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1) Figure 15-7
A profit-maximizing monopolist would incur total costs of
a. $81.
b. $120.
c. $144.
d. $240.
2) Figure 7-12
If the equilibrium price rises from $200 to $350, what is the producer surplus to new
producers
a. $15,000
b. $3,750
c. $7,500
d.$30,000
3) When the nation of Isoland opens up its steel market to international trade, that
change
a.creates winners and losers, regardless of whether Isoland ends up exporting or
importing steel.
b.results in a decrease in total surplus, regardless of whether Isoland ends up exporting
or importing steel.
c.creates winners, but no losers, if Isoland ends up exporting steel.
d.creates losers, but no winners, if Isoland ends up importing steel.
4) Walter used to work as a high school teacher for $40,000 per year but quit in order to
start his own painting business. To invest in his painting business, he withdrew $20,000
from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle,
whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies
and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist
to calculate his painting business's profit.
a.Tyler says his profit is $25,900, and Greg says his profit is $66,500.
b.Tyler says his profit is $35,000, and Greg says he lost $5,900.
c.Tyler says his profit is $34,100, and Greg says he lost $6,500.
d.Tyler says his profit is $34,100, and Greg says his profit is $34,100.
5) Which of the following is a characteristic of a corporation but not of a small
family-owned business?
a.The corporation buys inputs in markets for the factors of production.
b.The corporation sells output in markets for goods and services.
c.The corporation is guided in its decisions by the objective of profit maximization.
d.The corporation faces a principal-agent problem created by the separation of
ownership and control.
6) When a firm operates at efficient scale, it is producing at the minimum point on its
average total cost curve.
a.True
b.False
7) The profit-maximization problem for a monopolist differs from that of a competitive
firm in which of the following ways?
a.A competitive firm maximizes profit at the point where marginal revenue equals
marginal cost; a monopolist maximizes profit at the point where marginal revenue
exceeds marginal cost.
b.A competitive firm maximizes profit at the point where average revenue equals
marginal cost; a monopolist maximizes profit at the point where average revenue
exceeds marginal cost.
c.For a competitive firm, marginal revenue at the profit-maximizing level of output is
equal to marginal revenue at all other levels of output; for a monopolist, marginal
revenue at the profit-maximizing level of output is smaller than it is for larger levels of
output.
d.For a profit-maximizing competitive firm, thinking at the margin is much more
important than it is for a profit- maximizing monopolist.
8) The concept of diminishing marginal utility is embedded in the utilitarian rationale
for
a.trickle-down effects.
b.enhancing market efficiency.
c.redistributing income.
d.maintaining the status quo income distribution.
9) When fixed costs are ignored because they are irrelevant to a business's production
decision, they are called
a.explicit costs.
b.implicit costs.
c.sunk costs.
d.opportunity costs.
10) The rental price of capital is
a.determined outside the realm of factor markets.
b.the price paid to use capital for a limited time period.
c.the price paid for ownership of the capital.
d.always more than the purchase price.
11) Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's
marginal cost equals $20 and its average total cost equals $25. The firm sells its output
for $30 per unit.
At Q = 999, the firm's profits equal
a. $4,990.
b. $5,000.
c. $5,020.
d. $5,030.
