Chapters 13, 14, 15 & 16 Review questions of the above are correct. Figure 13-6 The curves below reflect information about the cost structure of a firm. ____ 20. Refer to Figure 13

Chapters 13, 14, 15 & 16 Review questions

Multiple Choice Identify the letter of the choice that best completes the statement or answers the question.

Scenario 13-2 Zach took $400,000 out of the bank and used it to start his new cookie business. The bank account pays 3 percent interest per year. During the first year of his business, Zach sold 6,000 boxes of cookies for $2.50 per box. Also, during the first year, the cookie business incurred costs that required outlays of money amounting to $9,000.

____ 1. Refer to Scenario 13-2. Zach's economic profit for the year was

a. $-506,000. b. $-6,000. c. $3,000. d. $6,000.

____ 2. Jane decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business she turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Jane's economic profit from running her own business? a. $-65,000 b. $5,000 c. $10,000 d. $20,000

____ 3. Suppose that for a particular business there are no implicit opportunity costs. Then a. accounting profit will be greater than economic profit. b. accounting profit will be the same as economic profit. c. accounting profit will be less than economic profit. d. the relationship between accounting profit and economic profit cannot be determined since

the amount of explicit opportunity costs is not given.

____ 4. Which of the following is an implicit cost? a. Salaries paid to owners who work for the firm b. Interest on money borrowed to finance equipment purchases c. Cash payments for raw materials d. Foregone rent on office space owned and used by the firm

____ 5. The marginal product of labor can be defined as a. change in profit/change in labor. b. change in output/change in labor. c. change in labor/change in output. d. change in labor/change in total cost.

____ 6. Assume a certain firm regards the number of workers it employs as variable, and that it regards the size of its factory as fixed. This assumption is often realistic a. in the short run, but not in the long run. b. in the long run, but not in the short run. c. both in the short run and in the long run. d. neither in the short run nor in the long run.

____ 7. For a firm, the production function represents the relationship between a. implicit costs and explicit costs. b. quantity of inputs and total cost.

c. quantity of inputs and quantity of output. d. quantity of output and total cost.

Table 13-2

Number of Workers Output 0 0 1 50 2 110 3 180 4 260 5 330

____ 8. Refer to Table 13-2. What is the marginal product of the fourth worker?

a. 65 b. 70 c. 75 d. 80

____ 9. Refer to Table 13-2. At which number of workers does diminishing marginal product begin? a. 2 b. 3 c. 4 d. 5

Table 13-3

Number

of Workers

Number

of Machines

Output (corks

produced per hour)

Marginal

Product of Labor

Cost of Workers

Cost of Machines

Total Cost

1 2 5 2 2 10 3 2 20 4 2 35 5 2 55 6 2 70 7 2 80

____ 10. Refer to Table 13-3. Assume Gallo's currently employs 2 workers. What is the marginal product of labor

when Gallo's adds a 3rd worker? a. 5 corks b. 10 corks c. 20 corks d. 25 corks

Figure 13-3

____ 11. Refer to Figure 13-3. In this diagram, the shift in the total product curve represents an increase in the firm's

a. costs of production. b. productivity. c. diseconomies. d. market share.

____ 12. As Al's Radiator Company adds workers while keeping the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Al's Radiator Company encounters a. economies of scale. b. diseconomies of scale. c. increasing marginal returns. d. diminishing marginal returns.

____ 13. If a firm produces nothing, which of the following costs will be zero? a. total cost b. fixed cost c. opportunity cost d. variable cost

____ 14. The amount by which total cost rises when the firm produces one additional unit of output is called a. average cost. b. marginal cost. c. fixed cost. d. variable cost.

____ 15. The cost of producing an additional unit of output is the firm's a. marginal cost. b. productivity offset. c. variable cost. d. average variable cost.

____ 16. Variable cost divided by quantity produced is a. average total cost. b. marginal cost. c. profit. d. None of the above is correct.

Scenario 13-4

Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker regardless of the current output level.

____ 17. Refer to Scenario 13-4. Average fixed cost will be

a. rising at all points. b. falling at all points. c. U-shaped. d. constant.

____ 18. When marginal cost exceeds average total cost, a. average fixed cost must be rising. b. average total cost must be rising. c. average total cost must be falling. d. marginal cost must be falling.

____ 19. The marginal cost curve crosses the average total cost curve at a. the efficient scale. b. the minimum point on the average total cost curve. c. a point where the marginal cost curve is rising. d. All of the above are correct.

Figure 13-6 The curves below reflect information about the cost structure of a firm.

____ 20. Refer to Figure 13-6. Which of the curves is most likely to represent average variable cost?

a. A b. B c. C d. D

____ 21. Average total cost (ATC) is calculated as follows: a. ATC = (change in total cost)/(change in quantity of output). b. ATC = (change in total cost)/(change in quantity of input). c. ATC = total cost/quantity of output. d. ATC = total cost/quantity of input.

____ 22. In the short run, a firm incurs fixed costs a. only if it incurs variable costs. b. only if it produces no output. c. only if it produces a positive quantity of output. d. whether it produces output or not.

____ 23. Which of the following statements about costs is correct? a. When marginal cost is less than average total cost, average total cost is rising. b. The total cost curve is U-shaped. c. As the quantity of output increases, marginal cost eventually rises. d. All of the above are correct.

Table 13-5

Measures of Cost for ABC Inc. Widget Factory Quantity

of Widgets Variable

Costs Total Costs

Fixed Costs

0 $10 1 $ 1 2 $ 3 $13 3 $ 6 $16 4 $10 5 $25 6 $21 $10

____ 24. Refer to Table 13-5. The average fixed cost of producing five widgets is

a. $1.00 b. $2.00 c. $3.00 d. $5.00

____ 25. Refer to Table 13-5. What is the variable cost of producing five widgets? a. $13.00 b. $14.00 c. $15.00 d. It can't be determined from the information given.

Table 13-6 Adrian's Premium Chocolates produces boxes of chocolates for its mail order catalogue business. She rents a small room for $150 a week in the downtown business district that serves as her factory. She can hire workers for $275 a week. There are no implicit costs.

Number of Workers

Boxes of Chocolates

Produced per Week

Marginal Product of Labor

Cost of Factory

Cost

of Workers

Total Cost

of Inputs

0 0 1 330 150 275 425 2 630 3 150 825 975

4 890 5 950 60 1,375 6 10 1,800

____ 26. Refer to Table 13-6. What is the total cost associated with making 890 boxes of premium chocolates per

week? a. $1,250 b. $1,325 c. $1,400 d. $1,575

____ 27. Refer to Table 13-6. One week, Adrian earns a profit of $125. If her revenue for the week is $1100, how many boxes of chocolate did she produce? a. 140 b. 330 c. 780 d. 950

Table 13-7 Teacher's Helper is a small company that has a subcontract to produce instructional materials for disabled children in public school districts. The owner rents several small rooms in an office building in the suburbs for $600 a month and has leased computer equipment that costs $480 a month.

