Unit 14 P1 P2 M1 D1
P1 - Describe the different approaches to customer service delivery in contrasting businesses.
P2 - Examine ways that customer service in a selected business can meet the expectations and satisfaction of customers and adhere to relevant current legislation and regulations.
M1 - Analyse how legislation and regulation impacts on customer service provision in a selected business.
D1 - Evaluate the importance for a selected business of providing excellent customer service and adhering to relevant current legislation and regulations.
ECN 6100 Winter 2016 Ch. 1-7
1. A normative economic statement:
a. is a model used to collect data.
b. is a statement of fact.
c. is a statement of what ought to be, not what is.
d. indicates what will occur if certain assumptions are true.
2. If everyone expects the price of almonds to rise in the near future, what will happen to the market for almonds?
a. People will buy the same amount now.
b. People will buy less now, causing a decrease in demand.
c. The amount bought and sold today will increase.
d. The supply will increase today.
e. The amount bought and sold today will decrease.
3. Which of the following may cause a change in demand (shift to a new demand schedule) for a product?
a. A change in the profitability of producing another product
b. A decrease in the cost of producing the product
c. A change in consumer incomes
d. A change in the price of the product
e. A change in the plans of producers
Price per Loaf Quantity Demanded Quantity Supplied
4. Beginning with equilibrium in Table 2.3, an increase in price of $1 would
a. cause a shortage of 36.
b. cause a surplus of 36.
c. cause a shortage of 72.
d. cause a surplus of 72.
e. lead to an increase in demand.
5. An equilibrium in a market results when the market
a. produces a surplus.
b. produces an output at which the price consumers are willing to pay exactly equals the price producers are willing to accept.
c. produces an output at which the demand curve lies above the supply curve.
d. results in a product that can be purchased at many different prices.
e. produces an output at which the supply curve lies above the demand curve.
Exhibit 2-10 Production possibilities curve data
A B C D E
Capital goods 0 1 2 3 4
Consumption goods 25 23 19 13 0
6. Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. The second unit of capital goods production will cost ____ units of consumption goods, and the third unit of capital goods production will cost ____ units of consumption goods.
a. 4; 6
b. 25; 23
c. 23; 19
d. 1; 23
e. 2; 19
7. The ability to produce at a lower opportunity cost than someone else is referred to as:
a. absolute advantage.
b. comparative advantage.
c. absolute superiority.
d. competitive disadvantage.
e. comparative disadvantage.
8. Table 3.1 shows the quantities demanded and supplied at different prices. If the price were $1.40,
a. the excess demand would cause the price to fall.
b. the excess demand would cause the price to rise.
c. the market would be in equilibrium.
d. the excess supply would cause the price to fall.
e. the excess supply would cause the price to rise.
9. To finance medical care, the federal government raises the tax per pack paid by sellers of cigarettes. Other things being equal, the price of cigarettes rises because of a(n):
a. upward movement along the supply curve for cigarettes.
b. rightward shift of the supply curve for cigarettes.
c. upward movement along the demand curve for cigarettes.
d. leftward shift of the supply curve for cigarettes.
10. If the quantity supplied of a product decreases at every price (shifting the supply curve leftward) and the demand curve for the product is relatively inelastic, equilibrium quantity will _____, equilibrium price will _____, but equilibrium _____ will change proportionately more.
a. decrease; increase; price
b. increase; decrease; price
c. decrease; decrease; price
d. increase; increase; quantity
e. increase; decrease; quantity
Exhibit 4-3 Supply and demand curves
11. Initially the market shown in Exhibit 4-3 is in equilibrium at P3, Q3 (E3). Changes in market conditions result in a new equilibrium at P2, Q2 (E2). This change is stated as a(n):
decrease (shift) in demand and an increase (shift) in supply.
decrease (shift) in demand and a decrease in quantity supplied.
decrease in quantity demanded and an increase in quantity supplied.
decrease in quantity demanded and an increase (shift) in supply.
