Microeconomics Cengage Questions Chapter 13-16

question

A firm produces 500 units of output at a total cost of $1,500. If total variable costs are $500, then

answer

average fixed cost is $2.
average total cost is $3.
average variable cost is $1.

question

Sami owns a cookie shop. Sami can bake 100 dozen cookies per day. She is considering hiring her husband Nevin to work for her. Together Sami and Nevin can bake 175 dozen cookies per day. What is Nevin's marginal product?

answer

75 dozen cookies

question

Gian Carlo used to work as an architect for $50,000 per year but quit in order to start his own photography business. To invest in his photography business, he withdrew $20,000 from his savings, which paid 2% interest, and borrowed $40,000 from his brother, whom he pays 3% interest per year. Last year Gian Carlo paid $10,000 for supplies and had revenues of $70,000. Gian Carlo asked William the accountant and Henry the economist to calculate his photography business's annual costs.

answer

William says his costs are $11,200, and Henry says his costs are $61,600.

question

Explicit costs

answer

are considered by economists and accountants when measuring a firm's profit.

question

Refer to the table. Assume that fixed costs are $5,000, and variable costs are $250 per worker. For this firm, what are the shapes of the production function and the total-cost curve?

answer

The production function is increasing at a decreasing rate, whereas the total-cost function is increasing at an increasing rate.

question

Refer to the table. What is the marginal product of the third worker?

answer

125 units

question

Refer to the table. If this firm chooses to produce at the efficient scale, it should produce

answer

3 units of output.

question

Wilbur's Bean Emporium serves barbeque sandwiches over the lunch hour. The marginal cost of the 50th barbeque sandwich is $1.50. The average total cost of the 49th sandwich is $1.75. For Wilbur's Bean Emporium, __________ when output is 50 sandwiches.

answer

average total costs are falling

question

Refer to the table. What is the marginal product of the second worker?

answer

150 units

question

Jacklyn carves ice sculptures. She carves and sells 10 sculptures. Her average cost of production per sculpture is $50. She sells each sculpture for a price of $150. Jacklyn's total revenues are

answer

$1,000.

question

Melody owns and runs a hot yoga studio. Assume that Melody has no fixed costs and that her only costs of production are the instructors she hires to teach classes. Melody's output is measured in terms of the number of students who take classes in a given week. When Melody hires one instructor, the studio's output is 400 students. When Melody hires two instructors, the studio's output is 600 students, and when Melody hires three instructors, the studio's output is 700 students. The average total cost when Melody hires two instructors is $10. What is the total cost when Melody hires two instructors?

answer

$6,000

question

Average total cost exceeds average variable costs by the value of marginal cost.

answer

False

question

Gavin observes that his average variable costs of producing widgets are rising. For Gavin's firm,

answer

marginal costs must be higher than average variable costs.

question

Assuming that implicit costs are positive, economic profit is greater than accounting profit.

answer

False

question

Refer to the Figure. Which curve is most likely to represent marginal cost?

answer

Curve A

question

Total cost is the amount a firm receives for its output, and total revenue is the market value of the inputs a firm uses in production.

answer

False

question

Refer to the Figure. Curve A is always declining because

answer

we are dividing fixed costs by higher and higher levels of output.

question

Wilbur's Bean Emporium serves barbeque sandwiches over the lunch hour. The marginal cost of the 50th barbeque sandwich is $2. The average total cost of the 49th sandwich is $1.75. For Wilbur's Bean Emporium, __________ when output is 50 sandwiches.

answer

average total costs are rising

question

Refer to the table. What is the total output when 4 workers are hired?

answer

200 units

question

When average total cost equals marginal cost, marginal cost is at its minimum.

answer

False

question

Forgone interest payments when the money is invested in one's business are an __________ of capital.

answer

opportunity cost

question

Lucy is a young entrepreneur who sells lemonade from her lemonade stand in her driveway on Saturday afternoons. During the first hour, Lucy sells 30 glasses of lemonade and incurs an average variable cost of $0.20. Lucy's _________ for the first hour are __________

answer

variable costs; $6.00

question

When a firm exits a competitive market in the long run

answer

it avoids paying both fixed and variable costs.

question

The condition that firms use to exit a competitive market in the long run is

answer

P < ATC

question

Refer to the figure. How many units of output will be supplied to the market if there are 200 identical firms and a market price of $2.00?