Output (Instructional

Modules per Month)

Fixed Costs

Variable Costs

Total Cost

Average

Fixed Cost

Average Variable

Cost

Average

Total Cost

Marginal Cost

0 1,080 1 1,080 400 1,480 400 2 965 450 3 1,350 2,430 4 1,900 475 5 2,500 216 6 4,280 700 7 4,100 8 5,400 135 9 7,300

10 10,880 980

____ 28. Refer to Table 13-7. What is the marginal cost of creating the tenth instructional module in a given month?

a. $900 b. $1,250 c. $2,500 d. $3,060

____ 29. Refer to Table 13-7. What is the average fixed cost for the month if nine instructional modules are produced? a. $108.00 b. $120.00 c. $150.00 d. $811.11

____ 30. Which of the following must always be true as the quantity of output increases?

a. Marginal cost must rise. b. Average total cost must rise. c. Average variable cost must rise. d. Average fixed cost must fall.

____ 31. Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that marginal cost when three workers are hired is $40 and the average total cost when three workers are hired is $50. What is the total cost of production when three workers are hired? a. $50 b. $90 c. $120 d. $150

____ 32. The average total cost when 5 units of output are produced is $30, and the marginal cost of the sixth unit of output is $60. What is the average total cost when six units are produced? a. $10 b. $25 c. $30 d. $35

Table 13-8

Quantity of

gigaplots

Fixed Cost

Variable

Cost

Total Cost

Average Fixed Cost

Average Variable

Cost

Average Total Cost

Marginal

Cost 1 $13 $38 2 $28 3 $70 4 $64 5 $110 6 $108 7 $133 8 $185

____ 33. Refer to Table 13-8. What is the average variable cost of producing 3 gigaplots at Jimmy's Gigaplot factory?

a. $14 b. $15 c. $16 d. $17

____ 34. Refer to Table 13-8. What is the average total cost of producing 2 gigaplots at Jimmy's Gigaplot factory? a. $14.00 b. $18.50 c. $22.50 d. $26.50

____ 35. If marginal cost is greater than average total cost then a. profits are increasing. b. economies of scale are becoming greater. c. average total cost remains constant. d. average total cost is increasing.

____ 36. If Franco's Pizza Parlor knows that the marginal cost of the 500th pizza is $3.50 and that the average total cost of making 499 pizzas is $3.30, then a. average costs are rising at Q = 500. b. average costs are falling at Q = 500. c. total costs are falling at Q = 500. d. average variable costs must be falling.

____ 37. The long-run average total cost curve is always a. flatter than the short-run average total cost curve, but not necessarily horizontal. b. horizontal. c. falling as output increases. d. rising as output increases.

____ 38. Constant returns to scale occur when a. long-run total costs are constant as output increases. b. long-run average total costs are constant as output increases. c. the firm's long-run average cost curve is falling as output increases. d. the firm's long-run average cost curve is rising as output increases.

____ 39. Economies of scale arise when a. an economy is self-sufficient in production. b. individuals in a society are self-sufficient. c. fixed costs are large relative to variable costs. d. workers are able to specialize in a particular task.

____ 40. How long does it take a firm to go from the short run to the long run? a. six months b. one year c. two years d. It depends on the nature of the firm.

Table 13-9

Output Total Cost 0 40 10 60 20 90 30 130 40 180 50 240

____ 41. Refer to Table 13-9. What is the total fixed cost for this firm?

a. $20 b. $30 c. $40 d. $50

____ 42. Refer to Table 13-9. What is average fixed cost when output is 40 units? a. $1.00 b. $3.32 c. $5.00 d. $8.00

Table 13-10

Consider the following table of long-run total cost for four different firms

Quantity 1 2 3 4 5 6 7 Firm 1 $210 $340 $490 $660 $850 $1,060 $1,290 Firm 2 $180 $350 $510 $660 $800 $930 $1,050 Firm 3 $120 $250 $390 $540 $700 $870 $1,050 Firm 4 $150 $300 $450 $600 $750 $900 $1,050

____ 43. Refer to Table 13-10. Which firm has economies of scale over the entire range of output?

a. Firm 1 b. Firm 2 c. Firm 3 d. Firm 4

____ 44. Refer to Table 13-10. Which firm has economies of scale and then diseconomies of scale as output increases from 1 to 7? a. Firm 1 b. Firm 2 c. Firm 3 d. Firm 4

____ 45. A local potato chip company plans to keep and maintain its chip factory, which is estimated to last 25 years. All cost decisions it makes during the 25-year period a. are short-run decisions. b. are long-run decisions. c. involve only maintenance of the factory. d. are zero, since the cost decisions were made at the beginning of the business.

____ 46. When a firm has little ability to influence market prices it is said to be in a. a competitive market. b. a strategic market. c. a thin market. d. a power market.

____ 47. If a firm in a perfectly competitive market triples the number of units of output sold, then total revenue will a. more than triple. b. less than triple. c. exactly triple. d. Any of the above may be true depending on the firm’s labor productivity.

____ 48. Suppose a firm in a competitive market received $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? a. $5 and 50 b. $5 and 100 c. $10 and 50 d. $10 and 100

____ 49. Whenever a perfectly competitive firm chooses to change its level of output, holding the price of the product constant, its marginal revenue a. increases if MR < ATC and decreases if MR > ATC. b. does not change. c. increases. d. decreases.

____ 50. Which of the following expressions is correct for a competitive firm?

a. Profit = (Quantity of output) x (Price - Average total cost) b. Marginal revenue = (Change in total revenue)/(Quantity of output) c. Average cost = Total variable cost/Quantity of output d. Average revenue = (Marginal revenue) x (Quantity of output)

____ 51. If a competitive firm is (i) selling 1,000 units of its product at a price of $9 per unit and (ii) earning a positive profit, then a. its total cost is less than $9,000. b. its marginal revenue is less than $9. c. its average revenue is greater than $9. d. the firm cannot be a competitive firm since competitive firms can only earn zero profit.

____ 52. Suppose that in a competitive market the market price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market? a. Less than $2.50. b. More than $2.50. c. $2.50. d. The marginal revenue cannot be determined without knowing the actual quantity sold by

the typical firm.

Table 14-3 Use the information for a competitive firm in the table below to answer the following questions.

Quantity Total Revenue Total Cost 0 $0 $10 1 9 14 2 18 19 3 27 25 4 36 32 5 45 40 6 54 49 7 63 59 8 72 70 9 81 82

____ 53. Refer to Table 14-3. At which quantity of output is marginal revenue equal to marginal cost?

a. 3 b. 6 c. 8 d. 9

____ 54. Refer to Table 14-3. The maximum profit available to this firm is a. $2 b. $3 c. $4 d. $5

____ 55. Refer to Table 14-3. If the firm finds that its marginal cost is $5, it should a. reduce fixed costs by lowering production. b. increase production to maximize profit. c. decrease production to maximize profit. d. maintain its current level of production to maximize profit.

Figure 14-2 The figure below depicts the cost structure of a profit-maximizing firm in a competitive market.

____ 56. Refer to Figure 14-2. Which line segment best reflects the short-run supply curve for this firm?

a. ABCE b. CD c. DE d. BCD

Figure 14-3 The figure below depicts the cost structure of a profit-maximizing firm in a competitive market.

____ 57. Refer to Figure 14-3. This firm will exit the market for any price on the line segment

a. AB b. BC

c. CD d. None of the above

Figure 14-4 The figure below depicts the cost structure of a firm in a competitive market.

____ 58. Refer to Figure 14-4. When market price is P2, a profit-maximizing firm's losses can be represented by the

area a. (P3 - P2) Q2. b. (P2 - P1) Q2. c. At a market price of P2, the firm does not have losses. d. At a market price of P2 the firm has losses, but the reference points in the figure don't

identify the losses.

