Econ 110 Exam 1, 2, 3 Final Question

question

All societies must address the questions of what outputs to produce, how to produce those outputs, and who gets to consume them because:

answer

scarcity exists and the desired uses for resources exceed the resources available.

question

The ceteris paribus assumption is used to:

answer

isolate the relationship between two variables by holding other influences on the relationship constant.

question

Which of the following is a normative microeconomic statement?

answer

Government should lower the taxes paid by small businesses.

question

Demand that is perfectly elastic graphs as a:

answer

a horizontal line.

question

The responsiveness of buyers to changes in the price of a product is measured by:

answer

price elasticity of demand.

question

If Janet can produce more baskets per hour than Karen, then:

answer

Janet has an absolute advantage in the production of baskets.

question

For a normal good, an increase in consumer income leads to:

answer

an increase in demand and an increase in both equilibrium price and quantity.

question

An outward shift of a production possibilities frontier illustrates that:

answer

economic growth has occurred.

question

According to the principle of comparative advantage, Frank and Lisa can both gain from specialization and trade if Frank produces _______ and Lisa produces ________.

answer

clothing; food

question

Microeconomics studies the:

answer

decisions and behaviors of individuals and businesses.

question

Which of the following is an example of capital as a factor of production?

answer

Kitchen equipment for a new restaurant venture

question

Assume that the popularity of playing dodge ball increases at the same time that the number of dodge ball manufacturers increases. Supply and demand analysis predicts that:

answer

the equilibrium quantity of dodge balls will increase but the change in the equilibrium price can't be determined from the information given.

question

The assumption that because specific individuals benefit when taxes are lowered, the economy as a whole must also be stronger when taxes are lowered best illustrates the:

answer

fallacy of composition.

question

Use the graph representing the market for a dozen of red roses in Smalltown, USA during Valentine's week to answer:
A market price of $20 per dozen of roses will lead to a:

answer

shortage of 200 dozens of red roses.

question

Using the graph above:
The equilibrium price of a dozen red roses in this market is:

answer

$30 because the quantity supplied of red roses is equal to the quantity demanded of red roses at $30 per dozen of red roses.

question

In the simple circular flow model:

answer

businesses are demanders in resource markets and suppliers in product markets.

question

If a 5% increase in the price of a product results in a 10% decrease in the quantity demanded of the product, then the absolute value of the price elasticity of demand coefficient is _________ and demand is said to be _________.

answer

1/2; elastic

question

Use the midpoint formula to calculate the price elasticity of demand coefficient for a product if quantity demanded is 125 when price is $4 and quantity demanded is 75 when price is $6.

answer

0.8

question

If quantity demanded is 30 when price is $3 and quantity demanded is 20 when price is $5, then total revenue __________ if price increases from $3 to $5, implying that demand is _________.

answer

increases; inelastic

question

Products that are necessities with no close substitutes tend to have _____ demand curves.

answer

inelastic

question

If the cross elasticity of demand between goods X and Y is 2, goods X and Y are:

answer

complementary goods.

question

Market economies are characterized by all of the following except:

answer

government ownership of capital

question

In a capitalist market economy, economic activity is mainly guided by:

answer

self-interest and prices.

question

"To make the national tax system more fair, the federal government should impose a tax on overall consumer spending rather than on total personal income" is an example of a:

answer

normative macroeconomic statement.

question

Any point inside a production possibilities frontier represents:

answer

unemployed resources.

question

If drought conditions in the farm belt result in a decrease in the supply of wheat, what will happen to the equilibrium price and quantity of wheat, other things held constant?

answer

Price increases and quantity decreases

question

Use the graph of the chocolate market to answer.
A price of $8 per box of chocolates results in:

answer

a shortage of 4,000 boxes of chocolates

question

At equilibrium, buyers of chocolates pay _______ per box and purchase______boxes.

answer

$10; 10,000

question

For an inferior good, an increase in consumer income leads to:

answer

a decrease in demand and a decrease in equilibrium price.

question

The demand for a product tends to be less elastic if:

answer

there are very few good substitutes for the product.

question

According to the law of demand, an increase in the price of beef leads to, ceteris paribus:

answer

a decrease in the quantity demanded of beef.

question

Which of the following events will most likely cause an increase in the supply of apple juice, ceteris paribus?

