ECON 303 Exam #3 (Ch. 8,9,10) - Assignment Essays

question

Chapter 8

Figure 8.2
Refer to Figure 8.2. If the firm expects $80 to be the long-run price, how many units of output will it plan to produce in the long run?

answer

C.
64

question

Ronny's Pizza House is a profit maximizing firm in a perfectly competitive local restaurant market, and their optimal output is 80 pizzas per day. The local government imposes a new tax of $250 per year on all restaurants that operate in the city. How does this affect Ronny's profit maximizing decisions?

answer

D.
Ronny's decision depends on the circumstances -- if their profits are larger than $250 per year, then the tax does not impact output; otherwise, Ronny's Pizza House will shut down.

question

A few sellers may behave as if they operate in a perfectly competitive market if the market demand is:

answer

C.
very elastic

question

If any of the assumptions of perfect competition are violated,

answer

D.
there may still be enough competition in the industry to make the model of perfect competition usable.

question

An industry has 1000 competitive firms, each producing 50 tons of output. At the current market price of $10, half of the firms have a short-run supply curve with a slope of 1; the other half each have a short-run supply curve with slope 2. The short-run elasticity of market supply is

answer

A.
3/10

question

Price-takers are individuals in a market who:

answer

have no ability to affect the price of a good in a market.

question

Revenue is equal to

answer

E.
price times quantity.

question

Suppose a plant manager ignores some implicit marginal costs of production so that the perceived MC curve is below the actual MC curve. What is the likely outcome from this error?

answer

C.
Firm produces more than optimal quantity and earns lower profits

question

Refer to Figure 8.2. As the competitive industry, not just the firm in question, moves toward long-run equilibrium, how much profit will the firm earn?

answer

B.
$0

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

The supply curve for a competitive firm is

answer

D.
its MC curve above the minimum point of the AVC curve

question

If current output is less than the profit-maximizing output, then the next unit produced

answer

C.
will increase revenue more than it increases cost.

question

Producer surplus in a perfectly competitive industry is

answer

C.
the difference between revenue and variable cost.

question

A firm never operates

answer

D.
on the downward-sloping portion of its AVC curve.

question

A firm's producer surplus equals its economic profit when

answer

B.
fixed costs are zero.

question

Chapter 9

In economics, 'social welfare' (W) refers to

answer

None of the above.

question

In economics, welfare analysis is useful to

answer

determine who gains and who loses in a particular policy option.

question

Sarah's demand curve for shoes has the same slope as Pete's; however, it lies to the right of Pete's. An increase in the price of shoes will cause

answer

Sarah to incur a greater loss of consumer surplus than Pete will.

question

Producer surplus equals

answer

All of the above.

question

The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the tax revenue is

answer

$2 ∗ Q 1

question

In the long-run equilibrium in perfect competition

answer

producer surplus is greater than consumer surplus.

question

Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Jones' producer surplus is

answer

$5,000.

question

In the long-run equilibrium in perfect competition, consumer surplus is

answer

positive

question

The welfare loss from an import quota is greater than that of an equivalent tariff because

answer

tariff revenues can be used to society's benefit.

question

If in a market the last unit of output was sold at a price higher than marginal cost

answer

social welfare is not maximized.

question

If lower-income households spend a greater share of their income on cigarettes than do higher-income households, then a tax that raises the price of cigarettes will

answer

cause consumer surplus to decline among smokers, but the relative impact cannot be determined from the given information.

question

The above figure shows supply and demand curves for apartment units in a large city. If the city government passes a law that establishes $350 per month as the legal maximum rent, the consumer's net gain in surplus equals

answer

c - f.

question

Producer surplus is equal to

answer

the difference between price and marginal cost for all units sold.

question

In general, the deadweight loss associated with an import tariff or quota becomes relatively larger when:

answer

supply and demand are elastic.

question

The above figure shows supply and demand curves for apartment units in a large city. If the city government passes a law that establishes $350 per month as the legal maximum rent, deadweight loss occurs because

answer

consumers place a greater value on the last apartment unit than the cost to supply it.

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?

answer

D.
$4512.50

question

Roaring Lion Studios can produce DVDs at a constant marginal cost of $5 per disk, and the studio has just releasing the DVD for its latest hit film, Ernest Goes to the Hamptons. The retail price of the DVD is $25, and the elasticity of demand for this film is - 2. Has the studio selected the profit- maximizing retail price for this DVD?

answer

No, the retail price is too high

question

Scenario 10.9: Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows: MR = 360 - 8Q MC = 4QRefer to Scenario 10.9. What level of output maximizes the sum of consumer surplus and producer surplus?

answer

question

BioMed Pharmaceutical has held a patent on an important heart medication called Heartex, but the patent will expire in the coming year. After the patent expires, other firms can legally sell the same medication as a generic drug product. What will happens to the demand for Heartex and to the Lerner index for this product as the generic drugs enter the market?

answer

Demand becomes more elastic, Lerner index declines

question

Which factors determine the firm's elasticity of demand?

answer

Number of firms and the nature of interaction among firms

question

Scenario 10.9: Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows: P = 360 - Q and MC = 4QRefer to Scenario 10.9. What is the profit maximizing level of output?

answer

question

With respect to monopolies, deadweight loss refers to the

answer

none of the above

question

Use the following statements to answer this question:I. Cartel activities like price fixing and other forms of collusion are never allowed under U.S. antitrust laws.II. The Sherman Act applies to all foreign firms that operate in U.S. markets.

answer

I and II are false.

question

The monopolist that maximizes profit

answer

None of the above.

question

Which of the following is NOT associated with a high degree of monopoly power?

