ECO201 Microeconomics for Business

 

ECO201 Microeconomics for Business

American Public University System (APUS)

 

ECON201 Week 1 Quiz Score 100 Percent

Question 1 (10 points)

 

The branch of economics that examines the impact of choices on aggregates in the economy is:

Question 1 options:

	positive economics.
	normative economics.
	macroeconomics.
	microeconomics.

Question 2 (10 points)

 

When we are forced to make choices we are facing the concept of:

Question 2 options:

	ceteris paribus.
	free goods.
	scarcity.
	the margin.

Question 3 (10 points)

 

An economic system is the set of rules that define _______ and _______ .

Question 3 options:

	resources; prices
	who gets to vote; when elections will be held
	market prices; factors of production
	how an economy's resources are to be owned; how decisions about the resources are to be made

Question 4 (10 points)

 

In a market capitalist economy:

Question 4 options:

	factors of production are owned privately and decisions about their use are basically made by individuals.
	factors of production are owned by the government but decisions about their use are made privately.
	private ownership exists but decisions about resource allocation are usually made centrally by the government.
	there is no role for the government.

Question 5 (10 points)

 

The branch of economics that examines the choices of consumers and firms is:

Question 5 options:

	positive economics.
	normative economics.
	macroeconomics.
	microeconomics.

Question 6 (10 points)

 

Scarcity in economics means:

Question 6 options:

	not having sufficient resources to produce all the goods and services we want.
	the wants of people are limited.
	there must be poor people in rich countries.
	economists are clearly not doing their jobs.

Question 7 (10 points)

 

The basic concern of economics is:

Question 7 options:

	to keep business firms from losing money.
	to prove that capitalism is better than socialism.
	to study the choices people make.
	to use unlimited resources to produce goods and services to satisfy limited wants.

Question 8 (10 points)

 

Whenever a choice is made:

Question 8 options:

	the value of all the other choices that could have been made is called opportunity cost.
	normative economics is encountered.
	the problem of "all other things unchanged" results.
	the opportunity cost of that choice is value of the next best alternative

Question 9 (10 points)

 

Economics is different from other social sciences because it gives special emphasis to the study of ______; it is similar to other social sciences because they are all concerned with the study of _______.

Question 9 options:

	unlimited resources; economic systems
	human interactions; limited resources
	opportunity costs; choices
	social behavior; scarcity

PPC 1

Question 10 (10 points)

 

(Exhibit: Production Possibilities Curve-Military and Civilian Goods) A movement from point G to H on Curve 1 would:

Question 10 options:

	require giving up military goods in order to get more civilian goods.
	indicate that, in this economy, there is no scarcity.
	require giving up civilian goods to get more military goods.
	require greater efficiency in the production of civilian goods.

Question 11 (10 points)

 

(Exhibit: Production Possibilities Curve-Military and Civilian Goods) If an economy is at point U, and its production possibilities curve is Curve 1, this would indicate that:

Question 11 options:

	resources are fully employed.
	economic growth has taken place.
	there is inefficiency and/or unemployment.
	the economy is maximizing its economic objectives.

Question 12 (10 points)

 

(Exhibit: Production Possibilities Curve-Military and Civilian Goods) If the economy is represented by Curve 1, then:

Question 12 options:

	point E is unattainable at the present time.
	point G is superior to point H.
	point H is superior to point G.
	factors of production are not being used efficiently.

PPS 1

Question 13 (10 points)

 

(Exhibit: Production Possibilities Schedule) If the economy is producing at alternative X, the opportunity cost to it of producing at Y instead of X is _______ units of consumer goods per period.

Question 13 options:

	0
	6
	8
	14

Question 14 (10 points)

 

(Exhibit: Production Possibilities Schedule) If an economy is producing at alternative W, the opportunity cost to it of producing at X is _______ unit(s) of consumer goods per period.

Question 14 options:

	0
	1
	4
	18

Question 15 (10 points)

 

(Exhibit: Production Possibilities Schedule) A move from alternative Y to alternative X would:

Question 15 options:

	result in greater unemployment.
	decrease potential growth.
	increase potential growth.
	result in greater underemployment.

 

 

 

ECON201 Week 2 Discussion

Here's an explanation and graphs of a competitive market.
1. Provide examples of a variable that affect the supply curve and a variable that affects the demand curve.
2. Think of a product or service that use in your everyday life or workplace. Describe how the supply or demand of this product might be changed.

 

    

 

ECON201 Week 2 Term paper 1

For Term Paper #1 I'd like you to explore the concept of division of labor. Please make sure to address the following questions:

How important is the division of labor to a capitalist economy?