answer

An increase in the number of apple trees planted in orchards

question

The opportunity cost of moving from combination C to combination D is:

answer

20 scarves.

question

This production possibilities schedule:

answer

results in a straight-line PPF and illustrates constant opportunity cost.

question

The opportunity cost of going to a free lecture on economics is the:

answer

value of the best alternative activity given up to attend the lecture.

question

The opportunity cost of 1 car is:

answer

1 boat for Country A and ½ boat for Country B.

question

If both countries produce the good for which each has a comparative advantage, Country A will produce _____________ and Country B will produce _______________.

answer

cars; boats

question

Ceteris paribus, a shortage in the market for cars will:

answer

put upward pressure on the price of cars.

question

In a market economy:

answer

output prices adjust to eliminate shortages and surpluses.

question

Ceteris paribus, an increase in the price of cereal leads to:

answer

a decrease in the quantity demanded of cereal.

question

Assuming no market failures, an efficient level of an output exists when:

answer

marginal benefit is equal to marginal cost.

question

Ceteris paribus, if the marginal benefit of bananas decreases as the quantity of bananas consumed increases, then:

answer

the demand curve for bananas will slope downward.

question

All of the following are true regarding an effective (binding) price ceiling for a good except:

answer

the quantity bought and sold increases because the price has decreased

question

The economic burden (economic incidence) of a tax is borne by:

answer

buyers if demand is and supply highly inelastic is elastic.

question

The tendency to use common resources more than is desirable from society's point of view is called the:

answer

Tragedy of the Commons.

question

When some of the costs of a good spill over to a third party, a _____ externality exists and the good tends to be _______ by private markets.

answer

negative; overproduced

question

Assuming no externalities exist, a market generates the efficient level of an output when:

answer

the marginal benefit of the last unit is equal to the marginal cost of the last unit.

question

Positive externalities occur when:

answer

market activity creates benefits that spill over to third parties.

question

The U.S. government performs all of the following functions except:

answer

Promoting a perfectly equal distribution of income

question

Which of the following is a government solution to a positive externality?

answer

The county uses tax revenue to fund public schools

question

The "free-rider" problem occurs when:

answer

the benefits associated with public goods cannot be denied to those who do not pay for them.

question

The downward-sloping portion of a LRAC curve implies:

answer

economies of scale exist over that range of the curve.

question

The assumed goal of firms in the marketplace is to:

answer

maximize profit.

question

Output (Q = TP) TVC TC
0 $ 0 $160
1 40 200
2 60 220
3 100 ____
4 _____ ____
5 240 400
If this firm does not produce any output, it:

answer

will still have to pay fixed costs of $160.

question

Output (Q = TP) TVC TC
0 $ 0 $160
1 40 200
2 60 220
3 100 ____
4 _____ ____
5 240 400
If the marginal cost of the 4th unit of output is $60, total cost is ________ and average total cost is ________ when 4 units of output are produced.

answer

$320; $80

question

All of the following are possible sources of inefficiency except:

answer

Competitive markets

question

A marginal cost curve can be interpreted as a:

answer

supply curve.

question

Buyers enjoy consumer surplus when the market price is _____ than the highest price buyers would pay; sellers enjoy producer surplus when the market price is _____ than the lowest price sellers would accept.

answer

lower; higher

question

A firm is producing 100 units of output at a total cost of $800. The firm's average variable cost is $5 per unit. The firm's:

answer

average fixed cost is $3.

question

If a firm can produce 560 units of output with 5 workers, 600 units of output with 6 workers, then the:

answer

marginal product of the 6th worker is 40 units.

question

When labor is the variable input, marginal product is defined as:

answer

the additional output produced by an additional worker.

question

In the short run:

answer

at least on input is fixed

question

Use the following to answer the questiom
(Bicycles (Dollars) Output total cost
per week)
1 100
2 200
3 310
4 440
5 580
6 730
7 900
8 1200
Refer to the table above. If the output of bicycles is 4 per week, then the marginal cost of producing another bicycle is:

answer

$140

question

Use the following to answer the question:
(Bicycles (Dollars) Output Total cost
per week)
1 100
2 200
3 310
4 440
5 580
6 730
7 900
8 1200

