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Category > Economics Posted 30 Apr 2020 My Price 15.00

ECON 1002 Microeconomics Unit 3 Challenges

ECON 1002 Microeconomics Unit 3 Challenges

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Unit 3 Challenge 1

Which of the followings statements regarding perfectly competitive markets is true?

· a.)

Most markets lie somewhere between perfect competition and monopoly.

· b.)

Firms in perfectly competitive markets have control over price.

· c.)

Perfect competition involves barriers in the flow of information.

· d.)

Perfectly competitive markets are common in the real world.

Firms in perfect competition are __________.

· a.)

few in number and large in size

· b.)

few in number and small in size

· c.)

many in number and small in size

· d.)

many in number and large in size

High initial costs, licenses, start-up fees and government regulation are all examples of __________.

· a.)

shared information within perfect competition

· b.)

issues faced by firms in perfect competition

· c.)

barriers to entry or exit

· d.)

a simplified view of the market

Which of the following descriptions corresponds with a monopoly?

· a.)

STB Airlines' logo is produced by Deb's Designs. Deb's Designs has a patent on a process necessary for STB's logo, so Paul cannot order the logo imprinting anywhere else.

· b.)

The office workers order pizza every Friday from the same Don's Pizza because Don's sauce is their favorite. Even when other local pizza outlets offer specials, the office workers insist on Don's Pizza.

· c.)

There are many companies that sell paper clips and pens and the prices of such items are relatively stable.

· d.)

A group of labor unions that work with airlines collude and determine that all of their workers must be paid $35 per hour, or else they will go on strike.

Which of the following examples is a characteristic necessary for a diamond firm to run as a monopoly?

· a.)

The cost to enter the diamond industry is inexpensive and there are many mines available for purchase.

· b.)

Consumers have access to the production costs of diamond mining.

· c.)

The firm has complete control over price and is known as a price-maker.

· d.)

Companies differentiate their diamonds by the use of advertising.

Diamonds are unique as a gemstone and have no substitutes.

Which of the following characteristics of a monopoly is being exhibited with the above statement?

· a.)

A monopoly has control over an essential resource as a barrier to entry.

· b.)

A monopoly is a price maker.

· c.)

A monopoly has a differentiated product.

· d.)

A monopoly can maintain imperfect information in the market.

Which of the following description corresponds with a monopolistic competition?

· a.)

All of the baggage handlers at a certain airport belong to the same labor union, which sets the wages for that type of labor.

· b.)

There are only a few companies that offer catering services to the university, and although they offer similar food and beverages, their prices seem higher than they would be if there was more competition.

· c.)

The warehouse workers order sandwiches every Wednesday. Generally, they prefer to order from the Sandwich Shoppe because the oven-baked bread is their favorite. Since there are many competing sandwich places, sometimes they order from other restaurants who offer a great deal.

· d.)

Jean Genie uses Label Haven to produce their brand's label. Label Haven has a patent on the production of this specific label, so the owner of Jean Genie cannot order the label to be manufactured at another company.

Trevor always buys ALR Jeans, a trendy brand that uses a celebrity spokesperson, so he is willing to pay a bit more for them.

Which of the following characteristics of monopolistic competition is being exhibited by ALR jeans?

· a.)

Advertising expenditures

· b.)

One seller

· c.)

Similar price as competitors

· d.)

Imperfect information

When buying a new purse, Kelly prefers to purchase the brand SouthPlace because they have a cute symbol on the front of the bag and the material is durable.

Which of the following characteristics of monopolistic competition is being exhibited by SouthPlace?

· a.)

Differentiated product

· b.)

Imperfect information

· c.)

Advertising expenditures

· d.)

One seller

Which of the following would NOT be an industry that contains oligopolies?

· a.)

Airlines

· b.)

Distributers of apples

· c.)

Car industry

· d.)

Internet service providers

Oligopolistic industries maintain __________.

· a.)

diseconomies of scale

· b.)

low start up and operating costs

· c.)

market prices set by the government

· d.)

barriers to entry

The oligopolist produces __________ and charges a __________ price than a monopolist.

· a.)

more; lower

· b.)

less; higher

· c.)

less; lower

· d.)

more; higher

Unit 3 Challenge 3

Thread Club produced 700 sweatshirts with a production cost of $11.25 per sweatshirt. This month, they have sold 500 sweatshirts at $18.50 per sweatshirt.

Based on this information, Thread Club's accounting profit for this month would be __________.

