Deck 24: Extension D: Review

Question 1

-Vito's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $22.50 per pizza, what is Vito's profit-maximizing output?

A) 2 pizzas per day
B) 3 pizzas per day
C) 4 pizzas per day
D) 5 pizzas per day

Answer 1

4 pizzas per day

Question 2

-Vito's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $22.50 per pizza, how much economic profit per day does the firm make?

A) zero
B) $10
C) $20
D) -$7.50

Answer 2

$10

Question 3

-Firms in which of the following industries can incur an economic loss in the short run?

A) Any firm can incur an economic loss profit in the short run.
B) only perfect competition and monopolistic competition
C) only monopolistic competition
D) only perfect competition

Answer 3

Any firm can incur an economic loss profit in the short run.

Question 4

-Vito's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. What is Vito's shut-down point?

A) $10.00 per pizza
B) $12.50 per pizza
C) $15.00 per pizza
D) $17.50 per pizza

Question 5

-Vito's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $17.50 per pizza, how much economic profit does the firm make?

A) zero
B) $10
C) -$7.50
D) $15

Question 6

-Vito's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $17.50 per pizza, what is Vito's profit-maximizing output?

A) 2 pizzas per day
B) 3 pizzas per day
C) 4 pizzas per day
D) 5 pizzas per day

Question 7

-For the monopoly shown in the figure above, the maximum total economic profit is

A) zero.
B) $32.
C) $80.
D) $240.

Question 8

-In the table above, what is the marginal product of the 5th worker?

A) 190 units per week
B) 4 units per week
C) 20 units per week
D) 38 units per week

Question 9

-Given the information in the table above, suppose labor is the only variable input. The price of labor is $400 per week and total fixed costs are $1,000 per week. If the firm wants to minimize its average total cost, it should produce

A) 100 units.
B) 140 units.
C) 170 units.
D) 190 units.

Question 10

-For the monopoly shown in the figure above, the profit maximizing output is

A) 20 units.
B) more than 40 units and less than 60 units.
C) 40 units.
D) 60 units.

Question 11

-For the monopoly shown in the figure above, the profit maximizing price is

A) less than $1.00.
B) $3.00.
C) $4.00.
D) $6.00.

Question 12

Ms. Lollipop opened a candy store in December 2013. She rented a building for $25,000 a year and used $30,000 from her savings account, which earned an annual interest rate of 5 percent, to buy capital equipment. During the first year of operation, Lollipop paid $28,000 to her employees, $10,000 for utilities, and $16,000 for goods she bought from other firms. In December 2014, the market value of Lollipop's capital equipment was $26,000. Lollipop's best alternative to running her candy store is to work as a sales clerk at Winn-Dixie for $15,000 a year. What is Lollipop's total opportunity cost?

A) $99,500
B) $94,000
C) $79,000
D) $20,500

Question 13

-Given the information in the table above, suppose labor is the only variable input. The price of labor is $400 per week and total fixed costs are $1,000 per week. What is the marginal cost of producing the 120th unit?

A) $400.00
B) $40.00
C) $20.00
D) $10.00

Question 14

-Given the information in the table above, suppose labor is the only variable input. The price of labor is $400 per week and total fixed costs are $1,000 per week. What is the total cost of producing 100 units?

A) $1,700
B) $1,800
C) $1,900
D) $2,000

Question 15

Ms. Lollipop opened a candy store in December 2013. She rented a building for $25,000 a year and used $30,000 from her savings account, which earned an annual interest rate of 5 percent, to buy capital equipment. In December 2014, the market value of her capital equipment was $26,000. What is the economic depreciation of Lollipop's capital?

A) $3,000
B) $4,000
C) $1,000
D) $25,000

Question 16

Which of the following statements is FALSE?

A) In the short run, a monopolist might operate even though it is incurring an economic loss, but in the short run a perfectly competitive firm always shuts down if it is incurring an economic loss.
B) A monopoly can earn an economic profit in the long run, but a perfectly competitive firm cannot.
C) A monopoly can set its price while a perfectly competitive firm cannot.
D) A monopoly is protected by barriers to entry while a perfectly competitive firm is not.

Question 17

-For the monopoly shown in the figure above, the markup is

A) zero.
B) $1.
C) $2.
D) $4.

