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##### ECO 201 Homework 3 Assignment Solution

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Question;Topics 14 through 19This is a printable version of Homework 3. Answers must be submitted through Blackboard (theSubmittable Homework button) by 11:59PM on Tuesday, November 5.1. Marginal revenue is:a. the change in total revenue divided by total outputb. total revenue divided by total outputc. total revenue minus total cost then divided by total outputd. the change in total revenue divided by the change in price of outpute. the change in total revenue divided by the change in total output2. W hich of the following will always equal zero when the firm's output level is zero?a. fixed costsb. implicit costsc. variable costs d. opportunity costs3. The change in cost to the firm from producing one additional unit of ou tput is:a. average total costb. total variable costc. average variable costd. marginal coste. total cost4. As a firm increases its output in the short run, average fixed cost:a. rises steadilyb. falls and then risesc. falls steadilyd. rises and then fallse. remains unchanged5. W hich of the following is true about the relationships among various cost curves?a. when MC exceeds ATC, ATC must be risingb. when MC exceeds ATC, ATC could be rising or fallingc. when ATC is falling, MC must exceed ATCd. when TC is rising, MC must exceed TCe. TC falls when AFC falls6. Assume that a firm has a wage rate of \$300. If the firm's AVC is \$2, its APL is:a. 0b. 2c. 150d. 300e. 6007. If Carol's Crayon Factory's price exceeds its average total cost in the short run, then:a. it should shut downb. it is earning a positive economic profitc. profits are being maximizedd. it should increase outpute. it should decrease outputUse the following table for questions 8 through 14.K4444444L0123456q060115165210250285Assume that each unit of capital employed costs \$200 and the wage rate is \$50.8. W hat is the total fixed cost of producing 165 units?a. \$150b. \$200c. \$600d. \$800e. \$9509. W hat is the total variable cost of producing 165 units?a. \$50b. \$100c. \$150d. \$200e. \$25010. W hat is the total cost of producing 165 units?a. \$500b. \$750c. \$800d. \$850e. \$95011. W hat is the average fixed cost of producing 165 units?a. \$0.91b. \$1.00c. \$2.50d. \$4.85e. \$5.7612. W hat is the average variable cost of producing 165 units?a. \$0.91b. \$1.00c. \$2.50d. \$4.85e. \$5.7613. W hat is the average total cost of producing 165 units?a. \$0.91b. \$1.00c. \$2.50d. \$4.85e. \$5.7614. W hat is the marginal cost of producing 165 units?a. \$0.91b. \$1.00c. \$2.50d. \$4.85e. \$5.7615. W hen marginal cost exceeds marginal revenue:a. the firm can increase profits by increasing outputb. the firm will lower profits by increasing outputc. the firm is maximizing profitsd. total cost exceeds total revenuee. average cost equals average revenue16. The change in total profit when the firm increases its output by one unit equals:a. total revenue minus total costb. total revenue minus marginal revenuec. marginal revenue minus marginal costd. total revenue minus marginal coste. marginal revenue plus marginal cost17. If price equals average total cost at the profit-maximizing output level, then in the short run:a. economic profits are positiveb. economic profits are negativec. the firm will go out of businessd. the firm will earn zero economic profite. the firm's supply curve is horizontal18. Justina's operates in a perfectly competitive market. Which of the following is its short -runsupply curve?a. the MC curve above its point of intersection with the ATC curveb. the market supply curvec. the MC curve above its point of intersection with the AVC curved. the market demand curvee. its MC curve19. If a firm shuts down in the short run:a. it exits the industryb. losses would equal its variable costsc. losses would equal its fixed costsd. profits would be zeroe. losses would equal to zero20. If a perfectly competitive firm cannot avoid economic losses, it should continue to operate inthe short run as long as:a. marginal revenue exceeds average fixed costb. price exceeds average total costc. the market price exceeds average total costd. the marginal revenue is less than the average variable coste. price exceeds average variable cost21. As new firms enter a market the supply curve:a. shifts right and price rises.b. shifts right and price falls.c. shifts left and price rises.d. shifts left and price falls.22. Tommy's Tires operates in a perfectly competitive market. If tires sell for \$50 each and ATC =\$55 per tire at the profit-maximizing output level, then in the long run:a. firms will enter the marketb. firms will exit from the marketc. the equilibrium price per tire will falld. average total costs must falle. marginal revenue will