Question 1Normal profit is the return to? _____. Normal profit is part of a? firm’s _____ cost because it is the cost of not running another firm.A. ?capital; fixedB. ?capital; opportunityC. foreign? investment; sunkD. ?entrepreneurship; opportunityQuestion 2Ty leases a? farmer’s field and grows melons. He hires students to pick and pack the melons.The table sets out Ty’s total product schedule.What is the marginal product of the first student and the average product of 1 student??The marginal product of the first student is _____ melons a day.The average product of 1 student1 student is ______melons a day.?>>> Answer to 1 decimal place.Labor?(students)Total product?(melonsmelonsper? day)001100222033004360540064207430Question 3Naomi’s birdhouse factory rents equipment for constructing birdhouses and hires students.Naomi pays ?$50 a day for equipment and ?$120 a day for each student hiredThe table shows Naomi’s total product schedule.Construct Naomi’s total variable cost and total cost schedules. Fill in the columns in the table.At each? output, total cost exceeds total variable cost by the? firm’s _______.?A. average fixed costB. total fixed costC. average total costD. marginal costQuestion 4The table gives the cost of producing? T-shirts.The total fixed cost is? ______ and the marginal cost of increasing production from 10 to 12? T-shirts is? _______.A. ?$56; $16??B. ?$20; $64C. ?$8; $20D. ?$20; $8Output?(T-shirtsper? hour)Totalcost?(dollars)Total variable cost?(dollars)??876561084641210080Question 5The graph shows the average variable cost curve and average total cost curve for a firm that produces candles.Draw the? firm’s marginal cost curve. Label it.When the marginal cost of producing an output exceeds its average variable cost but is less than its average total? cost, _______.?A. average variable cost is increasing while average total cost is decreasingB. total variable cost is at its maximum valueC. both average variable cost and average total cost are increasingD. average fixed cost is increasingQuestion 6hires students at ?$50 a day to paint houses.??She leases equipment that costs ?$120 a day.??Suppose that Judy doubles the number of students sheshe hires and doubles the amount of equipment that she leases.If Judy experiences diseconomies of scale diseconomies of scale?, herher ?long-run average cost curve? ______.A. slopes upwardB. shifts upwardC. slopes downwardD. shifts downwardE. is horizontalQuestion 7The table shows the demand schedule for Lila’sApple Orchard.Lila’s Apple Orchard operates in a market called? ______.A. monopolistic competitionB. a perfect oligopolyC. a monopolyD. perfect competitionE. an oligopolyLila’s marginal revenue for each crate of apples demanded is ?$_______Price?(dollars percratecrate?)Quantity demanded?(cratescratesper? day)350351352353354355356Question 8The table shows the cost structure of a firm selling bottles of water in a perfectly competitive market.What is the quantity at the? firm’s shutdown? point?The? firm’s shutdown point occurs at a quantity of _____bottles of water per week and the market price is ?$_____ a bottleQuantity?(bottles per? week)MarginalcostAverage variable cost?(dollars per? bottle)0001003.004.402003.203.903003.503.504003.823.555004.203.606005.003.75Question 9Rose growing is a perfectly competitive industry and all rose growers have the same costsThe market price of roses is ?$15 a bunch and each grower maximizes profit by producing 1600 bunches a week.?Average total cost of producing roses is ?$11 a bunch and average variable cost is ?$7 a bunch.Minimum average variable cost is ?$3 a bunch.What is the price at the? grower’s shutdown? point?The price at the? grower’s shutdown point is ?$____bunch.Question 10Consider a perfectly competitive market in which all firms have the same costs.Choose the statement that is incorrect.A. The market demand is perfectly elastic at the market price.B. Market demand and market supply determine the market price and market output.C. The market supply curve is upward sloping at prices above the? firm’s shutdown price.D. Each firm takes the market price as given and produces its? profit-maximizing output.Question 11Rose growing is a perfectly competitive industry and all rose growers have the same cost curves.The market price of roses is ?