Refer to the table above. If the output of bicycles is 4 per week, then the average cost of producing a bicycle is:

answer

$110

question

Number of workers Quantity of output
1 4
2 10
3 18
4 28
5 32
6 34
7 36
8 36
9 34
10 30
Refer to the table above. If employment is 3 then total output is:

answer

question

Number of workers Quantity of output
1 4
2 10
3 18
4 28
5 32
6 34
7 36
8 36
9 34
10 30
Refer to the table above. Marginal product declines when which worker is hired?

answer

the fifth

question

Number of workers Quantity of output
1 4
2 10
3 18
4 28
5 32
6 34
7 36
8 36
9 34
10 30
Refer to the table above. The marginal product of the fourth worker is:

answer

question

Total revenue minus explicit measurable costs equals:

answer

Accounting profit

question

The difference between economic profit and accounting profit is equal to:

answer

implicit costs

question

In the long run:

answer

all inputs are variable

question

When labor is the variable input, marginal product is defined as:

answer

the additional output produced by an additional worker.

question

What is a production function?

answer

The relationship between any combination of inputs and the maximum output obtained from that combination.

question

The law of diminishing marginal productivity does not apply in the long-run because:

answer

no inputs are fixed in the long-run.

question

The short-run average total cost curve is generally assumed to be:

answer

U-shaped

question

If marginal cost is greater than average total cost, then:

answer

average total cost is rising.

question

When output sells for a price that is higher than its marginal cost to the seller (the minimum price the seller is willing to accept), the seller:

answer

enjoys a producer surplus.

question

Ceteris paribus, when supply decreases, there is:

answer

an increase in price and a decrease in consumer surplus.

question

Ceteris paribus, the more elastic the demand for a taxed commodity, the _____ it is for sellers to shift the economic burden of the tax to consumers by _____ the product price.

answer

harder; raising

question

According to the Coase theorem, private parties can efficiently resolve the problem of negative externalities as long as:

answer

property rights are well-defined and there are no obstacles to private bargaining.

question

From society's perspective, outputs that generate negative externalities tend to be:

answer

overproduced by private markets.

question

For a pure monopoly, the industry or market demand curve is:

answer

the same as the monopoly firm's demand curve.

question

A natural monopoly can:

answer

supply the entire market at a lower cost than many competing firms.

question

Compared to a perfectly competitive market, a monopoly produces a ________ output and charges a ________ price, provided economies of scale are not significant.

answer

lower; higher

question

Government addresses the problem of monopoly inefficiency by:

answer

all of the above are true.

question

From society's perspective:

answer

competition leads to lower prices, higher output, and greater efficiency than monopoly.

question

This profit-maximizing firm will produce:

answer

2,400 units of output and charge a price of $10 per unit.

question

Assuming this firm follows the profit-maximizing rule, it will earn total revenue equal to:

answer

$24,000

question

Assuming this firm follows the profit-maximizing rule, it will pay total cost equal to _____ and earn economic profit equal to _____.

answer

$24,000; $0

question

In order to price discriminate, a monopoly firm must be able to:

answer

separate customers based on different elasticities of demand.

question

A firm that is able to engage in perfect (or first-degree) price discrimination:

answer

is able to charge each individual consumer the highest price that consumer is willing to pay

question

When government sets price equal to average total cost for a natural monopoly:

answer

economic profit is equal to zero.

question

The characteristic that distinguishes oligopoly from other market structures is:

answer

interdependence (strategic behavior) among firms in pricing and output decisions

question

The Herfindahl-Hirschman Index is a measure of industry concentration that is calculated by:

answer

summing the squares of the market shares of each firm in the industry.

question

To be successful in increasing the price of their product, members of a cartel must:

answer

restrict market output.

question

Compared to a perfectly competitive market, a monopoly produces a ________ output and charges a ________ price, provided economies of scale are not significant.

answer

lower; higher

question

A perfectly competitive firm incurring an economic loss is shown by panel ____ and a monopolistically competitive firm in long-run equilibrium is shown by panel ____.

answer

(d); (c)

question

If firms in an oligopoly market are able to collude, then:

answer

the market price is likely to be higher and the output is likely to be lower than they would be if firms could not collude.

question

Which of the following best represents a derived demand for labor?

answer

The demand for the services of nurses by hospitals.

question

Number of workers Quantity of output
0 0
1 5
2 11
3 16
4 20
5 23
According to the table depicting a firm's short-run production function, the marginal product of the second worker is equal to

answer

6 and the marginal product of the third worker is equal to 5.