____ 59. When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit, this task is accomplished by producing the quantity at which price is equal to a. sunk cost. b. average fixed cost. c. average variable cost. d. marginal cost.

____ 60. By comparing marginal revenue and marginal cost, a firm in a competitive market is able to adjust production to the level that achieves its objective, which we assume to be a. maximization of total revenue. b. maximization of profit. c. minimization of variable cost. d. minimization of average total cost.

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 $15 and its average total cost equals $11. The firm sells its output for $12 per unit.

____ 61. Refer to Scenario 14-2. At Q = 1,000, the firm's profit amounts to

a. $-200. b. $1,000. c. $3,000.

d. $4,000.

____ 62. A competitive firm's marginal cost curve is regarded as its supply curve because a. the position of the marginal cost curve determines the price for which the firm should sell

its product. b. among the various cost curves, the marginal cost curve is the only one that slopes upward. c. the marginal cost curve determines the quantity of output the firm is willing to supply at

any price. d. the firm is aware that marginal revenue must exceed marginal cost in order for profit to be

maximized.

____ 63. A firm's marginal cost has a minimum value of $2, its average variable cost has a minimum value of $4, and its average total cost has a minimum value of $5. Then the firm will shut down if the price of its product falls below a. $2. b. $4. c. $5. d. There is not enough information given to answer the question.

____ 64. Mrs. Smith is operating a firm in a competitive market. The market price is $6.50. At her profit-maximizing level of output, her average total cost of production is $7.00 and her average variable cost of production is $6.00. a. Mrs. Smith is earning a loss and should shutdown in the short run. b. Mrs. Smith is earning a loss but should continue to operate in the short run. c. Mrs. Smith is earning a profit since the price is above the average variable cost. d. Without knowing Mrs. Smith's marginal cost we cannot determine whether she should

stay in business or shut down.

____ 65. Mrs. Smith operates a business in a competitive market. The current market price is $8.50, and at her profit-maximizing level of production, the average variable cost is $8.00 and the average total cost is $8.25. a. Mrs. Smith should shut down her business in the short run but continue to operate in the

long run.. b. Mrs. Smith should continue to operate in the short run but shut down in the long run. c. Mrs. Smith should continue to operate in both the short run and long run. d. Mrs. Smith should shut down in both the short run and long run.

____ 66. In a competitive market the current price is $7, and the typical firm in the market has ATC = $7.50 and AVC = $7.15. a. In the short run firms will shut down, and in the long run firms will leave the market. b. In the short run firms will continue to operate, but in the long run firms will leave the

market. c. New firms will likely enter this market to capture any remaining economic profits. d. In the long run the market will cease to exist.

____ 67. Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average cost of production equal to $5, and is earning $240 economic profit in the short run. What is the current market price? a. $9 b. $10 c. $11 d. $12

Table 14-4 The following table presents cost and revenue information for John’s Vineyard.

COSTS REVENUES Quantity Produced

Total Cost

Marginal Cost

Quantity Demanded

Price

Total Revenue

Marginal Revenue

0 0 -- 0 80 -- 1 50 1 80 2 102 2 80 3 157 3 80 4 217 4 80 5 285 5 80 6 365 6 80 7 462 7 80 8 582 8 80

____ 68. Refer to Table 14-4. What is the marginal cost of the 5th unit?

a. $55 b. $60 c. $68 d. $80

____ 69. In a market with 1,000 identical firms, the short-run market supply is the a. marginal cost curve (above average variable cost) for a typical firm in the market. b. quantity supplied by the typical firm in the market. c. sum of the prices charged by each of the 1,000 individual firms. d. sum of the quantities supplied by each of the 1,000 individual firms.

Figure 14-6 In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms.

____ 70. Refer to Figure 14-6. If there are 200 identical firms in this market, what level of output will be supplied to

the market when price is $1.00? a. 2,000 b. 5,000

c. 10,000 d. 20,000

____ 71. When new firms enter a perfectly competitive market, a. demand increases. b. the short-run market supply curve shifts right. c. the short-run market supply curve shifts left. d. existing firms will increase prices to keep the new firms from entering.

____ 72. In a competitive market with free entry and exit, if all firms have the same cost structure, then a. all firms will operate at efficient scale in the short run. b. all firms will operate at efficient scale in the long run. c. the price of the product will differ across firms. d. the number of sellers in the market will steadily decrease over time.

____ 73. A long-run supply curve is flatter than a short-run supply curve because a. firms can enter and exit a market more easily in the long run than in the short run. b. long-run supply curves are sometimes downward sloping. c. competitive firms have more control over demand in the long run. d. firms in a competitive market face identical cost structures.

____ 74. A market might have an upward-sloping long-run supply curve if a. firms have different costs. b. consumers exercise market power over producers. c. all factors of production are essentially available in unlimited supply. d. the entry of new firms into the market has no effect on the cost structure of firms in the

market.

____ 75. In the long-run equilibrium of a market with free entry and exit, marginal firms are operating a. at the point where average variable cost equals marginal cost. b. at the minimum point on their marginal cost curves. c. at their efficient scale. d. where accounting profit is zero.

____ 76. The short-run market supply curve in a perfectly competitive industry a. shows the total quantity supplied by all firms at each possible price. b. is perfectly inelastic at the market price. c. is perfectly elastic at the market price. d. is usually downward-sloping.

____ 77. In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is a. zero. b. equal to the industry profits. c. the market supply curve. d. a horizontal line.

____ 78. When a firm's average total cost curve continually declines, the firm is a a. government-created monopoly. b. natural monopoly. c. revenue monopoly. d. All of the above are correct.

Scenario 15-1

Consider a transportation corporation named C.R. Evans that has just completed the development of a new subway system in a medium-sized town in the Northwest. Currently, there are plenty of seats on the subway, and it is never crowded. Its capacity far exceeds the needs of the city. After just a few years of operation, the shareholders of C.R. Evans experienced incredible rates of return on their investment, due to the profitability of the corporation.

____ 79. Refer to Scenario 15-1. Which of the following statements are most likely to be true?

(i) New entrants to the market know they will earn a smaller piece of the market than C.R. Evans currently has.

(ii) C.R. Evans is most likely experiencing increasing average total cost. (iii) C.R. Evans is a natural monopoly. a. (i) and (ii) b. (ii) and (iii) c. (i) and (iii) d. (i), (ii), and (iii)

____ 80. The fundamental cause of monopoly is a. incompetent management in competitive firms. b. the zero-profit feature of long-run equilibrium in competitive markets. c. advertising. d. barriers to entry.

____ 81. A natural monopoly arises when a. there are constant returns to scale over the relevant range of output. b. there are economies of scale over the relevant range of output. c. one firm owns a key natural resource. d. the government gives a single firm the exclusive right to produce a particular good or

service.

____ 82. Which of the following would be most likely to have monopoly power? a. A long-distance telephone service provider b. A local cable TV provider c. A large department store d. A gas station

____ 83. Economists assume that monopolists behave as a. cost minimizers. b. profit maximizers. c. price maximizers. d. maximizers of social welfare.

____ 84. A profit-maximizing monopolist will produce the level of output at which a. average revenue is equal to average total cost. b. average revenue is equal to marginal cost. c. marginal revenue is equal to marginal cost. d. total revenue is equal to opportunity cost.

