Scenario: Monopolist
The demand curve for a monopolist is P = 75 ” 0.5Q, and the monopolist has the
following MC expressed as P = 2Q. Assume also that ATC at the profit-maximizing
level of production is equal to $12.50.
(Scenario: Monopolist) Look at the scenario Monopolist. The deadweight loss from this
monopolist’s production is:
A) $31.25.
B) $12.50.
C) $0.00
D) $30.00.
The slope of a long-run average total cost curve exhibiting increasing returns to scale is:
A) zero.
B) infinite.
C) positive.
D) negative.
At the profit-maximizing level of production, a perfectly competitive industry will
produce an _____ level of production, and a monopolist produces an _____ level of
production.
A) efficient; efficient
B) inefficient; efficient
C) inefficient; inefficient
D) efficient; inefficient
Assume the federal government determines the total level of pollutants that can be
discharged by city industries. A city is able to buy and sell the rights to this total
discharge level with other cities. This is an:
A) emissions tax.
B) Pigouvian tax.
C) tradable emissions permit.
D) environmental standard.
The number of seats in a football stadium is fixed at 70,000. The city decides to impose
a tax of $10 per ticket. In response, the team management raises the ticket price from
$30 to $40 and still sells all 70,000 tickets. The tax caused a change in the consumer
surplus of _____, a change in the producer surplus of _____, and a deadweight loss of
_____.
A) “$10; $0; $10
B) “$700,000; $0; $700,000
C) “$10; $0; $0
D) “$700,000; $0; $0
Figure: A Perfectly Competitive Firm in the Short Run
(Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly
Competitive Firm in the Short Run. The minimum price that the firm must receive to
produce in the short run is:
A) F.
B) E.
C) N.
D) P.
Tankao makes earbuds for mobile devices. When Tankao produces 20 sets of earbuds,
its average variable cost is $5 per set and its average total cost is $8 per set. Tankao’s:
A) marginal cost is less than $3 per set.
B) marginal cost is $3 per set.
C) average fixed cost is $3 per set.
D) marginal cost is equal to its average fixed cost.
A firm’s shut-down point is the minimum value of:
A) total cost.
B) average variable cost.
C) average total cost.
D) marginal cost.
The term autarky refers to a country that:
A) trades goods and services based upon the principle of comparative advantage.
B) trades goods and services based upon the principle of absolute advantage.
C) trades goods and services based upon the principle of Ricardian advantage.
D) does not trade with other countries.
Table: Pumpkin Market
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. At
the equilibrium price and quantity, total consumer surplus is:
A) $10.
B) $8.
C) $6.
D) $0.
Which of the following is NOT one of the four principles of individual choice?
A) Resources are scarce.
B) Unpaid volunteer work is irrational, since economic rationality dictates that
individuals should only engage in work they are paid for.
C) The real cost of something is its opportunity cost.
D) People usually take advantage of opportunities to make themselves better off.
Ms. Sweettooth always consumes iced tea and sugar in fixed proportions: 8 ounces of
iced tea to 3 teaspoons of sugar. This implies that for Ms. Sweettooth:
A) iced tea and sugar are perfect substitutes.
B) the indifference curves for iced tea and sugar are parallel.
C) 8 ounces of iced tea and 3 teaspoons of sugar yield exactly the same utility as 16
ounces of iced tea and 6 teaspoons of sugar.
D) iced tea and sugar are perfect complements.
The sum of fixed and variable costs is _____ cost.
A) total
B) marginal
C) variable
D) average
Which of the following is an example of a price floor?
A) a rent-controlled apartment
B) a maximum legal price that could be charged for gasoline during a time of war
C) the minimum wage
D) a government decree that capped the price of bottled water in the aftermath of a
devastating hurricane
(Table: Tonya’s Production Function for Apples) Look at the table Tonya’s Production
Function for Apples. Tonya’s variable:
A) input is land.
B) input is labor.
C) inputs are land and labor.
