question
When a firm is experiencing economies of scale
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long-run average total cost is decreasing.
question
Use the following graph for a purely competitive firm operating at a loss in the short run to answer the next question.
Which area in the graph represents the amount of economic loss for the firm?
Which area in the graph represents the amount of economic loss for the firm?
answer
NOT 0beg. NOT. abef.
question
A monopolist can sell 20 toys per day for $8 each. To sell 21 toys per day, the price must be cut to $7. The marginal revenue of the 21st toy is
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-$13.
question
Fixed costs are those costs that are
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unchanging through time.
question
Natural monopolies result from
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extensive economies of scale in production.
question
Monopolistic competition is characterized by firms
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producing differentiated products.
question
A cartel is
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a formal agreement among firms to collude.
question
If the price level rises by 4% in a year and nominal wages increase by 2%, then real wages will
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decrease by 2%.
question
A union might increase the demand for the labor services of its members by
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decreasing the prices of complementary inputs.
question
Which of the following is an explanation for the high labor-productivity in the United States?
answer
plentiful capital resources
question
Wayne's Jacket Shop sells Wayne's jackets for $20 each. Wayne finds that his total revenues change according to the number of workers he hires, as shown in the table below.
Workers
Total Revenue
1 $1,000
2 1,400
3 2,000
4 1,600
5 800
What is the marginal revenue product of the fifth worker?
Workers
Total Revenue
1 $1,000
2 1,400
3 2,000
4 1,600
5 800
What is the marginal revenue product of the fifth worker?
answer
-$800
question
If you know that with 8 units of output average fixed cost is $12.50 and average variable cost is $81.25, then total cost at this output level is
answer
$750.
question
Harry owns a barber shop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. Harry should
answer
hire the second barber because he will add $28 to profits.
question
In many large U.S. cities, taxicab companies operate as near monopolies because of
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licenses.
question
Use the following graph to answer the next question.
Given the diagram above, which level of output should the entrepreneur choose?
Given the diagram above, which level of output should the entrepreneur choose?
answer
X3 since any increase in output will reduce profits
question
Which would be an implicit cost for a firm? The cost
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of wages foregone by the owner of the firm.
question
Marginal revenue product measures the
answer
amount by which the extra production of one more worker increases a firm's total revenue.
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If one worker can pick $30 worth of grapes and two workers together can pick $50 worth of grapes, the
answer
marginal revenue product of the second worker is $20.
question
In a purely competitive industry, each firm
answer
can easily enter or exit the industry.
question
Which of the following is a barrier to entry?
answer
patents and licenses
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The demand for airline pilots results from the demand for air travel. This fact is an example of
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the derived demand for labor.
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If average variable cost is $74 and total fixed cost is $100 at 5 units of output, then average total cost at this output level is
answer
$94
question
Harry owns a barber shop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per 8-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. The MRP of the second barber is
answer
$108.
question
Use the following graph for a profit-maximizing monopolist to answer the next question.
At equilibrium, the firm will be earning
At equilibrium, the firm will be earning
answer
positive profits.
question
According to the law of diminishing marginal returns
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marginall product generated by additional units of an input will eventually diminish.
question
Use the following graphs to answer the next question.
The long-run equilibrium for a monopolistically competitive firm is represented by graph
The long-run equilibrium for a monopolistically competitive firm is represented by graph
answer
NOT C. NOT A.
question
A firm should continue to operate even at a loss in the short run if
answer
it can cover its variable costs and some of its fixed costs.
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Collusion refers to a situation where rival firms decide to
answer
agree with each other to set prices and output.
question
Use the following table to answer the question below.
Output
Total Cost
0
$10
1 20
2 28
3 38
4 53
5 73
6 98
The marginal cost of producing the sixth unit of output is
Output
Total Cost
0
$10
1 20
2 28
3 38
4 53
5 73
6 98
The marginal cost of producing the sixth unit of output is
answer
$25.
question
We say that the demand for labor is a derived demand because
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we demand the product that labor helps produce rather than labor service per se.
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Cash expenditures a firm makes to pay for resources are called
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explicit costs.
question
What is the meaning of the phrase "dilemma of regulation"?
answer
The socially optimal price achieves allocative efficiency but may produce economic losses; the fair return price yields a normal profit but may not be allocatively efficient.
question
Answer the next question based on the following payoff matrix for a duopoly in which the numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy.
If both firms collude to maximize joint profits, the total profits for the two firms will be
If both firms collude to maximize joint profits, the total profits for the two firms will be
answer
$1,250,000.
question
T-Shirt Enterprises is selling in a purely competitive market. It is producing 3,000 units, selling them for $2 each. At this level of output, the average total cost is 2.50 and the average variable cost is $2.20. Based on these data, the firm should
answer
shut down in the short run.
question
Use the following graph to answer the next question.
