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Base on the table above showing total cost (in $) of various production levels, what is the average variable cost of the second unit produced? $7

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Base on the table above showing total cost (in $) of various production levels, what is the average variable cost of the second unit produced?

$7.50

$10

$15

$17.50

Indeterminate

incorrect

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Question 3

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Base on the table above showing total cost (in $) of various production levels, what is the marginal cost of producing the third unit?

$5

$10

$15

$20

$30

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Question 4

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Several companies are making negative profits in a short-run, perfectly competitive market. In the long run, what happens to the price of the goods being sold and to the number of firms in the market?

Number of firms decreases, price of goods increases

Number of firms increases, no change in price of good

Number of firms decreases, price of goods decreases

Number of firms increases, price of goods decreases

Number of firms increases, price of goods increases

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Question 5

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A firm hires new workers for a factory with a fixed amount of machinery. As the firm hires additional workers, the marginal product should

Rise initially, then fall

Fall initially, then rise

Rise consistently due to diminishing returns

Rise consistently due to increasing returns to scale

None of the above

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Question 6

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In the graph of a firm's total cost (TC) and total revenue (TR) above, what does the value Y represent and what is the profit-maximizing quantity for the firm?

Explicit costs, Q1

Variable costs, Q2

Fixed costs, Q2

Variable costs, Q1

Fixed costs, Q3

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Question 7

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If the ATC of producing 10 goods is $10, the fixed costs are $40, and the AVC of producing 11 goods is $7, what is the marginal cost of the 11th good?

$12

$15

$17

$20

$22

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Question 8

1/1 point (graded)

Which of the following statements must be true for a profit-maximizing firm?

MR = MC

P < AVC

P = ATC

MR = AVC

P = AVC

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Question 9

0/1 point (graded)

A firm will not continue production in the short run if

Price is below ATC

Price is below AFC

Price is below AVC correct

Marginal revenue is below price

They face decreasing returns to scale

incorrect

Explanation

Price is below AVC. A firm that shuts down permanently must still pay off their fixed costs. For this reason, firms making negative profits in the short run may still consider producing if they can work towards paying off their fixed costs. This will occur as long as price remains above average variable costs at their profit-maximizing production level. This intuitively makes sense as if the price each unit is sold for is below the average cost of producing those units, the firm will only lose money by deciding to produce goods. However, so long as price remains above AVC, the firm can take action towards paying off their fixed costs with the hope of long run profits.

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Question 10

1 point possible (graded)

Which of the following does not provide a firm with an incentive to expand production?

Diseconomies of scale

Larger market influence

Increased name/brand recognition

Access to new consumers

Economies of scale

Question 1

1 point possible (graded)

Which of the following is true of a profit-maximizing monopolist firm?

It has no incentive to minimize its costs

It sets price equal to marginal cost

It chooses a production level higher than that which is socially optimal

It chooses a production level on the elastic portion of the demand curve

It chooses a production level such that marginal revenue is greater than marginal cost

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Question 2

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Given the payoff matrix depicted above, with Company A's payoffs listed first, what is the dominant strategy for each firm?

Company A has no dominant strategy; Company B’s dominant strategy is to expand.

Company A has no dominant strategy; Company B’s dominant strategy is not to expand.

Company A’s dominant strategy is to expand; Company B has no dominant strategy.

Company A’s dominant strategy is not to expand; Company B has no dominant strategy.

Company A’s dominant strategy is not to expand; Company B’s dominant strategy is not to expand.

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Multiple Choice

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Given the payoff matrix depicted above, with Company A's payoffs listed first, which of the following describes the Nash equilibrium of the game?

Both companies expand

Neither company expands

Company A expands, and Company B does not

Company B expands, and Company A does not

A Nash equilibrium does not exist for this game

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Question 4

1 point possible (graded)

In which of the following market structures do firms maximize profits by producing at the point where price is equal to marginal cost?

I. Perfect competition

II. Monopoly

III. Oligopoly

IV. Monopolistic competition

I

II

II and III

I and IV

I, II, III, and IV

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Question 5

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Which of the following areas represents the deadweight loss resulting from the non-price-discriminating monopoly shown above?

A+B+E

C+D+F

E+F

J+I+H

G

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Question 6

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Which of the following is not a characteristic of firms in monopolistic competition?

Product differentiation

The need to advertise

Free entry

Positive economic profits in the long-run

Production at the level where marginal revenue equals marginal cost

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Question 7

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In which of the following structures are cartels most likely to form?

Perfect competition

Monopoly

Monopolistic competition

Oligopoly

Monopsony

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Question 8

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If a non-price discriminating monopoly sells an additional unit of a good, they must _________ the price on each previous good. The price will be _________ the marginal revenue.

Increase; above

Increase; below

Decrease; above

Decrease; below

Decrease; equal to

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Question 9

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In which of the following industries/products is a natural monopoly least likely to arise?

Electricity/power

Railroads

Search Engines

Water treatment

Agriculture

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Question 10

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Which of the following would NOT result from a profit-maximizing monopolist firm becoming able to perfectly price discriminate?

The firm’s profits increase

Consumer surplus decreases

Deadweight loss increases

Quantity supplied increases

Quantity supplied stays the same as that supplied in a perfectly competitive market

 

Which of the following factors of production is/are considered variable in the short run?

I. Land

II. Labor

III. Capital

I, II

II

II, III

I, II, III

None of the above

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Question 2

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Country A recently loosened their immigration policies, which has greatly increased the number of mechanics in the workforce. Which of the following pairs represents the new wage and the new quantity of mechanics?

