Micro Final Practice (Exam 3 Questions)

Question 1 of 35

1

Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
At Q = 999, the firm's profits equal...

Select one of the following:

$5,000.
$5,030.
$4,990.
$5,020

Explanation

Question 2 of 35

1

Monopolistic competition is an inefficient market structure because...

Select one of the following:

it has a deadweight loss, just as monopoly does.
long-run profits are zero due to free entry.
marginal revenue equals marginal cost.
All the answers are correct.

Explanation

Question 3 of 35

1

A monopoly can earn positive profits because it...

Select one of the following:

can set the price it charges for its output but faces a horizontal demand curve.
can sell unlimited quantities at any price it chooses.
can maintain a price such that total revenue will exceed total costs.
takes the market price as given and can sell unlimited quantities.

Explanation

Question 4 of 35

1

The fundamental source of monopoly power is...

Select one of the following:

decreasing average total cost.
profit.
a product without close substitutes.
barriers to entry.

Explanation

Question 5 of 35

1

Roger owns a small health store that sells vitamins in a perfectly competitive market. If vitamins sell for $12 per bottle and the average total cost per bottle is $11.50 at the profit-maximizing output level, then in the long run...

Select one of the following:

the equilibrium price per bottle will rise.
average total costs will rise.
more firms will enter the market.
some firms will exit from the market.

Explanation

Question 6 of 35

1

The average-fixed-cost curve...

Select one of the following:

is constant.
intersects marginal cost at the minimum of average fixed cost.
is always decreasing.
intersects marginal cost at the minimum of marginal cost.

Explanation

Question 7 of 35

1

If a firm in a competition market doubles it number of units sold, total revenue for the firm will///

Select one of the following:

double.
may increase or decrease depending on the price elasticity of demand.
increase but by less than double.
more than double.

Explanation

Question 8 of 35

1

What is the marginal cost of the 5th unit?

Select one of the following:

$68
$80
$55
$60

Explanation

Question 9 of 35

1

Suppose that the organic-produce industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will. ..

Select one of the following:

cause the remaining firms to collude so that they can produce more efficiently.
cause the market supply to decline and the price of organic produce to rise.
cause firms in the organic-produce industry to suffer long-run economic losses.
shift the demand curve outward so that price will rise to the level of production cost.

Explanation

Question 10 of 35

1

Suppose that a firm in a competitive market has the following cost curves (see picture)
If the market price is $4.00, the firm will earn...

Select one of the following:

zero economic profits in the short run.
negative economic profits and shut down.
negative economic profits in the short run but remain in business.
positive economic profits in the short run.

Explanation

Question 11 of 35

1

What is the marginal revenue for the monopolist for the sixth unit sold?

Select one of the following:

$11
$5
$3
$17

Explanation

Question 12 of 35

1

Which of the following statements is correct?

Select one of the following:

Firms with some degree of monopoly power are common, but firms with substantial monopoly power are rare.
Firms with some degree of monopoly power are rare, as are firms with substantial monopoly power.
Firms with some degree of monopoly power are rare, but firms with substantial monopoly power are common.
Firms with some degree of monopoly power are common, as are firms with substantial monopoly power.

Explanation

Question 13 of 35

1

Which of the following is NOT a reason for the existence of a monopoly?

Select one of the following:

patents
diseconomies of scale
copyrights
sole ownership of a key resource

Explanation

Question 14 of 35

1

A monopolist maximizes profits by...

Select one of the following:

A) producing an output level where marginal revenue equals marginal cost.
B) charging a price equal to marginal revenue and marginal cost.
C) charging a price where marginal cost equals average total cost.
Both A and B are correct.

Explanation

Question 15 of 35

1

Suppose a profit-maximizing firm in a competitive market produces rubber banks. When the market price for rubber bands rises above the minimum of its average variable cost, but still lies below the minimum of average total cost, in the short run the firm will...

Select one of the following:

raise the price of its product.
earn both economic and accounting profits.
shut down.
experience losses but will continue to produce rubber bands.

Explanation

Question 16 of 35

1

Sonia opened a yoga studio where she teaches classes and sells yoga clothing. Fixed costs for Sonia's yoga studio include the cost of the...
(i) Tank tops
(ii) Wages paid to the other yoga instructors.
(iii) Lease on the studio space.
(iv) Insurance that the landlord requires Sonia to carry for the studio.