____ 85. When a monopolist increases the amount of output that it produces and sells, its average revenue a. increases and its marginal revenue increases. b. increases and its marginal revenue decreases. c. decreases and its marginal revenue increases. d. decreases and its marginal revenue decreases.

____ 86. Which of the following statements is true? (i) When a competitive firm sells an additional unit of output, its revenue increases by

an amount less than the price. (ii) When a monopoly firm sells an additional unit of output, its revenue increases by an

amount less than the price. (iii) Average revenue is the same as price for both competitive and monopoly firms. a. (ii) only b. (iii) only c. (i) and (ii) d. (ii) and (iii)

Figure 15-2 The figure below illustrates the cost and revenue structure for a monopoly firm.

____ 87. Refer to Figure 15-2. The average total cost curve for a monopoly firm is depicted by curve

a. A. b. B. c. C. d. D.

____ 88. For a monopoly firm, the shape and position of the demand curve play a role in determining (i) the profit-maximizing price.

(ii) the shape and position of the marginal cost curve. (iii) the shape and position of the marginal revenue curve. a. (i) and (ii) b. (ii) and (iii) c. (i) and (iii) d. (i), (ii), and (iii)

Figure 15-3 The figure below illustrates the cost and revenue structure for a monopoly firm.

____ 89. Refer to Figure 15-3. A profit-maximizing monopoly's total revenue is equal to

a. P3 Q2. b. P2 Q4. c. (P3 - P0) Q2. d. (P3 - P0) Q4.

____ 90. Due to the nature of the patent laws on pharmaceuticals, the market for such drugs a. always remains a competitive market. b. always remains a monopolistic market. c. switches from competitive to monopolistic once the firm's patent runs out. d. switches from monopolistic to competitive once the firm's patent runs out.

____ 91. What is the monopolist's profit under the following conditions? The profit-maximizing price charged for goods produced is $12. The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. Average total cost for 10 units of output is $5. a. $60 b. $70 c. $100 d. $120

____ 92. For a monopolist, when does marginal revenue exceed average revenue? a. Never b. When output is less than the profit-maximizing level of output c. When output is greater than the profit-maximizing level of output d. For all levels of output greater than zero.

____ 93. If a monopolist sells 100 units at $8 per unit and realizes an average total cost of $6 per unit, what is the monopolist's profit? a. $200 b. $400 c. $600 d. $800

____ 94. A monopolist can sell 200 units of output for $36.00 per unit. Alternatively, it can sell 201 units of output for $35.80 per unit. The marginal revenue of the 201st unit of output is

a. $-4.20. b. $-0.20. c. $4.20. d. $35.80.

____ 95. A monopolist faces the following demand curve:

Price Quantity Demanded $51 1 $47 2 $42 3 $36 4 $29 5 $21 6 $12 7

The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing level of production? a. 2 units b. 3 units c. 4 units d. 5 units

____ 96. Suppose when a monopolist produces 75 units its average revenue is $10 per unit, its marginal revenue is $5 per unit, its marginal cost is $6 per unit, and its average total cost is $5 per unit. What can we conclude about this monopolist? a. The monopolist is currently maximizing profits and its total profits are $375. b. The monopolist is currently maximizing profits and its total profits are $300. c. The monopolist is not currently maximizing profits; it should produce more units and

charge a lower price to maximize profits. d. The monopolist is not currently maximizing profits; it should produce fewer units and

charge a higher price to maximize profits.

Table 15-2 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information.

COSTS REVENUES Quantit

Produced Total Cost

($) Marginal

Cost Quantity

Demanded Price

($/unit) Total

Revenue Marginal Revenue

0 100 -- 0 170 -- 1 140 1 160 2 184 2 150 3 230 3 140 4 280 4 130 5 335 5 120 6 395 6 110 7 475 7 100 8 565 8 90

____ 97. Refer to Table 15-2. What is the marginal cost of the 8th shirt?

a. $50 b. $60 c. $90 d. $110

____ 98. Monopolies use their market power to a. charge prices that equal minimum average total cost. b. attain normal profits in the long run. c. charge a price that is higher than marginal cost. d. dump excess supplies of their product on the market.

____ 99. The supply curve for the monopolist a. is horizontal. b. is vertical. c. is upward sloping. d. does not exist.

Table 15-4 Consider the following demand and cost information for a monopoly.

Quantity Price Total Cost 0 $30 $3 1 $25 $7 2 $20 $12 3 $15 $18 4 $10 $25

____ 100. Refer to Table 15-4. The marginal revenue of the second unit is

a. $10 b. $15 c. $20 d. $25

____ 101. A monopoly market a. always maximizes total economic well-being. b. always minimizes consumer surplus. c. generally fails to maximize total economic well-being. d. generally fails to maximize producer surplus.

____ 102. For a monopoly market, total surplus can be defined as the value of the good to a. producers minus the cost incurred by consumers. b. producers plus the cost incurred by consumers. c. consumers minus the costs of producing the good. d. consumers plus the cost of producing the good.

____ 103. Which of the following statements is correct? a. The benefits that accrue to a monopoly’s owners are equal to the costs that are incurred by

consumers of that firm's product. b. The deadweight loss that arises in monopoly stems from the fact that the

profit-maximizing monopoly firm produces a quantity of output that exceeds the socially-efficient quantity.

c. The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a product.

d. The primary social problem caused by monopoly is monopoly profit.

____ 104. In the diagram below, which area represents the deadweight loss from monopoly?

a. E b. H c. C+D+E d. E+H

____ 105. The social cost of a single-price monopoly is equal to its a. economic profit. b. fixed cost. c. dead weight loss. d. variable cost.

____ 106. The collection of statutes aimed at curbing monopoly power is called a. the 14th amendment. b. the Clayton Act. c. the Sherman Act. d. antitrust law.

____ 107. In the majority of cases where there is a natural monopoly, the U. S. government usually deals with the problem a. by splitting the natural monopoly into smaller companies. b. through regulation. c. by turning the natural monopoly into a public enterprise. d. by doing nothing.

____ 108. For a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because a. the average cost of producing units of electricity by one producer in a specific region was

lower than if the same quantity were produced by two or more producers in the same region.

b. the average cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more produced in the same region.

c. the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more producers in the same region.

d. electricity is a special non-excludable good that could never be sold in a competitive market.

____ 109. For a firm to price discriminate, a. it must be a natural monopoly. b. it must be regulated by the government. c. it must have some market power. d. consumers must tell the firm what they are willing to pay for the product.

____ 110. Which of the following may eliminate some or all of the inefficiency that results from monopoly pricing? a. The government can regulate the monopoly. b. The monopoly can be prohibited from price discriminating. c. The monopoly can be forced to operate at a point where its marginal revenue is equal to its

marginal cost. d. None of the above would eliminate any inefficiency associated with a monopoly.

____ 111. In reality, perfect price discrimination is a. used by about 75 percent of all monopolies. b. used by about 50 percent of all monopolies. c. seldom used by monopolies because it leads to lower profits. d. not possible.

____ 112. A monopolist faces the following demand curve:

Price Quantity Demanded $8 300 $7 400 $6 500 $5 600 $4 700 $3 800 $2 900 $1 1,000

The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit. If the monopolist were able to perfectly price discriminate, how many units would it sell? a. 400 b. 500 c. 900 d. 4,200

____ 113. Customers who purchase a book from Dave's Bookstore are charged 20% more than customers who purchase the same book from the Dave's Bookstore website. This is an example of a. perfect price discrimination. b. price discrimination. c. deadweight loss. d. socially inefficient output.

