Question 1Framjam Sports Equipment produces basketballs at its factory in Kentucky and soccer balls at its factory in Illinois. At its current annual rate of production, the cost of producing soccer balls is $75,000 and the cost of producing basketballs is $35,000. If the firm consolidates production at a single location, the annual cost of production will be $100,000. What is the degree of economies of scope in this case?Select one:A. 4B. 5C. 0.90D. 0.10E. 1.15Question 2Trudeau’s Body Shop incurs total costs given by TC = 2,400 + 100Q. If the price it charges for a paint job is $120, what is its break-even level of output?Select one:A. 20 paint jobsB. 40 paint jobsC. 60 paint jobsD. 90 paint jobsE. 120 paint jobsQuestion 3NIn the above figure, if price is equal to P1, the firm willSelect one:A. shut down.B. earn positive economic profits.C. incur an economic loss.D. earn zero economic profits.Question 4The per-week demand for use of the Golden Gate Bridge in San Francisco is P = 13 – 0.15Q during peak traffic periods and P = 10 – 0.1Q during off-peak hours, where Q is the number of cars crossing the bridge in thousands and P is the toll in dollars. If the marginal congestion cost of using the bridge is MC = 5 + 0.2Q, what is the optimal peak load toll for crossing the bridge?Select one:A. 6.5B. 8.0C. 8.7D. 9.9E. 10.6Question 5The long-run average cost curve slopes upward if there are:Select one:A. some factors without diminishing marginal returnsB. diseconomies of scope in the management of multiplant operationsC. economies of scaleD. diseconomies of scaleE. no factors without diminishing marginal returnsQuestion 6The long run is a time period during which:Select one:A. all inputs are semivariableB. all inputs except capital and entrepreneurship are variableC. average variable costs are strictly less than average total costD. all inputs are quasi-variableE. all inputs are variableQuestion 7Average variable cost is equal to the:Select one:A. change in total variable cost divided by the change in output levelsB. total variable cost divided by the level of outputC. marginal cost divided by the average product of the variable inputD. marginal cost divided by the marginal product of the variable inputE. total variable cost divided by the change in output levelsQuestion 8The addition to total cost resulting from the addition of the last unit of output is known as:Select one:A. marginal productB. average productC. average variable costD. average total costE. marginal costQuestion 9An example of implicit costs is the:Select one:A. bad-debt liabilities arising out of excessive sales on creditB. wages paid to the owners’ childrenC. opportunity cost of owner-supplied capital and labor that is not recognized by accountantsD. prices paid for purchased inputsE. the alternative uses for money that could be borrowedQuestion 10Economies of scope exist when it is cheaper to produce:Select one:A. with a large fixed plant and equipmentB. at increasing rates of outputC. given quantities of two different products together than to produce the same quantities separatelyD. given quantities of two different products separately than to produce the same quantities togetherE. using more than one techniqueQuestion 11The long-run average cost curve slopes downward if there are:Select one:A. some factors without diminishing marginal returnsB. economies of scope in the management of multiplant operationsC. economies of scaleD. diseconomies of scope in the management of multiplant operationsE. no factors without diminishing marginal returnsQuestion 12Short-run marginal cost eventually increases with increasing output because:Select one:A. eventually marginal returns will diminishB. not all variable inputs increase at the same rateC. diseconomies of scale usually set in immediatelyD. of diseconomies of scopeE. eventually diseconomies of scale set inQuestion 13If a firm is choosing cost minimizing combinations of inputs, marginal cost can be defined as the price of any:Select one:A. input divided by its average productB. variable input divided by its average productC. fixed input divided by its average productD. variable input divided by its marginal productE. fixed input divided by its marginal productQuestion 14When average total cost is at its minimum:Select one:A. average variable cost is declining with increases in outputB. average variable cost plus average fixed cost is declining with increases in outputC. average total cost is equal to average variable costD. marginal cost is equal to average variable costE. marginal cost is equal to average total costQuestion 15In the short run, perfectly-competitive firms may earn:Select one:A. Positive economic profit.B. abnormal profit.C. Negative economic profit.D. Positive, negative or zero economic profit.Question 16In the model of perfect competition, there are:Select one:A. high barriers to entry and no nonprice competitionB. low barriers to entry and some advertising and product differentiationC. very high barriers to entry and some advertising and product differentiationD. high barriers to entry and some advertising and product differentiationE. low barriers to entry and no nonprice competitionQuestion 17If price is above the average variable cost but below the average total cost of a representative