Name: Test #2 - fall 2015 Multiple Choice Identify the choice that best completes the statement or answers the question. Table 3-3 Class: ID: A ‘Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes ata constant rate, Machine Minutes Needed to Make 1 Toothbrush | Hairbrush 3 10 5 6 1. Refer to Table 3-3. Zimbabwe's opportunity cost of one hairbrush is a, 3/10 toothbrush and Portugal’s opportunity cost of one hairbrush is 5/6 toothbrush. b. 3/10 toothbrush and Portugal’s opportunity cost of one hairbrush is 6/5 toothbrushes. c. 10/3 toothbrushes and Portugal's opportunity cost of one hairbrush 5/6 toothbrush. 4d, 10/3 toothbrushes and Portugal’s opportunity cost of one hairbrush is 6/5 toothbrushes. the opportunity cost of this decision? a. 0.3 hairbrush b. 3 hairbrushes 30 hairbrushes d. 100 hairbrushes 2. Refer to Table 3-3. Suppose Zimbabwe decides to increase its production of toothbrushes by 10, What is 3. Refer to Table 3-3. Zimbabwe has an absolute advantage in the production of a, toothbrushes and a comparative advantage in the production of toothbrushes. b. toothbrushes and a comparative advantage in the production of hairbrushes. cc. hairbrushes and a comparative advantage in the production of toothbrushes. 4, hairbrushes and a comparative advantage in the production of hairbrushes. 4, Refer to Table 3-3. Portugal has an absolute advantage in the production of toothbrushes and a comparative advantage in the production of toothbrushes. hairbrushes and a comparative advantage in the production of toothbrushes. a b, toothbrushes and a comparative advantage in the production of hairbrushes. . q hairbrushes and a comparative advantage in the production of hairbrushes.‘Name: ID: A Refer to Table 3-3. Assume that Zimbabwe and Portugal each has 60 machine minutes available, Originally, each country divided its time equally between the production of toothbrushes and hairbrushes. Now, each country spends all its time producing the good in which it has a comparative advantage. Asa result, the total output increased by a. 4 toothbrushes and 2 hairbrushes. b. 10 toothbrushes and 5 hairbrushes. ©. 16 toothbrushes and 8 hairbrushes. d. 20 toothbrushes and 10 hairbrushes. ‘Tom Brady should pay someone else to mow his lawn instead of mowing it himself, unless a. Brady has an absolute advantage over everyone else in mowing his lawn. b. Brady has a comparative advantage over everyone else in mowing his lawn. ¢. Brady's opportunity cost of mowing his lawn is higher than it is for everyone else. 4. Allof the above are correct. In order to be successful, a cartel must a. find a way to encourage members to produce more than they would otherwise produce. 'b. agree on the total level of production for the cartel, but they need not agree on the amount produced by each member. . agree on the total level of production and on the amount produced by each member. 4d, agree on the prices charged by each member, but they need not agree on amounts produced. To increase their individual profits, members of a cartel have an incentive to charge a higher price than the other members of the cartel crease production above the level agreed upon. jore the choices made by the other firms and act as a monopolist. charge the same price a monopolist would charge. b, os 4.‘Name: ID: A Table 17-10 ‘The table shows the town of Driveaway's demand schedule for gasoline. Assume the town’s gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost. in gallons) Total Revenue 0 30 50 350 100 600 150 750 200 800 230 750 300 600 350 350 400 0 9. Refer to Table 17-10. Ifthe market for gasoline in Driveaway is perfectly competitive, then the equilibrium price of gasoline is a, $0.and the equilibrium quantity is 400 gallons. b. $1 and the equilibrium quantity is 350 gallons. ©. $2and the equilibrium quantity is 300 gallons. 4. $4and the equilibrium quantity is 200 gallons. 10, Refer to Table 17-10. If the market for gasoline in Driveaway is a monopoly, then the profit-maximizing, monopolist will charge a price of a, $6 and sell 100 gallons. b. $5 and sell 150 gallons. cc, $4 and sell 200 gallons. d. $3 and sell 250 gallons. 