1. Suppose that a profit-maximizing firm sells t-shirts in a monopolistically competitive market
and is producing its profit-maximizing level of output Suppose further that at this level of
output its marginal cost is $9 and its average total cost is $9. Over time, everything else
held constant, the number of firms selling t-shirts in the market will (\j\(,c C\^ decrease.
remain unchanged. ... ^ ,., ,/.
increase.
Suppose the government imposes an excise tax of $10 on a market. Suppose further that
the price elasticity of demand for the good is 1.5 and the price elasticity of supply is 3.5.
Everything else held constant, the price the sellers receive for the good will ^ by
decrease; 3
K ^ .!_
B)
C)
increase; 3
increase; 7
c?
CJO D) increase; 15
E) decrease; 7
-
3. Suppose a new organizational scheme increases the productivity of every worker at a tapas S I
bar. Everything else held constant, this new scheme will cause in the total fjxed_cost
of the bar.
no change
an increase
a decrease
4. Suppose a new union contract increases the hourly wage for all workers at a steel mill. SH/
Everything else held constant, this new contract will cause the marginaj cost of the mill to
decrease,
increase.
C) remain unchanged.
^5. Suppose, at a moment in time, the price at which a_mQnopelisi4s selling its output is $lg P"^ I '
and the marginal revenue from the last unit sold is $10. Suppose further that the marginal fV\ ^ (0
cost of producing the last unit of output sold is $11. Everything else held constant, which of fy\
the following actions should the non-price discriminating, profit-maximizing monopolist take?
,A) Increase output and increase price. /IAC ^«
Decrease output and increase price.
C) Shutdown. \T_
D) Decrease output and decrease price.
E) Increase output and decrease price.
6. Suppose a grocery store advertises the following special: "This Week ONLY: 10% Off & a
Free Bag when you purchase 6 Bottles or more of any 750 ml Wine." VyitMhis_offer, the
store is
A) not engaging in price discrimination.
Bp engaging in second-degree price discrimination.-^ d
C) engaging in third-degree price discrimination. —
D) engaging in first-degree price discrimination. •=>
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, 7. Suppose Matthew is considering opening his own sushi bar. To do so, he would have to
quit his current job, which pays £40.000 Dec year, and take over a store building he owns
and currently rents to his brother, Michael, for $32,000 per year. His expenses at the sushi
bar would be $150,000 per year for food and $12,000 per year for utilities. Given this
information, what are Matthew's implicit costs for running the sushi bar for the year?
A) $40,000. \irt\9'^0 005 &MP~- \°)0,000
BI $52,000. K V2..0GO
; Cf> $72,000, . =^-77vr
0) $84,000.
E) $234,000.
8. Answer true or false to the following statement. In the lQog_cun, average total cost is
greater than average variable cost for a non-price discriminating, profit-maximizing
monopolist JV^^^-AV^
A) True. u/-
B)T) False. fs
•- —^s
Use the following to answer questions 9-11:
Suppose, at a given point in time, Mimi's Magic Marker Company operates in a perfectly
competitive market and is producing its profit-maximizing level of output. Suppose further
that at this level of production its average total cost of producing magic markers is $0.20,
average variable cost is $0.1 5, and marginal revenue is $0.25. PvTC- .1
-v.te
9. Over time, there will be _ in the number of firms producing magic markers.
f
no change , o > CvTf
an increase
a decrease
10. Over time, the quantity of magic markers produced by Mimi will
A) remain unchanged.
B) increase,
decrease.
11. In the short run, Mimi is earning economic profits _ zero.
A) less than
greater than
equal to
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and is producing its profit-maximizing level of output Suppose further that at this level of
output its marginal cost is $9 and its average total cost is $9. Over time, everything else
held constant, the number of firms selling t-shirts in the market will (\j\(,c C\^ decrease.
remain unchanged. ... ^ ,., ,/.
increase.
Suppose the government imposes an excise tax of $10 on a market. Suppose further that
the price elasticity of demand for the good is 1.5 and the price elasticity of supply is 3.5.
Everything else held constant, the price the sellers receive for the good will ^ by
decrease; 3
K ^ .!_
B)
C)
increase; 3
increase; 7
c?
CJO D) increase; 15
E) decrease; 7
-
3. Suppose a new organizational scheme increases the productivity of every worker at a tapas S I
bar. Everything else held constant, this new scheme will cause in the total fjxed_cost
of the bar.
no change
an increase
a decrease
4. Suppose a new union contract increases the hourly wage for all workers at a steel mill. SH/
Everything else held constant, this new contract will cause the marginaj cost of the mill to
decrease,
increase.
C) remain unchanged.
^5. Suppose, at a moment in time, the price at which a_mQnopelisi4s selling its output is $lg P"^ I '
and the marginal revenue from the last unit sold is $10. Suppose further that the marginal fV\ ^ (0
cost of producing the last unit of output sold is $11. Everything else held constant, which of fy\
the following actions should the non-price discriminating, profit-maximizing monopolist take?
,A) Increase output and increase price. /IAC ^«
Decrease output and increase price.
C) Shutdown. \T_
D) Decrease output and decrease price.
E) Increase output and decrease price.
6. Suppose a grocery store advertises the following special: "This Week ONLY: 10% Off & a
Free Bag when you purchase 6 Bottles or more of any 750 ml Wine." VyitMhis_offer, the
store is
A) not engaging in price discrimination.
Bp engaging in second-degree price discrimination.-^ d
C) engaging in third-degree price discrimination. —
D) engaging in first-degree price discrimination. •=>
Version T Page 1
, 7. Suppose Matthew is considering opening his own sushi bar. To do so, he would have to
quit his current job, which pays £40.000 Dec year, and take over a store building he owns
and currently rents to his brother, Michael, for $32,000 per year. His expenses at the sushi
bar would be $150,000 per year for food and $12,000 per year for utilities. Given this
information, what are Matthew's implicit costs for running the sushi bar for the year?
A) $40,000. \irt\9'^0 005 &MP~- \°)0,000
BI $52,000. K V2..0GO
; Cf> $72,000, . =^-77vr
0) $84,000.
E) $234,000.
8. Answer true or false to the following statement. In the lQog_cun, average total cost is
greater than average variable cost for a non-price discriminating, profit-maximizing
monopolist JV^^^-AV^
A) True. u/-
B)T) False. fs
•- —^s
Use the following to answer questions 9-11:
Suppose, at a given point in time, Mimi's Magic Marker Company operates in a perfectly
competitive market and is producing its profit-maximizing level of output. Suppose further
that at this level of production its average total cost of producing magic markers is $0.20,
average variable cost is $0.1 5, and marginal revenue is $0.25. PvTC- .1
-v.te
9. Over time, there will be _ in the number of firms producing magic markers.
f
no change , o > CvTf
an increase
a decrease
10. Over time, the quantity of magic markers produced by Mimi will
A) remain unchanged.
B) increase,
decrease.
11. In the short run, Mimi is earning economic profits _ zero.
A) less than
greater than
equal to
Version T Page 2
