07 Feb competitive. Then

ECON312N Principles of Economics Week 4 Quiz Question 1 Paulette owns a pizza parlor. Her total cost schedule is in the above table. Her total fixed cost is equal to Some amount, but more information is needed to determine her fixed cost. $35. $85. $79. $20. Question 2 Mylan Pharmaceuticals holds a patent on the EpiPen – designed to inject epinephrine into shock victims. In 2016, Mylan received criticism for charging $600 for this life-saving drug. The market for EpiPens is considered ________ which means that the price of an Epipen ________ its marginal cost. perfect competition; equals an oligopoly; equals a monopoly; is greater than a monopoly; equals monopolistic competition; is greater than Question 3 Use the figure above to answer this question. Mary is the only veterinarian in a small town. To maximize her profit, Mary will choose to treat ________ animals per hour and charge ________ per customer in order to ________. 6; $20; minimize cost in order to attract more customers 6; $30; minimize average total cost 4; $50; operate on the inelastic portion of her demand curve 4; $50; maximize profit 6; $20; maximize profit Question 4 Cost curves shift if i. technology changes. ii. the prices of factors of production change. iii. productivity changes. i, ii, and iii i only i and iii i and ii ii only Question 5 Austin owns the Fruit Bowl food truck. Which of the following would be short run decisions for Austin? i. how much fruit to buy ii. how many workers to hire iii. installing a new stove in his truck i only i and ii i, ii and iii ii only ii and iii Question 6 Energizer and Duracell dominate the battery market. It is possible that they could ________ because they operate in ________. earn $0 profit in the long run; a monopolistically competitive market form a cartel and collude; an oligopoly have excess capacity; a natural monopoly form a cartel; a monopolistically competitive market collude; a perfect competitive market Question 7 Anna owns a dog grooming salon in Brunswick, Georgia. The above table has Anna’s total product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for her salon. These are her only costs. When Anna has a staff of 6 workers, her total cost equals $10.00. $2,400. $7.50. $300. $1,800. Question 8 Excess capacity exists when a firm produces None of the above answers is correct. less than the quantity that minimizes average total cost. more than the profit-maximizing level of output. more than the quantity that minimizes marginal cost. less than the quantity that minimizes marginal cost. Question 9 The table shows the cost structure of a firm selling bottles of water in a perfectly competitive market. Quantity ?(bottles per? week) Marginal cost Average variable cost ?(dollars per? bottle) 0 0 0 100 3.00 4.40 200 3.20 3.90 300 3.50 3.50 400 3.82 3.55 500 4.20 3.60 600 5.00 3.75 What is the quantity at the firm’s shutdown point? The firm’s shutdown point occurs at a quantity of nothing bottles of water per week and the market price is $ nothing a bottle. Question 10 A Nash equilibrium in the duopoly game will always lead to equilibrium in which the firms’ total profit is the largest. means that one player has greater market power. occurs when each player takes the best possible action regardless of the strategy chosen by other firms. means that a firm must be able to determine its actions and the actions of its competitor. can occur only if firms cooperate with each other. Question 11 How do advertising and other selling costs affect a firm? The only effect is that the excess capacity is reduced. They shift the marginal cost curve upward. The do not change demand and shift the average total cost curve downward. They shift the average total cost curve upward. The only effect is that the demand for the product increases. Question 12 Which of the following is a list of fixed inputs for a hospital? the lobby, the doctors, and the electricity it uses antibiotics, pain medication, and other prescription drugs bandages, casts, and other materials the emergency room, intensive care unit, and other facilities the nurses, receptionists, and other employees Question 13 In a perfectly competitive market, the firm is a price taker because ______. the price is dictated by the largest firm in the? market, and if a given firm lowers its price other firms will conspire against it it produces only a tiny proportion of the total output of a particular good and buyers are well informed about the prices of other firms the price in the market is the price that maximizes each? firm’s producer surplus the firms in perfect competition are interdependent and if one firm charges a lower? price, other firms will also lower their prices and all firms will incur an economic loss each firms makes a slightly different product Question 14 The above figure shows the U.S. market for flip-flops. With international trade, U.S. consumers buy ________ flip-flops and U.S. producers produce ________ flip-flops. 