question

Number of workers Quantity of output
0 0
1 5
2 11
3 16
4 20
5 23
According to the table depicting a firm's short-run production function and assuming this firm is selling output in a perfectly competitive market for a price of $2 per unit, the value of marginal product of the second worker is equal to:

answer

$12 and the value of marginal product of the third worker is equal to $10.

question

In a competitive labor market, an increase in the supply of labor, ceteris paribus, will:

answer

decrease the market wage rate.

question

In competitive labor markets, firms hire:

answer

the amount of labor needed to produce the profit-maximizing level of output.

question

The demand for labor:

answer

is derived from the demand for the output that labor helps produce.

question

In competitive labor markets, a firm's demand for labor is determined by:

answer

the marginal product of each worker and the price of the product.

question

In a competitive labor market, an increase in the equilibrium wage rate could result from:

answer

an increase in the demand for labor.

question

Ceteris paribus, the demand for farm workers will increase in response to all of the following except an increase in the:

answer

wage paid to farm workers

question

The percentage of total industry output accounted for by the largest firms in an industry is called the:

answer

concentration ratio.

question

Monopolistically competitive firms:

answer

may earn either profits or losses in the short run, but tend to earn zero economic profits in the long run.

question

The typical firm in a perfectly competitive market earns zero economic profit in the long run because:

answer

there are no barriers preventing new firms from entering the market in the long run.

question

This profit-maximizing/loss-minimizing firm will produce _____ units of output and have total revenue of $_____.

answer

180; 2,700

question

This profit-maximizing/loss-minimizing firm will have total cost of $_____ and total fixed cost of $_____.

answer

1,800; 720

question

This profit-maximizing/loss-minimizing firm is:

answer

earning an economic profit of $900 in the short run.

question

This firm should shut down production in the short-run to minimize its loss if the market price falls below:

answer

$4.

question

If perfectly competitive firms are incurring economic losses in the short run, the adjustment to long-run equilibrium includes firms _________________ the market which causes market supply to _____________ and market price to _______________.

answer

exiting; decrease; increase

question

A firm is in long-run equilibrium in a perfectly competitive market when:

answer

P = MR = MC = ATC.

question

An individual firm operating in a perfectly competitive market:

answer

is a price-taker and has a demand curve that is perfectly elastic at the price determined by the market forces of demand and supply.

question

If pencil manufacturers are earning positive economic profit in the short run, and there are no barriers to entry into the pencil market, economic theory predicts that:

answer

new firms will enter the market and drive down the price of pencils in the long run, ceteris paribus.

question

Obstacles that make it impossible or unprofitable for new firms to enter a market are:

answer

barriers to entry that may lead to monopoly power.

question

Which of the following statements is true for a pure, unregulated monopolist that cannot price discriminate in short-run equilibrium?

answer

P > MR = MC

question

A natural monopoly can:

answer

supply the entire market at a lower cost than many competing firms.

1 of 120

question

All societies must address the questions of what outputs to produce, how to produce those outputs, and who gets to consume them because:

answer

scarcity exists and the desired uses for resources exceed the resources available.

question

The ceteris paribus assumption is used to:

answer

isolate the relationship between two variables by holding other influences on the relationship constant.

question

Which of the following is a normative microeconomic statement?

answer

Government should lower the taxes paid by small businesses.

question

Demand that is perfectly elastic graphs as a:

answer

a horizontal line.

question

The responsiveness of buyers to changes in the price of a product is measured by:

answer

price elasticity of demand.

question

If Janet can produce more baskets per hour than Karen, then:

answer

Janet has an absolute advantage in the production of baskets.

question

For a normal good, an increase in consumer income leads to:

answer

an increase in demand and an increase in both equilibrium price and quantity.

question

An outward shift of a production possibilities frontier illustrates that:

answer

economic growth has occurred.

question

According to the principle of comparative advantage, Frank and Lisa can both gain from specialization and trade if Frank produces _______ and Lisa produces ________.

answer

clothing; food

question

Microeconomics studies the:

answer

decisions and behaviors of individuals and businesses.

question

Which of the following is an example of capital as a factor of production?

answer

Kitchen equipment for a new restaurant venture

question

Assume that the popularity of playing dodge ball increases at the same time that the number of dodge ball manufacturers increases. Supply and demand analysis predicts that:

answer

the equilibrium quantity of dodge balls will increase but the change in the equilibrium price can't be determined from the information given.