· a.)

$9,250

· b.)

$1,200

· c.)

$7,875

· d.)

$1,375

Carrie's Cakes charges $15 per cake and she sells 10 cakes each day. Carrie's costs of production is $80 total each day.

Based on this information, Carrie's accounting profit per day would be __________.

· a.)

$70

· b.)

$65

· c.)

$220

· d.)

$150

Sarah sells tulips at her store and charges her customers $12 per dozen. She sells 20 dozen each day.

The tulips that Sarah orders to sell in her store cost $216 total for 240 tulips.

Based on this information, the profit total that Sarah would make if she were able to sell all of the tulips, sold in bouquets at $12 per dozen, would be __________.

· a.)

$24

· b.)

$240

· c.)

$204

· d.)

When an investor selects a business to invest in, what is her opportunity cost?

· a.)

The money withdrawn from savings to buy the portion of the company.

· b.)

The firm's cost of producing their product.

· c.)

The taxes she will pay on dividends.

· d.)

The anticipated profits from her next best investment choice.

When a firm opts to produce burgers instead of hot dogs, their opportunity cost is __________.

· a.)

the price of the burgers

· b.)

the expected profit from selling hot dogs

· c.)

the inventory cost of hot dog buns

· d.)

the time it takes to retrain their employees

Ted chooses to go to the movies on Saturday night. He drives to the movie theater, where he purchased a movie ticket, popcorn and soda.

His opportunity cost for this decision is __________.

· a.)

the price of the gas he uses to get to the restaurant

· b.)

the price of the movie ticket

· c.)

the value of the enjoyment he gained from seeing the movie

· d.)

the hockey game he did not attend because he was at the movies

Sparkle Dreams has produced 600 pairs of earrings that cost the company $5.00 each to make. They recently sold 450 pairs of earrings to a local accessory store at $11.50 each. Their opportunity cost is $1,000.

What is Sparkle Dreams’ economic profit?

· a.)

$1,175

· b.)

$1,925

· c.)

$2,925

· d.)

$2,175

Before Kelly opened up her boutique, she worked as a hair stylist in a salon and earned a $33,000 annual salary.

Now in her fifth year of operating the boutique, it was easy to see that she made the right decisions both financially and personally. Below is a list of Kelly's financial facts for her shop's second year.

$145,000 = Total Revenue
$20,000 = Rental Fees
$8,000 = Utilities
$30,000 = Salary for Assistant Manager
$50,000 = Merchandise

Kelly's economic profit for her shop's second year was __________.

· a.)

$108,000

· b.)

$37,000

· c.)

$4,000

· d.)

$33,000

An investor, who had $75,000 to contribute, was choosing between a boutique and a local shoe shop. After careful deliberation, the investor chose the boutique.

In the first year, the boutique generated enough profit to pay the investor $15,000 (an agreed percentage of profits to be paid to the investor). The investor found out that if he had invested in the local shoe shop he would have received $9,000 (an agreed percentage of profits to be paid to the investor).

The investor's economic profit was __________.

· a.)

$51,000

· b.)

$6,000

· c.)

$24,000

· d.)

$15,000

Which of the following is a fixed input for a computer company?

· a.)

Electricity and gas to run their factory during production hours

· b.)

Materials to make the computers

· c.)

Lease on their factory

· d.)

Wages to workers

Which of the following is a fixed input for an airline company?

· a.)

Fuel for the flights

· b.)

Commissions paid to sales people based on the number of flights sold

· c.)

Renting space (gates and terminals) at airports

· d.)

Purchase of food and drinks for passengers

Which of the following is a variable input for a transportation company?

· a.)

Wages for drivers, who are paid per trip

· b.)

Garage space rented to house buses

· c.)

Lease for the sales office downtown

· d.)

Interest paid on the loan taken out to purchase a group of buses

Which of the following statements is true for a perfectly competitive firm?

· a.)

Marginal revenue will fall below zero.

· b.)

Marginal revenue is equal to price of a unit.

· c.)

Marginal revenue is the sum of both the price and output effect.

· d.)

Marginal revenue is lower than price.

For perfectly competitive firms, the price effect is zero because __________.

· a.)

the marginal revenue is lower than marginal cost

· b.)

the marginal revenue is equal to the price

· c.)

the demand curve is inelastic

· d.)

the price increases as we sell more units

Average revenue is also known as the __________.