answer

60,000

question

Refer to the Figure. If the price in this competitive market is $30, this firm will

answer

be indifferent between producing and shutting down and will lose $2,400.

question

Which of the following is a likely effect from firms exiting from a competitive market

answer

The profits for existing firms should increase.

question

Firms in a competitive market are considered price takers because

answer

no individual buyer or seller can affect the market price.

question

An increase in market demand in a competitive market will have which effect in the short run?

answer

the market price will increase

question

How do natural monopolies differ from other monopolies?

answer

They do not need to worry about competition eroding their monopoly position.

question

Refer to the Figure. If there are no fixed costs of production, monopoly profit with perfect price discrimination equals

answer

$6,250.

question

Monopoly pricing prevents some mutually beneficial trades from taking place. Which of the following is not true about those unrealized, mutually beneficial trade?

answer

They are offset by the higher profits earned by a monopolist.

question

Refer to the scenario.A movie theater knows that there are two types of moviegoers: senior citizens and everyone else. For a particular movie, there are 20 senior citizens who will pay $6 for a ticket while there are 100 other people who will pay $10 for a ticket. There are 120 seats available in the theater. Suppose the cost to the movie theater of running the movie is $500, which includes the cost of the rights to the movie, a person to run the film, etc.How much additional profit can the movie theater earn by charging each customer their willingness to pay relative to charge a flat price of $10 per ticket?

answer

$120

question

How can the economic efficiency of a monopolist not be measured?

answer

by the monopolist's profit

question

Which of the following is an example of price discrimination?

answer

AAA members receive a discount at certain retail shops if they show their card.

question

Refer to the Figure. In order to maximize profits, the monopolist should charge a price of

answer

$40.

question

Which of the following is not a characteristic of a monopoly?

answer

one buyer

question

Which of these is the best example of a barrier to entry?
a.Miguel offers free portrait sketches on Sunday afternoons as a form of advertising.
b.Florence charges a lower price than anyone else for her photography sessions.
c.Kevin obtains a copyright for the new app he invented.
d.Nicholas charges a higher price than anyone else for tennis lessons.

answer

Kevin obtains a copyright for the new app he invented.

question

Refer to the Table. Suppose the monopolist has fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced. What is the profit-maximizing price?

answer

$18

question

Refer to the figure. Which of the following statements is not true?
a.Considering the relationship between average total cost and marginal cost, the marginal-cost curve for this firm must lie entirely below the average-total-cost curve.
b.The shape of the average-total-cost curve in the future suggests that the firm is experiencing economies of scale.
c.Average total cost would rise if production of this good was divided among more firms.
d.The shape of the average-total-cost curve indicates that this monopoly stems from ownership of a key resource by a single firm.

answer

The shape of the average-total-cost curve indicates that this monopoly stems from ownership of a key resource by a single firm.

question

How does monopoly that engages in perfect price discrimination compare to a competitive market?

answer

In both cases, total social welfare is maximized.

question

Which of the following statements is not correct about how competitive firms differ from monopolies?

answer

Monopolies cannot make positive profit in the long run but competitive firms can.

question

Which of the following is a characteristic of a monopoly?

answer

barriers to entry

question

Refer to the scenario . What is Marco's profit on a typical day?

answer

$1,025

question

Which of the following statements is not correct?

answer

A monopolist can charge any price and sell any quantity that they choose.

question

A monopolistically competitive firm is

answer

inefficient because price is greater than marginal cost.

question

Which of the following is true if the content of the advertisement does not provide any information about the product?

answer

The advertisement can signal the quality of the good.

question

A monopolistically competitive firm and a perfectly competitive firm each operate at excess capacity in the long run.

answer

False

question

Which of the following is true for a monopolistically competitive firm in the long run?

answer

The firm earns zero economic profits and is socially efficient.

question

Which of the following conditions describes an oligopoly?

answer

Firms in the market have some price setting ability.

question

Which of the following is true with respect to firms in markets with highly differentiated products?

answer

Firms will likely spend a substantial amount on advertising.

question

Which of the following markets is most likely to be monopolistically competitive?

answer

A market with differentiated products

question

A firm in a monopolistically competitive market in the long run equates price with average total cost.

answer

True

question

Signaling theory suggests

answer

consumers are not concerned over advertising content but rather use spending as an indicator of quality.

