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ECONOMICS 10-8
ECON 10-8: FINAL EXAM
12/16/00
PROF. WILDE
In microeconomics, we typically assume that producers are attempting to maximize profits, which can be measured by:
total costs – total revenues
(P – ATC) Q
(Q-ATC) P
PQ – ATC
P(ATC) – Q
In microeconomics, we refer to the short run as a time interval during which a producer is able to select:
the output quantity
the quantity of workers
the quantity of capital
all of the above
only a and b
Which of the following are characteristics of a perfectly competitive market?
firms in this market produce a homogeneous product
individual firms are “price-makers” in that they realistically choose both the price and the quantity of their goods
all firms in this market make positive economic profits in the long run
price will equal the minimum LRATC in the long run
both a and d
Consider the curves for a perfectly competitive firm in Figure X. At a price of $20, this firm will choose an output of :
c) 60
e) 90
d) 80
In a short run perfectly competitive market in Figure XI, the supply curve is reflective of the cost situations facing ______ firms. The various points along the market supply curve result in ______ economic profits for the firms involved.
many; positive
few; zero or positive
many; positive, zero or negative
few; zero
one; zero
If other firms in Figure XI are making positive economic profits, the firm in Figure X will:
leave the industry because there is no way for it to keep up with its competitors
expect to see new firms enter the industry
simply increase its output in order to raise profits to match theirs
buy fewer inputs in order to reduce costs
pray for a recount of profits
If competitive firms face an increase in worker wage rates, we can expect them to witness a ______ shift in their ______ curve(s).
upward; MC and AVC
downward; demand
upward; MC, AFC and ATC
downward; AFC
both a and d
An increase in worker wage rates in a competitive industry will likely result in __________ by the time the industry gets to a new long-run equilibrium.
less employment
d) all of the above
fewer firms
e) only b and c
higher prices
A monopolist finds its profit-maximizing quantity where:
MC=ATC
d) MR=MC
P=ATC
e) both c and d
P=MC
Figure XII represents the short run situation of a monopoly. We know that it is NOT a perfectly competitive firm because:
the marginal revenue curve is not above the demand curve
the marginal cost curve is u-shaped
the demand curve is downward-sloping
of the profit outcome
there is no average fixed cost curve
When the Figure XII firm is maximizing profits, it will have ______ economic profits and will _______ in the short run.
negative; choose to produce
positive; choose to produce
zero; shut down
negative; leave the industry
negative; shut down
If preferences change for the product depicted in Figure XII such that the product becomes more attractive to consumers, we can expect that:
the demand curve will shift to the right
the profit-maximizing output will increase
the profit-maximizing price will increase
economic profits will increase
all of the above
In the long run the Figure XII firm will likely:
down-size if that will reduce ATC
adopt a more sophisticated technology which raises ATC
adopt a new technology if it lowers ATC
leave the industry if costs cannot be lowered
any of a, c, or d
If Figure XII applies to a firm in a monopolistically competitive industry, the long run implications for the industry include:
a reduction in the number of firms
an increase in the profits of surviving firms
a decrease in the prices of surviving firms
all of the above
only a and b above
15. Pharmaceutical companies, such as Glaxo, could be labelled “natural monopolies” because:
they have very large fixed costs in the form of research, development, and