ECON510-1900-SP11: 7th Assignment
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ECON510-1900-Managerial Economics-SP11-KIM You are logged in as Dhruv Dholakiya (Logout)
UNVA-Online► ECON510-1900-SP11► Quizzes► 7th Assignment► Review of attempt 2
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Sunday, May 29, 2011, 09:51 PM Sunday, May 29, 2011, 11:05 PM 1 hour 13 mins 17/40 2.13 out of a maximum of 5 (43%)
Industry Y is a perfectly competitive industry. Assume that as a result of changes in other markets there is a twenty percent increase in the price of Marks: 1 variable inputs used by firms in industry Y. After all adjustments have taken place, we would expect the equilibrium price in industry Y to:
1
Choose one answer.
a. decrease and the number of firms to decrease. b. increase and the number of firms to decrease. c. decrease and the number of firms to increase. d. increase and the number of firms to increase.
Correct Marks for this submission: 1/1.
If a market is perfectly competitive and is in long-run equilibrium, which of the following conditions does not hold? Marks: 1
2
Choose one answer.
a. Price is equal to the minimum long-run average cost of production. b. The value of the last unit of output produced is equal to the value of the resources used to produce it. c. Economic profit equals zero. d. There is an incentive for additional firms to enter the market because existing firms are earning revenues in excess of the explicit costs of production.
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ECON510-1900-SP11: 7th Assignment
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Correct Marks for this submission: 1/1.
Perfectly competitive firms are said to be "small." Which of the following best describes this smallness? Marks: 1
3
Choose one answer.
a. The individual firm faces a downward-sloping demand curve. b. The individual firm must have fewer than 10 employees. c. The individual firm is unable to affect market price through its output decisions. d. The individual firm has assets of less than $2 million.
Incorrect Marks for this submission: 0/1.
When price is less than average variable cost at the profit-maximizing level of output, a firm should: Marks: 1
4
Choose one answer.
a. continue to produce the level of output at which marginal revenue equals marginal cost if it is operating in the short run. b. shutdown, because it cannot even cover all of its variable costs let alone its fixed costs if it stays in business. c. continue to produce the level of output at which marginal revenue equals marginal cost if it is operating in the long run. d. shutdown, because it will lose nothing in that case.
Incorrect Marks for this submission: 0/1.
5
In the case of the perfectly competitive firm:
Marks: 1
Choose one answer.
a. marginal revenue equals the market price. b. marginal revenue is less than the market price. c. marginal revenue is equal to, less than, or greater than market price depending on the level of output. d. marginal revenue is greater than the market price.
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ECON510-1900-SP11: 7th Assignment
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Correct Marks for this submission: 1/1.
Which of the following barriers to entry is is most likely to result in the creation of of new products and production processes? Marks: 1
6
Choose one answer.
a. Ownership of an essential raw material. b. Licenses. c. Significant economies of scale. d. Patents.
Incorrect Marks for this submission: 0/1.
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The manager of a perfectly competitive firm has to decide:
Marks: 1
Choose one answer.
a. the price the firm should charge for its output. b. the quantity of output the firm should produce. c. the quantity of output the firm should produce and the price it should charge. d. neither the quantity of output the firm should produce nor the price it should charge because the market makes both of these decisions.
Correct Marks for this submission: 1/1.
If a monopoly wants to maximize its profit, it should produce in the range where Marks: 1
8
Choose one answer.
a. its demand curve is elastic. b. its average costs are declining. c. its marginal costs are declining. d. its marginal costs are less than its average costs.
Correct Marks for this submission: 1/1.
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By continuing to operate when price is greater than average variable cost but less than average total cost, a firm limits its losses to: Marks: 1
9
Choose one answer.
a. $0. b. the difference between its total fixed cost and the amount by which total revenue exceeds total variable costs. c. its total variable costs. d. its total fixed costs.
Correct Marks for this submission: 1/1.
All of the following are strategies a firm with market power can adopt to increase it profits over time except: Marks: 1
10
Choose one answer.
a. setting price equal to the marginal costs of production. b. mergers with, and acquisitions of, competing firms. c. influencing the regulatory process. d. erecting barriers to entry.
Incorrect Marks for this submission: 0/1.
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Which of the following statements is correct?
Marks: 1
Choose one answer.
a. The monopolist's supply curve is its MC curve. b. The monopolist's supply curve is that section of its MC curve that lies above its MR curve. c. The monopolist does not have a supply curve. d. The monopolist's supply curve is that section of its MC curve that lies above its AVC curve.
Incorrect Marks for this submission: 0/1.
A monopolist sells 100 units at $10 per unit and 90 units at $15 per unit. The marginal revenue from the tenth unit is Marks: 1
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a. $1000.
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ECON510-1900-SP11: 7th Assignment
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b. $100. c. $350. d. $1350.
Correct Marks for this submission: 1/1.
A perfectly competitive firm will maximize profits (or minimize losses) so long as price (marginal revenue) is: Marks: 1
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Choose one answer.
a. greater than marginal cost. b. greater than average total cost. c. greater than average fixed cost. d. greater than average variable cost.
Incorrect Marks for this submission: 0/1.
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For a demand curve that is horizontal, the marginal revenue curve
Marks: 1
Choose one answer.
a. will be to the left of the demand curve and half as steep. b. will be the same as the demand curve c. will be to the right of the demand curve and twice as steep. d. will be to the right of the demand curve and half as steep.
Correct Marks for this submission: 1/1.