question

The dog food industry spends a substantial amount of revenue on advertising. It is likely that

answer

there is a large variety of dog foods available in the market.

question

Which of the following is considered a likely result from advertising?

answer

Signaling theory suggests that expensive testimonials from celebrities indicate a higher quality product.

question

Which of the following markets is likely to be monopolistically competitive?

answer

pizza

question

Which of the following is true for a monopolistically competitive firm in the long run?

answer

The firm earns zero economic profits and creates a deadweight loss.

question

Which of the following is not an example of an oligopoly?

answer

price taker

question

Which of the following is true with respect to firms in markets with highly differentiated products?

answer

Firms will likely spend a substantial amount on advertising.

question

Which of the following market structures require that price is greater than marginal cost as a profit-maximizing condition?

answer

monopoly and monopolistic competition

question

A monopolistically competitive firm operates

answer

below the efficient scale creating excess capacity in the long run.

question

Which of the following is true for a monopolistically competitive firm in the long run?

answer

The firm earns zero economic profits and creates a deadweight loss.

question

Excess capacity describes a situation where

answer

average total cost is decreasing.

question

A monopolistically competitive firm operates

answer

where average total cost is decreasing in the long run.

question

Which of the following correctly describes the two types of imperfectly competitive markets?

answer

monopolistic competition and oligopoly

question

Which of the following is correct for a monopolist and monopolistically competitive firm?

answer

A monopolist and monopolistically competitive firm each maximize profits when marginal revenue is equal to marginal cost.

1 of 67

question

A firm produces 500 units of output at a total cost of $1,500. If total variable costs are $500, then

answer

average fixed cost is $2.
average total cost is $3.
average variable cost is $1.

question

answer

75 dozen cookies

question

answer

William says his costs are $11,200, and Henry says his costs are $61,600.

question

Explicit costs

answer

are considered by economists and accountants when measuring a firm's profit.

question

Refer to the table. Assume that fixed costs are $5,000, and variable costs are $250 per worker. For this firm, what are the shapes of the production function and the total-cost curve?

answer

The production function is increasing at a decreasing rate, whereas the total-cost function is increasing at an increasing rate.

question

Refer to the table. What is the marginal product of the third worker?

answer

125 units

question

Refer to the table. If this firm chooses to produce at the efficient scale, it should produce

answer

3 units of output.

question

answer

average total costs are falling

question

Refer to the table. What is the marginal product of the second worker?

answer

150 units

question

Jacklyn carves ice sculptures. She carves and sells 10 sculptures. Her average cost of production per sculpture is $50. She sells each sculpture for a price of $150. Jacklyn's total revenues are

answer

$1,000.

question

answer

$6,000

question

Average total cost exceeds average variable costs by the value of marginal cost.

answer

False

question

Gavin observes that his average variable costs of producing widgets are rising. For Gavin's firm,

answer

marginal costs must be higher than average variable costs.

question

Assuming that implicit costs are positive, economic profit is greater than accounting profit.

answer

False

question

Refer to the Figure. Which curve is most likely to represent marginal cost?

answer

Curve A

question

Total cost is the amount a firm receives for its output, and total revenue is the market value of the inputs a firm uses in production.

answer

False

question

Refer to the Figure. Curve A is always declining because

answer

we are dividing fixed costs by higher and higher levels of output.

question

answer

average total costs are rising

question

Refer to the table. What is the total output when 4 workers are hired?

answer

200 units

question

When average total cost equals marginal cost, marginal cost is at its minimum.

answer

False

question

Forgone interest payments when the money is invested in one's business are an __________ of capital.

answer

opportunity cost

question

answer

variable costs; $6.00

question

When a firm exits a competitive market in the long run

answer

it avoids paying both fixed and variable costs.

question

The condition that firms use to exit a competitive market in the long run is

answer

P < ATC

question

Refer to the figure. How many units of output will be supplied to the market if there are 200 identical firms and a market price of $2.00?

answer

60,000

question

Refer to the Figure. If the price in this competitive market is $30, this firm will

answer

be indifferent between producing and shutting down and will lose $2,400.

question

Which of the following is a likely effect from firms exiting from a competitive market

answer

The profits for existing firms should increase.

question

Firms in a competitive market are considered price takers because

answer

no individual buyer or seller can affect the market price.