12. Which of the following is not a common [non-price] effect of imposing a rent control?
a. Discriminatory practices by landlords.
b. More time on waiting lists and searching for housing.
c. A "black market" for rentals.
d. An excess supply of rentals at the controlled price.
13. [Formula: Elasticity = % change in Quantity Demanded / % change in Price]
Assume that the price elasticity of demand is 0.20. Given a 10 percent increase in price, we will see a
a. 20 percent increase in the quantity demanded.
b. 2 percent decrease in the quantity demanded.
c. 20 percent decrease in the quantity demanded.
d. 0.2 percent decrease in the quantity demanded.
e. 2 percent increase in the quantity demanded.
14. If the total cost of producing 6 units is $228 and the total cost of producing 7 units is $245, what is the marginal cost of producing the seventh unit?
15. Consider the market for bicycles. If a dealer cuts prices by 10 percent and sells 20 percent more bikes, then demand for bicycles is:
a. inelastic, and total revenue will increase.
b. elastic, and total revenue will increase.
c. inelastic, and total revenue will decrease.
d. elastic, and total revenue will decrease.
e. unit elastic, and total revenue will remain the same.
16. The marginal product of labor can be defined as:
a. the change in profit divided by the change in labor, other factors of production held constant.
b. the change in total output divided by the change in labor, other factors of production held constant.
c. the total output divided by the total labor utilized.
d. the change in labor utilized divided by the change in total output, other factors of production held constant.
e. the change in labor utilized divided by the change in total output, other factors of production held constant.
17. Use the table below to answer the following question.
Output Total Fixed
Cost (dollars) Total Variable
1 1,000 1,200
2 1,000 2,400
3 1,000 3,600
4 1,000 5,000
5 1,000 6,600
What is the average total cost at an output level of four units?
18. A profit-maximizing firm that is operating in the short run will sell an additional unit of output as long as:
a. as doing so reduces the firm's per-unit costs.
b. doing so reduces the firm's marginal costs.
c. doing so adds more to revenue than it adds to cost.
d. there is additional plant capacity with which to produce.
19. Refer to Figure 7-C. If the market price decreased from the equilibrium price to $4.70 in Graph B, this firm should:
a. seek to increase its marginal costs.
b. increase output.
c. decrease output.
d. continue producing the same level of output.
20. A firm that is a price taker in a perfectly competitive market can:
a. substantially change the market price of its product by changing its level of production.
b. sell all of its output at the market price.
c. sell some of its output at a price higher than the market price.
d. decide what price to charge for its product.
Exhibit 7-11 A firm's cost and marginal revenue curves
21. In Exhibit 7-11, when the price is $5, the firm:
a. is making a profit..
b. should produce output equal to 10.
c. is breaking even.
d. should produce output equal to 8..
e. should produce output equal to 7.
22. If the demand curve for a product is relatively inelastic and there is a fall in the price of an input used in the manufacture of the product, equilibrium quantity will _____, equilibrium price will _____, but equilibrium _____ will change proportionately more.
decrease; decrease; price
increase; decrease; price
increase; increase; quantity
increase; decrease; quantity
increase; increase; price
23. Figure 4.5 shows a shift of the supply curve for a product from S1 to S2, as a result of a tax levied on the product. The amount of the tax is _____ and the amount of the tax the consumers bear is _____.
P2 – P1; P3 – P2
P3 – P1; P3 – P2
P3 – P1; P2 – P1
P3 – P2; P2 – P1
P2 – P1; P3 – P1
True/False (3 points per question)
Indicate whether the statement is true or false.
24. The statement "The income tax is unfair to those who work hard to earn their incomes" is an example of positive economic analysis.
25. The demand schedule is a table or list of the prices and corresponding quantities demanded of a particular good or service.
26. More television sets are being sold today than one year ago, and the selling price has increased. This could have been caused by an increase in demand.