Select one of the following:

(i) and (ii) only
(i) only
(iii) and (iv) only
(i), (ii), (iii), and (iv)

Explanation

Question 17 of 35

1

One way in which monopolistic competition differs from oligopoly is that...

Select one of the following:

in oligopoly markets there are only a few sellers.
all firms in an oligopoly eventually earn zero economic profits.
there are no barriers to entry in oligopolies.
strategic interactions between firms are rate in oligopolies.

Explanation

Question 18 of 35

1

The Wacky Widget company has total fixed costs of $100,000 per year. The firm's average variable cost is $10 for 10,000 widgets. At that level of output, the firm's average total costs equal...

Select one of the following:

$25
$10
$20
$15

Explanation

Question 19 of 35

1

A typical firm in the US economy would be classified as...

Select one of the following:

a duopolist.
imperfectly competitive.
an oligopolist.
perfectly competitive.

Explanation

Question 20 of 35

1

Suppose that a firm's long-run average total costs of producing small commuter jet airplanes increases as it produces between 2,000 and 4,000 airplanes. For this range of output, the firm is experiencing...

Select one of the following:

constant returns to scale.
diseconomies of scale.
specialization.
economies of scale.

Explanation

Question 21 of 35

1

McDonald's restaurants has recently announced intentions to open a new restaurant in Smalltown, Indiana. Assume that the fast-food restaurant market in Smalltown is characterized by monopolistic competition.
As a result of the new McDonald's, residents of Smalltown are likely to benefit from...

Select one of the following:

A) a product-variety externality.
B) a business stealing externality.
C) the fact that McDonald's will increase its production to achieve the efficient scale.
Both B and C are correct.

Explanation

Question 22 of 35

1

Which of the following statements is NOT correct?

Select one of the following:

Monopolistic competition is similar to perfect competition because both market structures are characterized by free entry.
Monopolistic competition is similar to perfect competition because both market structures are characterized by many sellers.
Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry.
Monopolistic competition is similar to monopoly because in each market structure the firm can charge a price above marginal costs.

Explanation

Question 23 of 35

1

The story of the prisoners' dilemma shows why...

Select one of the following:

oligopolies can fail to cooperate, even when cooperation is in their best interest.
predatory pricing is clearly not in society's best interest.
oligopolies can fail to act independently, even when independent decision-making is in their best interest.
economists are unanimous in condemning resale price maintenance, since it inevitably reduces competition.

Explanation

Question 24 of 35

1

The prisoner's dilemma game...

Select one of the following:

is a game in which neither player has a dominant strategy.
provides insight into why cooperation is individually rational.
is a game in which exactly one of the two players has a dominant strategy.
provides insight into why cooperation is difficult.

Explanation

Question 25 of 35

1

Tom's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $80 for 10,000 tents. At that level of output, the firm's average total costs equal. ..

Select one of the following:

$90
$110
$100
$80

Explanation

Question 26 of 35

1

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 a leased computer equipment that costs $480 a month.
What is the marginal cost of creating the tenth instructional module in a given month?

Select one of the following:

$1,250
$2,500
$3,060
$900

Explanation

Question 27 of 35

1

As the number of firms in a oligopoly market...

Select one of the following:

decreases, the price charged by firms likely decreases.
decreases, the market approaches the competitive market outcome.
increases, the market approaches the competitive market outcome.
increases, the market approaches the monopoly outcome.

Explanation

Question 28 of 35

1

If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to...

Select one of the following:

$0
$1,562.50
$6,250
$3,125

Explanation

Question 29 of 35

1

In the transition from the short run to the long run, the number of firms in a competitive industry is...

Select one of the following:

able to adjust to market conditions.
decreasing.
fixed.
increasing at a constant rate.

Explanation

Question 30 of 35

1

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which...

Select one of the following:

total revenue is equal to variable cost.
total revenue is equal to total cost.
profit is maximized.
total revenue is equal to fixed cost.

Explanation

Question 31 of 35

1

A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average revenue is $60, and its average total costs is $34.
At Q = 500, the firm's marginal cost is...