Question 18

Ms. Lollipop opened a candy store in December 2013. She rented a building for $25,000 a year and used $30,000 from her savings account, which earned an annual interest rate of 5 percent, to buy capital equipment. During the first year of operation, Lollipop paid $28,000 to her employees, $10,000 for utilities, and $16,000 for goods she bought from other firms. In December 2014, the market value of Lollipop's capital equipment was $26,000. Lollipop's best alternative to running her candy store is to work as a sales clerk at Winn-Dixie for $15,000 a year. What is Lollipop's economic profit?

A) $21,000
B) $500
C) $5,000
D) -$9,000

Question 19

-Given the information in the table above, suppose labor is the only variable input. The price of labor is $400 per week and total fixed costs are $1,000 per week. If 170 units are produced, the average total cost is

A) $15.29.
B) $5.88.
C) $9.41.
D) $7.99

Question 20

-The profit maximizing condition for any competitive firm is

A) MR = P.
B) MC = MR.
C) P = ATC.
D) None of the above answers is correct because each type of competitive firm has a different condition of maximizing its profit.

Question 21

Cheating by a member of a cartel ________ consumer surplus and ________ the total economic profit earned by all the firms in the cartel.

A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases

Question 22

-If the firm in the figure above is unregulated, it will charge a price of

A) $4 per unit.
B) $16 per unit.
C) $20 per unit.
D) $40 per unit.

Question 23

-If a marginal cost pricing rule is imposed on the firm in the figure above, the firm will produce

A) 500 units per day.
B) 600 units per day.
C) 900 units per day.
D) zero units.

Question 24

-If a marginal cost pricing rule is imposed on the firm in the figure above, the deadweight loss will be

A) zero.
B) $1,800.
C) $3,200.
D) $16,200.

Question 25

-If an average cost pricing rule is imposed on the firm in the figure above, the firm will produce

A) 500 units per day.
B) 600 units per day.
C) 900 units per day.
D) zero units.

Question 26

-If a marginal cost pricing rule is imposed on the firm in the figure above, the price will be

A) $4 per unit.
B) $16 per unit.
C) $20 per unit.
D) $40 per unit.

Question 27

Oligopoly is a market structure in which a ________ number of firms compete and there ________ barriers to entry.

A) small; are
B) large; are
C) small; are no
D) large; are no

Question 28

-In some industries it is important for each firm to predict how all the other firms will react to their decisions.

A) This is not true for monopolistic competition because there are too many firms and no barriers to entry.
B) This is not true of any industry with barriers to entry.
C) This is not true for monopolistic competition because firms do not sell homogeneous goods.
D) This is true for oligopoly because these firms sell a homogeneous good.

Question 29

A cartel tries to ________ its members' economic profit and thereby the cartel ________ consumer surplus.

A) increase; increases
B) increase; decreases
C) decrease; increases
D) decrease; decreases

Question 30

-If the firm in the figure above is unregulated, it will produce

A) 500 units per day.
B) 600 units per day.
C) 900 units per day.
D) zero units.

Question 31

-If an average cost pricing rule is imposed on the firm in the figure above, the firm's economic profit is

A) zero.
B) $1,000.
C) -$7,200.
D) $320.

Question 32

-If the firm in the figure above is unregulated, the deadweight loss will be

A) zero.
B) $1,800.
C) $3,200.
D) $16,200.

Question 33

-If a marginal cost pricing rule is imposed on the firm in the figure above, the firm's economic profit is

A) zero.
B) $1,000.
C) -$7,200.
D) $320.

Question 34

-If an average cost pricing rule is imposed on the firm in the figure above, the deadweight loss is

A) zero.
B) $1,800.
C) $3,200.
D) $16,200.

Question 35

-If an average cost pricing rule is imposed on the firm in the figure above, the price will be

A) $4 per unit.
B) $16 per unit.
C) $20 per unit.
D) $40 per unit.

Question 36

-For the monopoly shown in the figure above, the efficient output level is

A) 20 units.
B) more than 40 units and less than 60 units.
C) 40 units.
D) 60 units.

Question 37

-Monopolistic competition is a market structure in which a ________ number of firms compete and each firm produces ________ product.

A) large; an identical
B) small; an identical
C) large; a differentiated
D) small; a differentiated

Question 38

-The firm shown in the figure above is

A) not a natural monopoly because it experiences diseconomies of scale where its LRAC curve intersects the demand curve.
B) a natural monopoly because it experiences economies of scale where its LRAC curve intersects the demand curve.
C) a natural monopoly because its marginal cost is constant, so it experiences constant returns to scale.
D) not a natural monopoly because its LRAC curve is above its MC curve.