Exam 4 Microeconomics - Assignment Essays

question

The amount of output that a firm decides to sell has no effect on market price under perfect competition because

answer

the firm's output is a small fraction of the entire output supplied by the industry.

question

The demand curve facing a perfectly competitive firm is

answer

the same as average revenue curve and its marginal revenue curve.

question

For any market structure, price

answer

equals average revenue.

question

The slope of the Total Revenue curve measures

answer

only Marginal Revenue.

question

For a firm under perfect competition, price

answer

equals marginal revenue.

question

Equilibrium is the output level at which

answer

Total Profits are at a maximum.

question

Total Profits are at a maximum, where

answer

the difference between Total Revenue and Total Cost is at a maximum.

question

It is possible for a firm under perfect competition in the short - run

answer

to earn profits or incur losses or be in a situation of no profit no loss.

question

If Average Profits = -22 when the firm produces 8 units of output, total profits made by the firm

answer

will equal - 176.

question

At output of 9 units, P > ATC, then the firm is

answer

making profits.

question

The farmer's profit - maximizing level of output is ______________ units of output.

answer

1,000

question

If this farmer is producing the profit maximizing level of output, his profit is

answer

$3,000

question

If the market price of soybeans falls to $8, then to maximize profits the farmer should produce

answer

700 bushels

question

A perfectly competitive firm's marginal revenue is exceeded by its marginal cost at its current level of output. The firm will

answer

reduce its output.

question

A firm under perfect competition produces at profit maximizing output level. This output level is achieved when ______________ and the MC curve intersects the MR curve from ________________

answer

MR = MC; below.

question

At its present level of output of 100 units, a perfectly competitive firm discovers that (i) its total fixed costs are $200 and (ii) its marginal cost is $7 and equal to average total cost. At an output level of 50 units, marginal cost is $4 and equal to average variable cost. The price of the commodity being produced is $6.
At present level of output, the firm experiences

answer

losses less than its total fixed cost.

question

answer

decrease output.

question

A perfectly competitive firm should quit business when:
(1) price does not cover average total cost.
(2) price does not cover average variable cost.
(3) total revenue is less than total variable cost.
Which of the statements must be true?

answer

2 and 3 only.

question

In general, a perfectly competitive firm's short - run supply curve is

answer

the rising portion of the MC curve above the minimum of AVC.

question

You are a consultant to a Pet Shop that operates in a perfectly competitive environment. The firm is currently producing at a point where market price equals its marginal cost. The Pet Shop's total revenue exceeds its total variable cost but is less than its total cost. you should advise Pet Shop to

answer

continue in business.

question

At profit maximizing level of output, a firm in the short - run

answer

can earn profits or incur losses or be in a situation of no profit no loss

question

The firms in the oat industry are currently receiving a price of $2 per bushel for their product. The minimum of long - run average cost is $1 per bushel. It follows that:

answer

new firms will enter the oat industry.

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Suppose world demand for a product produced by firms under perfectly competitive environment decreases. As a result, the world price of this product will ___________ and existing firms will start _____________.

answer

decrease; incurring losses.

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Suppose world demand for a product produced by firms under perfectly competitive environment decreases. As a result, some firms ________ business and the world supply curve will shift to the _______________ .

answer

quit; left

question

Suppose there are 50 firms in a perfectly competitive market and each maximizes profit at 50 units of output when the market price is $15.00 per unit. One of the points on the market supply curve must be at:

answer

price = $15; Quantity supplied = 2,500

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The marginal revenue of fourth pound of chocolate covered ants is $

answer

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The firm's total revenue will be maximized at a price of $

answer

question

The marginal revenue will be positive

answer

at a price above $5

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If the firm raises its price from $5 to $6, total revenue for the firm will

answer

decrease

question

For a monopolist, if total revenue increases as output decreases, then marginal revenue is

answer

negative

question

The profit maximizing level of output for this monopolist is

answer

question

The profit maximizing price for this firm is $

answer

question

If this firm is producing the profit - maximizing quantity and selling it at the profit maximizing price, the firm's total profits will be $

answer

question

At profit - maximizing level of output, the total cost incurred by the firm equal $

answer

154

question

As compared to a monopoly, a firm under perfect competition will produce ______________ output and charge ___________ price.

answer

more; less

question

A firm under monopoly is likely to produce less and set a higher price than under perfect competition because

answer

the firm faces a downward sloping demand curve.

