ECON312N Principles of Economics
Week 4 Quiz
Some amount, but more information is needed to determine her fixed cost.
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
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
Cost curves shift if
i, ii, and iii
i and iii
i and ii
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 and ii
i, ii and iii
ii and iii
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
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
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.
The table shows the cost structure of a firm selling bottles of water in a perfectly competitive market.
?(bottles per? week)
Average variable cost
?(dollars per? bottle)
What is the quantity at the firm’s shutdown point?
The firm’s shutdown point occurs at a quantity of
bottles of water per week and the market price is $
nothing a bottle.
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.
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.
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
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
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.
does not? change; does not change
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.
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.
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
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
Information on the price of a can of paint is needed to answer the question.
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?
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?
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
$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
save domestic jobs
penalizing lax environmental standards
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
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
To maximize profit, a firm in monopolistic competition will produce the quantity where marginal revenue
equals marginal cost.
equals average total cost.
is less than marginal cost.
is greater than marginal cost.
Airlines seek new ways to save on fuel as costs soar
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.
continue to make an economic profit.
incur an economic loss.
exit the industry if the price and his costs do not change.
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.
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
ii and iii
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
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.
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?
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; less than 2,000 pounds.
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.
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.
Diseconomies of scale is a result of
specialization of labor, capital, and management.
larger fixed costs as the firm’s production increases.
difficulties of coordinating and controlling a large enterprise.