answer

A relatively elastic demand curve for the firm

question

You work as a marketing analyst for a pharmaceutical firm, and you are trying to gather information about the marginal cost of production for a competing firm. You know that they have a patent on a popular medication that sells for $20 per dose, and you believe the elasticity of demand for this product is roughly - 4. Assuming the competing firm acts as a profit- maximizing monopolist, what is the competing firm's approximate marginal cost of production?

answer

$15 per dose

question

Scenario 10.9: Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows: P = 360 - Q and MC = 4QRefer to Scenario 10.9. At the profit maximizing level of output, what is the deadweight loss?

answer

360

question

The marginal cost of a monopolist is constant and is $10. The marginal revenue curve is given as follows:MR = 100 - QThe profit maximizing price is

answer

$45.

question

Scenario 10.7:The marginal revenue of green ink pads is given as follows: MR = 2500 - Q The marginal cost of green ink pads is 5Q.Refer to Scenario 10.7. How many ink pads will be produced to maximize revenue?

answer

2500

question

Zinc Communications developed a new type of cellular telephone that has a three-dimensional (3-D) screen. The company holds a patent on this technology, so they are the only seller of the 3-D phone when it is introduced. Over time, Zinc starts to becomes the hottest phone on the market as consumers develop a preference for this phone over others. What happens to the demand for 3-D phones facing Zinc and to the profit-maximizing price for the 3-D phone as these similar products enter the market?

answer

Demand becomes less elastic, price increases

1 of 45

question

Chapter 8

Figure 8.2
Refer to Figure 8.2. If the firm expects $80 to be the long-run price, how many units of output will it plan to produce in the long run?

answer

C.
64

question

answer

D.
Ronny's decision depends on the circumstances -- if their profits are larger than $250 per year, then the tax does not impact output; otherwise, Ronny's Pizza House will shut down.

question

A few sellers may behave as if they operate in a perfectly competitive market if the market demand is:

answer

C.
very elastic

question

If any of the assumptions of perfect competition are violated,

answer

D.
there may still be enough competition in the industry to make the model of perfect competition usable.

question

answer

A.
3/10

question

Price-takers are individuals in a market who:

answer

have no ability to affect the price of a good in a market.

question

Revenue is equal to

answer

E.
price times quantity.

question

Suppose a plant manager ignores some implicit marginal costs of production so that the perceived MC curve is below the actual MC curve. What is the likely outcome from this error?

answer

C.
Firm produces more than optimal quantity and earns lower profits

question

Refer to Figure 8.2. As the competitive industry, not just the firm in question, moves toward long-run equilibrium, how much profit will the firm earn?

answer

B.
$0

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

The supply curve for a competitive firm is

answer

D.
its MC curve above the minimum point of the AVC curve

question

If current output is less than the profit-maximizing output, then the next unit produced

answer

C.
will increase revenue more than it increases cost.

question

Producer surplus in a perfectly competitive industry is

answer

C.
the difference between revenue and variable cost.

question

A firm never operates

answer

D.
on the downward-sloping portion of its AVC curve.

question

A firm's producer surplus equals its economic profit when

answer

B.
fixed costs are zero.

question

Chapter 9

In economics, 'social welfare' (W) refers to

answer

None of the above.

question

In economics, welfare analysis is useful to

answer

determine who gains and who loses in a particular policy option.

question

Sarah's demand curve for shoes has the same slope as Pete's; however, it lies to the right of Pete's. An increase in the price of shoes will cause

answer

Sarah to incur a greater loss of consumer surplus than Pete will.

question

Producer surplus equals

answer

All of the above.

question

The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the tax revenue is

answer

$2 ∗ Q 1

question

In the long-run equilibrium in perfect competition

answer

producer surplus is greater than consumer surplus.

question

answer

$5,000.

question

In the long-run equilibrium in perfect competition, consumer surplus is

answer

positive

question

The welfare loss from an import quota is greater than that of an equivalent tariff because

answer

tariff revenues can be used to society's benefit.

question

If in a market the last unit of output was sold at a price higher than marginal cost

answer

social welfare is not maximized.

question

If lower-income households spend a greater share of their income on cigarettes than do higher-income households, then a tax that raises the price of cigarettes will

answer

cause consumer surplus to decline among smokers, but the relative impact cannot be determined from the given information.

question

answer

c - f.

question

Producer surplus is equal to

answer

the difference between price and marginal cost for all units sold.

question

In general, the deadweight loss associated with an import tariff or quota becomes relatively larger when:

answer

supply and demand are elastic.

question

answer

consumers place a greater value on the last apartment unit than the cost to supply it.

question

answer

D.
$4512.50

question

answer

No, the retail price is too high

question

answer

question

answer

Demand becomes more elastic, Lerner index declines

question

Which factors determine the firm's elasticity of demand?

answer

Number of firms and the nature of interaction among firms

question

Scenario 10.9: Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows: P = 360 - Q and MC = 4QRefer to Scenario 10.9. What is the profit maximizing level of output?

answer

question

With respect to monopolies, deadweight loss refers to the

answer

none of the above

question

answer

I and II are false.

question

The monopolist that maximizes profit

answer

None of the above.

question

Which of the following is NOT associated with a high degree of monopoly power?

answer

A relatively elastic demand curve for the firm

question

answer

$15 per dose

question

Scenario 10.9: Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows: P = 360 - Q and MC = 4QRefer to Scenario 10.9. At the profit maximizing level of output, what is the deadweight loss?

answer

360

question

The marginal cost of a monopolist is constant and is $10. The marginal revenue curve is given as follows:MR = 100 - QThe profit maximizing price is

answer

$45.

question

answer

2500

question

answer

Demand becomes less elastic, price increases

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