question

The assumption that because specific individuals benefit when taxes are lowered, the economy as a whole must also be stronger when taxes are lowered best illustrates the:

answer

fallacy of composition.

question

Use the graph representing the market for a dozen of red roses in Smalltown, USA during Valentine's week to answer:
A market price of $20 per dozen of roses will lead to a:

answer

shortage of 200 dozens of red roses.

question

Using the graph above:
The equilibrium price of a dozen red roses in this market is:

answer

$30 because the quantity supplied of red roses is equal to the quantity demanded of red roses at $30 per dozen of red roses.

question

In the simple circular flow model:

answer

businesses are demanders in resource markets and suppliers in product markets.

question

answer

1/2; elastic

question

Use the midpoint formula to calculate the price elasticity of demand coefficient for a product if quantity demanded is 125 when price is $4 and quantity demanded is 75 when price is $6.

answer

0.8

question

If quantity demanded is 30 when price is $3 and quantity demanded is 20 when price is $5, then total revenue __________ if price increases from $3 to $5, implying that demand is _________.

answer

increases; inelastic

question

Products that are necessities with no close substitutes tend to have _____ demand curves.

answer

inelastic

question

If the cross elasticity of demand between goods X and Y is 2, goods X and Y are:

answer

complementary goods.

question

Market economies are characterized by all of the following except:

answer

government ownership of capital

question

In a capitalist market economy, economic activity is mainly guided by:

answer

self-interest and prices.

question

"To make the national tax system more fair, the federal government should impose a tax on overall consumer spending rather than on total personal income" is an example of a:

answer

normative macroeconomic statement.

question

Any point inside a production possibilities frontier represents:

answer

unemployed resources.

question

If drought conditions in the farm belt result in a decrease in the supply of wheat, what will happen to the equilibrium price and quantity of wheat, other things held constant?

answer

Price increases and quantity decreases

question

Use the graph of the chocolate market to answer.
A price of $8 per box of chocolates results in:

answer

a shortage of 4,000 boxes of chocolates

question

At equilibrium, buyers of chocolates pay _______ per box and purchase______boxes.

answer

$10; 10,000

question

For an inferior good, an increase in consumer income leads to:

answer

a decrease in demand and a decrease in equilibrium price.

question

The demand for a product tends to be less elastic if:

answer

there are very few good substitutes for the product.

question

According to the law of demand, an increase in the price of beef leads to, ceteris paribus:

answer

a decrease in the quantity demanded of beef.

question

Which of the following events will most likely cause an increase in the supply of apple juice, ceteris paribus?

answer

An increase in the number of apple trees planted in orchards

question

The opportunity cost of moving from combination C to combination D is:

answer

20 scarves.

question

This production possibilities schedule:

answer

results in a straight-line PPF and illustrates constant opportunity cost.

question

The opportunity cost of going to a free lecture on economics is the:

answer

value of the best alternative activity given up to attend the lecture.

question

The opportunity cost of 1 car is:

answer

1 boat for Country A and ½ boat for Country B.

question

If both countries produce the good for which each has a comparative advantage, Country A will produce _____________ and Country B will produce _______________.

answer

cars; boats

question

Ceteris paribus, a shortage in the market for cars will:

answer

put upward pressure on the price of cars.

question

In a market economy:

answer

output prices adjust to eliminate shortages and surpluses.

question

Ceteris paribus, an increase in the price of cereal leads to:

answer

a decrease in the quantity demanded of cereal.

question

Assuming no market failures, an efficient level of an output exists when:

answer

marginal benefit is equal to marginal cost.

question

Ceteris paribus, if the marginal benefit of bananas decreases as the quantity of bananas consumed increases, then:

answer

the demand curve for bananas will slope downward.

question

All of the following are true regarding an effective (binding) price ceiling for a good except:

answer

the quantity bought and sold increases because the price has decreased

question

The economic burden (economic incidence) of a tax is borne by:

answer

buyers if demand is and supply highly inelastic is elastic.

question

The tendency to use common resources more than is desirable from society's point of view is called the:

answer

Tragedy of the Commons.

question

When some of the costs of a good spill over to a third party, a _____ externality exists and the good tends to be _______ by private markets.