How does the division of labor lead to more efficient production?

What are some examples of division of labor and specialization from your personal experiences?

Complete this essay in a Microsoft Word document in APA format. Your work will automatically be submitted to Turnitin for plagiarism review. Please note that a minimum of 700 words for your essay is required.

   

 

ECON201 Week 2 Quiz SCORE 100 PERCENT

Quiz

Question 1 (10 points)

 

A shift of a demand curve to the right, all other things unchanged, will:

Question 1 options:

	increase equilibrium price and quantity.
	decrease equilibrium price and quantity.
	decrease quantity and increase price.
	increase quantity and decrease price.

Question 2 (10 points)

 

If the current price is above the equilibrium price, we would expect:

Question 2 options:

	quantity demanded to exceed quantity supplied.
	upward pressure on price.
	quantity supplied to exceed quantity demanded.
	no change in the market price.

Question 3 (10 points)

 

Demand is defined as:

Question 3 options:

	an amount that is purchased at a specific price, given supply.
	a schedule that establishes the price of a good.
	a schedule that shows how much will be purchased at various prices during a particular period, all other things unchanged.
	the amount that will be bought at a specific price.

Question 4 (10 points)

 

The primary difference between a change in demand and a change in the quantity demanded is:

Question 4 options:

	a change in demand is a movement along the demand curve, and a change in quantity demanded is a shift in the demand curve.
	a change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.
	both a change in quantity demanded and a change in demand are shifts in the demand curve, only in different directions.
	both a change in quantity demanded and a change in demand are movements along the demand curve, only in different directions.

Question 5 (10 points)

 

A negative relationship between the quantity demanded and price is called the law of ______.

Question 5 options:

	demand
	diminishing marginal returns
	market clearing
	supply

Question 6 (10 points)

 

The relationship between the quantity of a good or service sellers are willing and able to offer for sale and the independent variables that determine quantity is:

Question 6 options:

	supply.
	demand.
	equilibrium.
	disequilibrium.

Question 7 (10 points)

 

A price below the equilibrium price will:

Question 7 options:

	result in pressure for price to rise.
	result in a surplus.
	never be the case.
	result in pressure for price to fall.

Question 8 (10 points)

 

It is true that the equilibrium quantity will always go up if supply:

Question 8 options:

	and demand both increase.
	increases and demand decreases.
	and demand both decrease.
	decreases and demand remains unchanged.

Question 9 (10 points)

 

The intersection of the supply and demand curves indicates:

Question 9 options:

	the equilibrium solution in the market.
	a surplus that will cause the price to fall.
	a shortage that will cause the price to rise.
	the quantity demanded exceeds the quantity supplied.

Question 10 (10 points)

 

A decrease in supply means:

Question 10 options:

	a shift to the left of the entire supply curve.
	moving downward (to the left) along the supply curve with lower prices.
	less will be demanded at every price.
	more will be supplied at every price.

Demand & Supply Schedule

Question 11 (10 points)

 

(Exhibit: Demand and Supply Schedules for a Good) The equilibrium price is ________ and the equilibrium quantity is ________.

Question 11 options:

	$2.00; 230 units
	$3.00; 240 units
	$4.00; 210 units
	impossible to determine; impossible to determine

Question 12 (10 points)

 

(Exhibit: Demand and Supply Schedules for a Good.) If there were an increase in demand by 50 units at each price, the equilibrium price and quantity would be ________ and ________ units, respectively.

Question 12 options:

	$2.00; 310
	$2.50; 295
	$3.00; 290
	$3.50; 250

Question 13 (10 points)

 

(Exhibit: Supply and Demand Schedules for a Good) If there were a decrease in supply by 100 units at each price, the equilibrium price and quantity would be ________ and ________ units, respectively.

Question 13 options:

	$2.00; 100
	$3.00; 140
	$3.50; 175
	$4.00; 160

Demand and Supply Shifters

Question 14 (10 points)

 

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel best describes how this will affect the market for dress ties, a normal good?

Question 14 options:

	Panel (a)
	Panel (b)
	Panel (c)
	Panel (d)

Question 15 (10 points)

 

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the Surgeon General announces that eating chocolate prevents heart disease. Which panel best describes how this will affect the market for chocolate?

Question 15 options:

	Panel (a)
	Panel (b)
	Panel (c)
	Panel (d)

Question 16 (10 points)

 

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose oil becomes more expensive. Which panel best describes how this will affect the market for gasoline, which is made from oil?

Question 16 options:

	Panel (a)
	Panel (b)
	Panel (c)
	Panel (d)

Question 17 (10 points)

 

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose half the people in San Diego move to Colorado Springs. Which panel best describes how this will affect the market for houses in Colorado Springs?

