Exam 03 (part 01) - Custom Scholars
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# Exam 03 (part 01)

question
Which of the following is a necessary characteristic of a monopoly?
answer
b. The firm is the sole seller of its product.
question
Refer to Table 14-7. If the market price is \$16, this firm will
answer
b. produce 5 units of output in the short run and face competition from new market entrants in the long run.
question
Refer to Table 13-10. How many instructional modules are produced when marginal cost is \$1,300?
answer
8
question
Refer to Figure 16-6. In response to the situation represented by the figure, we would expect
answer
some of the firms that are currently in the market to exit.
question
For a firm to price discriminate,
answer
c. it must have some market power.
question
Refer to Figure 13-6. At levels of output less than M, the firm experiences
answer
constant returns to scale. (incorrect)
question
Refer to Figure 16-2. Assuming the firm is maximizing profit, this firm is operating
answer
a. in the short run and earning a positive economic profit.
question
Scenario 14-2
The information below applies to a competitive firm that sells its output for \$40 per unit.

• When the firm produces and sells 150 units of output, its average total cost is \$24.50.
• When the firm produces and sells 151 units of output, its average total cost is \$24.55.

Refer to Scenario 14-2 . Let Q represent the quantity of output. Which of the following magnitudes has the same value at Q = 150 and at Q = 151?
answer
b. Average revenue
question
Which of the following expressions is correct for a competitive firm?
answer
a. Profit = (quantity of output) × (price − average total cost)
question
A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it
answer
b. can prevent children from buying the lower-priced tickets and selling them to adults.
question
If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would
answer
a. be horizontal.
question
Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for \$600 a month and has leased computer equipment that costs \$480 a month.

Refer to Table 13-10. What is the marginal cost of creating the tenth instructional module in a given month?
answer
\$2,500
question
The following table shows the production costs for The Flying Elvis Copter Rides.

Refer to Table 13-7. What is the value of E?
answer
b. \$100
question
Refer to Figure 15-3. A profit-maximizing monopoly will produce an output level of
answer
b. Q3.
question
Scenario 14-2
The information below applies to a competitive firm that sells its output for \$40 per unit.

• When the firm produces and sells 150 units of output, its average total cost is \$24.50.
• When the firm produces and sells 151 units of output, its average total cost is \$24.55.

Refer to Scenario 14-2 . Suppose the firm is currently producing and selling 150 units of output. Should the firm increase its output to 151 units?
answer
c. Yes, because the marginal revenue exceeds the marginal cost.
question
Suppose that for a particular business there are no implicit costs. Then
answer
c. accounting profit will be the same as economic profit.
question
Scenario 14-3
Victor is the recipient of \$1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the \$1 million in a risk-free bond fund, he could have earned \$100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn \$75,000 per year.

Refer to Scenario 14-3. What is Victor's opportunity costs of operating his new business?
answer
b. \$175,000
question
Scenario 16-2
Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition.

Refer to Scenario 16-2. As a result of the new restaurant, consumers in Boston are likely to experience a
answer
b. product-variety externality, which is a positive externality.
question
Table 13-7The following table shows the production costs for The Flying Elvis Copter Rides.

Refer to Table 13-7. What is the value of C?
answer
c. \$100
question
Monopoly firms face
answer
a. downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.
question
A firm that produces and sells furniture gets to choose
answer
c. how many workers to hire in both the short run and the long run.
question
Refer to Figure 16-5. In order to maximize its profit, the firm will choose to produce
answer
a. 100 units of output.
question
Average total cost is very high when a small amount of output is produced because
answer
d. average fixed cost is high.
question
Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to
answer
c. remain unchanged.
question
A monopolist can sell 300 units of output for \$45 per unit. Alternatively, it can sell 301 units of output for \$44.60 per unit. The marginal revenue of the 301st unit of output is
answer
a. -\$75.40.
question
The figure is drawn for a monopolistically competitive firm.
Refer to Figure 16-6. In order to maximize its profit, the firm will choose to produce
answer
a. 100 units of output.
question
Figure 15-5
The following graph depicts the market situation for a monopoly pastry shop called Bearclaws.