D) inputs are neither land nor labor.
The restaurant industry is characterized by excess capacity. This means that:
A) restaurants are producing more than their profit-maximizing level.
B) the profit-maximizing level is less than the level that minimizes average total costs.
C) restaurants are producing less than their profit-maximizing level.
D) the quantity of restaurant meals supplied exceeds the quantity of restaurant meals
demanded.
If rival solar roof panel manufacturers in Reno limit production and _____ prices in a
way that increases their profits without meeting with one another in a formal way, they
are engaging in _____ collusion.
A) lower; tacit
B) raise; tacit
C) lower; explicit
D) raise; explicit
If two points on a graph are (0, 8) and (12,15):
A) X is 0 when Y is 12.
B) X and Y have a positive relation.
C) the horizontal intercept is given by the point (0, 8).
D) the slope of a line connecting the two points is negative.
(Table: Production of Bagels) Look at the table Production of Bagels. The marginal
product of the third worker is _____ bagels.
A) 9,000
B) 10,000
C) 12,000
D) 15,000
Which of the following is TRUE?
A) Monopolistic competition and perfect competition are both inefficient.
B) Monopolistic competition is efficient because of product differentiation.
C) The inefficiency of monopolistic competition may be a small price to pay for the
wide range of product choices it offers.
D) The inefficiency of monopolistic competition is a result of advertising expenses.
The market for corn is in equilibrium. Which of the following is most likely to
INCREASE the equilibrium price of corn?
A) a bountiful harvest
B) increasing production of corn-based ethanol
C) decreasing household incomes, with corn being a normal good
D) a decrease in the price of wheat, a substitute in consumption
Figure: Strawberries and Submarines
(Figure: Strawberries and Submarines) Look at the figure Strawberries and Submarines.
Suppose the economy now operates at point C. Moving to point E would require that
the economy:
A) achieve full employment and an efficient allocation of resources.
B) eliminate its production of strawberries.
C) reduce its production of submarines.
D) improve its technology or increase its quantities of factors of production.
Figure: Consumer Equilibrium III
(Figure: Consumer Equilibrium III) Look at the figure Consumer Equilibrium III.
Given the figure, which of the following is TRUE?
A) Point C is preferable to point E.
B) At point E, Px = Py.
C) Point B could be attained with an increase in the consumer’s income.
D) To increase utility beyond that received at point E requires a change in the
preferences of the consumer.
(Table: Production Possibilities for Machinery and Petroleum) Look at the table
Production Possibilities for Machinery and Petroleum. The opportunity cost of _____ is
_____ in the United States as (than) in Mexico.
A) petroleum; less
B) petroleum; more
C) petroleum; the same
D) machinery; the same
In the circular-flow diagram, an organization that produces goods or services for sale is
a:
A) market.
B) household.
C) factor.
D) firm.
Property rights are an important feature of an effective market because they:
A) lead to the development of government control over prices.
B) prevent harm to the environment from pollution.
C) give owners of goods and services the right to use and dispose of those goods and
services as they choose.
D) are the basis for an equitable tax system.
A direct restriction on the quantity of an import is called a(n):
A) import quota.
B) tariff.
C) import subsidy.
D) import restriction.
If a monopolist is producing a quantity that generates MC = P, then profit:
A) is maximized.
B) is maximized only if MR = P.
C) can be increased by increasing production.
D) can be increased by decreasing production.
In 1999, a judge declared that Microsoft was a monopolist. Assuming that Microsoft
has a linear demand curve and that it is maximizing its profits at its current level of
output, we may conclude that if Microsoft were to increase its price, its total revenue
would:
A) rise.
B) fall.
C) remain unchanged.
D) There is insufficient information to make a determination.
In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips.
In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes
of tulips. When the two countries begin trading beef for tulips, we expect the total
surplus from beef consumption and production to:
A) fall in Argentina.
B) rise in Argentina.
C) stay the same in Venezuela.
D) either rise or fall in Venezuela.