Economics Chapter on Production and Markets

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Questions and Answers

What is the total revenue from selling 7 units?

$120

$840 (correct)

$490

$562

What is the marginal revenue from selling the 3rd unit?

$55

$120 (correct)

$137

$140

Is oligopoly considered a market structure under imperfect competition?

Depends on the number of firms

True (correct)

False

Only in specific conditions

In a perfectly competitive market, can firms earn positive economic profit in the long run?

False Signup and view all the answers

Is Firm A experiencing economies of scale?

True Signup and view all the answers

If the government regulates a natural monopolist's price to marginal cost, what is likely to happen?

The government will need to subsidize the firm Signup and view all the answers

Does a monopolist that practices perfect price discrimination impose a deadweight loss on society?

False Signup and view all the answers

What is the likely shape of the long-run supply curve in a competitive market when resources are limited?

Upward sloping Signup and view all the answers

If the price in a competitive industry is $6 in the short run, what will be the long-run outcome?

Individual firms will earn positive economic profits, enticing others to enter. Signup and view all the answers

What occurs in the long run if the short-run price is $3.50?

Some firms will exit the industry due to negative economic profits. Signup and view all the answers

Given 100 identical firms in a market with a price of $6, what will be the total quantity supplied?

200 units Signup and view all the answers

According to the cost data provided, what does the total cost of producing 2 units equal?

$12 Signup and view all the answers

In short-run equilibrium where market conditions are profitable, what happens to market supply?

It increases as firms enter the market. Signup and view all the answers

What will happen if firms face average variable costs higher than the market price?

Firms will shut down operations. Signup and view all the answers

Which of the following best describes the entry of firms into a competitive market?

Firms enter when they can earn positive economic profits. Signup and view all the answers

What is the average revenue of the 200th unit if a firm increases its output from 150 to 200 units, with total revenue of $1,800?

$12 Signup and view all the answers

What will be the total revenue if a firm in a competitive market that sells 150 units increases output to 200 units?

$2,400 Signup and view all the answers

Firms operating in competitive markets reach output levels where marginal revenue equals which of the following?

Price Signup and view all the answers

For a competitive firm, which statement is true regarding total revenue and average revenue?

Average revenue equals marginal revenue Signup and view all the answers

What does Farmer Brown's production function exhibit when he plants increasing amounts of seeds?

Diminishing marginal product Signup and view all the answers

How does Farmer Brown's total-cost curve change as he plants more seeds?

Increasing at an increasing rate Signup and view all the answers

Which of the following is a characteristic of the production function underlying a typical total cost function?

Total output increases as the quantity of inputs increases but at a decreasing rate Signup and view all the answers

What is the marginal product of the seventh worker when L=6 and Q=147, and L=7 and Q=184?

37 units of output Signup and view all the answers

Under which condition does a firm have market power?

Influence the market price of the good it sells Signup and view all the answers

What does free entry in a market indicate?

No legal barriers prevent a firm from entering an industry Signup and view all the answers

Which industry is most likely to demonstrate free entry characteristics?

Dairy farming Signup and view all the answers

Which of the following best describes a price-taking firm?

Charging more than the market price results in no sales Signup and view all the answers

In the long run, what options does a firm selling textbooks have?

All of the above are correct Signup and view all the answers

If the total cost curve becomes steeper as output increases, which economic concept is being exhibited?

Diminishing marginal product Signup and view all the answers

Which statement about the production function is correct?

All of the above are correct Signup and view all the answers

What is the lowest price at which the firm would operate in the short run?

$5 Signup and view all the answers

What level of output will be supplied to the market when the price is $1.00 with 300 identical firms?

30,000 Signup and view all the answers

At a price of $2.00, what level of output will be supplied to the market by 300 identical firms?

60,000 Signup and view all the answers

If the monopoly firm is not allowed to price discriminate, what does consumer surplus amount to?

$1,562.50 Signup and view all the answers

What is the deadweight loss when a monopolist is not allowed to price discriminate?

$1,562.50 Signup and view all the answers

For a monopolist, if the output effect is greater than the price effect, what is the status of marginal revenue?

Positive Signup and view all the answers

In a typical natural monopoly, how does average total cost behave?

Declining, often because fixed costs are very large Signup and view all the answers

What is the profit of a monopolist charging a price of $14, with marginal cost of $7 at an output of 15 units?

$90 Signup and view all the answers

What does it mean if a firm is incurring a short run loss but will earn zero profit in the long run?

The firm is experiencing temporary inefficiency. Signup and view all the answers

In a perfectly competitive market, the price charged by the firm is at which point according to the available data?

I Signup and view all the answers

Which area represents the deadweight loss produced by the firm as indicated in the provided figure?

BCIJ Signup and view all the answers

Which market requires an understanding of strategic behavior to fully grasp its dynamics?

Oligopoly Signup and view all the answers

What type of oligopoly is represented as the simplest form?

Duopoly Signup and view all the answers

If player A chooses the strategy that maximizes their payoff in the game, what should player B choose?

Choose left for a higher payoff. Signup and view all the answers

When at long-run equilibrium where the firm has zero economic profit, which consequence is most likely?

The firm will maintain its operations. Signup and view all the answers

In a monopolistically competitive market, what is the profit-maximizing price compared to a perfectly competitive market?

Higher than the competitive price. Signup and view all the answers

Study Notes

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.

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Description

This quiz covers key concepts in economics related to production, market power, and cost curves. It explores ideas such as marginal product, firm entry conditions, and the relationship between labor and output. Perfect for students looking to test their understanding of microeconomic principles.