Refer to Figure 15-5. Given that Bearclaws chooses the profit-maximizing price and quantity, what profit level will it obtain?
answer
b. \$280.
question
Refer to Figure 16-3. Assume the firm in the figure is currently producing 20 units of output and charging \$925. The firm
answer
a. will increase its profits if it lowers its price and expands its production level.
question
Refer to Table 14-1. If the firm doubles its output from 3 to 6 units, total revenue will
answer
b. increase by exactly \$15.
question
A monopoly can earn positive profits because it
answer
b. can maintain a price such that total revenues will exceed total costs.
question
In a competitive market the price is \$8. A typical firm in the market has ATC = \$6, AVC = \$5, and MC = \$8. How much economic profit is the firm earning in the short run?
answer
b. \$2 per unit
question
The following table shows the production costs for The Flying Elvis Copter Rides.
Refer to Table 13-7. What is the value of A?
answer
\$50
question
Monopolistic competition is considered inefficient because
answer
price exceeds marginal cost.
question
Which of the following industries has the highest concentration ratio?
answer
c. Household laundry equipment
question
Which of the following conditions is characteristic of a monopolistically competitive firm in both the short run and the long run?
answer
b. P > MC
question
When fixed costs are ignored because they are irrelevant to a business's production decision, they are called
answer
d. sunk costs.
question
In a market that is characterized by imperfect competition,
answer
c. there are at least a few firms that compete with one another.
question
Refer to Figure 15-4. How much output will the monopolist produce in order to maximize profit ?
answer
b. W
question
To maximize total surplus with a monopoly firm, a benevolent social planner would choose the level of output where
answer
d. MC intersects the demand curve.
question
Suppose that a firm in a competitive market has the following cost curves:
Refer to Figure 14-1. The firm should shut down if the market price is
answer
c. less than \$6.
1 of 40
question
Which of the following is a necessary characteristic of a monopoly?
answer
b. The firm is the sole seller of its product.
question
Refer to Table 14-7. If the market price is \$16, this firm will
answer
b. produce 5 units of output in the short run and face competition from new market entrants in the long run.
question
Refer to Table 13-10. How many instructional modules are produced when marginal cost is \$1,300?
answer
8
question
Refer to Figure 16-6. In response to the situation represented by the figure, we would expect
answer
some of the firms that are currently in the market to exit.
question
For a firm to price discriminate,
answer
c. it must have some market power.
question
Refer to Figure 13-6. At levels of output less than M, the firm experiences
answer
constant returns to scale. (incorrect)
question
Refer to Figure 16-2. Assuming the firm is maximizing profit, this firm is operating
answer
a. in the short run and earning a positive economic profit.
question
Scenario 14-2
The information below applies to a competitive firm that sells its output for \$40 per unit.

• When the firm produces and sells 150 units of output, its average total cost is \$24.50.
• When the firm produces and sells 151 units of output, its average total cost is \$24.55.

Refer to Scenario 14-2 . Let Q represent the quantity of output. Which of the following magnitudes has the same value at Q = 150 and at Q = 151?
answer
b. Average revenue
question
Which of the following expressions is correct for a competitive firm?
answer
a. Profit = (quantity of output) × (price − average total cost)
question
A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it
answer
b. can prevent children from buying the lower-priced tickets and selling them to adults.
question
If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would
answer
a. be horizontal.
question
Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for \$600 a month and has leased computer equipment that costs \$480 a month.

Refer to Table 13-10. What is the marginal cost of creating the tenth instructional module in a given month?
answer
\$2,500
question
The following table shows the production costs for The Flying Elvis Copter Rides.

Refer to Table 13-7. What is the value of E?
answer
b. \$100
question
Refer to Figure 15-3. A profit-maximizing monopoly will produce an output level of
answer
b. Q3.
question
Scenario 14-2
The information below applies to a competitive firm that sells its output for \$40 per unit.