Question 17 options:

	Panel (a)
	Panel (b)
	Panel (c)
	Panel (d)

Question 18 (10 points)

 

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose half the people in San Diego pack up and move to Colorado Springs. Which panel best describes how this will affect the supply of houses in San Diego?

Question 18 options:

	Panel (a)
	Panel (b)
	Panel (c)
	Panel (d)

Question 19 (10 points)

 

(Exhibit: Demand and Supply Shifters) The exhibit shows how supply and demand might shift in response to specific events. Suppose the technology for producing handheld calculators improves. Which panel best describes how this will affect the market for handheld calculators?

Question 19 options:

	Panel (a)
	Panel (b)
	Panel (c)
	Panel (d)

 

   

 

ECON201 Week 3 Discussion Price Discrimination

Movie theaters, airlines, and many other businesses like to charge customers different prices based on time of the day, age, and purchase dates. Why?

Provide an example of a price discrimination for a good or service that you thought it to unfair. Do you still believe that the discrimination is unjustifiable?

  

 

ECON201 Week 3 Quiz SCORE 100 PERCENT

Quiz

Question 1 (10 points)

 

Demand is price inelastic if:

Question 1 options:

	the price of the good responds slightly to a quantity change.
	the demand curve shifts very little when a demand shifter changes.
	the percentage change in quantity demanded is relatively small in response to a relatively large percentage change in price.
	all of the above are true.

Question 2 (10 points)

 

If the absolute value of price elasticity is greater than 1, this means the demand curve in that region is:

Question 2 options:

	price elastic.
	price inelastic.
	unit price elastic.
	upward sloping.

Question 3 (10 points)

 

Which of the following will lead to a decrease in total revenue?

Question 3 options:

	price goes up and demand is perfectly inelastic
	price goes up and demand is price inelastic
	price declines and demand is price elastic
	price increases and demand is price elastic

Question 4 (10 points)

 

If total revenue goes up when price falls, the price elasticity of demand is said to be:

Question 4 options:

	price inelastic.
	unit price elastic.
	price elastic.
	positive.

Question 5 (10 points)

 

Price elasticity of demand measures the responsiveness of the change in:

Question 5 options:

	quantity demanded to a change in price.
	price to a change in quantity demanded.
	slope of the demand curve to a change in price.
	slope of the demand curve to a change in quantity demanded.

Question 6 (10 points)

 

The price elasticity of demand is:

Question 6 options:

	always positive.
	always greater than 1.
	usually equal to 1.
	always negative.

Question 7 (10 points)

 

A men's tie store sold an average of 30 ties per day when the price was $5 per tie but sold 50 of the same ties per day when the price was $3 per tie. Hence, the absolute value of the price elasticity of demand is:

Question 7 options:

	greater than zero but less than 1.
	equal to 1.
	greater than 1 but less than 3.
	greater than 3.

Question 8 (10 points)

 

If the total revenue received by a firm does not change when it raises its price, this indicates that the demand for the firm's product is:

Question 8 options:

	unstable.
	price inelastic.
	price elastic.
	unit price elastic.

Question 9 (10 points)

 

The ratio of the percentage change in a dependent variable to the percentage change in an independent variable, all other things unchanged, is:

Question 9 options:

	total revenue.
	production possibilities.
	elasticity.
	slope.

Question 10 (10 points)

 

The price elasticity of a good will tend to be greater:

Question 10 options:

	the longer the relevant time period.
	the fewer number of substitute goods available.
	if it is a staple or necessity with few substitutes.
	All of the above are true.

Supply and Demand in Agriculture

Question 11 (10 points)

 

(Exhibit: Supply and Demand in Agriculture) To help farmers:

Question 11 options:

	a price floor would be set at P4, causing a surplus of Q3 - Q0.
	a price floor would be set at P2, causing a surplus of Q2 - Q0.
	a price ceiling would be set at P4, causing a surplus of Q2 - Q1.
	a price floor would be set at P1, causing a shortage of Q3 - Q0.

Question 12 (10 points)

 

(Exhibit: Supply and Demand in Agriculture) If a price floor at P4 is set to help farmers in terms of income and government wants to assure farmers that their output will be purchased, the government would have to purchase an amount of output equal to:

Question 12 options:

	Q3 - Q0.
	Q3 - Q1.
	Q2 - Q1.
	none of the above are correct.

Question 13 (10 points)

 

(Exhibit: Supply and Demand in Agriculture) If the government set an effective price floor at one of the prices shown on the vertical axis:

Question 13 options:

	with this much wheat on the market, the price would fall to P1.
	Q3 bushels of wheat would be supplied.
	the resulting shortage would be made up by the government out of its accumulated stocks.
	all of the above would be true.

