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ECON 2020 Exam 3 Q & A

question
A monopoly that does not practice price discrimination produces ___________ output than a competitive market would and charges a ___________ price than a competitive market would.

a. less; higher
b. less; lower
c. more; higher
d. more; lower
answer
a. less; higher
question
A natural monopoly emerges in a market when there are

a. economic losses in a market
b. opportunities for price discrimination
c. economies of scale
d. external diseconomies
answer
c. economies of scale
question
The table shows the total cost of producing monitors in Marion's factory. The market for monitors is perfectly competitive, and monitors currently sell for $260 each. What are Marion's fixed costs of production?

a. $200
b. $250
c. $100
d. $150
answer
c. $100
question
What is the average variable cost of producing 5 monitors at Marion's factory?

a. $125
b. $1.92
c. $220
d. $225
answer
c. $220
question
What is Marion's profit‐maximizing output?

a. 5 monitors an hour
b. 3 monitors an hour
c. 2 monitors an hour
d. 0 monitor an hour
answer
b. 3 monitors an hour
question
In the long run for a perfectly competitive market, profit is

a. Positive
b. Negative
c. Zero
d. Either a or b
answer
c. Zero
question
If the price falls below the AVC of production, a competitive firm will

a. Shut down
b. Increase production
c. Lower the price of output
d. Raise the price of output
answer
a. Shut down
question
The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot Pillows, a monopoly producer of pillows stuffed with parrot feathers. What is the deadweight loss associated with Paul's monopoly?

a. $20
b. $2,000
c. $15,000
d. $200
answer
c. $15,000
question
In which of the following industries there are no barriers to entry?

a. Monopoly
b. perfect competition
c. oligopoly
d. both (b) and (c)
answer
d. both (b) and (c)
question
If firms in a perfectly competitive market are making positive economic profit, firms will begin to _________ the market, and the profit of the remaining firms will ____________.

a. exit; rise
b. exit; fall
c. enter; rise
d. enter; fall
answer
a. exit; rise
question
Based on the graph of costs for the perfectly competitive firm below, if marginal revenue is $55, the firm will maximize its profit by producing ______ units of output.

a. 900
b. 100
c. 900‐100
d. 12
answer
b. 100
question
If the price in the market falls to $50, what profit will the perfectly competitive firm in the above problem earn?

a. $500
b. $14000
c. ‐$14000
d. $0
answer
...
question
Tom has his own business of selling hotdogs at tailgating parties for the Auburn football games. Alternatively, he could also work as a chef in a fancy French restaurant in Atlanta making $60,000 a year. If he makes revenues of $10,000 selling hot dogs, and incurs expenses of $500, what is his economic profit?

a. -$50,500
b. $49,500
c. $60,000
d. -$50,000
answer
a. -$50,500
question
Which short‐run curve is NOT U‐shaped?

a. Average total cost
b. Marginal cost
c. Average variable cost
d. Average fixed cost
answer
d. Average fixed cost
question
If a company triples its plant size and its average cost decreases, then the firm is experiencing:

a. diseconomies of scale
b. decreasing marginal returns
c. increasing marginal returns
d. economies of scale
answer
d. economies of scale
question
If the marginal product curve is __________ the average product curve, then the average product curve is __________.

a. above; falling
b. above; rising
c. below; rising
d. None of the above
answer
b. above; rising
question
Using the table below, when do diminishing returns set in?

a. After the 2nd worker is hired
b. After the 3rd worker is hired
c. After the 4th worker is hired
d. After the 5th worker is hired
answer
a. After the 2nd worker is hired
question
In the long run, some firms will exit the market if the price of the good is less than

a. marginal cost
b. average total cost
c. marginal revenue
d. average revenue
answer
b. average total cost
question
In a perfectly competitive industry the demand curve faced by a single firm is

a. Perfectly inelastic
b. Perfectly elastic
c. Positively sloped
d. Negatively sloped
answer
b. Perfectly elastic
question
In a perfectly competitive market, if a firm finds it is producing at a level of output such that its marginal cost exceeds its price, it will

a. Immediately shutdown for the short-run
b. Be maximizing profits
c. Increase its output to increase profits
d. Decrease its output to increase profits
answer
d. Decrease its output to increase profits
1 of 20
question
A monopoly that does not practice price discrimination produces ___________ output than a competitive market would and charges a ___________ price than a competitive market would.

