econ final 2

Suppose that there is an industry in which resource prices rise and the average total cost of producing a product increases, as the firms in an industry expand output in response to an increase in demand. The long-run market supply curve for this product will

• be perfectly elastic (a horizontal line)

• be perfectly inelastic (a vertical line)

• slope upward to the right.

• be more inelastic than the short-run supply curve for the product.

The summer driving season begins, and the increased demand for gasoline causes the price to rise. Angry voters complain about the higher price to politicians, who impose a binding price ceiling. Which of the following will occur after the price ceiling is imposed?

• People will drive more due to the lower price of gasoline.

• Gasoline producers will produce higher quality gasoline in order to attract more consumers.

• Some consumers will turn to black markets to buy inexpensive gasoline that is not legally available.

• none of the above

Which of the following is correct?

• Marginal Cost falls as output rises until diminishing returns occur; after that, marginal cost rises.

• Marginal Cost passes through the minimum point of Average Variable Cost.

• Marginal Cost passes through the minimum point of Average Total Cost.

• All of the above.

The price of cheddar cheese rises from $1 per pound to $2 per pound, and as a result, producers of cheese increase their production from 5 thousand tons per month to 55 thousand tons per month.

What is the arc price elasticity of supply?

• 1.667

• 2.5

• 10

• 0.4

Assume a monopolistically competitive firm is earning a positive economic profit. The marginal revenue from selling an additional unit is $30 and the marginal cost of producing that additional unit is $23. The firm should

• change neither its price nor its output level

• reduce its price and increase its output level

• increase its price and reduce its output level

• reduce both its price and its output level

• increase both its price and its output level

Starbucks will give you a free beverage or food product if you buy enough items from them to accumulate 125 "stars", or roughly 16 items (depending on what you buy). This is an example of...

• first degree price discrimination.

• second degree price discrimination.

• third degree price discrimination.

• fourth degree price discrimination.

Which of the following most closely approximates the conditions of monopolistic competition?

• the market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product

• the restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers

• local cable television service, where a licensed supplier competes with firms offering satellite service

• the market for jumbo aircraft, where one major domestic firm competes with one major foreign firm

The wooden barrel industry experienced a decline over the twentieth century, as shipping moved to more sanitary and sturdy containers. As this happened, the remaining barrel manufacturers found that their costs moved up. This is mostly likely because…

• they were in the “diseconomies of scale” region of their Long Run Average Total Cost curve.

• they were in the “economies of scale” region of their Long Run Average Total Cost curve.

• they were in the “neither economies nor diseconomies of scale” region of their Long Run Average Total Cost curve.

• they were in an increasing-cost industry.

The marginal cost of a good is

• lower for competitive firms than for monopolists.

  the cost of an additional unit.

• the cost of an additional unit

• equal to fixed cost at high output levels

• equal to variable cost when firm is maximizing profit

The table below shows output, MR, and MC for a firm. What kind of firm is this?

• A price searcher

• A price taker

• Perfect Competition

• A regulated monopoly