Week 4 Quiz
Question 1
Diseconomies of scale is a result of
mismanagement.
difficulties of
coordinating and controlling a large enterprise.
larger fixed costs
as the firm's production increases.
technological
progress.
specialization of
labor, capital, and management.
Question 2
In a perfectly competitive
market, the firm is a price taker because ______.
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
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 is
dictated by the largest firm in the? market, and if a given firm lowers its
price other firms will conspire against it
each firms makes a
slightly different product
Question 3
Which of the following chain of events occurs when a tariff
is imposed on a good?
Domestic prices
fall, decreasing the domestic quantity supplied and increasing the quantity
demanded.
Domestic prices
fall, shifting the demand curve rightward, and consumers buy more of the good.
Domestic prices
rise, shifting the demand curve leftward and the domestic supply curve
rightward.
Domestic prices
rise, decreasing the quantity demanded and increasing the domestic quantity
supplied.
Domestic prices
rise, shifting the domestic supply curve rightward.
Question 4
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
collude; a perfect
competitive market
form a cartel; a
monopolistically competitive market
Question 5
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
the emergency room,
intensive care unit, and other facilities
the nurses,
receptionists, and other employees
bandages, casts, and
other materials
Question 6
Cost curves shift if
i. technology
changes.
ii. the
prices of factors of production change.
iii. productivity
changes.
i and ii
i and iii
i, ii, and iii
i only
ii only
Question 7
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.
a monopoly; equals
monopolistic
competition; is greater than
an oligopoly; equals
a monopoly; is
greater than
perfect competition;
equals
Question 8
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
$6.00.
$300.
$2,400.
$10.00.
$600.
Question 9
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.
2,000; 4,000
4,000; 4,000
5,000; 3,000
4,000; less than
2,000 pounds.
3,000; 2,000
Question 10
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
produce more than 10
and less than 30 units.
produce more than 30
units and less than 40 units.
produce 40 units.
shut down.
produce 30 units.
Question 11
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.
??fixed; total
marginal; variable
??fixed; variable
??variable; fixed
Question 12
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.
does not? change;
does not change
decreases; decreases
??decreases;
increases
??increases;
decreases
increases; increases
Question 13
To maximize profit, a firm in monopolistic competition will
produce the quantity where marginal revenue
is greater than
marginal cost.
is less than
marginal cost.
equals marginal
cost.
equals zero.
equals average total
cost.
Question 14
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 and ii
i only
i, ii and iii
ii only
ii and iii
Question 15
Paulette owns a pizza parlor. Her total cost schedule is in
the above table. Her total fixed cost is equal to
$35.
$85.
Some amount, but
more information is needed to determine her fixed cost.
$79.
$20.
Question 16
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 4
million to 2 million
$20; decrease from 4
million to 3 million
$40; decrease from 5
million to 2 million
$20; decrease from 4
million to 2 million
$60; decrease from 4
million to 2 million
Question 17
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
look for the output
level where marginal revenue minus marginal cost is maximized
expand his output to
increase profits
shut down and earn
no profit but also incur no loss
shut down and incur
a loss equal to his total fixed cost
Question 18
A collusive agreement to form a cartel is difficult to
maintain because
supply will decrease
because of the high cartel price.
each member firm can
increase its own profits by cutting its price and selling more.
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.
Question 19
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?
$200
$100
$500
$400
$300
Question 20
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
exit the industry if
the price and his costs do not change.
continue to make an
economic profit.
incur an economic
loss.
raise his price to
more than $2.50 per dozen carnations.
raise his price to
$2.50 per dozen carnations.
Question 21
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
________.
4; $50; operate on
the inelastic portion of her demand curve
6; $20; maximize
profit
6; $30; minimize
average total cost
6; $20; minimize
cost in order to attract more customers
4; $50; maximize
profit
Question 22
The U.S. Postal Service has a monopoly over first-class mail
service because
stamps are
copyrighted.
stamps are patented.
the government has
granted this agency a public franchise.
stamps are
trademarked.
it owns a vital
resource, namely all mailboxes.
Question 23
A firm's fundamental goal is
to decrease its
employment of workers in order to cut its costs.
to maximize profit.
to make a quality
product.
different for each
firm.
to gain market
share.
Question 24
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 imports
6 units a day.
domestic production
is higher before trade than after trade.
the country imports
16 units a day.
the country exports
22 units a day.
the country exports
6 units a day.
Question 25
How do advertising and other selling costs affect a firm?
The do not change
demand and shift the average total cost curve downward.
They shift the
average total cost curve upward.
They shift the
marginal cost curve upward.
The only effect is
that the demand for the product increases.
The only effect is
that the excess capacity is reduced.
Question 26
A Nash equilibrium in the duopoly game
means that one
player has greater market power.
can occur only if
firms cooperate with each other.
occurs when each
player takes the best possible action regardless of the strategy chosen by
other firms.
will always lead to
equilibrium in which the firms' total profit is the largest.
means that a firm
must be able to determine its actions and the actions of its competitor.
Question 27
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
200 percent
20 percent
100 percent
25 percent
Question 28
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
national security
infant-industry
save domestic jobs
penalizing lax
environmental standards
Question 29
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
600,000 pounds.
200,000 pounds.
400,000 pounds.
800,000 pounds.
0 pounds.
Question 30
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 31
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
$1,800.
$300.
$2,400.
$7.50.
$10.00.
Question 32
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?
$0
$40
$30
$10
$20
Question 33
Excess capacity exists when a firm produces
more than the
profit-maximizing level of output.
less than the
quantity that minimizes average total cost.
None of the above
answers is correct.
less than the
quantity that minimizes marginal cost.
more than the
quantity that minimizes marginal cost.
Question 34
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.
$2.00
$2.50
$0.50
$1.00
$1.50
Question 35
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
$500.
$20.
Information on the
price of a can of paint is needed to answer the question.
$5.
$100.
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.
80
20
5
25
320
Question 37
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?
$90,000
$10,000
$60,000
$40,000
$50,000
Question 38
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
300,000; 700,000
700,000; 300,000
500,000; 500,000
500,000; 300,000
Question 39
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.
?few;
differentiated;? barriers; are well informed
?many; identical;
no? barriers; are well informed
?many; identical;?
barriers; have no information
?few;
differentiated; no? barriers; have no information
Question 40
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
ii and iii
iii only
i and iii
i only
ii only