11, Refer to Table 17-10. If the market for gasoline in Driveaway is a monopoly, then the monopolist’s maximum profit is a. $350, b. $400. c. $450, d. $500, 12. A tax placed on a good a, causes the effective price to sellers to increase. b. affects the welfare of buyers of the good but not the welfare of sellers. c. causes the equilibrium quantity of the good to decrease. 4d. creates a burden that is usually borne entirely by the sellers of the good.15. 16. ID: A Figure 8-2 The vertical distance between points A and B represents a tax in the market, os tis 225335 445 5 umn . Refer to Figure 8-2. ‘The imposition of the tax causes the quantity sold to a. increase by 1 unit. b. decrease by 1 unit. ¢. increase by 2 units. d. decrease by 2 units. Refer to Figure 8-2. The imposition of the tax causes the price paid by buyers to a. decrease by $2. b, increase by $3. c. decrease by $4. 4d, increase by $5. Refer to Figure 8-2. The imposition of the tax causes the price received by sellers to a. decrease by $2. b, increase by $3. c. decrease by $4. d. increase by $5. Refer to Figure 8-2. The amount of the tax on each unit of the good is a $l b $4. c. $5. a 99.17, 20. Refer to Figure 8-2. The amount of tax revenue received by the government is a. $2.50. b $4 c. $5. $9. Figure 8-8 Suppose the government imposes a $10 per unit tax on a good, 36 9 12 15 18 21 24 27 30 33 3639 Quantity Refer to Figure 8-8, The tax causes consumer surplus to decrease by the area aA b. BHC. cc. AFBHC, dd, A+BHC+D+F. Refer to Figure 8-8. The tax causes producer surplus to decrease by the area a, D+F. b. DHFHG, ©. DHF 4. d. DHF+G+H, Refer to Figure 8-8. The deadweight loss of the tax is the area a. BHD. b CHR, c. AHCHPY. dd. BHC+D+F.Name: 21. 22. 23. 24, 25, ID: A Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane's economic profit from her first year in her own practice is a, -$39,000. b. $124,000. ©. $163,000. d, $184,000. Table 13-8 Quantity [Fixed | Variable of Output_| Cost ___| Cost 0 $20 30 1 $20 S10 2 $20 $40 3 $20 $80 4 $20 $130 5 $20 $200 6 $20 $300 Refer to Table 13-8, What is the average fixed cost of producing 5 units of output? a $4 b. 85 $40 a. $44 Refer to Table 13-8. What is the average variable cost of producing 5 units of output? a $4 b. $5 $40 a. $44 Refer to Table 13-8. What is the marginal cost of producing the fifth unit of output? a $4 b. $40 c. $50 4. $70 If marginal cost is below average total cost, then average total cost a. is constant. b. is falling, ©. isrising. 4, may rise or fall depending on the size of fixed costs,Name: 26. 27, 28, ID: A Table 14-3 Quantity [Total Revenue 0 30 i $7 2 314 3 S21 4 $28 Refer to Table 14-3. For a firm operating in a competitive market, the price is a $0. b. $7. c $14 d. $21 Table 14-11 ‘Suppose that a firm in a competitive market faces the following pr Price | Quantity | Total Cost 35 [0 33 ss 35 ss [2 $8 35 [3 $12 ss [4 S17 5 $23 Refer to Table 14-11. In order to maximize profits, the firm should stop producing after it makes the a. first unit, b c. d. fifth unit, Refer to Table 14-11. 1f the firm is producing 2 units of output, it should a. produce more units of output because its marginal revenue is greater than its marginal cost. b. fewer units of output because its marginal revenue is less than its marginal cost. c, produce more units of output because its marginal revenue is less than its marginal cost. d. produce fewer units of output because its marginal revenue is greater than its marginal cost.Name: 29, 30, 31 32. ID: A Table 14-13 Diana’s Dress Emporium COSTS REVENUES Quantity] Total | Marginal Total Marginal Produced | Cost Cost Price | Revenue _| Revenue 0 $100 = 0 $120 = 1 $150 1 $120 2 $202 2 $120 3 $257 3 $120 4 $317 4 $120 3 $385 5 $120 6 $465 6 $120 7 $562 7 $120 8 $682 8 $120 Refer to Table 14-13. In order to maxi ize profits, how many units should Diana's Dress Emporium produce? a 5 b. 6 «7 a 8 Refer to Table 14-13, What is Diana’s economic profit at the profit maximizing point? a, $78 b. $243 ce. $278 d. $375 ‘When price is greater than marginal cost for a firm in a competitive market, a. marginal cost must be fal b. the firm must be minimizing its losses. cc. there are opportunities to increase profit by increasing production, 4d, the firm should decrease output to maximize profit. 