· a.)

revenue generated from the sale of an additional unit

· b.)

sales price

· c.)

total revenue minus price

· d.)

total revenue multiplied by price

The following table shows average costs and revenues at different levels of production.

The average cost at the second level of production is __________.

The marginal cost at the third level of production is _________.

· a.)

$2.11; $0.91

· b.)

$2.67; $0.91

· c.)

$2.11; $0.94

· d.)

$2.67; $0.94

The following table shows average costs and revenues at different levels of production.

The average cost at the second level of production is __________.

The marginal cost at the fourth level of production is _________.

· a.)

$3.00; $0.96

· b.)

$2.59; $1.00

· c.)

$3.00; $1.00

· d.)

$2.59; $0.96

The following table shows average costs and revenues at different levels of production.

The average cost at the first level of production is __________.

The marginal cost at the third level of production is _________.

· a.)

$2.38; $0.77

· b.)

$4.75; $0.77

· c.)

$4.75; $0.74

· d.)

$2.38; $0.74

When a firm uses four machines, it can produce 400 units daily. A fifth machine allows the firm to produce 560 units.

Which of the following statements is true regarding production?

· a.)

The total product for the ninth machine is 960 units.

· b.)

The average product for the fifth machine is 32 units.

· c.)

The average product for the fourth machine is 40 units.

· d.)

The marginal product for the fifth machine is 160 units

When a firm uses three machines, it can produce 200 units daily. A fourth machine allows the firm to produce 350 units.

Which of the following statements is true regarding production?

· a.)

The marginal revenue product of the fourth machine is 150 units.

· b.)

The marginal product of the fourth machine is 150 units.

· c.)

The total product is 150 units.

· d.)

The average product is 150 units.

Which of the following statements is true if a firm finds that with three workers it can produce 45 units?

· a.)

The average product of labor is 15 units.

· b.)

The total product of labor is 15 units.

· c.)

The marginal product of the third worker is 15 units.

· d.)

The marginal revenue product of the third worker is 15 units.

Unit 3 Challenge 3

Which of the following statements is true when a firm is maximizing its profit?

· a.)

The firm is charging the highest price possible.

· b.)

The opportunity costs are zero.

· c.)

The slope of the total revenue curve and total cost curves are equal.

· d.)

The slope of the marginal cost curve is equal to the firm's supply curve.

Based on this graph, which of the following statements is true at an output of 7,000 indicated by the green line?

· a.)

The firm should increase output.

· b.)

The slopes of the total revenue and total cost curves are equal.

· c.)

The profit is maximized.

· d.)

The cost is rising faster than the revenue.

Which of the following statements is true at the profit maximizing point?

· a.)

The total cost is at its lowest point.

· b.)

The total revenue is at its highest point.

· c.)

The marginal costs are negative.

· d.)

The difference between total cost and total revenue is greatest.

If a profit maximizing firm is currently producing 20 units, it should increase production because __________.

· a.)

the fixed costs are still being absorbed

· b.)

the price is above the average total cost at that point

· c.)

the firm is making a profit

· d.)

the marginal cost is less than the marginal revenue at that point

All profit maximizing firms will produce where __________.

· a.)

the marginal revenue equals the marginal cost

· b.)

the average total cost is at its lowest point

· c.)

the total cost is lowest

· d.)

the price per unit is at its highest point

Looking at this graph, the number of daily flights to Milwaukee that would provide Peace Airlines with profit maximization is __________.

· a.)

Five flights per day

· b.)

Six flights per day

· c.)

Seven flights per day

· d.)

Two flights per day

If the price of the product is $6 and the cost of each employee is $40, how many employees should the firm hire to maximize their profit?

· a.)

Six employees

· b.)

Three employees

· c.)

Four employees

· d.)

One employee

If the price of the product is $4 and the cost of each employee is $20, how many employees should the firm hire to maximize their profit?

· a.)

Five employees

· b.)

One employee

· c.)

Three employees

· d.)

Two employees

If the price of the product is $2 and the cost of each employee is $15, how many employees should the firm hire to maximize their profit?

· a.)

Five employees

· b.)

Two employees

· c.)

Three employees

· d.)

Four employees

The following cost curves show the costs for a firm's t-shirt production.

Based on this graph, the firm's breakeven point is at a price of __________.

· a.)

$20

· b.)

$24

· c.)

$14

· d.)

$26

The following cost curves show a firm's production costs for scarves.

If the firm were in a breakeven situation, approximately how many scarves would they sell?

· a.)