A short-run equilibrium that would produce losses for a monopolistically competitive firm would be represented by graph
A short-run equilibrium that would produce losses for a monopolistically competitive firm would be represented by graph
answer
D.
question
Which characteristic would best be associated with pure competition?
answer
price takers
question
Marginal resource cost is
answer
the increase in total resource cost associated with the hire of one more unit of the resource.
question
Which of the following statements is true of price discrimination?
answer
Successful price discrimination will provide the firm with more profit than if it did not discriminate.
question
Use the following graph to answer the next question.
To maximize profits, the firm should produce the quantity
To maximize profits, the firm should produce the quantity
answer
0C.
question
Use the table below to answer the next question for a purely competitive firm.
Output Total revenue Total cost
0 $0 $50
1 40 74
2 80 94
3 120 117
4 160 142
5 200 172
The marginal revenue from the third unit of output is
Output Total revenue Total cost
0 $0 $50
1 40 74
2 80 94
3 120 117
4 160 142
5 200 172
The marginal revenue from the third unit of output is
answer
$40.
question
Use the following table to answer the next question.
Output
Average Fixed Cost
Average Variable Cost
Average Total Cost
Marginal Cost
1 $300 $100 $400 $100
2 150 75 225 50
3 100 70 170 60
4 75 73 148 80
5 60 80 140 110
6 50 90 140 140
7 43 103 146 180
8 38 119 156 230
9 33 138 171 290
10 30 160 190 360
The table shows cost data for a firm that is selling in a purely competitive market. If the market price for the firm's product is $80, the firm will
Output
Average Fixed Cost
Average Variable Cost
Average Total Cost
Marginal Cost
1 $300 $100 $400 $100
2 150 75 225 50
3 100 70 170 60
4 75 73 148 80
5 60 80 140 110
6 50 90 140 140
7 43 103 146 180
8 38 119 156 230
9 33 138 171 290
10 30 160 190 360
The table shows cost data for a firm that is selling in a purely competitive market. If the market price for the firm's product is $80, the firm will
answer
produce 4 units.
question
Use the following graphs for a purely competitive market in the short run to answer the next question.
The graphs suggest that in the long run, assuming no changes in the given information
The graphs suggest that in the long run, assuming no changes in the given information
answer
new firms will be attracted into the industry.
question
A competitive employer should hire additional labor as long as
answer
the MRP exceeds the wage rate.
question
The consumer wifi-service providers' market is best described as a
answer
differentiated oligopoly.
question
Use the following graph to answer the next question.
A short-run equilibrium that would produce profits for a monopolistically competitive firm would be represented by graph
A short-run equilibrium that would produce profits for a monopolistically competitive firm would be represented by graph
answer
A.
question
Answer the next question on the basis of the information given in the following table.
Employment
Total Product
Product Price
0 0$3
1 12 3
2 22 3
3 30 3
4 36 3
5 40 3
6 42 3
If the firm is hiring workers under purely competitive conditions at a wage rate of $22, it will employ
Employment
Total Product
Product Price
0 0$3
1 12 3
2 22 3
3 30 3
4 36 3
5 40 3
6 42 3
If the firm is hiring workers under purely competitive conditions at a wage rate of $22, it will employ
answer
3 workers.
question
The economic incentive for price discrimination is based upon
answer
differences among buyers' elasticities of demand.
question
Mutual interdependence means that each firm in an oligopoly
answer
considers the reactions of its rivals when it determines its pricing policy.
question
Labor unions may attempt to raise wage rates by
answer
forcing employers, under the threat of a strike, to pay above-equilibrium wage rates.
question
Marginal cost can be defined as the change in
answer
NOT average variable cost resulting from one more unit of production.
question
If you operated a small bakery, which of the following would be a variable cost in the short run?
answer
baking supplies (flour, salt, etc.)
question
The demand curve faced by a purely competitive firm
answer
is the same as its marginal revenue curve.
question
Price discrimination is more common in service industries because
answer
low price buyers will find it virtually impossible to resell the products of such industries to high price buyers.
question
When a bakery manager reports that productivity of the 15 workers at her bakery last month was 1,800 loaves per worker, she is referring to the
answer
average product of labor.
question
Assume that the market for corn is purely competitive. Currently, firms growing corn are suffering economic losses. In the long run, we can expect
answer
some firms to exit causing the market price of corn to rise.
question
Marginal product is
answer
the amount an additional worker adds to the firm's total output.
question
If the marginal revenue product (MRP) of labor is less than the wage rate
answer
less labor should be employed.
question
If a price-discriminating monopolist sells the same product in two markets but charges a higher price in market X and a lower price in market Y, the pricing difference indicates that demand is
answer
less elastic in market X than market Y.
question
Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound would be
answer
$3.
question
Use the following graph to answer the next question.
If an inclusive union seeks to maximize the number of jobs available for its members, what wage rate will it seek to impose on the monopsonist?
If an inclusive union seeks to maximize the number of jobs available for its members, what wage rate will it seek to impose on the monopsonist?
answer
B
question
As the baby boomers in America grow old, the demand for health-care workers increases. This would be an example of which determinant of labor demand?
answer
An increase in product demand.
question
The characteristic most closely associated with oligopoly is
answer
a few large producers.
question
Implicit costs are
answer
"payments" for self-employed resources.
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