Question Details

(Answered)-Exam 3 1. Sam's hamburger shop, represented by Exhibit K-1, is a


Exam 3



?


1. Sam's hamburger shop, represented by Exhibit K-1, is a monopolistic competitor







2. Maxine's electro-translucent circuit board, a newly patented product, has been making her firm (ECB, Inc.) a bundle of money since being introduced to the market 6 months ago. Referring to Exhibit K-3,







3. Ralph's "Roll Free Rolling Pin" factory used to be the only business of its type but now faces many competitors in its market, each having a similar but differentiated product. Which of the panels in Exhibit K-4 is the most appropriate representation of Ralph's long-run situation producing "q" units of output?




4. Economic profit is defined as




5. What should a profit-maximizing monopolist do if she is currently producing where MC < MR?




6. Which of the following statements is true?




7. In Exhibit K-6, how much profit does the monopoly make when it produces 7 units?






8. In Exhibit K-6, how much profit does the monopoly make when it produces 10 units?




9. In Exhibit K-6, how much profit does the monopoly make when it produces 0 units?




10. Refer to Exhibit K-6. The demand schedule and cost schedule for a monopolist are provided. Which output level maximizes profit?




11. The price searcher's marginal revenue curve lies below the demand curve because




12. Monopolistically competitive firms sell goods that are




13. If there is an economic profit in monopolistic competition, there is




14. One reason why firms in monopolistically competitive markets earn zero profit in the long run is




15. If a monopoly finds that at the present level of production, marginal revenue exceeds marginal cost, the firm should




16. The demand curve that a monopolist firm faces is




17. The monopolist, unlike the perfectly competitive firm, continues to earn an economic profit in the long run because




18. You developed a new technology for weather stripping windows. Your monopoly in this market turns out to be lucrative. Your total revenue was $75,000 and your total cost-explicit and implicit costs combined-was $25,000. The $50,000 difference represents your




19. A concentration ratio refers to the




20. If a four-firm concentration ratio in an industry equals 75 percent, this implies that




21. Mutual interdependence means that





22. In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries. The HHI in industry III is




23. In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries. The HHI in industry II is




24. In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries. The HHI in industry I is




25. In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries. Using the HHI, the most concentrated of these three industries is (are)




26. The backward bending supply curve for labor is




27. Marginal physical product of labor measures the






28. In Exhibit O-1, the marginal physical product of the third unit of labor is




29. In Exhibit O-1, the marginal physical product of the fourth laborer is




30. In Exhibit O-1, diminishing returns set in when which worker is hired?




31. In Exhibit O-1, if the product price is $5, the MRP of the third worker is




32. In Exhibit O-1, if the product price is $5, the MRP of the fourth worker is




33. In Exhibit O-1, if the product price is $8, the MRP of the second worker is




34. In Exhibit O-1, if the product price is fixed at $8, the MRP of the third worker is







35. Which of the following is always wrong, regardless of what other information may be given to you?




36. The monopolistic-competition solution approximates the perfect competition solution in




37. Which of the following is not an entry barrier?




38. The key outcome of the Oligopoly Kinked-demand model is



39. The unique feature of oligopoly is



40. In the long-run, economic profits are




Essay


1 Explain the difference between perfect and monopolistic competition in the long run.

2 List 3 types of entry barriers.

3 Explain the kinked demand model of oligopoly.

4 Explain how firms obtain equilibrium in the factor market (ie how do they find the optimal level of factors to employ?).


ECON 2302

 

HCCSW Fall2013, Dr Smith

 

Exam 3

 


 

1. Sam's hamburger shop, represented by Exhibit K-1,

 

is a monopolistic competitor

 

a. making a profit of $100

 

b. producing an economically efficient output level of 50 hamburgers

 

c.

 


 

in long-run equilibrium at 50 units of output

 


 

d. taking in $400 of revenue.

 


 

2. Maxine's electro-translucent circuit board, a newly patented product, has been making her firm (ECB,

 

Inc.) a bundle of money since being introduced to the market 6 months ago. Referring to Exhibit K-3,

 

a. Maxine's profit is $200

 

b. profit maximizing output is 100 units

 

c.

 


 

Maxine's profit is $450

 


 

d. profit will be driven to zero in the long-run.

 


 

ECON 2302 Exam 3

 


 

p. 2/10

 


 

3. Ralph's &quot;Roll Free Rolling Pin&quot; factory used to be the only business of its type but now faces many

 

competitors in its market, each having a similar but differentiated product. Which of the panels in Exhibit

 

K-4 is the most appropriate representation of Ralph's long-run situation producing &quot;q&quot; units of output?

 

a. Panel 1

 

b. Panel 2

 

c.

 


 

Panel 3

 


 

d. Panel 4.

 


 

4. Economic profit is defined as

 

a. price minus the sum of average fixed and marginal cost

 

b. total revenue minus total implicit cost

 

c.