Select one of the following:

$34
greater than $34
less than $30
$30

Explanation

Question 32 of 35

1

What is the average total cost of producing 2 units of output?

Select one of the following:

$24
$48
$15
$19

Explanation

Question 33 of 35

1

Which of the figures represents the marginal cost curve for a typical firm?

Select one of the following:

Figure 1
Figure 2
Figure 3
Figure 4

Explanation

Question 34 of 35

1

The amount of money that a wheat farmer could have earned if he had planted barely instead of wheat is...

Select one of the following:

An accounting cost.
an explicit cost.
forgone accounting profit.
an implicit cost.

Explanation

Question 35 of 35

1

To maximize total surplus, a benevolent social planner would choose which of the following outcomes?

Select one of the following:

Q = 30 and P = 30
Q = 30 and P = 60
Q = 60 and P = 30
Q = 45 and P = 45

	Created by tran.melissa2015 over 8 years ago

Practice for the final in micro. includes only questions from exam 3.

Micro Final Practice (Exam 3 Questions)

Question 1 of 35

Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. At Q = 999, the firm's profits equal...

Select one of the following:

Explanation

Question 2 of 35

Monopolistic competition is an inefficient market structure because...

Select one of the following:

Explanation

Question 3 of 35

A monopoly can earn positive profits because it...

Select one of the following:

Explanation

Question 4 of 35

The fundamental source of monopoly power is...

Select one of the following:

Explanation

Question 5 of 35

Roger owns a small health store that sells vitamins in a perfectly competitive market. If vitamins sell for $12 per bottle and the average total cost per bottle is $11.50 at the profit-maximizing output level, then in the long run...

Select one of the following:

Explanation

Question 6 of 35

The average-fixed-cost curve...

Select one of the following:

Explanation

Question 7 of 35

If a firm in a competition market doubles it number of units sold, total revenue for the firm will///

Select one of the following:

Explanation

Question 8 of 35

What is the marginal cost of the 5th unit?

Select one of the following:

Explanation

Question 9 of 35

Suppose that the organic-produce industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will. ..

Select one of the following:

Explanation

Question 10 of 35

Suppose that a firm in a competitive market has the following cost curves (see picture) If the market price is $4.00, the firm will earn...

Select one of the following:

Explanation

Question 11 of 35

What is the marginal revenue for the monopolist for the sixth unit sold?

Select one of the following:

Explanation

Question 12 of 35

Which of the following statements is correct?

Select one of the following:

Explanation

Question 13 of 35

Which of the following is NOT a reason for the existence of a monopoly?

Select one of the following:

Explanation

Question 14 of 35

A monopolist maximizes profits by...

Select one of the following:

Explanation

Question 15 of 35

Suppose a profit-maximizing firm in a competitive market produces rubber banks. When the market price for rubber bands rises above the minimum of its average variable cost, but still lies below the minimum of average total cost, in the short run the firm will...

Select one of the following:

Explanation

Question 16 of 35

Select one of the following:

Explanation

Question 17 of 35

One way in which monopolistic competition differs from oligopoly is that...

Select one of the following:

Explanation

Question 18 of 35

The Wacky Widget company has total fixed costs of $100,000 per year. The firm's average variable cost is $10 for 10,000 widgets. At that level of output, the firm's average total costs equal...

Select one of the following:

Explanation

Question 19 of 35

A typical firm in the US economy would be classified as...

Select one of the following:

Explanation

Question 20 of 35

Suppose that a firm's long-run average total costs of producing small commuter jet airplanes increases as it produces between 2,000 and 4,000 airplanes. For this range of output, the firm is experiencing...

Select one of the following:

Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
At Q = 999, the firm's profits equal...

Suppose that a firm in a competitive market has the following cost curves (see picture)
If the market price is $4.00, the firm will earn...

McDonald's restaurants has recently announced intentions to open a new restaurant in Smalltown, Indiana. Assume that the fast-food restaurant market in Smalltown is characterized by monopolistic competition.
As a result of the new McDonald's, residents of Smalltown are likely to benefit from...

A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average revenue is $60, and its average total costs is $34.
At Q = 500, the firm's marginal cost is...