700,000; 500,000 500,000; 300,000 700,000; 300,000 300,000; 700,000 500,000; 500,000 Question 15 GM cuts jobs at its Australian manufacturing unit GM will cut 500 jobs, or about 12% of its workforce, at its Australian plant because of a sharp fall in demand for its locally-made “Cruze” small car. Source: The Wall Street Journal , April 8, 2013 As GM cuts its workforce, how will the marginal product and average product of a worker change in the short run? Suppose that before the cuts the marginal product of GM workers is below their average product. As the number of workers decreases, the marginal product of a GM worker ______ and the average product of a GM worker ______ in the short run. ??decreases; increases increases; increases ??increases; decreases does not? change; does not change decreases; decreases Question 16 A firm’s fundamental goal is to make a quality product. to maximize profit. different for each firm. to gain market share. to decrease its employment of workers in order to cut its costs. Question 17 The U.S. Postal Service has a monopoly over first-class mail service because stamps are patented. the government has granted this agency a public franchise. stamps are trademarked. stamps are copyrighted. it owns a vital resource, namely all mailboxes. Question 18 Anna owns a dog grooming salon in Brunswick, Georgia. The above table has Anna’s total product schedule. Anna pays each worker $300 per week and she pays rent of $600 a week for her salon. These are her only costs. When Anna has a staff of 2 workers, her average variable cost equals $2,400. $300. $600. $6.00. $10.00. Question 19 Suppose Pat’s Paints is a perfectly competitive firm. If Pat’s Paints’ marginal revenue equals $5 per can, and Pat decides to sell 100 cans of paint, Pat’s total revenue equals $5. Information on the price of a can of paint is needed to answer the question. $100. $20. $500. Question 20 The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. If TWC operated under a marginal cost pricing rule, what is the price of cable television in Oakland? $30 $40 $0 $10 $20 Question 21 Labor (workers) Output (bikes) Total fixed costs (dollars) Total variable cost (dollars) Total cost (dollars) 0 0 200 ? ? 1 20 ? 100 ? 2 50 ? ? ? 3 60 ? ? ? 4 64 ? ? ? The table above gives costs at Jan’s Bike Shop. Unfortunately, Jan’s record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total cost of producing 50 bikes? $300 $100 $500 $400 $200 Question 22 The figure above shows the U.S. demand and U.S. supply curves for cherries. At a world price of $2 per pound once international trade occurs, the total imports of cherries to the United States from other nations equals 800,000 pounds. 200,000 pounds. 0 pounds. 600,000 pounds. 400,000 pounds. Question 23 Consider the market for running shoes shown above. A tariff of ________ is imposed and causes the amount of shoes imported to ________ pairs. $40; decrease from 5 million to 2 million $40; decrease from 4 million to 2 million $60; decrease from 4 million to 2 million $20; decrease from 4 million to 3 million $20; decrease from 4 million to 2 million Question 24 Country A imports 1,000 cars per month. After imposing a $50 per car tariff, imports fall to 800 cars per month. How much does Country A’s government collect in tariff revenue? $60,000 $40,000 $50,000 $10,000 $90,000 Question 25 In the 1950s, crude oil and natural gas imports were restricted to keep the domestic industries viable in case of a war. The rationale for this protection is the ________ argument for protection. anti-dumping infant-industry save domestic jobs national security penalizing lax environmental standards Question 26 Perfect competition is a market in which there are? _____ firms, each selling? _____ product; many? buyers; _____ to the entry of new firms into the? industry; no advantage to established? firms; and buyers and sellers? _____ about prices. ?many; identical; no? barriers; are well informed ?few; differentiated; no? barriers; have no information ?few; differentiated;? barriers; are well informed ?many; identical;? barriers; have no information Question 27 Henry, a perfectly competitive lime grower in Southern California, notices that the market price of limes is greater than his marginal cost. What should Henry do? advertise his limes to be able to sell more output shut down and earn no profit but also incur no loss shut down and incur a loss equal to his total fixed cost look for the output level where marginal revenue minus marginal cost is maximized expand his output to increase profits