- Assume the following: marginal revenue is $5, output is 1,000 units, marginal cost is $5, average total cost is $7, and average variable cost is $5.50. What should the perfectly competitive firm do in the short run and why?
Question options:
| Shut down production, because average variable cost is greater than marginal revenue | |
| Shut down production, because of a loss of $2,000 | |
| Continue to produce at 1,000 units, because marginal revenue is greater than average total cost | |
| Continue to produce at 1,000 units, because marginal revenue is greater than average variable cost |
- In the long run, firms will continue to enter a perfectly competitive industry as long as ______ economic profits are present and they will expand until _________ of scale occur.
Question options:
| positive; diseconomies | |
| negative; diseconomies | |
| positive; economies | |
| zero; economies |
- Assume the monopoly is a simple monopoly that is operating in the short run. Use the information in the table below. The Demand column gives both the quantities and prices that make up the Demand Curve.
| Demand | Marginal Revenue | Marginal Cost | Average Total Cost | |
| Quantity | Price | |||
| 12 | $7.00 | $4.25 | $2.95 | $5.40 |
| 13 | $6.75 | $3.75 | $3.10 | $5.22 |
| 14 | $6.50 | $3.25 | $3.30 | $5.09 |
| 15 | $6.25 | $2.75 | $3.55 | $4.98 |
What is the short run profit maximizing quantity this monopoly should produce?
Question options:
| 12 | |
| 13 | |
| 14 | |
| 15 |
- Assume the monopoly is a simple monopoly that is operating in the short run. Use the information in the table below. The Demand column gives both the quantities and prices that make up the Demand Curve.
| Demand | Marginal Revenue | Marginal Cost | Average Total Cost | |
| Quantity | Price | |||
| 12 | $7.00 | $4.25 | $2.95 | $5.40 |
| 13 | $6.75 | $3.75 | $3.10 | $5.22 |
| 14 | $6.50 | $3.25 | $3.30 | $5.09 |
| 15 | $6.25 | $2.75 | $3.55 | $4.98 |
At the quantity you chose for the previous question, what is the price charged by the simple monopolist?
Question options:
| $3.25 | |
| $3.75 | |
| $6.50 | |
| $6.75 |
- Which of the following is NOT true of a natural simple monopoly (with no threat of entry) in the long run?
Question options:
| They set their profit maximizing quantity at the point where MR = MC | |
| They will earn positive profits | |
| They will not produce at the lowest cost possible (i.e. they will not produce at the minimum point of their LRATC curve) | |
| They set their price at the point on the marginal revenue curve where MR=MC |
- Which of the following is NOT an example of price discrimination?
Question options:
| Discounts for senior citizens at the movies | |
| Coupons for reduced price haircuts | |
| Lower prices for drinks purchased during happy hour at a restaurant | |
| Lower prices for children sized t-shirts than for adult sized t-shirts |
- Given the same market demand and supply curves, a price-discriminating monopoly will result in a _______ consumer surplus and a _______ lower deadweight loss than a simple monopoly.
Question options:
| larger; larger | |
| larger; smaller | |
| smaller; larger | |
| smaller; smaller |
- Use the Game Theory model of an oligopoly below. Note that in each cell Business A’s profits are listed first while Business B’s profits are listed second:
| Business B | |||
| $5 | $4 | ||
| Business A | $5 | $400, $400 | $200, $540 |
| $4 | $540, $200 | $360, $360 | |
What is the Nash Equilibrium of the game above?
Question options:
| Both business charge $5 | |
| Business A charges $5 while Business B charges $4 | |
| Business A charges $4 while Business B charges $5 | |
| Both business charge $4 |
- The market performance of an oligopoly is closest to which other market?
Question options:
| Monopoly | |
| Either perfect competition or monopoly depending partly on how stable the cartel is | |
| Monopolistic Competition | |
| Perfect Competition |
| Quantity | Marginal Cost | Average Total Cost | Average Variable Cost |
| 14 | $275 | $398.21 | $255.36 |
| 15 | $305 | $392.00 | $258.67 |
| 16 | $340 | $388.75 | $263.75 |
| 17 | $380 | $388.24 | $270.59 |
| 18 | $425 | $390.28 | $279.17 |
| 19 | $475 | $394.74 | $289.47 |
Suppose the equilibrium (or market) price is equal to $400. In the short run, what quantity of output should the perfectly competitive firm produce in order to maximize their profit?
Question options:
| 16 | |
| 17 | |
| 18 | |
| 19 |