27. All points on the production possibilities curve represent efficient levels of production.
28. If input prices increase, the supply curve for cheese will shift to the right.
29. If the supply curve decreases while the demand curve remains unchanged, the equilibrium price would decrease.
30. As output increases, marginal cost increases, reaches a maximum, and then falls.
31. From an economic perspective, one of the problems with the illegal drug market is that drug suppliers do not pay income taxes or social security taxes.
Short Answer/Essay (11 points available)
32. You have been hired by the city to determine whether or not an increase in the price of tickets for the mass transit system would raise system revenues. The debate has been heated and the city council seems to be divided. One side argues that in order to increase revenues from the transit system, prices must be increased. The opposing side argues that a price increase at this time will lower revenues. What assumptions are each side making about the price elasticity of demand, and how might you determine the best course of action?
Unit 14 - Working as a Holiday Representative - P1 P2 P3 M1 D1
A Distinction* worth of work marked by an examiner.
In P1 I describe the roles, duties, and responsibilities for different categories of holiday representatives, highlighting changing roles and working practice. In P2 I outline the legal responsibilities of holiday representatives in different holiday situations. In P3 I explain the role played by holiday representatives in creating a safe and healthy holiday environment. In M1 I compare the roles, duties, and responsibilities for one category of the representative with two different tour operators. In D1 analyze how the current and changing roles, duties and responsibilities of holiday representatives can contribute to the overall holiday experience.
ECON 2106: Graded 100%
Use the following to answer question 1: Figure: Monopolistic Competition VI
1. (Figure: Monopolistic Competition VI) The accompanying figure illustrates a firm in the ; in the , the demand and marginal revenue curves will shift .
A) long run; short run; right C) short run; long run; right
B) short run; long run; left D) long run; short run; left
2. Jessica spends all her income on two goods, A and B. The price of A is $5, and the price of B is $7. At the current consumption bundle, the marginal utility of A is 10, and the marginal utility of B is 21. To maximize utility given her income, Jessica should:
A) increase her consumption of A and decrease her consumption of B.
B) continue to consume the current bundle.
C) increase her consumption of B and decrease her consumption of A.
D) none of the above
ECON 2106 Shelby Frost Exam 3 11:00am TR Spring 2008 Version A
Use the following to answer question 3:
Figure: Monopoly Through Collusion
3. (Figure: Monopoly Through Collusion) Given the duopoly industry illustrated in the figure, if each firm acted on the belief that it faced demand curve D2 and acted without consideration of the other, each firm would attempt to maximize economic profits by producing quantity and setting price equal to .
A) Q2; P2 B) Q4; P1 C) Q4; P2 D) Q1; P4
Use the following to answer question 4: Figure and Table: The Budget Line
Consumption bundle Quantity of clams (pounds) Quantity of potatoes (pounds)
A 0 10
B 1 8
C 2 6
D 3 4
E 4 2
F 5 0
4. (Figure and Table: The Budget Line) In the accompanying figure, a(n) in the price of potatoes would rotate the budget line along the axis the origin.
A) decrease; horizontal; toward C) decrease; vertical; away from
B) increase; vertical; away from D) increase; horizontal; away from
5. In monopolistic competition:
A) each firm produces a differentiated product.
B) there are a large number of producers.
C) there is free entry and exit in the long run.
D) all of the above are true.
Use the following to answer question 6: Figure: The Budget Line
6. (Figure: The Budget Line) For months now, Agnes has had $20 per month to spend on tea and scones. The price of a cup of tea and the price of a scone are each $1. Which of the charts in the accompanying figure shows what will happen to her budget line if her income increases to $25?
A) Chart D B) Chart A C) Chart B D) Chart C
7. If a monopolist is producing a quantity that generates MC > MR, then profit:
A) can be increased by decreasing production.
B) can be increased by increasing production.
C) is maximized.
D) is maximized only if MC = P.
8. The main reason a monopoly engages in price discrimination is that:
A) by charging a lower price to some people, it may succeed in discouraging efforts to regulate it.
B) it wants to discourage potential competitors.
C) it wants to discriminate against a particular ethnic group.
D) doing so increases its profits.