question

Assume that a firm's MC is $5 and the elasticity of demand is -2. We can conclude that the firm's profit maximizing price is approximately $

answer

question

According to Abba Lerner's measure of monopoly power, monopoly power is ____________ when own price elasticity of demand is ________ .

answer

higher; lower.

question

Bundling products makes sense for the seller when

answer

consumers have heterogenous demands and the firms cannot price discriminate

question

Dumping occurs when the monopolist charges a price _________ marginal cost of production.

answer

less than

question

Under monopolistic competition, each firm faces

answer

a downward sloping demand or AR curve.

question

Under monopolistic competition, firms may produce and sell products which are

answer

either homogeneous or heterogeneous.

question

The assumption of free entry free exit means that in the long - run, each firm will

answer

be in a situation of no profit, no loss or P = LAC.

question

Under monopolistic competition, each firm spends a lot of money on

answer

advertising and packaging so as to distinguish their product from the competitors.

question

The feature that distinguishes monopolistic competition from pure monopoly is that

answer

good substitutes are available in monopolistic competition but not in monopoly.

question

Gwen's Country Curtains is currently manufacturing 1,000 pairs of curtains per month. This firm

answer

should continue to produce 1,000 pairs of curtains since it is already maximizing profits.

question

If Trollio's T - shirts is in long - run equilibrium it is producing _______ silk - screened T - shirts and selling each T - shirt at a price of

answer

50; $16

question

If Trollio's T - shirts is producing 50 silk - screened T - shirts and selling each T - shirt for $16, then in the the long-run this firm should

answer

continue to produce 50 silk screened T-shirts and sell each T-shirt for $16.

question

Excess capacity is

answer

(D) the difference between the output where long - run average cost is a minimum and the actual output in the long - run equilibrium.

question

The long - run equilibrium outcomes under monopolistic competition and perfect competition are similar, because in both market structures

answer

firms are in a situation of no profit no loss.

question

The market structure in which the behavior of any given firm depends on the behavior of the other firms in the industry is

answer

Oligopoly

question

Oligopoly is difficult to analyze because

answer

of the complex interdependence that usually exists among firms in the industry.

question

Under Cournot's model,

answer

each firm assumes that regardless of its output level, the other firm will hold its output as constant.

question

In Cournot model, each firm derives a demand or AR curve for itself,

answer

by subtracting from market demand curve, what it believes its rival will produce.

question

Under Cournot's model, each firm determines its profit maximizing output,

answer

when marginal cost equals derived marginal revenue curve.

question

In which oligopoly model, do firms earn zero profit?

answer

Bertrand

question

Consider a situation in which the first firm knows the reaction curve of the second firm. The second firm takes the output of the first one as given. In such a case

answer

The first firm will produce more than the second firm.

question

In comparing the Cournot equilibrium with monopoly,

answer

profit is higher and output is lower in monopoly

question

In comparing the Cournot equilibrium with the Bertrand equilibrium,

answer

Profit is lower and output is higher in Bertrand.

question

In comparing Stackelberg model with Bertrand model,

answer

Profit is higher and output is lower in Stackelberg

question

The dominant firm model is illustrated in the figure. Shown are the demand curve for the industry's product, D, the demand curve for the output of the dominant firm,d, the dominant firm's marginal cost curve, MCd, the dominant firm's marginal revenue curve, MRd, and the supply curve for all firms (except for the dominant firm), S.
The equilibrium level of output for the dominant firm is

answer

question

answer

question

answer

question

The oligopoly model that assumes that oligopoly prices will tend to be rigid inspite of small changes in cost is called the

answer

Kinked demand model

question

Suppose the price in oligopoly market is $15. The Kinked demand model assumes that if a firm increases its price to $20

answer

other firms will not increase their price.

question

You are negotiating with your florist over the price of flowers for a special occasion. Your value of floral arrangements is $500. It cost your florist $200 to do the arrangements. you finally settle at a price of $250.
Your negotiations is an example of

answer

cooperative game.

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Game Theory

answer

attempts to study decision - making where there is a mixture of conflict and cooperation.

question

A game''s outcome depends on the strategies used by each player. These possible outcomes are known as

answer

payoffs

question

Your professor has decided that your class will not be graded on the curve but on an absolute scale. Therefore, it is possible for every student in the class to get an "A". Your grade will not depend in anyway on your classmates performance. Based on this information, you decide that you should study economics three hours a day, regardless of what your classmates do. In the language of game theory, your decision to study three hours of economics is a

answer

dominant strategy.

question

A complete specification of what a player will do under each contingency in the playing of a game is called a

answer

strategy.

question

Firm X' s profit is listed before the comma, Y's outcome after the comma.