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries.

Firm Industry A Industry B Industry C Industry D 1 0.24 0.46 0.10 0.32 2 0.13 0.24 0.08 0.16 3 0.10 0.10 0.06 0.08

4 0.08 0.05 0.05 0.04 5 0.05 0.04 0.04 0.02 6 0.03 0.03 0.03 0.01 7 0.02 0.02 0.02 0.01 8 0.01 0.01 0.01 0.01

____ 114. Refer to Table 16-1. What is the concentration ratio in Industry C?

a. 29% b. 39% c. 45% d. 56%

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for four industries.

Firm Industry A Industry B Industry C Industry D 1 13,250 8,750 1,750 15,000 2 10,975 7,500 1,725 14,000 3 8,175 6,400 1,700 13,000 4 4,275 5,000 1,675 12,000 5 1,250 4,250 1,650 11,000 6 875 4,000 1,625 10,000

Total 45,350 70,900 30,125 120,000

____ 115. Refer to Table 16-2. Which industry has the lowest concentration ratio?

a. Industry A b. Industry B c. Industry C d. Industry D

____ 116. The commercial jetliner industry, consisting of Boeing and Airbus, would best be described as a (an) a. perfectly competitive market. b. monopolistically competitive market. c. oligopoly. d. monopoly.

____ 117. Which of the following is a characteristic of oligopoly but NOT perfect competition? a. Advertising and sales promotion b. Profit maximization according to the MR = MC rule c. Firms are price takers rather than price makers d. Horizontal demand and marginal revenue curves

____ 118. In markets characterized by oligopoly, a. the oligopolists earn the highest profit when they cooperate and behave like a monopolist. b. collusive agreements will always prevail. c. collective profits are always lower with cartel arrangements than they are without cartel

arrangements. d. pursuit of self-interest by profit-maximizing firms always maximizes collective profits in

the market.

Table 16-3 The information in the table below shows the total demand for premium-channel digital cable TV subscriptions in a small urban market. Assume that each digital cable TV operator pays a fixed cost of $100,000 (per year) to provide premium digital channels in the market area and that the marginal cost of providing the premium channel service to a household is zero.

Quantity Price (per year) 0 $120

3,000 $100 6,000 $ 80 9,000 $ 60 12,000 $ 40 15,000 $ 20 18,000 $ 0

____ 119. Refer to Table 16-3. If there is only one digital cable TV company in this market, what price would it charge

for a premium digital channel subscription to maximize its profit? a. $40 b. $60 c. $80 d. $100

____ 120. When an oligopoly market reaches a Nash equilibrium, a. the market price will be different for each firm. b. the firms will not have behaved as profit maximizers. c. a firm will have chosen its best strategy, given the strategies chosen by other firms in the

market. d. a firm will not take into account the strategies of competing firms.

____ 121. When firms have agreements among themselves on the quantity to produce and the price at which to sell output, we refer to their form of organization as a a. Nash arrangement. b. cartel. c. monopolistically competitive oligopoly. d. perfectly competitive oligopoly.

____ 122. When oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by other firms in the market, we have a. a cartel. b. a group of oligopolists behaving as a monopoly. c. a Nash equilibrium. d. the perfectly competitive outcome.

____ 123. Suppose a market is initially perfectly competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect a. an increase in market output and an increase in the price of the product. b. an increase in market output and an decrease in the price of the product. c. a decrease in market output and an increase in the price of the product. d. a decrease in market output and a decrease in the price of the product.

____ 124. If duopolists individually pursue their own self-interest when deciding how much to produce, the profit-maximizing price they will charge for their product will be

a. less than the monopoly price. b. equal to the perfectly competitive market price. c. greater than the monopoly price. d. possibly less than or greater than the monopoly price.

____ 125. As the number of firms in an oligopoly increases, the price approaches a. zero. b. marginal cost. c. infinity. d. the monopoly price.

____ 126. Consider the diagram below which shows the market demand curve for a particular product. Suppose this market is served by two duopolists who each face the marginal cost curve shown in the diagram. The marginal revenue curve that a monopolist would face in this market is also shown. Which of the following statements is true?

a. The total output in this market will likely be 2 units when the market is served by a

duopoly. b. The price in this market will likely be $6 when the market is served by a duopoly. c. The total revenue to each firm will likely be more than $16 when the market is served by a

duopoly. d. The total output in this market will likely be less than 4 units when the market is served by

a duopoly.

____ 127. Which of the following would be most likely to contribute to the breakdown of a cartel in a natural resource (e.g., bauxite) market? a. High prices b. Low price elasticity of demand c. High compatibility of member interests d. Unequal member ownership of the natural resource

____ 128. An oligopoly would tend to restrict output and drive up price if a. barriers to entering the industry are negligible. b. firms engage in informative advertising. c. firms produce a standardized product. d. firms collude and behave like a monopoly.

Table 16-8

Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from states to recover the healthcare related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses). State prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without the help of at least one cigarette firm study. Each firm has been presented with an opportunity to lower its liability in the suit if it cooperates with attorneys representing the states. Firm B Concede that

cigarette smoke causes lung cancer

Argue that there is no evidence that smoke causes cancer

Firm A

Concede that cigarette smoke

causes lung cancer

Firm A profit = $–20 Firm B profit = $–15


Argue that there is no evidence that

smoke causes cancer



____ 129. Refer to Table 16-8. Pursuing its own best interests, Firm A will concede that cigarette smoke causes lung

cancer a. only if Firm B concedes that cigarette smoke causes lung cancer. b. only if Firm B does not concede that cigarette smoke causes lung cancer. c. regardless of whether Firm B concedes that cigarette smoke causes lung cancer. d. None of the above. In pursuing its own best interests, Firm A will in no case concede that

cigarette smoke causes lung cancer.

____ 130. In a two-person repeated game, a tit-for-tat strategy starts with a. cooperation and then each player mimics the other player's last move. b. cooperation and then each player is unresponsive to the strategic moves of the other

player. c. noncooperation and then each player pursues his or her own self-interest. d. noncooperation and then each player cooperates when the other player demonstrates a

desire for the cooperative solution.

____ 131. Individual profit earned by Dave, the oligopolist, depends on which of the following? (i) The quantity of output that Dave produces

(ii) The quantities of output that the other firms in the market produce (iii) The extent of collusion between Dave and the other firms in the market a. (i) and (ii) b. (ii) and (iii) c. (iii) only d. (i), (ii), and (iii)

Scenario 16-1 Assume that the countries of Irun and Urun are the only two producers of crude oil. Further assume that both countries have entered into an agreement to maintain certain production levels in order to maximize profits. In the world market for oil, the demand curve is downward sloping.

____ 132. Refer to Scenario 16-1. The agreed-upon production level between the two countries will invariably be

a. lower than the Nash equilibrium level. b. equal to the Nash equilibrium level.

c. equal to the duopoly market equilibrium level. d. higher than the duopoly market equilibrium level.

Scenario 16-2 Imagine that two oil companies, Big Petro Inc. and Gargantuan Gas, own adjacent oil fields. Under the fields is a common pool of oil worth $48 million. Drilling a well to recover oil costs $2 million per well. If each company drills one well, each will get half of the oil and earn a $22 million profit ($24 million in revenue - $2 million in costs). Assume that having X percent of the total wells means that a company will collect X percent of the total revenue.

