Question 1

-According to the information provided in Exhibit K-11, the marginal revenue of the 12th unit of output equals

Accepted Answer

A)   $480
B)   $40
C)   $440
D)   $4
E)   an unknown amount because we have not been given the marginal costF) B) and D)
G) B) and E)

Question 2

-In Exhibit K-5, which represents a monopoly, an economist would argue that

Accepted Answer

A)   output is lower and price is higher than in perfect competition
B)   product price should be set at $6
C)   output should be 6 units from society's perspective
D)   an output of 10 should be chosen by this monopolist
E)   the monopolist's interests are compatible with society'sF) B) and E)
G) A) and B)

Question 3

If a firm makes normal profit, the entrepreneur must earn a wage that

Accepted Answer

A)   is at least as much as he can earn elsewhere
B)   must be less than he can earn elsewhere
C)   equals the economic profit generated by the firm
D)   lowers the opportunity cost of finding alternative work
E)   is enough for him to live onF) B) and D)
G) B) and E)

Question 4

Unlike firms in perfect competition, monopolists have control over

Accepted Answer

A)   the costs of production
B)   what technology to use
C)   what price to charge
D)   how much to produce
E)   the choice of plant sizeF) A) and D)
G) B) and E)

Question 5

Show, or explain, why a monopolist with positive marginal costs charges a price on the elastic range ofhis/her demand curve.

Accepted Answer

In the elastic range of demand...

Question 6

The entry of new firms into a monopolistically competitive market makes the demand curves for the existing firms more elastic.

Accepted Answer

A) True 
 B)False

Question 7

When all perfectly competitive firms in a market or all monopolistically competitive firms in a market make zero economic profit,

Accepted Answer

A)   no firms will enter the market
B)   all firms will exit the market
C)   a monopolist will take over the market
D)   the market demand shifts to the left
E)   the price of the good produced will increase in the long runF) C) and E)
G) A) and C)

Question 8

Craig quit a job earning $12,000 per year to open his own lawn-care service. Yesterday, he was offered a job earning $20,000 per year at Home Depot, but he turned it down to continue running his lawn-care service. Assuming that his total revenue (= P × Q) has not changed, (a) explain the impact of this job offer on Craig's economic profit, and (b) explain the impact of this job offer on his normal profit.

Accepted Answer

a. The opportunity cost of Craig's time ...

Question 9

If a firm in a perfectly competitive industry maximizes profit by producing 100 units and the marginal cost of the 100th unit is $23, the price is

Accepted Answer

A)   more than $23 since it's earning an economic profit
B)   $0.23
C)   $2,300
D)   $23
E)   not able to be calculated from the data givenF) A) and D)
G) A) and C)

Question 10

A firm in a perfectly competitive market

Accepted Answer

A)   can raise the price to sell more but by selling more will end up earning less economic profit than it had earned before the price increase
B)   can cut the price to sell more but by selling more will end up earning less economic profit than it had earned before the price cut
C)   can increase its supply to lower the price and thereby raise its economic profit
D)   can decrease its supply to raise the price and thereby raise its economic profit
E)   is a price taker, that is, accepts the market price for its good as givenF) A) and E)
G) B) and D)

Question 11

The market price in a perfectly competitive industry is $13. A firm is considering increasing its output from 30 units to 40 units. The marginal revenue of each of these extra units equals

Accepted Answer

A)   $13
B)   $130
C)   $390
D)   $520
E)   $130.F) A) and E)
G) None of the above

Question 12

Sally owns a beauty shop that generates a total revenue of $90,000 per year. She pays her employees a total of $45,000; pays $10,000 for rent, insurance, and utilities; and pays $15,000 for beauty supplies such as hair spray and shampoo. Sally is glad to have the shop, because her next best alternative is to work as a cafeteria attendant for a salary of$8,000 a year. From this we can conclude that Sally

Accepted Answer

A)   would earn more working at the cafeteria
B)   makes an economic profit of $20,000
C)   makes an economic profit of $12,000
D)   has total explicit costs of $78,000
E)   has total implicit costs of $12,000F) B) and D)
G) C) and D)

Question 13

Monopolistically competitive firms sell goods that are

Accepted Answer

A)   close substitutes
B)   perfect substitutes
C)   not substitutes
D)   not differentiated products
E)   complementsF) A) and C)
G) C) and D)

Question 14

For a monopolist, MR can never be negative.

Accepted Answer

A) True 
 B)False

Question 15

A meatball sandwich vendor finds that when he charges a price of $6, he sells 100 meatball sandwiches. When he charges a price of $4, he sells 200 meatball sandwiches. The marginal revenue for each of the additional 100 meatball sandwiches he sells is

Accepted Answer

A)   $6
B)   $4
C)   $3
D)   $2
E)   $1F) A) and B)
G) A) and C)

Question 16

According to George Stigler, the monopolist is distinguished from other entrepreneurs because of his or her

Accepted Answer

A)   motivation
B)   market position
C)   profit objective
D)   strategy
E)   moralityF) A) and D)
G) C) and E)

Question 17

Which of the following is not a characteristic of a perfectly competitive market structure?

Accepted Answer

A)   The firm is a price-taker.
B)   The firm is a profit maximizer.
C)   The firm's demand curve is horizontal.
D)   The market demand is downward sloping.
E)   The firm can earn an economic profit in the long run.F) A) and D)
G) A) and C)

Question 18

The demand curve facing a firm in monopolistic competition is elastic.

