Economics Chapter on Production and Markets

Question 1

• Marginal product of the seventh worker is 27 units of output.

Question 2

• A firm has market power if it can influence the market price of a good.

Question 3

• Free entry means no legal barriers prevent a firm from entering an industry.

Question 4

• Dairy farming is most likely to exhibit the characteristic of free entry.

Question 5

• A price-taking firm will sell none of its goods if it charges more than the going price.

Question 6

• In the long run, a firm can choose how many workers to hire, the size of its factories, and which short-run average total cost curve to use.

Question 7

• If the total cost curve gets steeper as output increases, the firm is experiencing diseconomies of scale.

Question 8

• A production function shows the relationship between labor and output, where the slope is the marginal product. The slopes of the production function and total cost curve are inversely related if one is increasing, the other is decreasing.

Question 9

• For competitive firms only, marginal revenue equals the price.

Question 10

• If a firm produces 200 units of output and has $1,800 in total revenue, the average revenue of the 200th unit is $12.

Question 11

• If a firm produces 150 units of output and has $1,800 in total revenue, increasing output to 200 units will result in $2,400 in total revenue.

Question 12

• Firms in competitive markets produce output levels where marginal revenue equals price.

Question 13

• For a competitive firm, total revenue equals average revenue and average revenue equals marginal revenue.

Question 14

• Farmer Brown's production function exhibits diminishing marginal product.

Question 15

• Farmer Brown's total cost curve increases at an increasing rate.

Question 16

• The graph illustrates a typical total cost curve.

Question 17

• The production function underlying the total cost function demonstrates decreasing marginal product.

Question 18

• In Table 13-5, the marginal product of the third worker is 8,000 units.

Question 19

• Table 13-5 shows diminishing marginal product begins with the addition of the third worker.

Question 20

• Firms being price takers in a competitive market requires many sellers, firms being able to freely enter/exit the market, and goods offered being largely the same.

Question 21

• In Table 14-3, the price is $13.

Question 22

• In Table 14-3, the marginal revenue is $13.

Question 23

• The total revenue from selling 7 units in Table 14-6 is $840.

Question 24

• The total revenue from selling 4 units in Table 14-6 is $480.

Question 25

• The marginal revenue from selling the third unit in Table 14-6 is $120.

Question 26

• Oligopoly and monopolistic competition are examples of imperfect competition.

Question 27

• The competition in monopolistically competitive markets is most likely a result of many sellers in the market.

Question 28

• All competitive firms do not necessarily earn zero economic profit in both the short run and the long run.

Question 29

• A firm operating in a perfectly competitive market can earn positive, negative, or zero economic profit in the long run.

Question 30

• Firm A is not experiencing economies of scale.

Question 31

• Firm B is experiencing constant returns to scale.

Question 32

• Firm C is experiencing economies of scale.

Question 33

• If the government regulates the price a natural monopolist can charge to be equal to the firm's marginal cost, the government will likely need to subsidize the firm.

Question 34

• A monopolist practicing perfect price discrimination does not impose a deadweight loss on society.

Question 35

• Monopolistic competition is characterized by many sellers offering differentiated products. Oligopoly is characterized by few sellers offering similar products.

Question 36

• When some resources used in production are only available in limited quantities, long-run supply curves are upward sloping in a competitive market.

Question 37

• If the price is $6 in the short run, individual firms will earn positive economic profits, which will entice other firms to enter the industry, leading to a decline in prices and profits for existing firms.

Question 38

• If the price is $3.50 in the short run, individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.

Question 39

• The total quantity supplied in the market for 100 identical firms at $6 price will be 200 units.

Question 40

• The lowest price at which the firm would operate in the short run in Table 14-15-a is $6.

Question 41

• If there are 300 identical firms in the market, output supplied at the $1.00 price is 30,000 units.

Question 42

• If there are 300 identical firms in the market, output supplied at the $2.00 price is 60,000 units.

Question 43

• Consumer surplus in Figure 15-19 without price discrimination is $1,562.50.

Question 44

• Consumer surplus in Figure 15-19 with perfect price discrimination is $0.

Question 45

• The deadweight loss in Figure 15-19 without price discrimination is $3,125.

Question 46

• When the output effect for a monopolist is greater than the price effect in a monopolist, marginal revenue is positive.

Question 47

• The consumer surplus at the profit-maximizing price in Figure 15-20 is $450.

Question 48

• The deadweight loss from production in Figure 15-20 is $225.

Question 49

• For a typical natural monopoly, average total cost is declining due to very large fixed costs.

Question 50

• A monopolist's profit is not able to be determined based on price of $14, marginal revenue and cost, and output of 15 units. More information is needed

Question 51

• When a monopolist produces 75 units with $10 average revenue, $5 marginal revenue, $6 marginal cost, and $5 average total cost, the monopolist will increase output and reduce price to maximize profit.

Question 52

• If a monopolist faces a constant marginal cost of $20, the output that maximizes profit is 2 units.

Question 53

• If a monopolist faces a constant marginal cost of $10, the output that maximizes profit is 3 units.

Question 54

• When a profit-maximizing firm in a monopolistically competitive market is at long-run equilibrium, all the average revenue will equal the firm's marginal cost, the marginal revenue will exceed the marginal cost, and the firm will earn 0 economic profit. And the demand curve will be tangent to the average total cost curve.

Question 55

• The excess capacity in Figure 16-14 is represented by the area GH.

Question 56

• The profit-maximizing outcome for the firm in Figure 16-14 is that the firm earns zero profit in the long run but is in long run equilibrium.

Question 57

• In a perfectly competitive market, the price in Figure 16-14 is equal to point I; whereas the profit maximizing price in a monopolistically competitive market is C.

Question 58

• The deadweight loss from production in Figure 16-14 is represented by the area BHJ

Question 59

• The deadweight loss from production in Figure 16-14 is BCIJ

Question 60

• Understanding how people behave in strategic situations is necessary to understand perfectly competitive, monopolistically competitive, and oligopolistically competitive markets.

Question 61

• The simplest type of oligopoly is a duopoly.

Question 62

• If player A chooses their best strategy in Table 17-14, player B should choose left and earn a payoff of 3.

Question 63

• When the market is in long-run equilibrium at point W in panel (b), the firm will have a zero economic profit.

Question 64

• An increase in demand from D0 to D1 in Figure 14-14 will result in a new market equilibrium at point Z, causing an increase in the number of firms in the market.

Question 65

• Points W, Y, and Z represent both short-run and long-run equilibrium in Figure 14-14.