question

An increase in market demand in a competitive market will have which effect in the short run?

answer

the market price will increase

question

How do natural monopolies differ from other monopolies?

answer

They do not need to worry about competition eroding their monopoly position.

question

Refer to the Figure. If there are no fixed costs of production, monopoly profit with perfect price discrimination equals

answer

$6,250.

question

Monopoly pricing prevents some mutually beneficial trades from taking place. Which of the following is not true about those unrealized, mutually beneficial trade?

answer

They are offset by the higher profits earned by a monopolist.

question

answer

$120

question

How can the economic efficiency of a monopolist not be measured?

answer

by the monopolist's profit

question

Which of the following is an example of price discrimination?

answer

AAA members receive a discount at certain retail shops if they show their card.

question

Refer to the Figure. In order to maximize profits, the monopolist should charge a price of

answer

$40.

question

Which of the following is not a characteristic of a monopoly?

answer

one buyer

question

answer

Kevin obtains a copyright for the new app he invented.

question

Refer to the Table. Suppose the monopolist has fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced. What is the profit-maximizing price?

answer

$18

question

answer

The shape of the average-total-cost curve indicates that this monopoly stems from ownership of a key resource by a single firm.

question

How does monopoly that engages in perfect price discrimination compare to a competitive market?

answer

In both cases, total social welfare is maximized.

question

Which of the following statements is not correct about how competitive firms differ from monopolies?

answer

Monopolies cannot make positive profit in the long run but competitive firms can.

question

Which of the following is a characteristic of a monopoly?

answer

barriers to entry

question

Refer to the scenario . What is Marco's profit on a typical day?

answer

$1,025

question

Which of the following statements is not correct?

answer

A monopolist can charge any price and sell any quantity that they choose.

question

A monopolistically competitive firm is

answer

inefficient because price is greater than marginal cost.

question

Which of the following is true if the content of the advertisement does not provide any information about the product?

answer

The advertisement can signal the quality of the good.

question

A monopolistically competitive firm and a perfectly competitive firm each operate at excess capacity in the long run.

answer

False

question

Which of the following is true for a monopolistically competitive firm in the long run?

answer

The firm earns zero economic profits and is socially efficient.

question

Which of the following conditions describes an oligopoly?

answer

Firms in the market have some price setting ability.

question

Which of the following is true with respect to firms in markets with highly differentiated products?

answer

Firms will likely spend a substantial amount on advertising.

question

Which of the following markets is most likely to be monopolistically competitive?

answer

A market with differentiated products

question

A firm in a monopolistically competitive market in the long run equates price with average total cost.

answer

True

question

Signaling theory suggests

answer

consumers are not concerned over advertising content but rather use spending as an indicator of quality.

question

The dog food industry spends a substantial amount of revenue on advertising. It is likely that

answer

there is a large variety of dog foods available in the market.

question

Which of the following is considered a likely result from advertising?

answer

Signaling theory suggests that expensive testimonials from celebrities indicate a higher quality product.

question

Which of the following markets is likely to be monopolistically competitive?

answer

pizza

question

Which of the following is true for a monopolistically competitive firm in the long run?

answer

The firm earns zero economic profits and creates a deadweight loss.

question

Which of the following is not an example of an oligopoly?

answer

price taker

question

Which of the following is true with respect to firms in markets with highly differentiated products?

answer

Firms will likely spend a substantial amount on advertising.

question

Which of the following market structures require that price is greater than marginal cost as a profit-maximizing condition?

answer

monopoly and monopolistic competition

question

A monopolistically competitive firm operates

answer

below the efficient scale creating excess capacity in the long run.

question

Which of the following is true for a monopolistically competitive firm in the long run?

answer

The firm earns zero economic profits and creates a deadweight loss.

question

Excess capacity describes a situation where

answer

average total cost is decreasing.

question

A monopolistically competitive firm operates

answer

where average total cost is decreasing in the long run.

question

Which of the following correctly describes the two types of imperfectly competitive markets?

answer

monopolistic competition and oligopoly

question

Which of the following is correct for a monopolist and monopolistically competitive firm?

answer

A monopolist and monopolistically competitive firm each maximize profits when marginal revenue is equal to marginal cost.

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Microeconomics Cengage Questions Chapter 13-16

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