 


 

total revenue minus the average total cost

 


 

d. total revenue minus the sum of implicit and explicit costs.

 


 

5. What should a profit-maximizing monopolist do if she is currently producing where MC &lt; MR?

 

a. Increase output until MC = MR

 

b. decrease output until MC = MR

 

c.

 


 

shut down in the long run

 


 

d. keep producing at this level.

 


 

6. Which of the following statements is true?

 


 

ECON 2302 Exam 3

 


 

a. Accounting profit usually is greater than economic profit.

 

b. Accountants ignore explicit costs in calculating profit.

 

c.

 


 

Explicit costs fall as output increases.

 


 

d. Economic profit always increases as output increases.

 


 

7. In Exhibit K-6, how much profit does the monopoly make when it produces 7 units?

 

a. 0

 

b. 24

 

c.

 


 

16

 


 

d. 12.

 


 

8. In Exhibit K-6, how much profit does the monopoly make when it produces 10 units?

 

a. 0

 

b. -30

 

c.

 


 

-20

 


 

d. -10.

 


 

9. In Exhibit K-6, how much profit does the monopoly make when it produces 0 units?

 

a. 0

 

b. -4

 

c.

 


 

-6

 


 

d. -2.

 


 

p. 3/10

 


 

ECON 2302 Exam 3

 


 

p. 4/10

 


 

10. Refer to Exhibit K-6. The demand schedule and cost schedule for a monopolist are provided. Which

 

output level maximizes profit?

 

a. 2

 

b. 6

 

c.

 


 

4

 


 

d. 5.

 


 

11. The price searcher's marginal revenue curve lies below the demand curve because

 

a. the monopoly is not an efficient producer

 

b. as the monopolist increases output, the price falls

 

c.

 


 

there is no account of implicit costs

 


 

d. the monopolist's demand curve is the market demand.

 


 

12. Monopolistically competitive firms sell goods that are

 

a. close substitutes

 

b. complements

 

c.

 


 

not substitutes

 


 

d. not differentiated products.

 


 

13. If there is an economic profit in monopolistic competition, there is

 

a. an incentive for new firms to enter

 

b. an incentive for existing firms to increase prices

 

c.

 


 

at least one firm engaged in advertising

 


 

d. an incentive for existing firms to decrease prices.

 


 

14. One reason why firms in monopolistically competitive markets earn zero profit in the long run is

 

a. product differentiation disappears

 

b. barriers to entry become prohibitive

 

c.

 


 

the price elasticity of demand for each firm falls to zero

 


 

d. so many firms enter the market that each firm's demand curve eventually becomes

 

tangent to the firm's ATC curve.

 


 

15. If a monopoly finds that at the present level of production, marginal revenue exceeds marginal cost,

 

the firm should

 

a. shut down

 


 

ECON 2302 Exam 3

 


 

p. 5/10

 


 

b. increase production

 

c.

 


 

maintain the production level because MR &gt; MC signifies economic profit

 


 

d. decrease production so that MC will equal MR.

 


 

16. The demand curve that a monopolist firm faces is

 

a. the same as the demand curve facing a perfectly competitive firm except the monopolist

 

is a price maker and the competitive firm is a price taker

 

b. the same as the demand curve facing a perfectly competitive firm except the monopolist

 

is a price taker and the competitive firm is a price maker

 

c.

 


 

horizontal, because there are no close substitutes for its product

 


 

d. the same as its industry demand curve.

 


 

17. The monopolist, unlike the perfectly competitive firm, continues to earn an economic profit in the long

 

run because

 

a. it can charge a higher price than its competitors and not lose market share

 

b. it can innovate, using its profit as research investment

 

c.

 


 

it can out-compete its competitors

 


 

d. barriers to entry.

 


 

18. You developed a new technology for weather stripping windows. Your monopoly in this market turns

 

out to be lucrative. Your total revenue was $75,000 and your total cost-explicit and implicit costs

 

combined-was $25,000. The $50,000 difference represents your

 

a. accounting revenue

 

b. accounting profit

 

c.

 


 

economic profit

 


 

d. economic revenue.

 


 

19. A concentration ratio refers to the

 

a. ranking of firms by profitability

 

b. percentage of sales accounted for by the largest firms in an industry

 

c.

 


 

percentage of sales accounted for by the smallest firms in an industry

 


 

d. ability of a firm to control market price.

 


 

20. If a four-firm concentration ratio in an industry equals 75 percent, this implies that

 

a. 75 percent of all profits in the industry accrue to the largest four firms

 

b. 25 percent of sales in the industry are accounted for by the four largest firms

 


 

ECON 2302 Exam 3

 


 

c.

 


 

p. 6/10

 


 

the four firms represent 75 percent of all the firms in the industry

 


 

d. 75 percent of all sales in the industry are accounted for by the four largest firms.

