"Monopsony and Monopoly Practice Test

"Monopsony and Monopoly Practice Test - Monopsony...

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Monopsony and Monopoly – Practice Test 1. ABC Textile Inc. is the only employer in town, and the company maximizes profits. Given the supply of labor and Marginal Revenue Product of labor shown here, we can determine that ABC will employ _____ workers. a) 140 d) 170 b) 150 e) 210 c) 160 2. The wage ABC will offer workers equals: a) 18 d) 25 b) 20 e) 32 c) 24 3. The deadweight loss in efficiency caused by ABC’s monopsony power is: a) 490 d) 980 b) 640 e) None of the above. c) 820 4. If labor is the only source of variable cost for ABC, we can determine that economic profits earned by ABC each production period will equal ________ minus fixed costs. a) 1620 b) 2160 c) 2480 d) 2940 e) None of the above 5. If ABC is operating in a perfectly competitive output market, able to sell as many units of output as it wishes for a price of 2 per unit, the marginal product of the last worker hired by ABC equals: a) 9 b) 16 c) 32 d) 64 e) None of the above 6. Workers for ABC Textiles, Inc form a union and negotiate a wage equal to 28. Under the terms of this contract, ABC will employ _____ workers. a) 120 b) 140 c) 160 d) 180 e) 200 7. Workers for ABC Textiles, Inc form a union and negotiate a wage equal to 28. If labor costs are the only costs ABC incurs in production, ABC’s profit per period will equal: a) 880 b) 1240 c) 1400 d) 1620 e) None of the above. 8. You are the manager of a Mom and Pop store that can buy milk from a supplier at $3.00 per gallon. If you believe the price elasticity of demand for milk by customers at your store is -4, then your profit- maximizing price is a) 2.00. b) 2.50. c) 4.00. d) 5.00. S Wage Labor 100 200 300 400 10 20 30 40 MRP
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9. Acme Consolidated is a monopoly firm, and the company maximizes profits. Given the marginal cost of production (MC) and market demand (D) for its product, we can determine that Acme will produce _____ units of output. a) 70 d) 100 b) 80 e) 105 c) 90 10. The price Acme will charge will be: a) 9 d) 14 b) 10 e) 16 c) 12 11. The deadweight loss in efficiency caused by Acme’s monopoly power is: a) 105.75 d) 126.00 b) 114.25 e) None of the above. c) 122.50 12. At Acme’s profit maximizing level of output the price elasticity of demand equals: a) -0.45 b) -1.00 c) -1.83 d) -2.29 e) -3.01 13. At its profit maximizing level of output, Acme is earning profit equal to ______ minus fixed costs. a) 585.25 b) 735.00 c) 885.75 d) 955.25 e) 1102.50 14. Suppose Acme is able to practice 1 st degree price discrimination , charging each customer in its market the maximum price he/she is willing to pay. Acme will produce _____ units of output to maximize profit. a)
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This note was uploaded on 04/12/2011 for the course ECON 415 taught by Professor Holland during the Spring '09 term at Purdue University-West Lafayette.

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"Monopsony and Monopoly Practice Test - Monopsony...

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