Accepted Answer

A) True 
 B)False

Question 19

Distinct from any other market structure, the firm in long-run perfect competition ends up producing where

Accepted Answer

A)   P = MR = MC = ATC, and AFC = 0
B)   P > MR = MC = ATC, and AFC = 0
C)   P 
D)   P = MR = MC = ATC, where ATC = (AFC + AV
C)  
E)   P > MR and ATC > MC, where MC = (AFC + AV
C)  F) C) and E)
G) None of the above

Question 20

A monopoly can charge any price it wishes, and chooses the

Accepted Answer

A)   highest price
B)   price equal to marginal cost
C)   price associated with the output level where MR = MC
D)   competitive price to keep out potential entrants
E)   price associated with greatest efficiencyF) B) and D)
G) A) and B)

Exam 11: Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

If a firm in a perfectly competitive industry maximizes profit by producing 100 units and the marginal cost of the 100th unit is $23, the price is

Correct Answer
verified

Distinct from any other market structure, the firm in long-run perfect competition ends up producing where

Correct Answer
verified

A meatball sandwich vendor finds that when he charges a price of $6, he sells 100 meatball sandwiches. When he charges a price of $4, he sells 200 meatball sandwiches. The marginal revenue for each of the additional 100 meatball sandwiches he sells is

Correct Answer
verified

Which of the following is not a characteristic of a perfectly competitive market structure?

Correct Answer
verified

The market price in a perfectly competitive industry is $13. A firm is considering increasing its output from 30 units to 40 units. The marginal revenue of each of these extra units equals

Correct Answer
verified

-In Exhibit K-5, which represents a monopoly, an economist would argue that

Correct Answer
verified

For a monopolist, MR can never be negative.

Correct Answer
verified

Show, or explain, why a monopolist with positive marginal costs charges a price on the elastic range ofhis/her demand curve.

Correct Answer
verified
In the elastic range of demand...
View Answer

Correct Answer
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A monopoly can charge any price it wishes, and chooses the

Correct Answer
verified

Correct Answer
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a. The opportunity cost of Craig's time ...
View Answer

According to George Stigler, the monopolist is distinguished from other entrepreneurs because of his or her

Correct Answer
verified

The demand curve facing a firm in monopolistic competition is elastic.

Correct Answer
verified

-According to the information provided in Exhibit K-11, the marginal revenue of the 12th unit of output equals

Correct Answer
verified

The entry of new firms into a monopolistically competitive market makes the demand curves for the existing firms more elastic.

Correct Answer
verified

If a firm makes normal profit, the entrepreneur must earn a wage that

Correct Answer
verified

Monopolistically competitive firms sell goods that are

Correct Answer
verified

When all perfectly competitive firms in a market or all monopolistically competitive firms in a market make zero economic profit,

Correct Answer
verified

A firm in a perfectly competitive market

Correct Answer
verified

Unlike firms in perfect competition, monopolists have control over

Correct Answer
verified

Exam 11: Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

If a firm in a perfectly competitive industry maximizes profit by producing 100 units and the marginal cost of the 100th unit is $23, the price is

Correct AnswerverifiedShow Answer

Distinct from any other market structure, the firm in long-run perfect competition ends up producing where

Correct AnswerverifiedShow Answer

A meatball sandwich vendor finds that when he charges a price of $6, he sells 100 meatball sandwiches. When he charges a price of $4, he sells 200 meatball sandwiches. The marginal revenue for each of the additional 100 meatball sandwiches he sells is

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of a perfectly competitive market structure?

Correct AnswerverifiedShow Answer

The market price in a perfectly competitive industry is $13. A firm is considering increasing its output from 30 units to 40 units. The marginal revenue of each of these extra units equals

Correct AnswerverifiedShow Answer

-In Exhibit K-5, which represents a monopoly, an economist would argue that

Correct AnswerverifiedShow Answer

For a monopolist, MR can never be negative.

Correct AnswerverifiedShow Answer

Show, or explain, why a monopolist with positive marginal costs charges a price on the elastic range ofhis/her demand curve.

Correct AnswerverifiedIn the elastic range of demand...View AnswerShow Answer

Correct AnswerverifiedShow Answer

A monopoly can charge any price it wishes, and chooses the

Correct AnswerverifiedShow Answer

Correct Answerverifieda. The opportunity cost of Craig's time ...View AnswerShow Answer

According to George Stigler, the monopolist is distinguished from other entrepreneurs because of his or her

Correct AnswerverifiedShow Answer

The demand curve facing a firm in monopolistic competition is elastic.

Correct AnswerverifiedShow Answer

-According to the information provided in Exhibit K-11, the marginal revenue of the 12th unit of output equals

Correct AnswerverifiedShow Answer

The entry of new firms into a monopolistically competitive market makes the demand curves for the existing firms more elastic.

Correct AnswerverifiedShow Answer

If a firm makes normal profit, the entrepreneur must earn a wage that

Correct AnswerverifiedShow Answer

Monopolistically competitive firms sell goods that are

Correct AnswerverifiedShow Answer

When all perfectly competitive firms in a market or all monopolistically competitive firms in a market make zero economic profit,

Correct AnswerverifiedShow Answer

A firm in a perfectly competitive market

Correct AnswerverifiedShow Answer

Unlike firms in perfect competition, monopolists have control over

Correct AnswerverifiedShow Answer

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In the elastic range of demand...
View Answer

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a. The opportunity cost of Craig's time ...
View Answer

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