9. Game theory is commonly used to explain behavior in oligopolies, because oligopolies are characterized by:
A) either homogenous or heterogeneous products.
C) imperfect competition.
D) large profits in the long run.
10. Joseph consumes pizza and soda. He is currently consuming three units of pizza and two units of soda. The price of pizza is $5 and the price of soda is $1. If he is consuming the optimal consumption bundle and his marginal utility of pizza is 50, then his marginal utility of soda is:
A) 5. B) 50. C) 10. D) none of the above
11. Chuck spends all his income on two goods: tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and put milkshakes on the vertical axis. The opportunity cost of one taco equals
units of milkshakes.
A) 10 B) 5 C) 1/5 D) 2
Use the following to answer questions 12-13:
Figure: Monopolistic Competition I
12. (Figure: Monopolistic Competition I) Which of the panels in the accompanying figure shows a monopolistic competitor in long-run equilibrium?
A) b B) c C) a D) all of the above
13. (Figure: Monopolistic Competition I) Which of the panels in the accompanying figure shows a monopolistic competitor earning a loss in the short run?
A) b B) c C) a D) none of the above
Use the following to answer question 14: Table: Demand for Crude Oil
Quantity Price ($/barrel) Total revenue ($)
0 $160 $0
10 150 1,500
20 140 2,800
30 130 3,900
40 120 4,800
50 110 5,500
60 100 6,000
70 90 6,300
80 80 6,400
90 70 6,300
100 60 6,000
110 50 5,500
120 40 4,800
130 30 3,900
140 20 2,800
150 10 1,500
160 0 0
14. (Table: Demand for Crude Oil) The accompanying table shows the demand schedule for crude oil. For simplicity, assume that the cost of producing crude oil is zero—the marginal cost of crude oil equals zero. Now assume Laverne and Shirley are the only two producers of crude oil, and they cannot cooperate. But assume they play this game every week, each player has a tit-for-tat strategy, and the other player knows this. In this case, what will be the equilibrium choice of outputs? Laverne will produce barrels and Shirley will produce barrels.
A) 30; 30 B) 50; 50 C) 40; 40 D) 40; 50
15. DeBeers became a monopoly by:
A) economies of scale.
B) ownership of a patent.
C) establishing control over diamond mines.
D) technological superiority.
Use the following to answer question 16: Figure: Monopolistic Competition II
16. (Figure: Monopolistic Competition II) The accompanying figure shows the demand, marginal revenue, marginal cost, and average total cost curves for Pat\'s Pizza Parlor, a monopolistic competitor in the food-to-go industry. The optimal level of output for Pat\'s Pizza Parlor is and the profit-maximizing price is .
A) 500; $5.50 B) 590; $5.60 C) 350; $3.50 D) 350; $7.00
17. When one firm responds to a rival\'s cheating by cheating and to a rival\'s cooperation by cooperating, that firm is practicing a:
A) tit-for-tat strategy. C) dormant strategy.
B) conclusive strategy. D) trigger strategy.
18. Which of the following is a barrier to entry?
A) economies of scale
B) government-created barriers such as patents and copyrights
C) control of scarce resources
D) all of the above
19. Most electric, gas, and water companies are examples of:
A) sunk-cost monopolies. C) unregulated monopolies.
B) restricted-input monopolies. D) natural monopolies.
20. One of the earliest actions of antitrust policy was the breakup of:
A) Bell Telephone. B) IBM. C) the Standard Oil Company. D) Microsoft.
21. The women\'s dress industry is monopolistically competitive. This means that one of the following conditions applies to this industry:
A) there is freedom of entry but not exit in this industry.
B) there are thousands of dress suppliers, all selling identical products.
C) prices tend to be lower than if the dress industry approximated perfect competition.
D) dresses tend to be differentiated among the many sellers serving this market.
22. Oligopoly is a market structure characterized by:
A) a small number of interdependent firms.
C) relatively easy entry and exit.
B) independence in decision making. D) a horizontal demand curve.