Demand and Price Elasticity 1

Question 14 (10 points)

 

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $2.50 and $2.25?

Question 14 options:

	-9
	-19
	indeterminate
	none of the above

Question 15 (10 points)

 

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $2.25 and $2.00?

Question 15 options:

	-5.67
	-4.00
	-9.00
	-17.6

Question 16 (10 points)

 

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $1.75 and $1.50?

Question 16 options:

	-0.42
	-1.5
	-1.86
	none of the above

 

    

ECON201 Midterm Exam SCORE 100 PERCENT

Quiz

Question 1 (5 points)

 

Economics is the study of:

Question 1 options:

	increasing the level of productive resources so there is maximum output in society.
	increasing the level of productive resources so there is a minimum level of income.
	how people, institutions, and society make choices under conditions of scarcity.
	the efficient use of scarce resources paid for at the minimum level of cost to consumers and businesses.

Question 2 (5 points)

 

Which of the following is not a central focus of the "economic perspective"?

Question 2 options:

	Scarcity and choice.
	The scientific method.
	Purposeful behavior.
	Marginal analysis.

Question 3 (5 points)

 

The satisfaction or pleasure one gets from consuming a good or service is:

Question 3 options:

	price.
	utility.
	consumption.
	preferences.

Question 4 (5 points)

 

The private ownership of property resources and use of prices to direct and coordinate economic activity is characteristic of:

Question 4 options:

	a command system.
	a market system.
	communism.
	socialism.

Question 5 (5 points)

 

Which statement best describes a capitalist economy?

Question 5 options:

	The production of goods and services is determined primarily by markets, but the allocation of goods and services is determined primarily by government.
	The production of goods and services is determined primarily by government, but the allocation of goods and services is determined primarily by markets.
	The production and allocation of goods and services is determined primarily through markets.
	The production and allocation of goods and services is determined primarily through government.

Question 6 (5 points)

 

Capitalism is an economic system that:

Question 6 options:

	produces more capital goods than consumer goods.
	produces more consumer goods than capital goods.
	gives the government the right to tax individuals and corporations.
	private individuals and corporations the right to own productive resources.

Question 7 (5 points)

 

In a market system, well-defined property rights are important because they:

Question 7 options:

	reduce unnecessary investment.
	limit destructive economic growth.
	create economic problems.
	encourage economic activity.

Question 8 (5 points)

 

If two goods are complements:

Question 8 options:

	they are consumed independently.
	an increase in the price of one will increase the demand for the other.
	a decrease in the price of one will increase the demand for the other.
	they are necessarily inferior goods.

Question 9 (5 points)

 

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. In this range of prices, demand for this product is:

Question 9 options:

	elastic.
	inelastic.
	cross-elastic.
	unitary elastic.

Question 10 (5 points)

 

Demand can be said to be inelastic when:

Question 10 options:

	an increase in price results in a reduction in total revenue.
	a reduction in price results in an increase in total revenue.
	a reduction in price results in a decrease in total revenue.
	the elasticity coefficient exceeds one.

Question 11 (5 points)

 

Economic growth is shown by a shift of the production possibilities curve outward and to the right.

Question 11 options:

	True
	False

Question 12 (5 points)

 

The four factors of production are land, labor, capital, and government services.

Question 12 options:

	True
	False

Question 13 (5 points)

 

If demand increases and supply simultaneously decreases, equilibrium price will rise.

Question 13 options:

	True
	False

Question 14 (5 points)

 

Property rights have a positive effect in a market economy because they encourage owners to maintain their property.

Question 14 options:

	True
	False

Question 15 (5 points)

 

In the price range where demand is inelastic, a decrease in price will result in a decrease in total revenue.

Question 15 options:

	True
	False

Question 16 (5 points)

 

Price elasticity of supply decreases the longer the time period.

Question 16 options:

	True
	False

Question 17 (5 points)

 

Toothpaste and toothbrushes are substitute goods.

Question 17 options:

	True
	False

Question 18 (5 points)

 

A government-set price ceiling will lower equilibrium price and quantity in a market.

Question 18 options:

	True
	False

Demand for Shirts

Question 19 (5 points)

 

(Exhibit: Demand for Shirts) The price elasticity of demand for the segment AB is:

Question 19 options:

	-13
	-11
	-0.91
	-0.1

Question 20 (5 points)

 

(Exhibit: Demand for Shirts) The price elasticity of demand for the segment BC is:

Question 20 options:

	greater than 3.33 (absolute value).
	-3.33.
	-3.
	-0.33.