38 scarves

· b.)

65 scarves

· c.)

58 scarves

· d.)

52 scarves

The following cost curves show the costs for flights from Chicago to Detroit using STB Airlines.

If STB Airlines is currently breaking even, how many flights are they running?

· a.)

11 flights

· b.)

13 flights

· c.)

14 flights

· d.)

12 flights

For a perfectly competitive firm, a price above $20 would result in __________.

· a.)

a short run loss, which would encourage some firms to leave the industry

· b.)

the firm shutting down

· c.)

long run economic profits

· d.)

a short run profit, which would encourage other firms to enter the industry

When would the firm pictured above shut down?

· a.)

At any price between P1 and P2

· b.)

At any price below P1

· c.)

At any price above P1

· d.)

At any price below P2

The following cost curves show a firm's production costs for scarves.

Assuming the price of scarves is currently $40, which of the following statements is true?

· a.)

The firm's profit would be approximately $10 per scarf in the short run.

· b.)

The firm would shut down in the short run.

· c.)

The firm would produce approximately 65 scarves.

· d.)

The firm would operate at a loss in the short run.

The short-run supply curve is represented by the __________ curve from above the _________ onward.

· a.)

marginal cost; shut-down point

· b.)

average variable cost; breakeven point

· c.)

average variable cost; shut-down point

· d.)

marginal cost; breakeven point

Which of the following images represents the short-run supply curve shaded in yellow?

· a.)

· b.)

· c.)

· d.)

A profit-maximizing, perfectly competitive firm's short-run supply curve would start at which output level?

· a.)

20 units

· b.)

30 units

· c.)

15 units

· d.)

25 units

Which of the following is NOT true of a long-run average cost curve?

· a.)

With the long-run average cost curve, all inputs are variable.

· b.)

The long-run average cost curve rises, then falls, as production increases.

· c.)

The long-run average cost curve rises because of diseconomies of scale.

· d.)

The long-run average cost curve is made up of the lowest points of several short-run average cost curve.

Which of the following is NOT true of a long-run average cost curve?

· a.)

The curve falls because of economies of scale.

· b.)

Long-run average cost curves are almost always U-shaped.

· c.)

It is comprised of the lowest points of each short-run average cost curve.

· d.)

It must always be equal to or lie above any short-run average cost curve.

Which of the following is true regarding the long-run average cost curve?

· a.)

The LRAC curve is comprised of the highest points of a series of short-run average cost curves.

· b.)

The LRAC curve maintains economies of scale regardless of production quantity.

· c.)

The LRAC is equal to or lies below any short-run cost curve due to fixed costs.

· d.)

The LRAC is comprised of a series of short-run average cost curves.

Party Supply Value's average cost went from $0.90 per balloon when they produced 1,000 units to $0.87 per balloon when they produced 3,000 units.

Which of the following describes this scenario?

· a.)

Diseconomies of scale

· b.)

Economies of scale

· c.)

Constant scale

· d.)

Both diseconomies and economies of scale

Valley View Chicken Coop's costs went from $0.05 per egg when they harvested from 50 chickens to $0.08 per egg when they harvested from 80 chickens.

Which of the following describes this scenario?

· a.)

Diseconomies of scale

· b.)

Economies of scale

· c.)

Constant scale

· d.)

Both diseconomies and economies of scale

Sarah, the owner of Piccadilly Bloom, noticed that the cost of creating boutonnieres during prom season averaged about $8.50 per boutonniere when they sold 150 units as well as when they sold 300 units.

Which of the following describes this scenario?

· a.)

Economies of scale

· b.)

Both diseconomies and economies of scale

· c.)

Constant scale

· d.)

Diseconomies of scale

Production costs can vary among industries, and among different firms within a given industry due to __________.

· a.)

the barriers to entry

· b.)

the patents given by the government

· c.)

the differences between variable and fixed costs

· d.)

the possible collusion among firms

Which of the following is true when firms in an industry reach diseconomies of scale at relatively low levels of production?

· a.)

Firms will be shutting down.

· b.)

The market price will increase.

· c.)

Other firms can easily enter the market.

· d.)

Firms will be exiting the industry.

Sometimes it is more efficient for one firm to produce all the output for a given market.

Which of the following describes this scenario?

· a.)

Diseconomies of scale

· b.)

Collusion

· c.)

Natural monopoly

· d.)

Price setting

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Status NEW Posted 30 Apr 2020 05:04 PM My Price 15.00

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