answer

negative; overproduced

question

Assuming no externalities exist, a market generates the efficient level of an output when:

answer

the marginal benefit of the last unit is equal to the marginal cost of the last unit.

question

Positive externalities occur when:

answer

market activity creates benefits that spill over to third parties.

question

The U.S. government performs all of the following functions except:

answer

Promoting a perfectly equal distribution of income

question

Which of the following is a government solution to a positive externality?

answer

The county uses tax revenue to fund public schools

question

The "free-rider" problem occurs when:

answer

the benefits associated with public goods cannot be denied to those who do not pay for them.

question

The downward-sloping portion of a LRAC curve implies:

answer

economies of scale exist over that range of the curve.

question

The assumed goal of firms in the marketplace is to:

answer

maximize profit.

question

Output (Q = TP) TVC TC
0 $ 0 $160
1 40 200
2 60 220
3 100 ____
4 _____ ____
5 240 400
If this firm does not produce any output, it:

answer

will still have to pay fixed costs of $160.

question

answer

$320; $80

question

All of the following are possible sources of inefficiency except:

answer

Competitive markets

question

A marginal cost curve can be interpreted as a:

answer

supply curve.

question

answer

lower; higher

question

A firm is producing 100 units of output at a total cost of $800. The firm's average variable cost is $5 per unit. The firm's:

answer

average fixed cost is $3.

question

If a firm can produce 560 units of output with 5 workers, 600 units of output with 6 workers, then the:

answer

marginal product of the 6th worker is 40 units.

question

When labor is the variable input, marginal product is defined as:

answer

the additional output produced by an additional worker.

question

In the short run:

answer

at least on input is fixed

question

answer

$140

question

answer

$110

question

Number of workers Quantity of output
1 4
2 10
3 18
4 28
5 32
6 34
7 36
8 36
9 34
10 30
Refer to the table above. If employment is 3 then total output is:

answer

question

Number of workers Quantity of output
1 4
2 10
3 18
4 28
5 32
6 34
7 36
8 36
9 34
10 30
Refer to the table above. Marginal product declines when which worker is hired?

answer

the fifth

question

Number of workers Quantity of output
1 4
2 10
3 18
4 28
5 32
6 34
7 36
8 36
9 34
10 30
Refer to the table above. The marginal product of the fourth worker is:

answer

question

Total revenue minus explicit measurable costs equals:

answer

Accounting profit

question

The difference between economic profit and accounting profit is equal to:

answer

implicit costs

question

In the long run:

answer

all inputs are variable

question

When labor is the variable input, marginal product is defined as:

answer

the additional output produced by an additional worker.

question

What is a production function?

answer

The relationship between any combination of inputs and the maximum output obtained from that combination.

question

The law of diminishing marginal productivity does not apply in the long-run because:

answer

no inputs are fixed in the long-run.

question

The short-run average total cost curve is generally assumed to be:

answer

U-shaped

question

If marginal cost is greater than average total cost, then:

answer

average total cost is rising.

question

When output sells for a price that is higher than its marginal cost to the seller (the minimum price the seller is willing to accept), the seller:

answer

enjoys a producer surplus.

question

Ceteris paribus, when supply decreases, there is:

answer

an increase in price and a decrease in consumer surplus.

question

Ceteris paribus, the more elastic the demand for a taxed commodity, the _____ it is for sellers to shift the economic burden of the tax to consumers by _____ the product price.

answer

harder; raising

question

According to the Coase theorem, private parties can efficiently resolve the problem of negative externalities as long as:

answer

property rights are well-defined and there are no obstacles to private bargaining.

question

From society's perspective, outputs that generate negative externalities tend to be:

answer

overproduced by private markets.

question

For a pure monopoly, the industry or market demand curve is:

answer

the same as the monopoly firm's demand curve.

question

A natural monopoly can:

answer

supply the entire market at a lower cost than many competing firms.

question

Compared to a perfectly competitive market, a monopoly produces a ________ output and charges a ________ price, provided economies of scale are not significant.

answer

lower; higher

question

Government addresses the problem of monopoly inefficiency by:

answer

all of the above are true.

question

From society's perspective:

answer

competition leads to lower prices, higher output, and greater efficiency than monopoly.

question

This profit-maximizing firm will produce:

answer

2,400 units of output and charge a price of $10 per unit.

