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Exam 5 - Principles of Microeconomics Test Form A Name ...

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Unformatted text preview: November 12, 2004 Principles of Microeconomics Test Form A Name § Arm M/l, U’lflbl lfiw‘t-J GTlD Q (l I’M'l/ @ {i} a ,0" Exam 5 Mark your GT lD number and the test form on your scantron. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A price discriminating monopolist charges lower prices to customers with 1) C A) higher willingness-to—pay. B) lower supply elasticities. C) lower willingness—to—pay. D) higher supply elasticities. <=:°»¢‘~'=%1’Lv§§,§fig1’rxw Rouge- , o i 71;: D a M C A TC (2.. 3} —O :9, ,3 <5: 23 22 l 6 l 2 l l i g; t i O l 4 l7 l 9 Quantity (units) 2) Consider the perfectly competitive firm in the above figure. The profit maximizing level of output 2) l E for the firm in the short run is equal to A) 19 units. B) 17 units. C) 14 units. D) 0 units. w 1' mam ’:‘2:%N»3§3’ 23am:- .. ——4 flmwa.O~\I®‘OO m.” A: :l' “a Price and costs (dolfars per unit) ATC MC . MR . 0 La» I J I l l O l 2 3 4 5 6 Quantity (millions of units) 3) If marginal cost pricing is imposed on the natural monopoly in the figure above, then the consumer surplus will be A) $32 million. B) $8 million. C) $16 million. D) $0. 4) If marginal cost pricing is imposed on the natural monopoly in the figure above, then the firm will A) incur an economic loss. B) earn an economic profit of $16 million. C) earn a normal profit, that is, an economic profit of $0. D) earn an economic profit of $4 million. 5) Compared to a single—price monopoly, a perfectly competitive industry produces A) less output and has a higher price. B) more output and has a higher price. C) more output and has a lower price. D) less output and has a lower price. 6) An average cost pricing rule for a natural monopoly sets the price the marginal cost, thereby a deadweight loss. A) below; avoiding B) below; creating C) above; creating D) above; avoiding Price D Quantity 7) In the monopoly market depicted in the above figure, with a single—price monopoly, which area represents deadweight loss? A) area LIK B) area GHIM C) area UH D) area PHIL 8) in the monopoly market depicted in the above figure, with a single—price monopoly in the market, which area represents consumer surplus? A) area HIKG B) area HI] C) area NFL D) area GHIL 9) When comparing perfect competition and monopolistic competition, we find that A) advertising plays a large role in monopolistic competition, unlike in perfect competition. B) firms in monopolistic competition face barriers to entry, unlike firms in perfect competition. C) firms in monopolistic competition are price takers just as is the case for firms in perfect competition. D) firms in monopolistic competition produce identical products just as do firms in perfect competition. 10) Suppose firms in a perfectly competitive industry are suffering an economic loss. Over time, A) some firms leave the industry, so the price rises and the economic loss decreases. B) other firms enter the industry, so the price rises and the economic loss decreases. C) some firms leave the industry, so the price falls and the economic loss decreases. D) other firms enter the industry, so the price falls and the economic loss decreases. 1m L Marginal Qu antity Total cost demanded {5:122:15 (dollars) 11) Using the data in the above table for a single—price monopolist, how many units of output will be 11) ‘: produced? A) 5 units B) 4 units C) 6 units D) 3 units 12) Tammy sells woolen hats in a perfectly competitive market. The marginal cost of producing 1 hat is 12) 4 $24. The marginal cost of producing a second hat is $26 and the marginal cost of producing a third hat is $28. The market price of a hat is $26. To maximize profit, Tammy produces a day. A) 2 hats B) as many hats as possible C) 1 hat D) 3 hats ”Ammkk.» 4 .-- 2 H.- M?- ” .9; MC Price and costs {dollars per ticket) l l l l L o O 20 40 (SO 80 lOO Quantity (tickets per hour) Ham ”we“ lay. r a 120 13) C- 13) if the monopoly illustrated in the figure above could engage in perfect price discrimination, then total revenue collected by the firm would be A) $210. B) 36310. C) $120. D) $110. Price and costs (dollars per unit) . x l O 2 A 6 8 10 12 Quantity {units per year} 14) The unregulated, single—price monopoly shown in the figure above has a total economic profit of 14) Y}; A) $24. B) $8. C) $16. D) $4. Price and costs {dollars per can) L j L l | 1 O 200 400 600 800 1 ,000 1 ,200 Quantity (cons per day) W flit-itefizxmt‘v W: mmwrrzzm‘ , 15) The figure above shows the cost, marginal revenue, and demand curves of Golden Chow, a 15) l ) producer of dog food. The market for dog food is monopolistic competition. In the long run as new firms enter, Golden Chow cuts its output to 200 cans per day. Its excess capacity is cans per day. A) more than 401 B) O C) between 201 and 400 D) between 0 and 200 ';> i ._.a i ”a 0 3 l MC ATC % 9t AVC 8 8~ 2 7- O 13 1;: 6.— 8 ,0 5 8 (v 4,. .8 5: 3L 2 l A 1r | | 4 L 1L__l L l L I 0 100 200 300 400 500 Quantity (dozens of doughnuts per hour) . van , I 15 16) The donut market is perfectly competitive. The figure shows the costs of a typical donut producer. In the short run, the donut producer’s supply curve is the curve running from point to point E. A) A B) B C) C D) D 17) in a small town, Marilyn's Christmas Tree Lot has a monopoly on sales of Christmas trees. In order to increase her sales from 100 trees to 101 trees, she must drop the price of all of her trees from $20 to $19. What is the marginal revenue? A) negative $81. 8) $81. (I) negative $19. D) $19. Output Total cost (tons of rice per (dollars per year) ton) 0 $1,000 $1,200 $1,600 1 2 3 4 5 18) Based on the table above which shows Chip's costs, if Chip shuts down in the short run, his total cost will be A) $1,000. B) $1,200. C) $0. D) $4,000. 18) AK 19) initially, a competitive industry that has 1,000 firms is in long—run equilibrium. Then 100 firms in 19) A the industry adopt a new technology that reduces the average cost of producing the good. In the short run, the price , firms with the new technology make profits, and firms with the old technology A) falls; positive economic; incur economic losses B) remains the same; positive economic; make normal profit C) remains the same; positive economic; incur economic losses D) remains the same; normal; incur economic losses 20) In monopolistic competition, in the long run customers pay a price that is 20) 6/ A) less than the minimum ATC. B) equal to both the minimum ATC and the minimum AVC. C) more than the minimum ATC. D) equal to the minimum ATC, but not equal to the minimum AVC. ...
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