shift to the right in the demand curve for beer
A shift to the left in the supply curve of beer
both A and B
none of the above
answer
C. both A and B
question
Refer to the indifference curve in figure 3.3. Which of the following statements is correct?
(graph has vertical lines)
good b on y axis
good a on x axis
arrow to the right saying increasing utility
(graph has vertical lines)
good b on y axis
good a on x axis
arrow to the right saying increasing utility
answer
this individual receives no satisfaction from good B
question
If the quantity of good A (QA) is plotted along the horizontal axis, the quantity of good B (QB) is plotted along the vertical axis, the price of good A is PA, the price of good B is PB and the consumer's income is I, then the slope of the consumer's budget constraint is
answer
-PA/PB
question
In the short run, a perfectly competitive profit maximizing firm that has not shut down
A) is operating at the minimum of its AVC curve
B) can be at any point on its AVC curve
C) is operating on the upward-sloping portion of its AVC curve
D) is not operating on its AVC curve
E) is operating on the downward-sloping portion of its AVC curve
A) is operating at the minimum of its AVC curve
B) can be at any point on its AVC curve
C) is operating on the upward-sloping portion of its AVC curve
D) is not operating on its AVC curve
E) is operating on the downward-sloping portion of its AVC curve
answer
C) is operating on the upward-sloping portion of its AVC curve
question
A few sellers may behave as if they operate in a perfectly competitive market if the market demand is
answer
very elastic
question
Scenario 4.4.
The demand curve for the new computer game; Rock and Roll Trivia, is given as follows
Q=200-5P-0.1Pc-0.5Pd 0.2A-1
where
P is the price of the game
Pc is the price of a computer
Pd is the price of a diskette
A is the level of advertising
I is the level of income
Suppose P=10, Pc=100, Pd=2, A=5 and I=50. What is the cross price elasticity of Rock and Roll Trivia progams and diskettes?
The demand curve for the new computer game; Rock and Roll Trivia, is given as follows
Q=200-5P-0.1Pc-0.5Pd 0.2A-1
where
P is the price of the game
Pc is the price of a computer
Pd is the price of a diskette
A is the level of advertising
I is the level of income
Suppose P=10, Pc=100, Pd=2, A=5 and I=50. What is the cross price elasticity of Rock and Roll Trivia progams and diskettes?
answer
-1/90
question
Which of thefollowing inputs are variable in the long run?
A) labor
B) capital and equipment
C) plant size
D) all of these
A) labor
B) capital and equipment
C) plant size
D) all of these
answer
D) all of these
question
By 2020, automobile market analysts expect that the demand for electric autos will increase as buyers become more familiar with the technology. HOwever, the costs of producing electric autos may increase because of higher costs for inputs (eg rare earth metals) or they may decrease as the manufacturers learn better assembly methods (ie learning by doing). What is the expected impact of these changes on the equilibrium price and quantity for electric autos?
answer
D) we cannot from any unambiguous expectations for either price or quantity
question
Consider the following three market baskets
Food Clothing
A 15 18
B 13 19
C 14 17
If baskets B and C are on the same indifference curve, and if preferences satisfy all four of the basic assumptions, then
Food Clothing
A 15 18
B 13 19
C 14 17
If baskets B and C are on the same indifference curve, and if preferences satisfy all four of the basic assumptions, then
answer
A is preferred to B,
A is preferred to C
Both A and B answer choices are correct
A is preferred to C
Both A and B answer choices are correct
question
Because of the relationship between perf competitive firm's demand cruve and its marginal revenue curve, the profit maximization condition for the firm can be written as
answer
P=MC
question
Rather than charging a single price to all Customers, a firm charges a higher price to men and a lower price to women. By engaging in this practice, the firm
answer
is attempting to convert Consumer Surplus into Producer Surplus
question
As a group, US consumers have no inocme response for their consumption of ice cream so that the income lasticity of demand for ice cream equals zero. Does this mean that the change in ice cream consumption that results from a price increase is entirely composed of the substitution effect?
answer
Yes, the income effect associated with a price change is zero
question
The authors explain that a firm earning a zero economic profit in the long run has earned a competitive return on their investment. What do they mean by "competitive" return in this context?
answer
The firm's return is at least as large as it could have earned in another investment
question
Which of the following is true?
A) in the short run, predatory pricing involves pricing the product below average variable cost
B) american courts frequently find companies guilty of predatory pricing
C) predatory pricing is a reliable method of monopolizing a market
D) none of the above is true
A) in the short run, predatory pricing involves pricing the product below average variable cost
B) american courts frequently find companies guilty of predatory pricing
C) predatory pricing is a reliable method of monopolizing a market
D) none of the above is true
answer
A
question
Use the folowing two statements in answering this questions.
