Midterm #3 Study Guide

Assume 95% of the shoe market is controlled by 4 companies. This would be an example of what type of market?

• Perfect Competition

• Monopolistic Competition

• Oligopoly

• Monopoly

Use the table above. What is the marginal product of increasing fertilizer from 10 to 20 pounds?

• 20 bu/lb

• 10 bu/lb

• 2 bu/lb

• 1 bu/lb

Use the table above. What is the marginal cost of increasing output from 100 to 110 bushels?

• $3

• $30

• $60

• $1

In the long-run, the primary reason that economic profits get closer to zero over time in perfectly competitive markets is

• Barriers to entry

• Entry and exit by firms

• Advertising

• Price discrimination

The table above shows the revenue and costs of operating a dairy farm. Based on the information in the table, to maximize profits the owner should

• Shut down

• Produce 1,000

• Produce 1,500

• Produce 2,000

The year is 2030 and Delta is the only airline operating in the United States, i.e. Delta has a monopoly in the air transportation market. The market demand is given by the equation: Q = 8 – P. The cost of producing is given by: Total Cost = 2*Q. Fill in the table below and answer the following two questions. What is the marginal revenue of producing the 2nd unit?

• $2.50

• $5

• $12

• $1

Delta will maximize profits by selling ______ tickets at a price of ______ per ticket.

• 1; $7

• 2; $6

• 3; $5

• 4; $4

In economics, a firm will want to reduce how much output it is producing if at the current level of production ______.

• MR < MC

• TR ≤ TC

• MR ≥ MC

• MR = MC

You run the only buffet restaurant in town (and thus have a monopoly) and there are six possible customers. The value (or willingness to pay) for adults and senior citizens is given in the table below. Assume that total costs are equal to zero. Use the table to answer the following five questions. If the buffet charges a single price to all customers (and maximizes profits), how many senior citizens will go to the buffet?

• 2

• 1

• 4

• 3

If the buffet charges a single price to all customers (and maximizes profits), what are total firm profits?

• $55

• $33

• $36

• $40