____ 133. Refer to Scenario 16-2. Gargantuan Gas's dominant strategy would lead to what sort of well-drilling

behavior? a. Gargantuan Gas will never drill a second well. b. Gargantuan Gas will always drill a second well. c. Gargantuan Gas will drill a second well only if Big Petro Inc. drills a well. d. Gargantuan Gas will drill a second well only if Big Petro Inc. does not drill a well.

____ 134. What happens when the prisoners' dilemma game is repeated numerous times in an oligopoly market? (i) The firms may well reach the monopoly outcome.

(ii) The firms may well reach the competitive outcome. (iii) Buyers of the oligopolists' product will likely be worse off as a result. a. (i) and (ii) b. (ii) and (iii) c. (i) and (iii) d. (i), (ii), and (iii)

Scenario 16-3 Consider two countries, Eudora and Inhabii, that are engaged in an arms race. Each country must decide whether to build new weapons or to disarm existing weapons. Each country prefers to have more arms than the other because a large arsenal gives it more influence in world affairs. But each country also prefers to live in a world safe from the other country's weapons. The following table shows the possible outcomes for each decision combination. The numbers in each cell represent the country’s ranking of the outcome. Inhabii

Build new weapons

Disarm existing weapons

Eudora

Build new weapons

Eudora: 2 Inhabii: 2


Disarm existing weapons



____ 135. Refer to Scenario 16-3. If Inhabii chooses to build new weapons, the country of Eudora will

a. disarm in order to prevent the loss of influence in world affairs. b. disarm in order to promote world peace. c. build new weapons in order to promote world peace. d. build new weapons in order to prevent the loss of influence in world affairs.

____ 136. A lack of cooperation by oligopolists trying to maintain monopoly profits a. is desirable for society as a whole.

b. is not desirable for society as a whole. c. may or may not be desirable for society as a whole. d. is not a concern due to antitrust laws.

____ 137. Oligopolists may well be able to reach their preferred, cooperative outcome if a. the number of oligopolists is large. b. they learn that a Nash equilibrium is in their best long-term interests. c. a sufficient number of firms can be persuaded to lower their prices. d. the game they play is repeated a sufficient number of times.

____ 138. George and Jerry are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or not at all. If they both advertise on TV, each will earn a profit of $3,000. If they both advertise on radio, each will earn a profit of $5,000. If neither advertises at all, each will earn a profit of $10,000. If one advertises on TV and the other advertises on radio, then the one advertising on TV will earn $4,000 and the other will earn $2,000. If one advertises on TV and the other does not advertise, then the one advertising on TV will earn $8,000 and the other will earn $5,000. If one advertises on radio and the other does not advertise, then the one advertising on radio will earn $9,000 and the other will earn $6,000. If both follow their dominant strategy, then George will a. advertise on TV and earn $3,000. b. advertise on radio and earn $5,000. c. advertise on TV and earn $8,000. d. not advertise and earn $10,000.

Table 16-14

B Q=2 Q=3

A Q=2 (10, 10) (8, 12) Q=3 (12, 8) (6, 6)

____ 139. Refer to Table 16-14. This table shows a game played between two firms, A and B. The firms must choose

how much output to produce. The profit for each firm is shown in the table as (Profit for A, Profit for B). Which of the following outcomes represent the Nash equilibrium in this game? a. Q=2 for A and Q=3 for B. b. Q=3 for A and Q=2 for B. c. There is no Nash equilibrium in this game since neither player has a dominant strategy. d. Both a and b are correct.

____ 140. In a prisoners' dilemma game, a. the solution when playing the game once will be the same as the solution when the players

play the game repeatedly, since agreements cannot be maintained in a prisoners' dilemma. b. if the players play the game repeatedly, the players can achieve a higher payoff, on

average, than when they play the game only once. c. repeated play will always result in a better outcome for both players than when the game is

played only once. d. the tit-for-tat strategy in repeated play requires players to always select the opposite

strategy as their opponent.

Table 16-16 Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk. The store owners each must make a decision to set a high milk price or a low milk price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2).

Store 2 Low Price High Price

Store 1 Low Price (500, 500) (800, 100) High Price (100, 800) (650, 650)

____ 141. Refer to Table 16-16. If grocery store 1 sets a low price, what price should grocery store 2 set? And what

will grocery store 2's payoff equal? a. Low price, $500 b. High price, $800 c. Low price, $100 d. High price, $650

____ 142. Refer to Table 16-16. If grocery store 1 sets a high price, what price should grocery store 2 set? And what will grocery store 2's payoff equal? a. Low price, $800 b. High price, $100 c. Low price, $500 d. High price, $650

Table 16-17 Amy and Heather are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The payoff table for this situation is provided below. The payoffs in each cell are shown as (Amy, Heather). Heather Clean Don’t Clean

Amy Clean (75, 75) (15, 100) Don’t Clean (100, 15) (20, 20)

____ 143. Refer to Table 16-17. If Amy chooses Don’t Clean, what will Heather choose to do? And if Amy chooses

Don’t Clean, what will Heather's payoff equal? a. Clean, $20 b. Don't Clean, $100 c. Clean, $75 d. Don't Clean, $20

Table 16-18 The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul). Paul Turn Drive Straight

John Turn (10, 10) (5, 20) Drive Straight (20, 5) (0, 0)

____ 144. Refer to Table 16-18. If John chooses Drive Straight, what will Paul choose to do and what will Paul's payoff equal? a. Turn, 5 b. Drive Straight, 0 c. Turn, 10 d. Drive Straight, 200

____ 145. Refer to Table 16-18. What is John's dominant strategy? a. John has no dominant strategy. b. John should always choose Turn. c. John should always choose Drive Straight. d. John has two dominant strategies.

____ 146. The Sherman Antitrust Act prohibits price-fixing in the sense that a. competing executives cannot even talk about fixing prices. b. competing executives can talk about fixing prices, but they cannot take action to fix prices. c. a price-fixing agreement can lead to prosecution provided the government can show that

the public was not well-served by the agreement. d. None of the above is correct. The Sherman Act did not address the matter of price-fixing.

Scenario 16-5 Assume that a local bank sells two services, checking accounts and ATM card services. Mr. Donethat is willing to pay $8 a month for the bank to service his checking account and $2 a month for unlimited use of his ATM card. Ms. Beenthere is willing to pay only $5 for a checking account, but is willing to pay $9 for unlimited use of her ATM card. Assume that the bank can provide each of these services at zero marginal cost.

____ 147. Refer to Scenario 16-5. If the bank is unable to use tying, what is the profit-maximizing price to charge for

unlimited use of an ATM card? a. $14 b. $11 c. $9 d. $2

____ 148. Which government entity is charged with investigating and enforcing antitrust laws? a. The U.S. Justice Department b. The U.S. Commerce Department c. The U.S. Treasury Department d. The Bureau of Alcohol, Tobacco, and Firearms

____ 149. Although the practice of predatory pricing is a common claim in antitrust suits, some economists are skeptical of this argument because they believe a. the evidence of its practice is nearly impossible to collect. b. predatory pricing is not a profitable business strategy. c. even though predatory pricing is a profitable business strategy, it is on balance beneficial

to society. d. predatory pricing actually attracts new firms to the industry.