fall23. In a long-run perfectly competitive equilibrium:a. marginal cost and marginal revenue are the greatest distance apartb. barriers to entry are established by entrenched firmsc. the typical firm will earn an economic profitd. average total cost is risinge. price and marginal cost are equal to minimum average total cost24. Assume that there is an increase in production costs for a perfectly competitive market. Whatwill be the result?a. prices rise, profits rise, and firms enter the marketb. prices fall, profits rise, and firms exit the marketc. prices fall, profits fall, and firms exit the marketd. profits fall, firms exit the market, and prices risee. profits rise, firms enter the market, and prices fall25. Assume that there is an increase in demand for a perfectly competitive market. What will bethe result?a. prices rise, profits rise, and firms enter the marketb. prices fall, profits rise, and firms exit the marketc. prices fall, profits fall, and firms exit the marketd. profits fall, firms exit the market, and prices risee. profits rise, firms enter the market, and prices fall26. The long-run supply curve in a perfectly competitive industry is horizontal:a. in an increasing-cost industryb. in a decreasing-cost industryc. if the short-run supply curves for firms are upward-slopingd. if the short-run market supply curve is negatively slopede. in a constant-cost industry27. The long-run supply curve is upward sloping in a(n):a. decreasing-cost industryb. increasing-cost industryc. constant-cost industryd. labor-intensive industrye. capital-intensive industry28. Assume that a firm is experiencing decreasing returns to scale. If the firm increases output,its average total cost will ____.a. increaseb. deceasec. not changed. unable to determine from the information given29. A monopoly is a:a. large number of producers each with a small share of the total market outputb. single seller of a product that has no close substitutesc. small group of producers with similar productsd. single buyer of an input into productione. cartel of firms with incentives to cooperate30. A monopoly exists because of:a. barriers to entryb. the large number of buyers and sellersc. the absence of barriers to entryd. collusion among the dominant firmse. the absence of exclusive government franchises31. Suppose that a monopoly is earning positive economic profits in the short run. As a result:a. no new firms will enter the industry because of barriers to entryb. the monopolist will increase its price and lower its outputc. the market supply curve will shift to the rightd. profits will fall as new firms enter the markete. the market demand curve will shift to the left32. Patents and copyrights:a. are illegal in the United Statesb. reduce barriers to entry in marketsc. protect small firms from large firmsd. lead to increased output and decreased pricese. provide incentives for firms to engage in research and development33. If a monopoly is regulated using average cost pricing (ACP), its price will be ____ ATC, andits economic profits will be ____.a. equal to, zerob. greater than, positivec. greater than, negatived. less than, positivee. less than, negative34. If a monopoly is regulated using marginal cost pricing (MCP), its pri ce will be ____ ATC, andits economic profits will be ____.a. equal to, zerob. greater than, positivec. greater than, negatived. less than, positivee. less than, negative35. Assume that a monopolist can sell 20 units for \$12 each. To sell 21 units, each must bestpriced at \$11.50. Marginal revenue on the 21 unit is:a. 0.50b. 1.00c. 1.50d. 11.50e. 12.0036. A monopolist that maximizes profit determines price and quantity where:a. profit per unit is the greatest.b. MR = MC.c. MC is the lowest possible.d. the price is the maximum that any customer will pay.37. If a monopoly were converted to perfect competition:a. both price and quantity would riseb. price would rise, but quantity would fallc. price would fall, but quantity would rised. both price and quantity would falle. both price and quantity would be unchanged38. If a firm wishes to engage in price discrimination, which of the following conditions must bemet?a. the demand curve must be horizontalb. it must be possible to prevent resale of the good from low-paying to high-payingcustomersc. the supply curve must be horizontald. many identical firms in the market must each have a small share of total industry outpute. price must be less than marginal cost39. Price discrimination occurs when:a. price exceeds marginal costb. a firm charges different customers different prices, and the differences are not explainedby cost factorsc. price exceeds average costd. a firm charges different customers different prices, where thes e differences are based oncost differencese. price equals average variable cost40. An important