23. The percentage of total industry sales accounted for by the four largest firms in the industry is the:
A) four-firm sales index. C) four-firm employment rate.
B) four-firm market number. D) four-firm concentration ratio.
24. John Smedley, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream. He had just achieved the utility-maximizing solution in his consumption of the two goods when the price of ice cream fell. As he adjusts to this event, he will consume:
A) more peanut butter and less ice cream.
B) less peanut butter and more ice cream.
C) less peanut butter and less ice cream.
D) more peanut butter and more ice cream.
25. At the optimal consumption bundle:
A) the price of all goods consumed is equal.
B) the marginal utility of all goods consumed is equal.
C) the marginal utility per dollar spent is equal for all goods consumed.
D) none of the above are true.
Use the following to answer question 26:
Figure: Pricing Strategy in Cable TV Market 2
26. (Figure: Pricing Strategy in Cable TV Market 2) If the two firms in the cable TV market collude then:
A) CableNorth will set a low price and earn $130,000 per month, while CableSouth will set a high price and earn $80,000 per month.
B) both firms will set a high price and each will earn $100,000 per month.
C) CableNorth will set a high price and earn $80,000 per month, while CableSouth will set a low price and earn $130,000 per month.
D) both firms will set a low price and each will earn $90,000 per month.
27. An industry with two firms is generally termed:
A) monopolistic competition. C) monopoly.
B) perfect competition. D) duopoly.
28. Marginal revenue for a monopolist is:
A) greater than price. C) equal to price.
B) equal to average revenue. D) less than price.
Use the following to answer question 29: Table: Prices and Demand
Quantity of hats demanded Price per hat
29. (Table: Prices and Demand) Prof. Dumbledorr has a monopoly on magic hats. He sells at most 1 hat to each customer, and the accompanying table shows each customer\'s willingness to pay. The marginal cost of producing a hat is $18. How many hats should Prof. Dumbledorr produce, and what price should he charge to maximize his profits?
A) 4; $22 B) 3; $24 C) 1; $28 D) 2; $26
30. For the monopolistically competitive seafood market, the demand curve for any individual firm is sloping, and there are producers of seafood.
A) downward-sloping; many C) upward-sloping; many
B) downward-sloping; a few D) vertical; a few
31. Since a monopolistically competitive firm faces a downward-sloping demand curve for its product, its price will be:
A) less than marginal revenue. C) equal to marginal revenue.
B) equal to total revenue. D) greater than marginal revenue.
Use the following to answer question 32: Figure: Payoff Matrix for Gehrig and Gabriel
32. (Figure: Payoff Matrix for Gehrig and Gabriel) The accompanying figure shows the payoff matrix for two producers, Gehrig and Gabriel, who sell handmade Davy Crockett figurines in San Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. For Gehrig and Gabriel, the dominant strategy is to:
A) produce 7,000 figurines.
B) produce between 5,000 and 7,000 figurines.
C) collude and increase production to more than 14,000 figurines.
D) produce 5,000 figurines.
33. One of the following statements about monopoly equilibrium and perfectly competitive equilibrium is incorrect. Which is the incorrect statement?
A) In the long run, economic profits are driven to zero in both a monopoly and a perfect competitive market.
B) Price is greater than marginal cost in monopoly, and price equals marginal cost in perfect competition.
C) When a monopoly exists, the consumer surplus is less than if the market were perfectly competitive.
D) Monopoly output will be less than the output of a comparable perfectly competitive industry.
Use the following to answer question 34: Table: Marginal Utility per Dollar
Clams (price of clams = $4 per pound) Potatoes (price of potatoes = $2 per pound)
Quantity of clams Utility from clams Marginal utility per pound of clam Marginal utility per dollar Quantity of potatoes Utility from potatoes Marginal utility per pound of potatoes Marginal utility per dollar
0 0 0 0
15 3.75 11.5 5.75
1 15 1 11.5
10 2.50 9.9 4.95
2 25 2 21.4
6 1.50 8.4 4.20
3 31 3 29.8
3 0.75 7.0 3.50
4 34 4 36.8
2 0.50 5.7 2.85
5 36 5 42.5
34. (Table: Marginal Utility per Dollar) According to data in the accompanying table, if the price of clams is $4 per pound, while the price of potatoes is $2 per pound, and this consumer has $20 to spend on potatoes and clams, then the utility-maximizing combination is pounds of clams and pounds of potatoes.