$14 a bunch and each grower maximizes profit by producing 700700 bunches a week.The average total cost of producing roses is ?$25 a bunch. Minimum average variable cost is ?$1212 a bunch?, and the minimum average total cost is ?$17 a bunch.In the long? run, the market price of roses is? _____ a bunch.A. ?$17B. ?$14C. ?$25D. ?$12E ?$59In the long? run, a rose ?grower’s economic profit is ?$______Question 12Peters tattoos is a tattooing business in a perfectly competitive market in Fargo.The table shows the total cost schedule of Peter’s Tattoos.If the market price is ?$35.00 a tattoo?, Peter’s Tattoos _________ in the short run of ?$____ an hour.In the long? run, firms _____ the industry.Quantity?(tattoostattoosper? hour)Total cost?(dollars per? hour)17021003120415051906250Question 13Allegiant? Air: The? tardy, gas-guzzling, most profitable airline in AmericaWith 64? jets, Allegiant Air has achieved the lowest? costs, fullest? planes, and highest margins in the U.S. airline industry. It serves 75 small U.S. cities and faces competition on just 17 of its 203 routes. It offers? no-frills fare and charges for everything? else, from? carry-on luggage to water.?Source: The Wall Street Journal?, June? 4, 2013Read the news? clip, then answer the following questions.Allegiant Air is? _________ monopoly on 186 routes.??A. a legalB. not aC. ?cost-effectiveD. a naturalThe barrier to entry in the market in which Allegiant Air competes is? _________.???A. a public franchiseB. a government licenseC. ?Allegiant’s costs, which are lower than other airlinesD.?Allegiant’s decision to charge for? carry-on luggage and waterQuestion 14A multiplex cinema in downtown Minneapolis is a monopoly.A. TrueB.FalseTiffany, the upscale jeweler is a monopoly.A. TrueB. FalseCostco, the discount retailer is a monopoly.A. TrueB. False??The only bus service licensed to operate at an airport is a monopoly.A. TrueB. False?The U.S. Postal Service is a monopoly.A. TrueB. FalseQuestion 15Mineral Springs is a? single-price monopoly.The table shows the demand schedule for Mark’s Mineral Springs ?(columns 1 and ? 2) and the? firm’s total cost schedule? (columns 2 and? 3).What is Mark’s ?profit-maximizing output,? price, and economic? profit?Mark’s ?profit-maximizing output is _____bottles an hour.Mark’s ?profit-maximizing price is ?$______ a bottle.When Mark’s produces the? profit-maximizing output and charges the? profit-maximizing price, economic profit is?$_____ an hour.Price?(dollars perbottlebottle?)Quantity?(bottlesbottlesper? hour)Total cost?(dollarsper? hour)140113181221711328104419556Question 16Out of This World is the only private rocket ride in the nation. ??The table sets out the demand schedule for rides and the cost schedule for producing the rides.???Calculate Out of This World’s ?profit-maximizing price, output and economic profit if it charges a single price for all rides.Out of This World’s ?profit-maximizing output is __________rides a day.Out of This World’s ?profit-maximizing price is ?$____ a ride.?>>> Answer to 2 decimal places.When Out of This World produces the? profit-maximizing output and charges the? profit-maximizing price, economic profit is ?$_________?>>> If the firm incurs an economic? loss, indicate the loss with a minus sign. If the firm earns an economic? profit, do not include a plus signPriceQuantityTotal cost?(dollars perrideride?)?(ridesridesperdayday?)?(dollars perdayday?)2001,000181002,000162003,000143004,000124005,000105006,00086007,00067008,00048009 000Question 17Cook’s Tall Ship Cruises is a? single-price monopoly.The table shows the demand schedule for cruises ?(columns 1 and? 2) and Cook’s total cost schedule? (columns 2 and? 3).Calculate Cook’s total revenue and marginal revenue schedules and fill in the two right columns of the table.Question 18Fogg’s Adventure Holidays is a? single-price monopoly. ?The table gives the demand schedule for holidays ?(columns 1 and? 2) and Fogg’s total cost schedule before taxes? (columns 2 and? 3).?Suppose the government taxes Fogg’s by ?$50,000 per holiday.?Calculate Fogg’s new? profit-maximizing output, price and economic profit.?>>> Remember that the amounts in the table are given in thousands of dollars.Fogg’s ?profit-maximizing output is ______holidays a month.?>>> Answer to 1 decimal place.Fogg’s ?profit-maximizing price is ?