 


 

21. Mutual interdependence means that

 

a. all other firms in a monopolistically competitive industry rely on one firm to take leadership

 

in setting price

 

b. monopolistically competitive firms will &quot;follower the leader&quot; allowing the monopoly firm to

 

determine price

 

c.

 


 

each firm within an oligopoly is affected by what the other firms in the industry do

 


 

d. all firms in the industry are independent of each other.

 


 

22. In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries.

 

The HHI in industry III is

 

a. 2,000

 

b. 1,925

 

c.

 


 

4,025

 


 

d. 1,600.

 


 

23. In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries.

 

The HHI in industry II is

 

a. 2,000

 

b. 1,925

 

c.

 


 

4,025

 


 

d. 1,600.

 


 

24. In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries.

 

The HHI in industry I is

 

a. 2,000

 

b. 1,925

 


 

ECON 2302 Exam 3

 


 

c.

 


 

p. 7/10

 


 

4,025

 


 

d. 1,600.

 


 

25. In Exhibit L-2, the table shows the market shares of five firms that operate in three different industries.

 

Using the HHI, the most concentrated of these three industries is (are)

 

a. Industry I

 

b. Industry II

 

c.

 


 

Industry III

 


 

d. Industries I and III (their HHIs are identical).

 


 

26. The backward bending supply curve for labor is

 

a. not valid for individuals

 

b. valid only for aggregate labor markets

 

c.

 


 

results from purchasing power effects that outweigh the relative price changes for leisure

 


 

d. has to do with lack of firm interest in high-cost labor.

 


 

27. Marginal physical product of labor measures the

 

a. quantity of output produced by hiring workers

 

b. change in output generated by hiring an additional worker

 

c.

 


 

change in revenue generated by hiring an additional worker

 


 

d. change in cost generated by hiring one additional worker

 


 

28. In Exhibit O-1, the marginal physical product of the third unit of labor is

 

a. 80

 

b. 45

 

c.

 


 

35

 


 

d. 100.

 


 

ECON 2302 Exam 3

 


 

29. In Exhibit O-1, the marginal physical product of the fourth laborer is

 

a. 80

 

b. 100

 

c.

 


 

45

 


 

d. 20.

 


 

30. In Exhibit O-1, diminishing returns set in when which worker is hired?

 

a. 1st

 

b. 2nd

 

c.

 


 

3rd

 


 

d. 4th.

 


 

31. In Exhibit O-1, if the product price is $5, the MRP of the third worker is

 

a. $35

 

b. $125

 

c.

 


 

$25

 


 

d. $175.

 


 

32. In Exhibit O-1, if the product price is $5, the MRP of the fourth worker is

 

a. $100

 

b. $125

 

c.

 


 

$25

 


 

d. $175.

 


 

33. In Exhibit O-1, if the product price is $8, the MRP of the second worker is

 

a. $25

 

b. $125

 

c.

 


 

$200

 


 

d. $175.

 


 

34. In Exhibit O-1, if the product price is fixed at $8, the MRP of the third worker is

 

a. $100

 

b. $125

 

c.

 


 

$280

 


 

p. 8/10

 


 

ECON 2302 Exam 3

 


 

p. 9/10

 


 

d. $375

 


 

35. Which of the following is always wrong, regardless of what other information may be given to you?

 

a. Hiring a worker when her marginal physical product is decreasing.

 

b. Hiring a worker when her marginal physical product is positive.

 

c.

 


 

Hiring a worker when her marginal physical product is increasing.

 


 

d. Hiring a worker when her marginal physical product is negative.

 


 

36. The monopolistic-competition solution approximates the perfect competition solution in

 

a. the long-run

 

b. the short-run

 

c.

 


 

in both long &amp; short runs

 


 

d. in neither long nor short runs.

 


 

37. Which of the following is not an entry barrier?

 

a. Patent

 

b. Exclusive ownership of a key factor (input)

 

c.

 


 

Published financial statements

 


 

d. License.

 


 

38. The key outcome of the Oligopoly Kinked-demand model is

 

a. price volatility

 

b. price stability

 

c.

 


 

output is less than monopoly

 


 

d. collusion is difficult to preserve.

 

39. The unique feature of oligopoly is

 

a. mutual interdependence

 

b. product heterogeneity

 

c.

 


 

long-run economic profits

 


 

d. long-run economic losses.

 

40. In the long-run, economic profits are

 


 

ECON 2302 Exam 3

 


 

p. 10/10

 


 

a. always zero in monopolistic competition

 

b. never zero in monopoly

 

c.

 


 

always positive in monopoly

 


 

d. never negative in oligopoly.

 


 

Essay

 

1 Explain the difference between perfect and monopolistic competition in the long run.

 

2 List 3 types of entry barriers.

 

3 Explain the kinked demand model of oligopoly.

 

4 Explain how firms obtain equilibrium in the factor market (ie how do they find the optimal level of factors

 

to employ?).

 


 

 


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