I. FOr all Giffen goods, the substitution effect is larger than the income effect
II. For all inferior goods, the substitution effect is larger than the income effect
I. FOr all Giffen goods, the substitution effect is larger than the income effect
II. For all inferior goods, the substitution effect is larger than the income effect
answer
I and II are false
question
Pencils sell for 10 cents and pens sell for 50 cents. Suppose Jack, whose preferences satisfy all of the basic assumptions, buys 5 pens and one pencil each semester. With this consumption bundle, his MRS of pencils for pens is 3. Which of the following is true?
answer
Jack could increase his utility by buying fewer pencils and fewer pens.
Jack could increase his utility by buying more pencils and more pens.
Jack could increase his utility by buying more pencils and more pens.
question
Scenario 10.9
Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The inverse demand func and total cost func for macadamia nuts are given as follows
P=360-4Q
C=2Q^2
Refer to scenario 10.9. At the profit maximizing level of output, what is the level of producer surplus?
Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The inverse demand func and total cost func for macadamia nuts are given as follows
P=360-4Q
C=2Q^2
Refer to scenario 10.9. At the profit maximizing level of output, what is the level of producer surplus?
answer
5400
question
Scenario 10.9
Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The inverse demand func and total cost func for macadamia nuts are given as follows
P=360-4Q
C=2Q^2
Refer to Scenario 10.9. What is the profit maximizing level of output?
Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The inverse demand func and total cost func for macadamia nuts are given as follows
P=360-4Q
C=2Q^2
Refer to Scenario 10.9. What is the profit maximizing level of output?
answer
30
question
Suppose capital and labor are perfect one-for-one substitutes in a long-run production process (ie one unit of labor can always be substituted for one unit of capital with no change in production, quantity and vice versa). If labor costs $15 per hour and the rental rate of capital is $20 per hour, what can we say about the profit maximizing choice of labor and capital inputs?
answer
We will only use labor in the production process
question
Suppose a firm has a monopoly and faces a downward sloping demand curve for its product, its marginal cost curve and is upward sloping. If the firm reduces its price, then:
answer
consumer surplus increases, producer surplus may increase or decrease
question
Assume that food is measured on the horizontal axis and cloting on the vertical axis. If the price of food falls relative to that of clothing, the budget line will
answer
become flatter
question
Consider the demand curve of the form Q=a-bP. If a is a positive real number and b=0, then demand is
answer
completely inelastic
question
WHen labor usage is at 12 units, ouput is 36 units. From this, we may infer that
answer
the average product of labor is 3.
question
In the short un, a perfectly competitive firm earning positive economic profit is
answer
on the upward-sloping portion of its ATC
question
Under perfect price discrimination, consumer surplus
answer
equals zero
question
Monica consumes only goods A and B. Supose that her marginal utility from consuming good A is equal to 1/Qa, and her marginal utility from consuming good B is 1/Qb. If the price of A is $0.50 and the price of B is $4.00, and Monica's income is $120.00. How much of good A will she purchase?
answer
120
question
Suppose biochemists discover an enzyme that can double the amount of ethanol that may be derived from a given amount of biomass. Based on this technological development, we expect the
answer
supply curve for ethanol to shift rightward
question
An L shaped iosquant
answer
would indicate that capital and labor cannot be substituted for each other in production
question
Which of the following will NOT cause a shift in the supply of gasoline?
answer
a decrease in theh price of gasoline
question
If one firm buys up all of its competitors, which of the following might still prevent it from rising its privce above the competition level?
answer
Raising the price might encourage new firms to enter the industry and compete
question
In an increasing cost industry, expansion of output
answer
causes input prices to rise as demand for them grows
question
A firm's producer surplus equals its economic profit when
answer
fixed costs are zero
question
Use the following statements to answer this questions
I. Markets may be highly competititve evne if there are onnly a few sellers
II. There is no ixed number of firms that determines whether a market is competitive
I. Markets may be highly competititve evne if there are onnly a few sellers
II. There is no ixed number of firms that determines whether a market is competitive
answer
I and II are true
question
Scenario 10.3
The demand curve and marginal revenue curve for red herrings are given as follows:
Q=250-5P
MR=50-0.4Q
Compared to a competitive red herring industry, the monopolistic red herring industry
The demand curve and marginal revenue curve for red herrings are given as follows:
Q=250-5P
MR=50-0.4Q
Compared to a competitive red herring industry, the monopolistic red herring industry
answer
produces less output at a higher price
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