$_______a holiday.When Fogg’s produces the? profit-maximizing output and charges the? profit-maximizing price, economic profit is _________dollars.???>>> If your answer is? negative, include a minus sign. If your answer is? positive, do not include a plus sign.Price?(thousands of dollarsperholidayholiday?)Quantity?(holidaysholidaysper? month)Total cost?(thousands of dollars per?month)24007522011702002275180339016045151405650Question 19?Bob’s Books is the only bookstore in town.The graph shows the demand curve for books and? Bob’s Books’ marginal revenue curve and marginal cost curve.?Bob’s Books maximizes its profit by charging? ______ a book and selling? ______ books a year.A. ?$12; 26,000B. ?$32; 6,000??C. ?$8; 15,000D. ?$23; 15,000Question 20Major league baseball is exempt from laws designed to limit market power and it operates as a monopoly.If the baseball market became? competitive, the number of teams would? ______ and the economic profit of each team would? ______.A.?increase; increaseB. ?increase; decreaseC.?decrease; decreaseD. not change because the current number of teams is the efficient? number; not changeE.?decrease; increaseQuestion 21For each of the following situations in? California, indicate whether or not it is an example of price discrimination.The weekend price of a hotel room is greater than the? mid-week price.?Stand-by passengers can fly at lower fares than passengers who buy etickets.Colleges charge? out-of-state students a higher tuition than Californian students.A cruise line sells the second cruise booked within a year at a 20 percent discount.A bank charges a higher interest rate on a car loan than it charges the same person for a student loan.The price of water is higher for a car wash firm than it is for a farmer.A tropical resort offers lower prices on holidays in low season.A railway company offers discounts to families traveling with young children.Question 22Which of the following is an example of a price cap regulation??A. Fast food employers have raised the wage rate to? $15 an hour following the new employee act.B. A government regulation has forced cable TV operators to lower the price of cable TV from? $55 a month to? $30 a month.C. Political parties are protesting against the? government’s decision to deregulate gas prices.D. Cell phone companies have reported an increase in profits this quarter.Question 23A firm is a natural monopoly if? ______.A. it can satisfy the market demand at a lower average total cost than other firms canB. it can produce a larger quantity of the good than other firms couldC. the government grants it a public franchise or patentD. it can produce the good at a price below its? competitor’s priceQuestion 24Hostess Brands closing for goodWhen its customers switched to healthier? foods, Hostess incurred losses. To return to? profit, the firm proposed a wage? cut, but its workers went on strike. Hostess shut down its 33? bakeries, 565 distribution? centers, and 570 outlet stores.?Source: CNN? Money, November? 16, 2012Read the news? clip, then answer the following questions.The switch to healthier foods brought economic loss to Hostess in the short run because? _______.??A. the demand for Hostess products decreasedB. the average fixed cost of Hostess products increasedC. the marginal cost of Hostess products increasedD. the marginal revenue from Hostess products increasedHostess decided to exit the market in the long run because it? _______.?A. expected the economic loss to persistB. expected new firms to enter the marketC. wanted to break the unionD. expected other firms in the market to exitQuestion 25Lorie teaches singing. Her fixed costs are? $1,000 a? month, and it costs her? $50 of labor to give one class. The table shows the demand schedule for? Lorie’s singing lessons.In the long? run, the demand for? Lorie’s lessons? ______, and her economic profit? ______.A.?increases; falls to zeroB. ?decreases; increasesC.?increases; increasesD.?decreases; falls to zeroPriceQuantity demanded?(dollars per? lesson)?(lessons per? month)025050200100150150100200502500Question 26The graph shows the demand curve and marginal revenue curve of At Home?, ?Inc., a producer of DVD players in monopolistic competition.?Draw the? firm’s marginal cost curve if At Home produces 125 DVD players a week. Label it.?Draw a point at the? profit-maximizing quantity and price.If average total cost at the? profit-maximizing quantity is ?