____ 150. A key issue in the Microsoft case involved whether or not the bundling of the Windows operating system with an Internet browser was an example of a. predatory pricing. b. tying. c. resale price maintenance. d. price discrimination.

Chapters 13, 14, 15 & 16 Review questions Answer Section

MULTIPLE CHOICE

1. ANS: B DIF: 2 REF: 13-1 TOP: Economic profit

MSC: Applicative

2. ANS: B DIF: 2 REF: 13-1 TOP: Opportunity cost MSC: Analytical

3. ANS: B DIF: 2 REF: 13-1 TOP: Profit MSC: Analytical

4. ANS: D DIF: 1 REF: 13-1 TOP: Implicit costs MSC: Interpretive

5. ANS: B DIF: 1 REF: 13-2 TOP: Marginal product of labor MSC: Definitional

6. ANS: A DIF: 1 REF: 13-2 TOP: Short run MSC: Interpretive

7. ANS: C DIF: 1 REF: 13-2 TOP: Production function MSC: Definitional

8. ANS: D DIF: 2 REF: 13-2 TOP: Marginal product MSC: Analytical

9. ANS: D DIF: 1 REF: 13-2 TOP: Marginal product MSC: Analytical

10. ANS: B DIF: 2 REF: 13-2 TOP: Marginal product of labor MSC: Applicative

11. ANS: B DIF: 2 REF: 13-2 TOP: Production function MSC: Analytical

12. ANS: D DIF: 2 REF: 13-2 TOP: Diminishing marginal product MSC: Interpretive

13. ANS: D DIF: 1 REF: 13-3 TOP: Variable costs MSC: Interpretive

14. ANS: B DIF: 1 REF: 13-3 TOP: Marginal cost MSC: Definitional

15. ANS: A DIF: 1 REF: 13-3 TOP: Marginal cost MSC: Definitional

16. ANS: D DIF: 2 REF: 13-3 TOP: Average variable cost MSC: Definitional

17. ANS: B DIF: 2 REF: 13-3 TOP: Average fixed cost MSC: Analytical

18. ANS: B DIF: 2 REF: 13-3 TOP: Average total cost MSC: Interpretive

19. ANS: D DIF: 2 REF: 13-3 TOP: Average total cost MSC: Interpretive

20. ANS: C DIF: 2 REF: 13-3 TOP: Average variable cost MSC: Analytical

21. ANS: C DIF: 1 REF: 13-3 TOP: Average total cost MSC: Definitional

22. ANS: D DIF: 1 REF: 13-3 TOP: Short run

MSC: Interpretive

23. ANS: C DIF: 2 REF: 13-3 TOP: Marginal cost MSC: Interpretive

24. ANS: B DIF: 2 REF: 13-3 TOP: Average fixed cost MSC: Applicative

25. ANS: C DIF: 2 REF: 13-3 TOP: Variable costs MSC: Applicative

26. ANS: A DIF: 2 REF: 13-3 TOP: Total cost MSC: Applicative

27. ANS: C DIF: 2 REF: 13-3 TOP: Accounting profit MSC: Applicative

28. ANS: C DIF: 2 REF: 13-3 TOP: Marginal cost MSC: Applicative

29. ANS: B DIF: 2 REF: 13-3 TOP: Average fixed cost MSC: Applicative

30. ANS: D DIF: 2 REF: 13-3 TOP: Average fixed cost MSC: Interpretive

31. ANS: D DIF: 2 REF: 13-3 TOP: Average total cost MSC: Analytical

32. ANS: D DIF: 3 REF: 13-3 TOP: Average total cost MSC: Analytical

33. ANS: B DIF: 2 REF: 13-3 TOP: Average variable cost MSC: Applicative

34. ANS: D DIF: 3 REF: 13-3 TOP: Average total cost MSC: Applicative


36. ANS: A DIF: 2 REF: 13-3 TOP: Average total cost MSC: Interpretive

37. ANS: A DIF: 2 REF: 13-4 TOP: Average total cost MSC: Interpretive

38. ANS: B DIF: 2 REF: 13-4 TOP: Constant returns to scale MSC: Definitional

39. ANS: D DIF: 2 REF: 13-4 TOP: Economies of scale MSC: Interpretive

40. ANS: D DIF: 1 REF: 13-4 TOP: Short run MSC: Interpretive

41. ANS: C DIF: 2 REF: 13-4 TOP: Fixed costs MSC: Analytical

42. ANS: A DIF: 3 REF: 13-4 TOP: Average fixed cost MSC: Analytical

43. ANS: B DIF: 3 REF: 13-4 TOP: Economies of scale MSC: Applicative

44. ANS: A DIF: 3 REF: 13-4 TOP: Economies of scale MSC: Applicative

45. ANS: A DIF: 2 REF: 13-4 TOP: Short run MSC: Interpretive

46. ANS: A DIF: 1 REF: 14-1 TOP: Competitive markets

MSC: Definitional

47. ANS: C DIF: 1 REF: 14-1 TOP: Total revenue MSC: Analytical

48. ANS: D DIF: 2 REF: 14-1 TOP: Average revenue MSC: Applicative

49. ANS: B DIF: 1 REF: 14-1 TOP: Competitive firms MSC: Interpretive

50. ANS: A DIF: 2 REF: 14-1 TOP: Profit MSC: Definitional

51. ANS: A DIF: 2 REF: 14-1 TOP: Profit MSC: Analytical

52. ANS: C DIF: 1 REF: 14-1 TOP: Marginal revenue MSC: Interpretive

53. ANS: B DIF: 2 REF: 14-2 TOP: Profit maximization MSC: Applicative

54. ANS: D DIF: 1 REF: 14-2 TOP: Profit MSC: Applicative

55. ANS: B DIF: 2 REF: 14-2 TOP: Profit maximization MSC: Analytical

56. ANS: A DIF: 2 REF: 14-2 TOP: Supply curve MSC: Interpretive


58. ANS: D DIF: 2 REF: 14-2 TOP: Profit MSC: Analytical

59. ANS: D DIF: 2 REF: 14-2 TOP: Profit maximization MSC: Interpretive

60. ANS: B DIF: 2 REF: 14-2 TOP: Profit maximization MSC: Interpretive

61. ANS: B DIF: 2 REF: 14-2 TOP: Profit MSC: Applicative

62. ANS: C DIF: 2 REF: 14-2 TOP: Supply curve MSC: Interpretive

63. ANS: B DIF: 2 REF: 14-2 TOP: Profit maximization MSC: Analytical

64. ANS: B DIF: 2 REF: 14-2 TOP: Profit maximization MSC: Applicative

65. ANS: C DIF: 2 REF: 14-2 TOP: Profit maximization MSC: Applicative

66. ANS: A DIF: 2 REF: 14-2 TOP: Profit maximization MSC: Applicative

67. ANS: C DIF: 3 REF: 14-2 TOP: Profit MSC: Analytical


69. ANS: D DIF: 2 REF: 14-3 TOP: Supply curve MSC: Interpretive

70. ANS: D DIF: 2 REF: 14-3 TOP: Supply curve

MSC: Applicative

71. ANS: B DIF: 2 REF: 14-3 TOP: Supply curve MSC: Interpretive

72. ANS: B DIF: 2 REF: 14-3 TOP: Competitive markets MSC: Interpretive