A) 3; 9 B) 2; 6 C) 3; 4 D) 1; 8
Use the following to answer question 35: Figure: Comparing Long-Run Equilibriums
35. (Figure: Comparing Long-Run Equilibriums) In the accompanying figure, which of the following statements is true?
A) Panel (a) and panel (b) show markets that have few interdependent firms.
B) Panel (a) and panel (b) show markets that produce identical products.
C) Panel (a) and panel (b) show markets that have many firms.
D) The major difference between panel (a) and panel (b) is that firms in the market structure shown in panel (a) cannot have excess profits in the long run, but the firms in the market structure shown in panel (b) can have excess profits in the long run.
Use the following to answer question 36:
Figure: Monopoly Model
36. (Figure: Monopoly Model) When the firm is in equilibrium, its total cost is the area of rectangle:
A) IPDH. B) 0SBJ. C) 0IHJ. D) 0PDJ.
37. The law of diminishing marginal utility indicates that the slope of the marginal utility curve eventually becomes:
A) vertical. B) horizontal. C) positive. D) negative.
38. A monopolistic competitor is likely to engage in advertising to:
A) shift the demand curve for its product rightwards.
B) convey information about the product it is offering for sale.
C) create a greater perception of product differentiation in the minds of potential consumers.
D) all of the above.
Use the following to answer question 39:
Units 0 1 2 3 4 5 6 7
Total utility 0 20 35 45 50 50 45 35
39. (Table: Utility) Marginal utility is zero for the unit.
A) second B) fifth C) first D) third
40. Wendy has a monopoly in the retailing of motor homes. She can sell five per week at
$21,000 each. If she wants to sell six, she can charge $20,000 each. The price effect of selling the sixth motor home is:
A) $5,000. B) $20,000. C) $25,000. D) $15,000.
ECON 2106 Shelby Frost Exam 3 11:00am TR Spring 2008 Version A
MGCR293 Final Exam
1. Why does a firm in a competitive industry charge the market price?
a. If a firm charges less than the market price, it loses potential revenue.
b. If a firm charges more than the market price, it loses all its customers to other firms.
c. The firm can sell as many units of output as it want to at the market price.
d. All of the above are correct.
2. If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then
a. average revenue exceeds marginal cost.
b. the firm is earning a positive profit.
c. decreasing output would increase the firm's profit.
d. All of the above are correct.
3. A firm will shut down in the short run if, for all positive levels of output
a. its loss exceeds its fixed costs.
b. its total revenue is less than its variable costs.
c. the price of its product is less than its average variable cost.
d. All of the above are correct.
4. A firm that exits its market has to pay
a. its variable costs but not its fixed costs.
b. its fixed costs but not its variable costs.
c. both its variable costs and its fixed costs.
d. neither its variable costs nor its fixed costs.
5. Which of the following statements is not correct?
a. In a long-run equilibrium, marginal firms make zero economic profit.
b. To maximize profit, firms should produce at a level of output where price equals average variable cost.
c. The amount of gold in the world is limited. Therefore, the gold jewelry market probably has a long-run supply curve that is upward sloping.
d. Long-run supply curves are typically more elastic than short-run supply curves.
6. Competitive firms differ from monopolies in which of the following ways?
(i) Competitive firms do not have to worry about the price effect lowering their total revenue.
(ii) Marginal revenue for a competitive firm equals price, while marginal revenue for a monopoly is less than the price it is able to charge.