$150 a player?, At Home?’s economic profit is ?$__________Question 27Suppose that a new technology enables anyone with a small workshop to produce outstanding barbecues.You would expect? ______ in production differentiation and? ______ competition on product? quality, price, and marketing.A. no change? in; lessB. a decrease?; lessC. an increase?; moreD. an increase?; no change inQuestion 28If in the short? run, firms in monopolistic competition make _______ economic? profit, then in the long? run, new firms will enter the market.The? ______ each individual? firm’s product will? ______.A.demand? for; increaseB.supply? of; increaseC.supply? of; decreaseD.demand? for; decreaseIn the new? long-run equilibrium, firms will make ________economic profit.Question 29The dry cleaning industry is in monopolistic competition.In the short? run, the? profit-maximizing price is? $10 per item and the average total cost is? $6 per item.In? long-run equilibrium, the? profit-maximizing price is? $8 per item.In? long-run equilibrium, what is the economic profit of a firm in the dry cleaning? industry?In? long-run equilibrium, the dry cleaning firm makes ?$_______economic profit.Question 30Which of the following firms produce at the efficient scale??A. Dell produces 100 computers a week at which its average total cost is minimized.B. A Gap outlet in Chicago sells 500 jackets a day and lowers its average variable cost.C. Toyota produces 20 cars a day at its Texas plant at which its profit is maximized.D. ?Starbucks’ makes 1000 chai lattes each day at which is total revenue is maximized.Question 31Curt bakes delicious cookies. His total fixed cost is ?$80 a? day, and his average variable cost is ?$1 a bag. He is maximizing his profit by selling 16 bags of cookies a day for?$6 a bag.Few people know about Curt’s Cookies. Curt thinks that if he spends ?$10 a day on? advertising, he can sell 38 bags of cookies a day for ?$6 a bag.If Curt’s belief about the effect of advertising is? correct, he ?______.A. can increase his economic profit by advertising only if he raises the price of a bag of cookiesB. can increase his economic profit by advertisingC. cannot increase his economic profit by advertising because advertising increases hishis average total costD. cannot increase his economic profit by advertising because advertising increases hishis total costE. can increase his economic profit by advertising only if hehe lowers the price of a bag of cookiesQuestion 32Hidden Valley has two wind turbines producing electricity?, one owned by Bill and the other owned by Ben.The marginal cost of producing electricity is ?$8 a unit.The table gives the demand schedule for electricity in this area.If Bill and Ben are forced to sell at the perfectly competitive? price, what is the price of a unit ofelectricity??The perfectly competitive price of electricity is ?$_________ a unit.The total quantity produced is ________ units a day.Price?(dollars per? unit)Quantity demanded?(units per? day)24020616121218824430036Question 33Duracell and Energizer are the only major producers of batteries. Each company has developed a long-lasting battery and aggressively advertises it.The two firms are locked in a? duopolists’ dilemma.The? duopolists’ dilemma facing Duracell and Energizer is? ______.A. for each firm to be successful in eliminating the other firm from the long-lasting battery marketB. what they can do to protect their control of the long-lasting battery marketC. how to increase advertising but at the same time lower average total costD. whether they could trust each other to raise the price of a battery and decrease advertising to raise economic profitQuestion 34Choose the statement that is incorrect.A. Firms in oligopoly might produce a differentiated product and compete on? price, product? quality, and marketing.B. Firms in oligopoly might produce an identical product and compete only on price.C. Oligopoly lies between perfect competition and monopoly.???D. Oligopolies have a natural barrier preventing the entry of new firms.Question 35A cartel is a group of firms acting together to? _____ output,? _____ price, and increase? _____.A. ?increase; raise; marginal revenueB. ?increase; raise; economic profitC. ?limit; lower; total revenueD. ?limit; raise; economic profit
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