2. Consider a firm operating in a competitive market, The firm is producing 40 units of output, has an average total cost of production equal to $6, and is earning $240 economic profit in the short run. What is the current market price? a $0 b. $6 ce. $10 d. $12Name: 33, 34. 35, ID: A Figure 15-6 Refer to Figure 15-6. In order to maximize profits, the monopolist should produce a. units. b c. 4. Refer to Figure 15-6. In order to maximize profits, the monopolist should charge a price of a $9. b. $12. c. $20, d. $23 Refer to Figure 15-6. A profit-maximizing monopolist would earn profits of a. $96, b. SII7. ©. $120, d. $126.Name: 36. 37, 38, 39, 40. ID: A Figure 15-11 T2345 69 8 9 WN W213 Qumiy Refer to Figure 15-1 a ANB Which area represents the deadweight loss from monopoly? b. CHF « G d. AtBHCHE Price discrimination 4, forces monopolies to charge a lower price as a result of government regulation. b. isan attempt by a monopoly to prevent some customers from purchasing its product by charging a high price. . isan attempt by a monopoly to increases its profit by selling the same good to different customers at different prices. d, increases the consumer surplus associated with a monopolistic market. A monopolistically competitive firm is currently producing 10 units of output. At this level of output the firm is charging a price equal to $10, has marginal revenue equal to $6, has marginal cost equal to $6, and has average total cost equal to $12. From this information we can infer that a, the firm is currently maximizing its profit. b. the profits of the firm are negative, . firms are likely to leave this market in the long run. 4d, Allof'the above are correct. For a profit-maximizing monopolistically competitive firm, marginal revenue equals marginal cost in a. the short run but not in the long run. b, the long run but not in the short run, . both the short run and the long run, d, neither the short run nor the long run. A firm operating in a monopolistically competitive market can earn economic profits in the short run but not in the long run. the long run but not in the short run, both the short run and the long run. neither the short run nor the long run,Name: ID: A Figure 16-5 ® Price © Pree Mo Pro a ae ; ac D i . ‘ MR co Guntiy a Guanthy ame . Which of the graphs shown would be consistent with a profit maximizing firm in a ‘monopolistically competitive market that is earning a positive profit? a. panela b. panel b ©. panel e d. panel d 42. Refer to Figure 16-5. Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money? a. panela b. panel b ec. panel e d. panel d ____ 43. Refer to Figure 16-5. Which of the graphs depicts a monopolisti equilibrium? a. panel a b. panel b ©. panel e 4, None of the above is correct.Name: 44. 45. A ‘On a vacation to China, you find yourself eating every meal at the local Burger King rather than buying a meal from one of the street vendors. Your traveling companion claims that you are irrational, since you never eat Burger King hamburgers when you are home, and Burger King's hamburgers cost more than the meals prepared and sold by China's street vendors. An economist would most likely explain your behavior by suggesting that ‘a, your behavior is rational, but your friend's behavior is clearly irrational, b. you are clearly irrational, but your friend’s behavior is rational. ¢. the Burger King brand name suggests consistent quali 4d. the advertising by Burger King in China is more persuasive than the advertising by Burger King in your home town. Which of the following statements is not correct? a. Monopolistic competition is different from monopoly because monopolistic competition is characterized by free entry, whereas monopoly is characterized by barriers to entry. b. Both monopolistic competition and oligopoly fall in between the more extreme market structures of competition and monopoly. ¢. Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small relative to the market, whereas each seller can affect the actions of other sellers in an oligopoly. 4d, Both monopolistic competition and perfect competition are characterized by product differentiation,