Wage increase, quantity increase

Wage increase, quantity decrease

Wage decrease, quantity decrease

Wage decrease, quantity increase

Indeterminate wage change, quantity decrease

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Question 3

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The market demand for labor represents

The vertical summation of individual firms’ demand for labor

The horizontal summation of individual firms’ demand for labor

The number of firms that already hire workers

The average firm’s demand for labor

None of the above

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Question 4

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If the government imposes the minimum wage shown, which of the following would occur in the above labor market?

The minimum wage will have no effect on the market.

A shortage of Q1-Q2 workers

A shortage of Q3-Q2 workers

A surplus of Q3-Q1 workers

A surplus of Q3-Q2 workers

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Question 5

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A firm produces and sells good X for $5 per unit. The above table shows the firm’s various amounts of labor and the marginal revenue product of labor. What is the marginal product of the third worker?

8 units

10 units

12 units

14 units

16 units

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Question 6

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The market for chocolate, a normal good, and the market for labor for producing chocolate are perfectly competitive. How would employment and wages be affected if the income of consumers increased?

Wages decrease, employment decreases

Wages increase, employment decreases

Wages decrease, employment increases

Wages increase, employment increases

Neither wages nor employment are affected.

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Question 7

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If a cost-minimizing firm sells its services in an oligopolistic market, with a marginal product of capital of 10, a rental rate of capital of $5, and a wage rate of $20, what is the marginal product of labor?

4

20

40

60

80

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Question 8

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Which of the following would cause a decrease in the supply of labor?

An increase in the preference for leisure

Immigration

An increase in worker productivity

The demand for the good produced decreases.

The demand for the good produced increases.

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Question 9

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Anne would produce 10 robots a week working for an employer that recently offered her a position. Each robot requires $50 in material inputs and sells for $100. For Anne, this would mean no longer day trading, from which she makes $450 per week. Which of the following wage rates might Anne and the robot factory agree to?

$400/week

$460/week

$510/week

$550/day

None of the above

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Question 10

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Which of the following best describes the labor market from the perspective of a single firm in a perfectly-competitive labor market?

Unit-elastic supply and demand for labor

Perfectly inelastic supply of labor and downward sloping demand for labor

Perfectly elastic supply and demand for labor

Perfectly inelastic supply and demand for labor

Perfectly elastic supply of labor and downward sloping demand for labor

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Question 1

1 point possible (graded)

 

 

The above graph is based on Sofia’s production of gadgets. It shows the curves for Marginal Social and Private Costs (MSC and MPC), Marginal Social and Private Benefits (MSB and MPB), and Marginal Revenue (MR). Absent government intervention, Sofia will produce:

5 more gadgets than is socially optimal

10 more gadgets than is socially optimal

5 fewer gadgets than is socially optimal

10 fewer gadgets than is socially optimal

The socially optimal output

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Question 2

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The above graph is based on Sofia’s production of gadgets. It shows the curves for Marginal Social and Private Costs (MSC and MPC), Marginal Social and Private Benefits (MSB and MPB), and Marginal Revenue (MR). Which of the following government actions would be most likely to correct the inefficiencies in the production of gadgets?

A tax of $4 on the firm on each unit produced

A tax of $20 for firms that wish to produce

A tax of $40 for firms that wish to produce

A subsidy of $4 given to the firm for each unit produced

No government action can correct the inefficiencies

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Question 3

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Which of the following types of goods is considered a public good?

Rival, excludable

Non-rival, excludable

Rival, non-excludable

Non-rival, non-excludable

Inferior goods

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Question 4

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Which of the following would most clearly lead to negative externalities?

The construction of a park near a neighborhood

A student’s decision to receive a college education

The creation of public transportation in a growing city

A factory’s practice of dumping waste into the ocean

None of the above

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Question 5

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The production of a good leads to a positive externality. Which of the following options could the government choose to increase allocative efficiency?

Subsidizing production of the good

Taxing the production of the good

Setting a price ceiling to encourage production

Setting a price floor to discourage production

Setting maximum quotas for the production of the good

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Question 6

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In order to maximize surplus in a market, which of the following must be true?

All costs and benefits to society are internalized.

All goods are common resources.

Quantity supplied is greater than quantity demanded.

Marginal private benefit equals marginal private cost.

None of the above

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Question 7

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The production of a good leads to a negative externality. Which of the following would help reduce the deadweight loss?

A per unit tax to producers

A lump sum subsidy to producers

A per unit subsidy to producers

A per unit tax to consumers

A lump sum tax to consumers

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Question 8

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Which of the following would lead to a more equal distribution of income?

A more progressive income tax

A more regressive income tax

An increase in unemployment

An increase in the high school dropout rate

An increase in earnings for capital owners

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Question 9

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How would a firm’s output and pollution levels be affected by a per-unit tax on the pollution from its production?

Output decrease, pollution decrease

Output increase, pollution increase

Output increase, pollution decrease

Output decrease, pollution increase

No output change, no pollution change

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Question 10

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How would a per-unit tax and a lump-sum tax affect long-run production in a perfectly competitive market?

A per-unit tax and a lump-sum tax will increase price and decrease quantity

A per-unit tax will increase price and decrease quantity; a lump-sum tax will have no effect on production

A per-unit tax and a lump-sum tax will decrease price and quantity

A per-unit tax will have no effect on production; a lump-sum tax will increase price

Neither tax affects production