• When the firm produces and sells 150 units of output, its average total cost is \$24.50.
• When the firm produces and sells 151 units of output, its average total cost is \$24.55.

Refer to Scenario 14-2 . Suppose the firm is currently producing and selling 150 units of output. Should the firm increase its output to 151 units?
answer
c. Yes, because the marginal revenue exceeds the marginal cost.
question
Suppose that for a particular business there are no implicit costs. Then
answer
c. accounting profit will be the same as economic profit.
question
Scenario 14-3
Victor is the recipient of \$1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the \$1 million in a risk-free bond fund, he could have earned \$100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn \$75,000 per year.

Refer to Scenario 14-3. What is Victor's opportunity costs of operating his new business?
answer
b. \$175,000
question
Scenario 16-2
Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition.

Refer to Scenario 16-2. As a result of the new restaurant, consumers in Boston are likely to experience a
answer
b. product-variety externality, which is a positive externality.
question
Table 13-7The following table shows the production costs for The Flying Elvis Copter Rides.

Refer to Table 13-7. What is the value of C?
answer
c. \$100
question
Monopoly firms face
answer
a. downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.
question
A firm that produces and sells furniture gets to choose
answer
c. how many workers to hire in both the short run and the long run.
question
Refer to Figure 16-5. In order to maximize its profit, the firm will choose to produce
answer
a. 100 units of output.
question
Average total cost is very high when a small amount of output is produced because
answer
d. average fixed cost is high.
question
Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to
answer
c. remain unchanged.
question
A monopolist can sell 300 units of output for \$45 per unit. Alternatively, it can sell 301 units of output for \$44.60 per unit. The marginal revenue of the 301st unit of output is
answer
a. -\$75.40.
question
The figure is drawn for a monopolistically competitive firm.
Refer to Figure 16-6. In order to maximize its profit, the firm will choose to produce
answer
a. 100 units of output.
question
Figure 15-5
The following graph depicts the market situation for a monopoly pastry shop called Bearclaws.

Refer to Figure 15-5. Given that Bearclaws chooses the profit-maximizing price and quantity, what profit level will it obtain?
answer
b. \$280.
question
Refer to Figure 16-3. Assume the firm in the figure is currently producing 20 units of output and charging \$925. The firm
answer
a. will increase its profits if it lowers its price and expands its production level.
question
Refer to Table 14-1. If the firm doubles its output from 3 to 6 units, total revenue will
answer
b. increase by exactly \$15.
question
A monopoly can earn positive profits because it
answer
b. can maintain a price such that total revenues will exceed total costs.
question
In a competitive market the price is \$8. A typical firm in the market has ATC = \$6, AVC = \$5, and MC = \$8. How much economic profit is the firm earning in the short run?
answer
b. \$2 per unit
question
The following table shows the production costs for The Flying Elvis Copter Rides.
Refer to Table 13-7. What is the value of A?
answer
\$50
question
Monopolistic competition is considered inefficient because
answer
price exceeds marginal cost.
question
Which of the following industries has the highest concentration ratio?
answer
c. Household laundry equipment
question
Which of the following conditions is characteristic of a monopolistically competitive firm in both the short run and the long run?
answer
b. P > MC
question
When fixed costs are ignored because they are irrelevant to a business's production decision, they are called
answer
d. sunk costs.
question
In a market that is characterized by imperfect competition,
answer
c. there are at least a few firms that compete with one another.
question
Refer to Figure 15-4. How much output will the monopolist produce in order to maximize profit ?
answer
b. W
question
To maximize total surplus with a monopoly firm, a benevolent social planner would choose the level of output where
answer
d. MC intersects the demand curve.
question
Suppose that a firm in a competitive market has the following cost curves:
Refer to Figure 14-1. The firm should shut down if the market price is
answer
c. less than \$6.

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