question
Kerem makes candles. If he charges $25 for each candle, his total revenue will be
answer
$625 if he sells 25 candles.
question
Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business?
answer
$170
question
Which of the following statements is correct?
answer
Assuming that implicit costs are positive, accounting profit is greater than economic profit.
question
Kate is a florist. Kate can arrange 27 bouquets per day. She is considering hiring her husband Amir to work for her. Together Kate and Amir can arrange 41 bouquets per day. What is Amir's marginal product?
answer
The correct answer is: 14 bouquets
question
Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers
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labor to be variable and capital to be fixed.
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Suppose a firm in a competitive market increases its output by 25 percent. As a result, the price of its output is likely to
answer
remain unchanged.
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If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then
answer
its average total cost is less than $10.
question
The accountants hired by Forever Fitness have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000. Because of this information, in the short run, Forever Fitness should
answer
shut down because staying open would be more expensive.
question
Which of the following expressions is correct for a competitive firm?
answer
Profit = (quantity of output) × (price − average total cost)
question
The short-run supply curve for a firm in a perfectly competitive market is
answer
The correct answer is: the portion of its marginal cost curve that lies above its average variable cost.
question
Profit-maximizing firms enter a competitive market when existing firms in that market have
answer
The correct answer is: average total costs that are less than market price.
question
Cold Duck Airlines flies between Tacoma and Portland. The company leases planes on a year-long contract at a cost that averages $600 per flight. Other costs (fuel, flight attendants, etc.) amount to $550 per flight. Currently, Cold Duck's revenues are $1,000 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profit, Cold Duck Airlines should
answer
continue flying until the lease expires and then drop the run.
question
The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average
answer
total cost.
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A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will
answer
fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.
question
Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will
answer
increase price in the short run but not in the long run.
question
When a firm operates under conditions of monopoly, its price is
answer
constrained by demand.
question
For a monopolist, an increase in output sold causes marginal revenue to be negative when
answer
the price effect is greater than the output effect.
question
Price discrimination
answer
The correct answer is: can maximize profits if the seller can prevent the resale of goods between customers.
question
Which of the following is not an example of price discrimination by a firm?
answer
A natural gas company charging all customers a higher rate in the winter than in summer
question
Which of the following statements is true?
answer
The correct answer is: When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.
question
A natural monopoly occurs when
answer
there are economies of scale over the relevant range of output.
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Refer to Figure 15-2. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to
answer
increase if the output is between Q3 and Q4.
question
Refer to Figure 15-2. Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at
answer
Q1 or Q2 only.
question
Refer to Figure 15-4. What price will the monopolist charge in order to maximize profit?
answer
B
question
Refer to Figure 15-4.What area measures the monopolist's profit?
answer
(B − Y) × O
question
For a firm to price discriminate,
answer
it must have some market power.
question
For a monopolist, an increase in output sold causes marginal revenue to be negative when
answer
the price effect is greater than the output effect.
question
Monopoly firms face
answer
downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.
question
Price discrimination
answer
can maximize profits if the seller can prevent the resale of goods between customers.
question
Price discrimination is a rational strategy for a profit-maximizing monopolist when
answer
there is no opportunity for arbitrage across market segments.
question
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $40, its average revenue is $80, and its average total cost is $44.
Refer to Scenario 15-1. At Q = 500, the firm's total revenue is
Refer to Scenario 15-1. At Q = 500, the firm's total revenue is
answer
$40,000.
question
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $40, its average revenue is $80, and its average total cost is $44.
Refer to Scenario 15-1. At Q = 500, the firm's profit is
Refer to Scenario 15-1. At Q = 500, the firm's profit is
answer
$18,000.
question
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $40, its average revenue is $80, and its average total cost is $44.
Refer to Scenario 15-1. At Q = 500, the firm's marginal cost is
Refer to Scenario 15-1. At Q = 500, the firm's marginal cost is
answer
$40.
question
The following table provides information on the price, quantity, and average total cost for a monopoly.
Refer to Table 15-1. At what price will the monopolist maximize his profit?
Refer to Table 15-1. At what price will the monopolist maximize his profit?
answer
$18
question
The following table provides information on the price, quantity, and average total cost for a monopoly.
Refer to Table 15-1. What is the maximum profit that the monopolist can earn?
Refer to Table 15-1. What is the maximum profit that the monopolist can earn?
answer
$20
question
Refer to Table 15-2. The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit. If the monopolist were able to perfectly price discriminate, how many units would it sell?
answer
900
question
Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is able to engage in perfect price discrimination.
Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the marginal revenue from selling the 5th tie?
Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the marginal revenue from selling the 5th tie?
answer
$120
question
Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is able to engage in perfect price discrimination.
Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the total revenue when 3 ties are sold?
Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the total revenue when 3 ties are sold?
answer
$450
question
Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the average revenue when 7 ties are sold?
answer
$130
question
The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?
answer
A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.
question
When a firm operates under conditions of monopoly, its price is
answer
constrained by demand.
question
When a monopolist increases the amount of output that it produces and sells, average revenue
answer
decreases, and marginal revenue decreases.
question
Which of the following is not an example of a barrier to entry?
answer
An entrepreneur opens a popular new hair salon.
question
Which of the following is not an example of price discrimination by a firm?
answer
A natural gas company charging all customers a higher rate in the winter than in summer
question
Which of the following statements is true?
answer
When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.
question
A budget constraint illustrates the
answer
consumption bundles that a consumer can afford.
question
Indifference curves illustrate
answer
a consumer's preferences.
question
Liana consumes only beer and chips. Her indifference curves are all bowed inward. Consider the bundles (2,6), (4,4), and (6,2). If Liana is indifferent between (2,6) and (6,2), then Liana must
answer
prefer (4,4) to (6,2).
question
If Priscilla regards cheese and crackers as perfect complements, then
answer
for Priscilla a bundle of 5 crackers and 5 ounces of cheese is just as good as a bundle of 5 crackers and 8 ounces of cheese.
question
When a consumer is purchasing the best combination of two goods, X and Y, subject to a budget constraint, we say that the consumer is at an optimal choice point. A graph of an optimal choice point shows that it occurs
answer
along the highest attainable indifference curve.
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