Suppose in this market the short-run equilibrium price is

Question

Assignment -

Question 1 - In a natural monopoly there are economies of scale for all levels of output that consumers are willing to purchase.

Question 2 - The fact that a monopolist must lower its price to sell more output explains why price exceeds marginal revenue.

Question 3 - If a purely competitive industry were taken over by a monopolist, the monopolist would usually produce more output and charge a higher price.

Question 4 - A firm that increases labor usage and office space (the only inputs used) by 10% and observes a 13% increase in output has decreasing returns to scale.

Question 5 - A single-price, profit maximizing monopolist always charges a price above the marginal cost of production.

Question 6 - Oligopolies typically earn normal profits.

Question 7 - Marginal revenue is the addition to total revenue by selling one more unit of a product.

Question 8 - If a firm operates in oligopoly market its product has no dose substitutes.

Question 9 - In order to sell an additional unit a firm in monopolistic competition markets must lower its price.

Question 10 - A firm that collects $100 in total revenue when it sells 10 units and receives $110 when it sells 11 units is a monopolist.

Question 11 - A firm's revenue is determined by the demand curve that the firm faces.

Question 12 - Copyrights and patents are examples of barriers to entry.

Question 13 - Competitive labor markets will discourage an employer from discriminating based on the employer's prejudice.

Question 14 - In the short run, firms in monopolistic competition markets set prices and output in a manner similar to a monopolist.

Question 15 - In a competitive market, an individual's firm demand curve is perfectly inelastic.

Question 16 - Suppose a monopolist and a competitive firm are both charging $5 for their respective outputs. One can infer that the marginal revenue is $5 for the competitive firm and less than $5 for the monopolist.

Question 17 - Economic efficiency is optimal when the deadweigh loss is positive.

Question 18 - For monopolistically competitive firm, their product differentiation is the source of market power.

Question 19 - The labor market demand curve is a derived demand from the goods and services produced by labor.

Question 20 - Perfect price discrimination involve charging different groups of consumers different prices.

Question 21 - If marginal product falls when a firm hires another unit of labor, marginal cost:

A. will rise.

B. will fall.

C. will remain the same.

D. may either rise or fall.

Question 22 - A firm should shut down when:

A. price falls below the minimum point of marginal cost.

B. price falls below the minimum point of average total cost.

C. price falls below the minimum point of average fixed cost.

D. price falls below the minimum point of average variable cost.

Question 23 - At the current level of output a firm's marginal revenue is less than marginal cast. To maximize profits or minimize losses:

A. a monopolist would decrease output, and a perfectly competitive firm would increase output.

B. a monopolist would increase output, and the perfectly competitive firm would decrease output.

C. both a monopolist and a perfectly competitive firm would increase output.

D. both a monopolist and a perfectly competitive firm would decrease output.

Question 24 - Use the graph below for the next two questions.

Teli Co., a manufacturer of electronics, is the only producer of a patented new product called "The Talking Phonebook". Given the following diagram, if Tell Co. has to charge all customers the same price, how many Talking phonebooks will this monopoly produce and at what price will it sell them?

A. 4000 Talking Phonebooks at $10 each.

B. 4000 Talking Phonebooks at $70 each.

C. 6000 Talking Phonebooks at $20 each.

D. 7000 Talking Phonebooks at $40 each.

Question 25 - Use the above graph to answer this question.

Teli's total economic profit is:

A. $250 billions.

B. $200 billions.

C. $160 billions.

D. $175 billions.

Question 26 - The definition of marginal revenue product of labor is:

A. the level of marginal revenue for the firm.

B. the price at which the firm sells its product.

C. the change in the firm's profits from hiring an additional worker.

D. the change in the firm's revenue from hiring an additional unit of the product.

Question 27 - In oligopoly market, an example of a barrier to entry is:

A. ownership of a key input

B. economies of scale

C. government imposed restrictions

D. all of the above

Question 28 - What determines the price at which a monopolist can sell its product?

A. rules imposed by the government regulatory agencies.

B. the price set by competitors.

C. the level of output at which the monopolist decides it wants to produce.

D. the monopolist's ability to earn a profit by selling at any price.

Question 29 - In the short run profit maximization for the monopolistically competitive firm will be similar to that for:

A. a monopolist, but Will tend to be more

B. a monopolist, but will tend to be less

C. a competitive firm, but will tend to be more

D. a competitive firm, but will tend to be less

Question 30 - "Starbrite" car wash in Boardman faces the following production schedule for the workers it hires to wash cars.

Workers per day	Car washed per day
0	0
1	15
2	28
3	38
4	45
5	51
6	56
7	60
8	55

If the firm pays workers $25 per day and charges $5 per car wash, it would hire how many workers per day if it were maximizing profits?

A. 2 workers

B. 4 workers

C. 6 workers

D. 7 workers

Question 31 -

Graphs above. The one on the left represents a perfectly competitive market; the other represents a typical firm in that sells its output in that market. Assume that all firms in this industry have identical cost structure.

Part A: Short-run analysis

Suppose in this market the short-run equilibrium price is $15:

1a. What is the profit maximizing output level that this firm should produce and supply?

Question 32 - 1b. Suppose the average total cost at the output level chosen in part 'a' is $12, how much (in dollars) is the firms economic loss or profit?

Question 33 - 1c. At what price would you recommend that this firm shuts down?

Part B: Long-run analysis

Question 34 -  1d. What will the long-run equilibrium price be?

Question 35 - 1e. How many units will the representative firm sell at the equilibrium price?

Question 36 - 1f. In the long run, how many firms are now in this industry?

Question 37 -

Use the above flow diagram to complete these statements.

1. A denotes _______ markets.

2. B denotes _______ markets.

3. Firms sell _______ in the (select A or B) _______ and receive _______ in return.

4. Firms buy _______ in the (select A or B) _______ and incur _______ in return.

5. Households sell _______in the (select A or B) _______ and _______receive in return.

6. Households buy _______ in the (select A or B) _______ and incur _______ in return.

Question 38 - 1. All firms in perfectly competitive marker are 'Price takers'. Briefly explain (or state the reasons) why this statement is indeed true.

Question 39 - 2a. What is a cartel?

2b. Why is it difficult for cartels to maintain high prices effectively over the longer term? Please be specific.

Question 40 - 3. What exactly do economists mean when they say "monopoly markets are inefficient"?

Question 41 - In a competitive market economy, all individuals (including you) supply their labor time in exchange for incomes. Explain clearly why your labor supply curve is backward bending?