75. ANS: D DIF: 2 REF: 14-3 TOP: Competitive firms MSC: Interpretive

76. ANS: A DIF: 1 REF: 14-3 TOP: Market supply MSC: Definitional

77. ANS: C DIF: 1 REF: 14-3 TOP: Market supply MSC: Definitional

78. ANS: B DIF: 1 REF: 15-1 TOP: Natural monopoly MSC: Definitional

79. ANS: C DIF: 2 REF: 15-1 TOP: Natural monopoly MSC: Interpretive

80. ANS: D DIF: 1 REF: 15-1 TOP: Barriers to entry MSC: Interpretive

81. ANS: B DIF: 1 REF: 15-1 TOP: Natural monopoly MSC: Definitional

82. ANS: B DIF: 2 REF: 15-1 TOP: Monopoly MSC: Applicative

83. ANS: B DIF: 2 REF: 15-2 TOP: Profit maximization MSC: Interpretive

84. ANS: C DIF: 2 REF: 15-2 TOP: Profit maximization MSC: Interpretive

85. ANS: D DIF: 2 REF: 15-2 TOP: Demand curve MSC: Analytical

86. ANS: D DIF: 3 REF: 15-2 TOP: Marginal revenue MSC: Interpretive


88. ANS: C DIF: 2 REF: 15-2 TOP: Demand curve MSC: Interpretive

89. ANS: A DIF: 2 REF: 15-2 TOP: Total revenue MSC: Analytical

90. ANS: D DIF: 2 REF: 15-2 TOP: Patents MSC: Interpretive

91. ANS: B DIF: 2 REF: 15-2 TOP: Profit MSC: Applicative

92. ANS: A DIF: 2 REF: 15-2 TOP: Marginal revenue MSC: Analytical

93. ANS: A DIF: 1 REF: 15-2 TOP: Profit MSC: Applicative

94. ANS: A DIF: 2 REF: 15-2 TOP: Marginal revenue

MSC: Applicative

95. ANS: C DIF: 3 REF: 15-2 TOP: Profit maximization MSC: Applicative

96. ANS: D DIF: 3 REF: 15-2 TOP: Profit maximization MSC: Analytical


98. ANS: C DIF: 2 REF: 15-2 TOP: Pricing MSC: Interpretive

99. ANS: D DIF: 1 REF: 15-2 TOP: Supply curve MSC: Interpretive

100. ANS: B DIF: 2 REF: 15-2 TOP: Marginal revenue MSC: Applicative

101. ANS: C DIF: 2 REF: 15-3 TOP: Welfare MSC: Interpretive

102. ANS: C DIF: 2 REF: 15-3 TOP: Total surplus MSC: Definitional

103. ANS: C DIF: 3 REF: 15-3 TOP: Deadweight loss MSC: Interpretive

104. ANS: D DIF: 2 REF: 15-3 TOP: Deadweight loss MSC: Interpretive

105. ANS: C DIF: 1 REF: 15-3 TOP: Deadweight loss MSC: Interpretive

106. ANS: D DIF: 2 REF: 15-4 TOP: Antitrust MSC: Interpretive

107. ANS: B DIF: 2 REF: 15-4 TOP: Natural monopoly MSC: Interpretive

108. ANS: A DIF: 2 REF: 15-4 TOP: Natural monopoly MSC: Interpretive

109. ANS: C DIF: 2 REF: 15-5 TOP: Price discrimination MSC: Interpretive

110. ANS: A DIF: 2 REF: 15-5 TOP: Regulation MSC: Interpretive

111. ANS: D DIF: 2 REF: 15-5 TOP: Perfect price discrimination MSC: Interpretive

112. ANS: C DIF: 3 REF: 15-5 TOP: Perfect price discrimination MSC: Analytical

113. ANS: B DIF: 2 REF: 15-5 TOP: Price discrimination MSC: Applicative

114. ANS: A DIF: 2 REF: 16-1 TOP: Concentration ratio MSC: Applicative

115. ANS: C DIF: 3 REF: 16-1 TOP: Concentration ratio MSC: Applicative

116. ANS: C DIF: 2 REF: 16-1 TOP: Oligopoly MSC: Interpretive

117. ANS: A DIF: 2 REF: 16-1 TOP: Oligopoly MSC: Interpretive

118. ANS: A DIF: 2 REF: 16-2 TOP: Cartels

MSC: Interpretive

119. ANS: B DIF: 2 REF: 16-2 TOP: Monopoly MSC: Applicative

120. ANS: C DIF: 2 REF: 16-2 TOP: Nash equilibrium MSC: Interpretive

121. ANS: B DIF: 1 REF: 16-2 TOP: Cartels MSC: Definitional

122. ANS: C DIF: 2 REF: 16-2 TOP: Nash equilibrium MSC: Definitional

123. ANS: C DIF: 2 REF: 16-2 TOP: Oligopoly MSC: Interpretive

124. ANS: A DIF: 2 REF: 16-2 TOP: Profit maximization MSC: Analytical

125. ANS: B DIF: 2 REF: 16-2 TOP: Oligopoly MSC: Analytical

126. ANS: D DIF: 3 REF: 16-2 TOP: Duopoly MSC: Interpretive

127. ANS: D DIF: 2 REF: 16-2 TOP: Cartels MSC: Interpretive

128. ANS: D DIF: 2 REF: 16-2 TOP: Collusion MSC: Interpretive

129. ANS: D DIF: 2 REF: 16-3 TOP: Game theory MSC: Applicative

130. ANS: A DIF: 2 REF: 16-3 TOP: Prisoners' dilemma MSC: Interpretive

131. ANS: D DIF: 2 REF: 16-3 TOP: Oligopoly MSC: Interpretive

132. ANS: A DIF: 2 REF: 16-3 TOP: Nash equilibrium MSC: Analytical

133. ANS: B DIF: 3 REF: 16-3 TOP: Prisoners' dilemma MSC: Applicative

134. ANS: C DIF: 2 REF: 16-3 TOP: Prisoners' dilemma MSC: Interpretive


136. ANS: A DIF: 2 REF: 16-3 TOP: Collusion MSC: Interpretive

137. ANS: D DIF: 2 REF: 16-3 TOP: Prisoners' dilemma MSC: Interpretive

138. ANS: D DIF: 3 REF: 16-3 TOP: Dominant strategy MSC: Applicative


140. ANS: B DIF: 2 REF: 16-3 TOP: Prisoners' dilemma MSC: Interpretive

141. ANS: A DIF: 2 REF: 16-3 TOP: Game theory MSC: Applicative

142. ANS: A DIF: 2 REF: 16-3 TOP: Game theory

MSC: Applicative


144. ANS: A DIF: 2 REF: 16-3 TOP: Game theory MSC: Applicative

145. ANS: A DIF: 2 REF: 16-3 TOP: Dominant strategy MSC: Applicative

146. ANS: A DIF: 2 REF: 16-4 TOP: Sherman Antitrust Act of 1890 MSC: Interpretive

147. ANS: C DIF: 2 REF: 16-4 TOP: Tying MSC: Applicative

148. ANS: A DIF: 1 REF: 16-4 TOP: Antitrust MSC: Interpretive

149. ANS: B DIF: 2 REF: 16-4 TOP: Predatory pricing MSC: Interpretive

150. ANS: B DIF: 2 REF: 16-4 TOP: Tying MSC: Interpretive

Documents

Chapters 13, 14, 15 & 16 Review questions of the above are correct. Figure 13-6 The curves below reflect information about the cost structure of a firm. ____ 20. Refer to Figure 13