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.
