ECON midterm review

Jennifer owns a small lemonade stand. Variable costs for her business in the short run would include:

The costs of lemons and sugar

The costs of building the lemonade stand

The costs of the blender used to make lemonade

The costs of hiring an artist to design a logo for her sign

All of the above

Malthus' very pessimistic predictions

Were based on the assumption that the MPL would shift out as technology improves

Were based on the assumption that technology does not improve over time and the MPL curve does not shift outward

Have become true through the world

Were based on the assumption that the size of the population does not change much over time

Were based on the assumption that wages would be stabilized at a high level, far above that needed for susistance

What is true about marginal costs?

Marginal costs is equal to total cost divided by output

Marginal costs is the additional to costs associated with hiring one more worker

Marginal cost curve eventually slopes upward because of the law of diminishing marginal returns

Marginal cost can be calculated as the slope of the total product curve

The long-run average cost curve will be upward sloping when the firm is experiencing

Increasing returns to scale

Decreasing returns to scale

Constant returns to scale

Economic profits at all levels of output

Economic losses at all levels of output

A firm has a certain TP curve, showing the relationship between the number of workers and the level of output. If the amount of capital the firm has increases,

The TP curve will shift up

The TP curve will shift down

There will be movement downward along the TP curve

The corresponding marginal product of labor curve will shift down

The region in which MC is increasing corresponds to the region

In which MPL is a vertical curve

Of diminishing marginal returns

Where division of labor and specialization cause MPL to rise

In which TFC are rising

Where the marginal productivity of workers has become negative

Tammy owns a firm in a perfectly competative industry, and she is currently maximizing profits. Her landlord announced to her a substantial increase in the monthly rent for the building. In order to continue maximizing profits, tammy should

Increase the price she charges for her product

Decrease the price she charges for her product

Decrease level of output

Increase the level of output

Leave the level of output unchanged

For a firm in a perfectly competitive industry, the demand curve

Microsoft and its Windows operating system are often cited as an example of a company that has been able to retain its status as near monopolist through:

In a perfectly competitive industry,

Each firm makes decisions regarding the optimal price to charge

Each firm produces a standardized product

Firms cannot easily enter

Firms cannot easily exit

Each firm has market power

The short-run supply curve for a perfectly competitive firm is

The ATC curve above the break even price

The AVC curve above the break even price

The MC curve above the break even price

The MC curve above the point where the MC and AVC curves intersect

The entire MC curve

Significant barriers to entry are a reason a monopoly

Can earn economic profits in the long run

Produces at the minimum average total cost curve

Produces with no fixed costs in the long run

Maximizes its profits by producing where P=MC

Faces a horizontal demand curve

Which of the following statements about the differences between monopoly and perfect competition is incorrect?

A monopolist has market power, while a perfect competitor does not

Unlike a perfectly competitive firm, a monopoly can make positive economic profits in the long run

A monopoly will charge a higher price and produce a smaller quantity than a competitive market with the same demand and costs structure

Monopoly profits can continue to exist in the long run because the monopoly produces more and charges a higher price than a comparable perfect competitive industry

In monopoly there are barriers to entry, in perfect competition there are no barriers to entry

To practice effective price discrimination, a firm must

Be able to estimate the cost functions of competitors

Be able to avoid detection by government regulatory agencies

Make sure that resale of the good or service is not possible among groups of buyers

Be a price taker

Aim to please customers by allowing them to have as much consumer surplus as possible

Price discrimination leads to a higher price for those consumers with

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