Question 1
If accounting profits for a firm are 20% of output, and the opportunity cost of financial capital is 8% of output, then what do the firm's economic profits equal?
a) 12% of output
b) 6% of output
c) 8% of output
d) 10% of output
Question 2:
Refer to the diagram above. In this instance, the marginal revenue curve
a. reflects a perfectly competitive firm
b. is equal to the price of the good
c. is a horizontal straight line
d. reflects each of the above
Question 3:
Given the data provided in the table below, the total revenue (TR) for production at quantity (Q) level 4 equals
|
Q
|
P
|
TC
|
TR
|
MR
|
MC
|
Profit
|
|
0
|
$5
|
$9
|
|
|
|
|
|
1
|
$5
|
$10
|
|
|
|
|
|
2
|
$5
|
$12
|
|
|
|
|
|
3
|
$5
|
$15
|
|
|
|
|
|
4
|
$5
|
$19
|
|
|
|
|
|
S
|
$5
|
$24
|
|
|
|
|
|
6
|
$5
|
$30
|
|
|
|
|
|
7
|
$5
|
$45
|
|
|
|
|
a. $1.00
b. $15.00
c. Zero
d. $20.00
Question 4:
Kate's 24-Hour Breakfast Diner menu offers one item, a 55.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to 53.95 per meal. Her costs for rent insurance cleaning supplies and business license average out to 51.25 per meal. Since the market is highly competitive, Kate should
a) keep the business open in the short-run, and plan to expand the business in the long-run.
b) keep the business open in the short-run, but plan to go out of business in the long-run.
c) lay-off her staff, break her lease, and close the business down immediately.
d) raise her prices above the perfectly competitive level set by the market.
Question 5:
If a monopolist increases quantity by one unit, but sells the increased output at a slightly lower price,
a) all the previous units, which used to sell at a higher price, now sell for more.
b) the marginal revenue of selling a unit is more than the price of the unit.
c) marginal revenue is affected by adding one additional unit sold at the new price.
d) because of higher output the marginal revenue curve is above the demand curve.
Question 6: and refer to the quantity and price at a point in time.
a) Monopoly; allocative efficiency
b) Monopoly; productive efficiency
c) Productive; allocative efficiency
d) Profit; maximization
Question 7:
The following table shows a monopolist's demand curve and cost information for the production of its good. What price will it charge?
|
Quantity
|
Price per Unit
|
Total Cost
|
|
1
|
40
|
$20
|
|
2
|
30
|
S25
|
|
3
|
25
|
528
|
|
4
|
20
|
534
|
a) 420
b) $30
c) $25
d) $40