Firm Y
Advertise Don't Advertise
Firm X
Advertise 10, 6 16, 0
Don't Advertise 7, 8 10, 3
If each firm follows a dominant strategy, which outcome will result?

answer

10,6

question

If Firm Y follows a dominant strategy and Firm X realizes this. The outcome will be

answer

...

question

The "prisoners dilemma" refers to

answer

a situation where both parties are worse off acting independently than if they had cooperated.

question

Firm X' s profit is listed before the comma, Y's outcome after the comma.
Firm Y
Rebate No Rebate
Firm X
Rebate 20, 10 30, 0
No Rebate 12, 16 10, 20

answer

The dominant strategy for Firm X is to offer rebate.

question

In this example,

answer

...

question

Objectives of Business or Firm

answer

make as much money as possible, maximize total profits, total profits = sales or total revenue - total costs

question

total revenue = price x quantity of output produced or sold

answer

...

question

short-run

answer

the time period in which at least one input is fixed

question

long-run

answer

time period in which all inputs are variable

1 of 79

question

The amount of output that a firm decides to sell has no effect on market price under perfect competition because

answer

the firm's output is a small fraction of the entire output supplied by the industry.

question

The demand curve facing a perfectly competitive firm is

answer

the same as average revenue curve and its marginal revenue curve.

question

For any market structure, price

answer

equals average revenue.

question

The slope of the Total Revenue curve measures

answer

only Marginal Revenue.

question

For a firm under perfect competition, price

answer

equals marginal revenue.

question

Equilibrium is the output level at which

answer

Total Profits are at a maximum.

question

Total Profits are at a maximum, where

answer

the difference between Total Revenue and Total Cost is at a maximum.

question

It is possible for a firm under perfect competition in the short - run

answer

to earn profits or incur losses or be in a situation of no profit no loss.

question

If Average Profits = -22 when the firm produces 8 units of output, total profits made by the firm

answer

will equal - 176.

question

At output of 9 units, P > ATC, then the firm is

answer

making profits.

question

The farmer's profit - maximizing level of output is ______________ units of output.

answer

1,000

question

If this farmer is producing the profit maximizing level of output, his profit is

answer

$3,000

question

If the market price of soybeans falls to $8, then to maximize profits the farmer should produce

answer

700 bushels

question

A perfectly competitive firm's marginal revenue is exceeded by its marginal cost at its current level of output. The firm will

answer

reduce its output.

question

A firm under perfect competition produces at profit maximizing output level. This output level is achieved when ______________ and the MC curve intersects the MR curve from ________________

answer

MR = MC; below.

question

answer

losses less than its total fixed cost.

question

answer

decrease output.

question

answer

2 and 3 only.

question

In general, a perfectly competitive firm's short - run supply curve is

answer

the rising portion of the MC curve above the minimum of AVC.

question

answer

continue in business.

question

At profit maximizing level of output, a firm in the short - run

answer

can earn profits or incur losses or be in a situation of no profit no loss

question

The firms in the oat industry are currently receiving a price of $2 per bushel for their product. The minimum of long - run average cost is $1 per bushel. It follows that:

answer

new firms will enter the oat industry.

question

answer

decrease; incurring losses.

question

answer

quit; left

question

answer

price = $15; Quantity supplied = 2,500

question

The marginal revenue of fourth pound of chocolate covered ants is $

answer

question

The firm's total revenue will be maximized at a price of $

answer

question

The marginal revenue will be positive

answer

at a price above $5

question

If the firm raises its price from $5 to $6, total revenue for the firm will

answer

decrease

question

For a monopolist, if total revenue increases as output decreases, then marginal revenue is

answer

negative

question

The profit maximizing level of output for this monopolist is

answer

question

The profit maximizing price for this firm is $

answer

question

If this firm is producing the profit - maximizing quantity and selling it at the profit maximizing price, the firm's total profits will be $

answer

question

At profit - maximizing level of output, the total cost incurred by the firm equal $

answer

154

question

As compared to a monopoly, a firm under perfect competition will produce ______________ output and charge ___________ price.

answer

more; less

question

A firm under monopoly is likely to produce less and set a higher price than under perfect competition because

answer

the firm faces a downward sloping demand curve.