difference between a perfectly competitive market and a monopolisticallycompetitive market is that, in the latter:a. there are more sellers of the goodb. there are only a few large sellersc. there are no barriers to entry or exitd. there is only one seller of the goode. the product is not standardized41. In the short run, a monopolistic competitor can:a. not earn an economic profit because of competitionb. use limit pricing to reduce competitionc. maximize profits by charging the highest price the market will beard. earn an economic profite. maximize profit by selecting the minimum efficient scale42. In the long run, entry of new firms ensures that the typical firm in monopolistic competitionwill:a. produce at minimum efficient scaleb. earn an economic profitc. earn a normal economic profitd. price its output at marginal coste. standardize its product43. A market in which a small number of strategically interdependent firms produce the dominantshare of output is called:a. perfect competitionb. a monopolyc. monopolistic competitiond. regulatede. an oligopoly44. W hen oligopolists make joint decisions concerning their prices and outp ut levels, they are:a. a natural oligopolyb. colludingc. a duopolyd. a homogeneous oligopolye. practicing bilateralism45. Limits to collusion include:a. price discriminationb. economies of scalec. horizontal market demand curvesd. high pricese. incentives to cheat on the collusive agreementUse the following for questions 46 through 63 to determine the appropriate market structure(s) foreach of the following market attributes.a.b.c.d.e.Perfect competitionMonopolistic competitionMonopolyboth perfect and monopolistic competitionboth monopolistic competition and monopoly46. There are many firms in the market.47. A single firm serves the entire market.48. Each firm produces a single standardized product.49. The firms product has no close substitutes.50. Firms produce differentiated products.51. There are no, or very low, barriers to entry.52. There are very high barriers to entry.53. P > MR54. P = MR55. Firms have a perfectly elastic demand curve.56. Firms have a downward sloping demand curve.57. The firm demand curve is the same as the market demand curve.58. Firms have no control over price.59. Firms have a small degree of control over price.60. A firm has complete control over price.61. Long run = 0.62. In the long run, P = MR = MC = ATC.63. In the long run P = ATC > MR = MC.Use the following subscripts for questions 64 through 66.PC: Perfect competitionMC: Monopolistic competitionM:Monopoly64. W hich of the following represents the long run price relationship among the above marketstructures?a. PM = PMC = PPCb. PM PPCd. PM > PMC = PPCe. PM < PMC = PPC65. W hich of the following represents the long ATC relationship among the above marketstructures?a. ATCM = ATCMC = ATCPCb. ATCM ATCPCd. ATCM > ATCMC = ATCPCe. ATCM MC > PCc. M < MC MC = PCe. M < MC = PC67. W hich of the following is the best example of perfect competition?a. a bankb. goldc. American Water Companyd. a local jewelry retailer68. W hich of the following is the best example of monopolistic competition?a. a bankb. goldc. American Water Companyd. a local jewelry retailer69. W hich of the following is the best example of a monopoly?a. a bankb. goldc. American Water Companyd. a local jewelry retailer70. W hich of the following is the best example of an oligopoly?a. a bankb. goldc. American Water Companyd. a local jewelry retailerUse the following graph for questions 71 through 78.\$/unit756560q90071. W hat is the firm's total revenues?a. 47,500b. 50,000c. 54,000d. 58,500e. 67,50072. W hat is the firm's total costs?a. 47,500b. 50,000c. 54,000d. 58,500e. 67,50073. W hat is the firm's economic profit?a.,500b. 9,000c. 15,000d. 18,500e. 27,50074. W hat is the firm's total variable cost?a. 47,500b. 50,000c. 54,000d. 58,500e. 67,50075. W hat is the firm's average fixed cost?a. 5b. 10c. 60d. 65e. 7576. W hat is the firm's total fixed cost?a. 4,500b. 9,000c. 15,000d. 18,500e. 27,50077. W hat is the firm's marginal cost?a. 5b. 10c. 60d. 65e. 7578. W hat is the firm's marginal revenue?a. 5b. 10c. 60d. 65e. 75\$/unit90807570q80079. W hat is the firm's total revenues?a. 54,000b. 60,000c. 64,000d. 72,000e. 75,00080. W hat is the firm's total costs?a. 54,000b. 60,000c. 64,000d. 72,000e. 75,00081. W hat is the firm's economic profit?a. 4,000b. 8,000c. 10,000d. 12,000e. 15,00082. W hat is the firm's total variable cost?a. 54,000b. 60,000c. 64,000d. 72,000e. 75,00083. W hat is the firm's average fixed cost?a. 5b. 10c. 15d. 25e. 3084. W hat is the firm's total fixed cost?a. 4,000b. 8,000c. 10,000d. 12,000e. 15,00085. W hat is the firm's marginal cost?a. 15b. 70c. 75d. 80e. 9086. W hat is the firm's marginal revenue?a. 15b. 70c. 75d. 80e. 90

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