question

Assuming this firm follows the profit-maximizing rule, it will earn total revenue equal to:

answer

$24,000

question

Assuming this firm follows the profit-maximizing rule, it will pay total cost equal to _____ and earn economic profit equal to _____.

answer

$24,000; $0

question

In order to price discriminate, a monopoly firm must be able to:

answer

separate customers based on different elasticities of demand.

question

A firm that is able to engage in perfect (or first-degree) price discrimination:

answer

is able to charge each individual consumer the highest price that consumer is willing to pay

question

When government sets price equal to average total cost for a natural monopoly:

answer

economic profit is equal to zero.

question

The characteristic that distinguishes oligopoly from other market structures is:

answer

interdependence (strategic behavior) among firms in pricing and output decisions

question

The Herfindahl-Hirschman Index is a measure of industry concentration that is calculated by:

answer

summing the squares of the market shares of each firm in the industry.

question

To be successful in increasing the price of their product, members of a cartel must:

answer

restrict market output.

question

Compared to a perfectly competitive market, a monopoly produces a ________ output and charges a ________ price, provided economies of scale are not significant.

answer

lower; higher

question

A perfectly competitive firm incurring an economic loss is shown by panel ____ and a monopolistically competitive firm in long-run equilibrium is shown by panel ____.

answer

(d); (c)

question

If firms in an oligopoly market are able to collude, then:

answer

the market price is likely to be higher and the output is likely to be lower than they would be if firms could not collude.

question

Which of the following best represents a derived demand for labor?

answer

The demand for the services of nurses by hospitals.

question

Number of workers Quantity of output
0 0
1 5
2 11
3 16
4 20
5 23
According to the table depicting a firm's short-run production function, the marginal product of the second worker is equal to

answer

6 and the marginal product of the third worker is equal to 5.

question

answer

$12 and the value of marginal product of the third worker is equal to $10.

question

In a competitive labor market, an increase in the supply of labor, ceteris paribus, will:

answer

decrease the market wage rate.

question

In competitive labor markets, firms hire:

answer

the amount of labor needed to produce the profit-maximizing level of output.

question

The demand for labor:

answer

is derived from the demand for the output that labor helps produce.

question

In competitive labor markets, a firm's demand for labor is determined by:

answer

the marginal product of each worker and the price of the product.

question

In a competitive labor market, an increase in the equilibrium wage rate could result from:

answer

an increase in the demand for labor.

question

Ceteris paribus, the demand for farm workers will increase in response to all of the following except an increase in the:

answer

wage paid to farm workers

question

The percentage of total industry output accounted for by the largest firms in an industry is called the:

answer

concentration ratio.

question

Monopolistically competitive firms:

answer

may earn either profits or losses in the short run, but tend to earn zero economic profits in the long run.

question

The typical firm in a perfectly competitive market earns zero economic profit in the long run because:

answer

there are no barriers preventing new firms from entering the market in the long run.

question

This profit-maximizing/loss-minimizing firm will produce _____ units of output and have total revenue of $_____.

answer

180; 2,700

question

This profit-maximizing/loss-minimizing firm will have total cost of $_____ and total fixed cost of $_____.

answer

1,800; 720

question

This profit-maximizing/loss-minimizing firm is:

answer

earning an economic profit of $900 in the short run.

question

This firm should shut down production in the short-run to minimize its loss if the market price falls below:

answer

$4.

question

answer

exiting; decrease; increase

question

A firm is in long-run equilibrium in a perfectly competitive market when:

answer

P = MR = MC = ATC.

question

An individual firm operating in a perfectly competitive market:

answer

is a price-taker and has a demand curve that is perfectly elastic at the price determined by the market forces of demand and supply.

question

If pencil manufacturers are earning positive economic profit in the short run, and there are no barriers to entry into the pencil market, economic theory predicts that:

answer

new firms will enter the market and drive down the price of pencils in the long run, ceteris paribus.

question

Obstacles that make it impossible or unprofitable for new firms to enter a market are:

answer

barriers to entry that may lead to monopoly power.

question

Which of the following statements is true for a pure, unregulated monopolist that cannot price discriminate in short-run equilibrium?

answer

P > MR = MC

question

A natural monopoly can:

answer

supply the entire market at a lower cost than many competing firms.

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Econ 110 Exam 1, 2, 3 Final Question

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