a. less; higher
b. less; lower
c. more; higher
d. more; lower
answer
a. less; higher
question
A natural monopoly emerges in a market when there are

a. economic losses in a market
b. opportunities for price discrimination
c. economies of scale
d. external diseconomies
answer
c. economies of scale
question
The table shows the total cost of producing monitors in Marion's factory. The market for monitors is perfectly competitive, and monitors currently sell for $260 each. What are Marion's fixed costs of production?

a. $200
b. $250
c. $100
d. $150
answer
c. $100
question
What is the average variable cost of producing 5 monitors at Marion's factory?

a. $125
b. $1.92
c. $220
d. $225
answer
c. $220
question
What is Marion's profit‐maximizing output?

a. 5 monitors an hour
b. 3 monitors an hour
c. 2 monitors an hour
d. 0 monitor an hour
answer
b. 3 monitors an hour
question
In the long run for a perfectly competitive market, profit is

a. Positive
b. Negative
c. Zero
d. Either a or b
answer
c. Zero
question
If the price falls below the AVC of production, a competitive firm will

a. Shut down
b. Increase production
c. Lower the price of output
d. Raise the price of output
answer
a. Shut down
question
The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot Pillows, a monopoly producer of pillows stuffed with parrot feathers. What is the deadweight loss associated with Paul's monopoly?

a. $20
b. $2,000
c. $15,000
d. $200
answer
c. $15,000
question
In which of the following industries there are no barriers to entry?

a. Monopoly
b. perfect competition
c. oligopoly
d. both (b) and (c)
answer
d. both (b) and (c)
question
If firms in a perfectly competitive market are making positive economic profit, firms will begin to _________ the market, and the profit of the remaining firms will ____________.

a. exit; rise
b. exit; fall
c. enter; rise
d. enter; fall
answer
a. exit; rise
question
Based on the graph of costs for the perfectly competitive firm below, if marginal revenue is $55, the firm will maximize its profit by producing ______ units of output.

a. 900
b. 100
c. 900‐100
d. 12
answer
b. 100
question
If the price in the market falls to $50, what profit will the perfectly competitive firm in the above problem earn?

a. $500
b. $14000
c. ‐$14000
d. $0
answer
...
question
Tom has his own business of selling hotdogs at tailgating parties for the Auburn football games. Alternatively, he could also work as a chef in a fancy French restaurant in Atlanta making $60,000 a year. If he makes revenues of $10,000 selling hot dogs, and incurs expenses of $500, what is his economic profit?

a. -$50,500
b. $49,500
c. $60,000
d. -$50,000
answer
a. -$50,500
question
Which short‐run curve is NOT U‐shaped?

a. Average total cost
b. Marginal cost
c. Average variable cost
d. Average fixed cost
answer
d. Average fixed cost
question
If a company triples its plant size and its average cost decreases, then the firm is experiencing:

a. diseconomies of scale
b. decreasing marginal returns
c. increasing marginal returns
d. economies of scale
answer
d. economies of scale
question
If the marginal product curve is __________ the average product curve, then the average product curve is __________.

a. above; falling
b. above; rising
c. below; rising
d. None of the above
answer
b. above; rising
question
Using the table below, when do diminishing returns set in?

a. After the 2nd worker is hired
b. After the 3rd worker is hired
c. After the 4th worker is hired
d. After the 5th worker is hired
answer
a. After the 2nd worker is hired
question
In the long run, some firms will exit the market if the price of the good is less than

a. marginal cost
b. average total cost
c. marginal revenue
d. average revenue
answer
b. average total cost
question
In a perfectly competitive industry the demand curve faced by a single firm is

a. Perfectly inelastic
b. Perfectly elastic
c. Positively sloped
d. Negatively sloped
answer
b. Perfectly elastic
question
In a perfectly competitive market, if a firm finds it is producing at a level of output such that its marginal cost exceeds its price, it will

a. Immediately shutdown for the short-run
b. Be maximizing profits
c. Increase its output to increase profits
d. Decrease its output to increase profits
answer
d. Decrease its output to increase profits
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