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Firms are "price makers" if they
Marks: 1
Choose one answer.
a. make their product price competitive. b. make the market price their product price. c. have sufficient market power to set their product price. d. None of the above
Correct Marks for this submission: 1/1.
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ECON510-1900-SP11: 7th Assignment
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Assume the firms in a perfectly competitive industry are initially in long-run equilibrium and the cost of labor increases. In the short run, this will cause Marks: 1 firms in the industry to:
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Choose one answer.
a. increase output and earn a positive economic profit. b. increase output and incur a loss. c. reduce output and incur a loss. d. reduce output and earn a positive economic profit.
Incorrect Marks for this submission: 0/1.
In comparing monopoly to a perfectly competitive market, which of the following is false? Marks: 1
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Choose one answer.
a. Market price will be higher under monopoly. b. Consumers will be worse off with the monopoly. c. Equilibrium quantity will be higher under perfect competition. d. Employment will be higher under monopoly.
Correct Marks for this submission: 1/1.
Which of the following conditions would definitely cause a perfectly competitive company to shut down in the short run? Marks: 1
18
Choose one answer.
a. P < MC b. P = MC < AC c. P = MR d. P < AVC
Correct Marks for this submission: 1/1.
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Marks: 1 Assume
at the firm's profit-maximizing level of output P = AVC. In this case, the firm will be: Choose one answer.
a. earning a positive economic profit. b. earning economic profit = 0. c. breaking even. d. incurring an economic loss.
Incorrect Marks for this submission: 0/1.
Assume that there is an improvement in the technology used by firms in a perfectly competitive industry that is initially in long-run equilibrium. In the Marks: 1 short run this would cause:
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Choose one answer.
a. no change in the firm's economic profit. b. cannot be determined with the information given. c. an increase in the firm's economic profit. d. a decrease in the firm's economic profit.
Incorrect Marks for this submission: 0/1.
21 Marks: 10
Given the Production Function: Q = 72X + 15X2 - X3, where Q = Output and X = Input a. What is the Marginal Product (MP) when X = 8? b. What is the Average Product (AP) when X = 6? c. At what value of X will Q be at its maximum? d. At what value of X will Diminishing Returns set in? Answer:
===> What is the Marginal Product (MP) when X = 8 MP = dQ / dX = 72 + 30x - 3x ^ MP = 120 2 (if X=8)
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In order to maximize its profits, a price-taking firm should produce the level of output at which: Marks: 1
22
Choose one answer.
a. total revenue = total cost. b. marginal revenue = marginal cost. c. average revenue = average cost. d. variable revenue = variable cost.
Correct Marks for this submission: 1/1.
Assume a perfectly competitive firm's short-run cost is TC = 100 + 160Q + 3Q2. If the market price is $196, what should it do? Marks: 1
23
Choose one answer.
a. produce zero units (i.e., shut down) b. produce 5 units and continue operating c. produce 6 units and continue operating d. Cannot be determined from the above information
Correct Marks for this submission: 1/1.
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When a perfectly competitive firm is in long-run equilibrium:
Marks: 1
Choose one answer.
a. the firm is operating at the minimum of its LRAC curve. b. its total revenues equal the sum of its total explicit and implicit costs costs. c. the firm is earning zero economic profit. d. All of the above.
Incorrect Marks for this submission: 0/1.
Assume a perfectly competitive firm is producing 300 units of output, P = $10, th th Marks: 1 ATC of the 300 unit is $11, marginal cost of the 300 unit = $10, and AVC of the 300th unit = $9. Based on this information, the firm is:
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ECON510-1900-SP11: 7th Assignment
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a. earning an economic profit of $300. b. incurring a loss of $300 and should shut down. c. earning an economic profit of $600. d. incurring a loss of $300, but should continue to operate in the short run.
Correct Marks for this submission: 1/1.
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All of the following are possible characteristics of a monopoly except:
Marks: 1
Choose one answer.
a. there is a single firm. b. the existence of some advertising. c. the firm is a price taker. d. the firm produces a unique product.
Incorrect Marks for this submission: 0/1.
Assume a perfectly competitive firm is producing a level of output at which MR < MC. What should the firm do to maximize its profits? Marks: 1
27
Choose one answer.
a. The firm should increase price. b. The firm should increase output. c. The firm should do nothing it wants to maximize the difference between MR and MC in order to maximize its profits. d. The firm should decrease output.
Incorrect Marks for this submission: 0/1.
By shutting down when price is less than average variable cost at the profitmaximizing level of output, a perfectly competitive firm will limit its losses to its: Marks: 1
28
Choose one answer.
a. marginal costs. b. total variable costs.
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c. total fixed costs. d. total costs. Correct Marks for this submission: 1/1.
Assume there is a decrease in the market demand for a good sold by pricetaking firms that are initially producing the profit-maximizing level of output. Marks: 1 For the individual firm, this would result in:
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Choose one answer.
a. an increase in both price and the profit-maximizing quantity of output. b. a decrease in price and increase in the profit-maximizing quantity of output. c. an increase in price and decrease in the profit-maximizing quantity of output. d. a decrease in both price and the profit-maximizing quantity of output.
Correct Marks for this submission: 1/1.
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Which is a required characteristic of a perfectly competitive industry?
Marks: 1
Choose one answer.
a. Products are highly differentiated. b. There are few firms so that none can influence market price. c. Barriers to entry are high d. None of the above
Incorrect Marks for this submission: 0/1.
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When MR = MC
Marks: 1
Choose one answer.
a. marginal profit is maximized. b. marginal profit is positive. c. total profit is zero. d. total profit is maximized.
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ECON510-1900-SP11
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