question

Assume that a firm's MC is $5 and the elasticity of demand is -2. We can conclude that the firm's profit maximizing price is approximately $

answer

question

According to Abba Lerner's measure of monopoly power, monopoly power is ____________ when own price elasticity of demand is ________ .

answer

higher; lower.

question

Bundling products makes sense for the seller when

answer

consumers have heterogenous demands and the firms cannot price discriminate

question

Dumping occurs when the monopolist charges a price _________ marginal cost of production.

answer

less than

question

Under monopolistic competition, each firm faces

answer

a downward sloping demand or AR curve.

question

Under monopolistic competition, firms may produce and sell products which are

answer

either homogeneous or heterogeneous.

question

The assumption of free entry free exit means that in the long - run, each firm will

answer

be in a situation of no profit, no loss or P = LAC.

question

Under monopolistic competition, each firm spends a lot of money on

answer

advertising and packaging so as to distinguish their product from the competitors.

question

The feature that distinguishes monopolistic competition from pure monopoly is that

answer

good substitutes are available in monopolistic competition but not in monopoly.

question

Gwen's Country Curtains is currently manufacturing 1,000 pairs of curtains per month. This firm

answer

should continue to produce 1,000 pairs of curtains since it is already maximizing profits.

question

If Trollio's T - shirts is in long - run equilibrium it is producing _______ silk - screened T - shirts and selling each T - shirt at a price of

answer

50; $16

question

If Trollio's T - shirts is producing 50 silk - screened T - shirts and selling each T - shirt for $16, then in the the long-run this firm should

answer

continue to produce 50 silk screened T-shirts and sell each T-shirt for $16.

question

Excess capacity is

answer

(D) the difference between the output where long - run average cost is a minimum and the actual output in the long - run equilibrium.

question

The long - run equilibrium outcomes under monopolistic competition and perfect competition are similar, because in both market structures

answer

firms are in a situation of no profit no loss.

question

The market structure in which the behavior of any given firm depends on the behavior of the other firms in the industry is

answer

Oligopoly

question

Oligopoly is difficult to analyze because

answer

of the complex interdependence that usually exists among firms in the industry.

question

Under Cournot's model,

answer

each firm assumes that regardless of its output level, the other firm will hold its output as constant.

question

In Cournot model, each firm derives a demand or AR curve for itself,

answer

by subtracting from market demand curve, what it believes its rival will produce.

question

Under Cournot's model, each firm determines its profit maximizing output,

answer

when marginal cost equals derived marginal revenue curve.

question

In which oligopoly model, do firms earn zero profit?

answer

Bertrand

question

Consider a situation in which the first firm knows the reaction curve of the second firm. The second firm takes the output of the first one as given. In such a case

answer

The first firm will produce more than the second firm.

question

In comparing the Cournot equilibrium with monopoly,

answer

profit is higher and output is lower in monopoly

question

In comparing the Cournot equilibrium with the Bertrand equilibrium,

answer

Profit is lower and output is higher in Bertrand.

question

In comparing Stackelberg model with Bertrand model,

answer

Profit is higher and output is lower in Stackelberg

question

answer

question

answer

question

answer

question

The oligopoly model that assumes that oligopoly prices will tend to be rigid inspite of small changes in cost is called the

answer

Kinked demand model

question

Suppose the price in oligopoly market is $15. The Kinked demand model assumes that if a firm increases its price to $20

answer

other firms will not increase their price.

question

answer

cooperative game.

question

Game Theory

answer

attempts to study decision - making where there is a mixture of conflict and cooperation.

question

A game''s outcome depends on the strategies used by each player. These possible outcomes are known as

answer

payoffs

question

answer

dominant strategy.

question

A complete specification of what a player will do under each contingency in the playing of a game is called a

answer

strategy.

question

answer

10,6

question

If Firm Y follows a dominant strategy and Firm X realizes this. The outcome will be

answer

...

question

The "prisoners dilemma" refers to

answer

a situation where both parties are worse off acting independently than if they had cooperated.

question

Firm X' s profit is listed before the comma, Y's outcome after the comma.
Firm Y
Rebate No Rebate
Firm X
Rebate 20, 10 30, 0
No Rebate 12, 16 10, 20

answer

The dominant strategy for Firm X is to offer rebate.

question

In this example,

answer

...

question

Objectives of Business or Firm

answer

make as much money as possible, maximize total profits, total profits = sales or total revenue - total costs

question

total revenue = price x quantity of output produced or sold

answer

...

question

short-run

answer

the time period in which at least one input is fixed

question

long-run

answer

time period in which all inputs are variable

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