(iii) Monopolies must lower their price in order to sell more of their product, while competitive firms do not.
a. (i) and (ii) only
b. (ii) and (iii) only
c. (i) and (iii) only
d. (i), (ii), and (iii)
7. Refer to the Figure above. In the short run, if the market price is higher than P1 but less than P4, individual firms in a competitive industry will earn
a. positive profits.
b. zero profits.
c. losses but will remain in business.
d. losses and will shut down.
8. Refer to the Figure above. In the short run, if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn
a. positive profits.
b. zero profits.
c. losses but will remain in business.
d. losses and will shut down.
9. Refer to the Figure above. Firms would be encouraged to enter this market for all prices that exceed
10. For a profit-maximizing monopolistically competitive firm, price exceeds marginal cost in
a. the short run but not in the long run.
b. the long run but not in the short run.
c. both the short run and the long run.
d. neither the short run nor the long run.
11. Refer to the Figure above. If the monopoly firm is currently producing Q3 units of output, then a decrease in output will necessarily cause profit to
a. remain unchanged.
c. increase as long as the new level of output is at least Q2.
d. increase as long as the new level of output is at least Q1.
12. Refer to the Figure above. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to
13. Refer to the Figure above. A profit-maximizing monopoly's total revenue is equal to
a. P4 x Q2.
b. P3 x Q4.
c. (P4-P2) x Q2.
d. (P4-P3) x Q2.
14. Refer to the Figure above. What is the monopoly price and quantity?
price = F; quantity = A
price = G; quantity = B
price = G; quantity = A
price = D; quantity = A
15. Refer to the Figure above. What area represents the total surplus lost due to monopoly pricing?
a. the rectangle (F-D)xA
b. the triangle 1/2[(F-D)x(B-A)]
c. the triangle 1/2[(F-G)x(B-A)]
d. the rectangle (F-D)xA plus the triangle 1/2[(F-D)x(B-A)]
16. In a perfectly competitive market, the process of entry and exit will end when
a. price equals minimum marginal cost.
b. marginal revenue equals marginal cost.
c. economic profits are zero.
d. accounting profits are zero.
17. Which of the following statements is true?
(i) When a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price.
(ii) When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.
(iii) Average revenue is the same as price for both competitive and monopoly firms.
(i) and (ii) only
(ii) and (iii) only
18. A firm in a monopolistically competitive market is similar to a monopoly in the sense that
(i) they both face downward-sloping demand curves.
(ii) they both charge a price that exceeds marginal cost.
(iii) free entry and exit determines the long-run equilibrium.
a. (i) only
b. (ii) only
c. (i) and (ii) only
d. (i), (ii), and (iii) only
19. In monopolistically competitive markets, free entry and exit suggests that
a. the market structure will eventually be characterized by perfect competition in the long run.
b. all firms earn zero economic profits in the long run.
c. some firms will be able to earn economic profits in the long run.
d. some firms will be forced to incur economic losses in the long run.
20. "In a long-run equilibrium, price is equal to average total cost." This statement applies to
a. competitive markets, but not to monopolistically competitive markets or monopolies.
b. competitive and monopolistically competitive markets, but not to monopolies.
c. competitive markets, monopolistically competitive markets, and monopolies.
d. None of the above is correct.
21. Refer to the Figure above. Suppose that average total cost is $18 when Q=12. What is the profit-maximizing price and resulting profit?
a. P=$12, profit=$0
b. P=$18, profit=$72
c. P=$18, profit=$24
d. P=$18, profit=$0
22. Refer to the Figure above. If the average variable cost is $12 at the profit-maximizing quantity, and if the firm’s fixed costs amount to $30, then the firm’s maximum profit is
23. Refer to the Figure above. Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry?
a. panel a
b. panel b
c. panel c
d. panel d
24. Refer to the Figure above. Panel a shows a profit-maximizing monopolistically competitive firm that is
a. earning zero economic profit.
b. likely to exit the market in the long run.
c. producing its efficient scale of output.
d. not maximizing its profit.
25. Refer to the Figure above. Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?
a. panel a
b. panel b
c. panel c
d. panel d