Question 28 To maximize profit, a firm in monopolistic competition will produce the quantity where marginal revenue equals marginal cost. equals zero. equals average total cost. is less than marginal cost. is greater than marginal cost. Question 29 Airlines seek new ways to save on fuel as costs soar Fuel is an airline’s biggest single expense. In 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation aircraft, which have more fuel-efficient engines. Source: The New York Times , June 11, 2008 Is the price of fuel a fixed cost or a variable cost? Is the price of a new fuel-efficient engine a fixed cost or a variable cost? Explain how a technological advance that makes an airplane engine more fuel efficient changes an airline’s average total cost. The cost of the new fuel-efficient engines are a _______ cost. The cost of fuel is a _______ cost. marginal; variable ??fixed; variable ??variable; fixed ??fixed; total Question 30 Keith is a perfectly competitive carnation grower. The market price is $2 per dozen carnations. Keith’s average total cost to grow carnations is $2.50 per dozen. In the long run, Keith will raise his price to $2.50 per dozen carnations. continue to make an economic profit. incur an economic loss. exit the industry if the price and his costs do not change. raise his price to more than $2.50 per dozen carnations. Question 31 Which of the following chain of events occurs when a tariff is imposed on a good? Domestic prices rise, decreasing the quantity demanded and increasing the domestic quantity supplied. Domestic prices fall, shifting the demand curve rightward, and consumers buy more of the good. Domestic prices fall, decreasing the domestic quantity supplied and increasing the quantity demanded. Domestic prices rise, shifting the demand curve leftward and the domestic supply curve rightward. Domestic prices rise, shifting the domestic supply curve rightward. Question 32 Which of the following is an implicit cost in Jim’s business venture? i. the salary Jim could have earned at another job ii. the interest Jim must pay on the loan he incurred to help open his business iii. the interest Jim lost when he used his savings to help open his business i and iii i only ii and iii iii only ii only Question 33 The above figure illustrates a perfectly competitive firm. If the market price is $40 a unit, to maximize its profit (or minimize its loss) the firm should shut down. produce 40 units. produce more than 10 and less than 30 units. produce more than 30 units and less than 40 units. produce 30 units. Question 34 The table above shows the revenue figures for the top four firms along with a total for the remaining firms in the fast-food industry. What is the four-firm concentration ratio for the industry? 80 percent 20 percent 100 percent 200 percent 25 percent Question 35 The figure above shows the U.S. demand and U.S. supply curves for cherries. In the absence of international trade, cherry farmers would receive ________ per pound of cherries. $1.50 $2.00 $1.00 $2.50 $0.50 Question 36 Kenya owns a lawn mowing company. His total product schedule is in the above table. When 4 workers are employed, the average product is ________ lawns mowed per week. 320 80 25 5 20 Question 37 Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a single-price monopoly. The figure above shows the relevant demand and cost curves. When the market is perfectly competitive, the quantity of steak is ________ pounds, and when the market is a monopoly, the quantity of steak is ________ pounds. 4,000; 4,000 3,000; 2,000 5,000; 3,000 2,000; 4,000 4,000; less than 2,000 pounds. Question 38 A collusive agreement to form a cartel is difficult to maintain because supply will decrease because of the high cartel price. forming a cartel is legal but frowned upon throughout the world. demanders will rebel once they realize a cartel has been formed. each firm can increase its profit if it decreases its production even more than the decrease set by the cartel. each member firm can increase its own profits by cutting its price and selling more. Question 39 The table above has the domestic demand and domestic supply schedules for a good. If the world price of the good is $10 and international trade occurs, then according to the table the country exports 22 units a day. domestic production is higher before trade than after trade. the country imports 16 units a day. the country imports 6 units a day. the country exports 6 units a day. Question 40 Diseconomies of scale is a result of mismanagement. technological progress. specialization of labor, capital, and management. larger fixed costs as the firm’s production increases. difficulties of coordinating and controlling a large enterprise.

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