firm in a competitive industry:Select one:A. there will be entry to the industry over timeB. there will be exit from the industry over timeC. the firms in the industry are just earning a normal rate of returnD. the firms in the industry are earning a supranormal rate of returnE. the industry is in long-run equilibriumQuestion 18If a typical firm in a perfectly-competitive industry is earning anegative economic profit, then we can expect: Select one:A. Some firms to exit the industry.B. The market price of the product to fall.C. The market supply curve to shift to the right.D. Some firms to enter the industry.Question 19A profit-maximizing perfectly-competitive firm will shut down when:Select one:A. p < 0.B. P < MC.C. P < ATC.D. P < AVC.Question 20A perfectly competitive firm will maximize profits whenSelect one:A. marginal cost is equal to marginal revenue.B. average cost is greater than marginal revenue.C. average cost is equal to average revenue.D. marginal cost is greater than marginal revenue.Question 21A firm operating in a perfectly-competitive industry faces a demandthat is:Select one:A. Vertical.B. Horizontal.C. Downward sloping.D. Upward sloping.Question 22In the model of perfect competition, firms maximize profits by producing where:Select one:A. the difference between marginal revenue and marginal cost is maximizedB. marginal revenue equals priceC. the difference between price and marginal cost is maximizedD. price equals marginal costE. the difference between price and marginal revenue is maximizedQuestion 23The ABC Company estimates that a newspaper advertising campaign would cost $25,000 and would generate $35,000 in new revenues. The firm should begin this campaign as long as:Select one:A. price elasticity of demand is at least 2.5 (in absolute value)B. price elasticity of supply is 1C. price elasticity of demand is at least 1.4 (in absolute value)D. marginal cost of production is no more than $25,000E. price elasticity of supply is 1.4Question 24So long as price exceeds average variable cost, in the model of monopolistic competition, a firm maximizes profits by producing where:Select one:A. the difference between marginal revenue and marginal cost is maximizedB. marginal cost equals marginal revenueC. marginal revenue equals priceD. the difference between price and marginal cost is maximizedE. price equals marginal costQuestion 25When producing 10 units, Jean has total variable costs of $100, total fixed costs of $100, and assets of $100. She wants a return of 10 percent. What price should she charge?Select one:A. $11B. $21C. $30D. $210E. $300Question 26Compared to perfectly competitive firms, the demand curve for a monopolist will beSelect one:A. perfectly elastic.B. more elastic.C. less elastic.D. as elastic.Question 27Firms advertise in order to:Select one:A. build brand loyal tyB. appeal to the price-sensitive consumersC. increase the demand elasticities of their loyal customersD. shift the market supply curve to the leftE. shift the market demand curve to the leftQuestion 28If elasticity of demand is -2, marginal cost is $4, and average cost is $6, a profit-maximizing markup price is:Select one:A. $4B. $6C. $8D. $10E. $12Question 29In the model of monopolistic competition, there can be short-run:Select one:A. losses or profits, but there must be profits in long-run equilibriumB. profits, but there must be losses in long-run equilibriumC. losses or profits, but there must be losses in long-run equilibriumD. losses or profits, but there must be neither profits nor losses in long-run equilibriumE. losses, but there must be profits in long-run equilibriumQuestion 30When a movie theater charges a higher price during the evening than during the day, it is practicing:Select one:A. peak load pricingB. first-degree price discriminationC. second-degree price discriminationD. third-degree price discriminationE. fourth-degree price discriminationQuestion 31Women are often charged more than men for haircuts performed by the same haircutter. This is not considered price discrimination because:Select one:A. women receive more consumer surplus from haircuts than men receiveB. haircutters claim to spend more time on women's hair, raising the cost of the haircut to the firmC. firms make up the extra cost to consumers by giving women free samples of productsD. men receive more consumer surplus from haircuts than women receiveE. women have a lower price elasticity of demand for haircutsQuestion 32When a monopolist requires a customer to pay an initial fee for the right to buy a product as well as a usage fee for each unit of the product bought, this is known as a(n):Select one:A. bundling contractB. price differentiationC. oligopolistic deviceD. two-part tariffE. maximizing deviceQuestion 33When a utility charges homeowners less than big industrial users, it is practicing:Select one:A. first-degree price discriminationB. fourth-degree price discriminationC. third-degree price discriminationD. markup pricingE. tyingQuestion 34When Pan United Airlines gives a $400 fare discount to persons with student IDs, they are practicing:Select one:A. first-degree price discriminationB. second-degree price discriminationC. third-degree price discriminationD. markup pricingE. tying
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