Question 21 (5 points)

 

(Exhibit: Demand for Shirts) The price elasticity of demand for the segment CD is:

Question 21 options:

	greater than 1 (absolute value).
	-1.
	-0.71.
	-0.29.

Markets and Efficiency

Question 22 (5 points)

 

(Exhibit: Markets and Efficiency) In panel (a):

Question 22 options:

	the price of apples is $0.80 and the quantity demanded is Q1.
	the equilibrium price ensures that quantity demanded will match quantity supplied.
	the equilibrium price ensures that there will be neither surpluses nor shortages.
	all of the above are true.

Question 23 (5 points)

 

(Exhibit: Markets and Efficiency) The equilibrium price in Panel (a) tells us that the marginal cost of a pound of apples is:

Question 23 options:

	less than $0.80.
	equal to $0.80.
	greater than $0.80.
	equal to the average cost of producing apples.

Question 24 (5 points)

 

(Exhibit: Markets and Efficiency) The price and marginal cost in Panel(a) are equal because of:

Question 24 options:

	the marginal decision rule.
	the law of demand.
	the law of supply.
	the law of increasing cost.

Question 25 (5 points)

 

(Exhibit: Markets and Efficiency) What is the marginal benefit to a producer of an extra pound of apples in Panel (a)?

Question 25 options:

	It is the price the producer receives.
	It is the price the consumer receives.
	It is the price the producer pays.
	It is all of the above.

Question 26 (5 points)

 

(Exhibit: Markets and Efficiency) What is the marginal cost of an extra pound of apples to a producer in Panel(a)?

Question 26 options:

	It is greater than the price.
	It is the value that must be given up to produce an extra pound of apples.
	It must be less than the price.
	It is the cost of the least satisfactory apples.

Question 27 (5 points)

 

(Exhibit: Markets and Efficiency) In Panel (b) demand shifted from D1 to D2, reflecting a change in consumer preferences. The price of apples will change to the new equilibrium price:

Question 27 options:

	where the marginal benefit of apples is again equal to the marginal cost.
	of $0.70.
	where an efficient solution is again achieved.
	that is described by all of the above.

 

Question 28 (20 points)

 Question 28

What effect on the price elasticity of demand for commuter rail is there likely to be from a decrease in the price of gasoline? Explain your answer.

 

 

ECON201 Week 4 Discussion - Utility

For this week's discussion, come up with an example of diminishing marginal utility you've encountered recently.

 

   

 

ECON201 Week 5 Discussion Business & their costs

Complete the following simulation and answer the questions below.

• What factors affected demand for your product?
• What pricing strategies did you use?
• Describe your most successful day and your least successful? Why were they successful or unsuccessful?
• What was your total # of cups sold at the end of the week?

           

 

ECON201 Week 6 Discussion Profits and the Shut Down Decision

Why might a profitable motel shut down in the long run if the land on which it is located becomes extremely valuable due to surrounding economic development? What kinds of costs are involved in making a decision to shut down?

   

 

ECON201 Week 7 Discussion Pricing and Competition

How would a low-cost price leader enforce its leadership through implied threats to a rival? Provide at least one example of such a strategy.

 

  

 

ECON201 Week 7 Quiz SCORE 100 PERCENT

Quiz

Question 1 (10 points)

 

Monopolistic competition is an industry characterized by a:

Question 1 options:

	small number of firms producing identical products, with barriers to entry for firms.
	small number of firms producing similar products, with relatively easy entry for firms.
	large number of firms producing similar products, with relatively easy entry for firms.
	large number of firms producing identical products, with relatively easy entry for firms.

Question 2 (10 points)

 

Imperfect competition is:

Question 2 options:

	a market structure with no more than one firm in the industry.
	an industry in which all firms are price takers.
	a market structure where firms have a degree of monopoly power.
	described by all of the above.

Question 3 (10 points)

 

Imperfect competition includes:

Question 3 options:

	monopolistic competition and oligopoly.
	monopolistic competition and monopoly.
	perfect competition and monopoly.
	monopoly and oligopoly.

Question 4 (10 points)

 

A firm in monopolistic competition maximizes its profit by producing at the level at which:

Question 4 options:

	MC = ATC.
	MC = AR.
	MC = P.
	MC = MR.

Question 5 (10 points)

 

An industry characterized by many firms, producing similar but differentiated products, in a market with easy entry and exit is called:

Question 5 options:

	perfect competition.
	monopoly.
	monopolistic competition.
	oligopoly.

Question 6 (10 points)

 

An oligopoly knows that its _______ affect(s) its _______ and that the _______ of its rivals will affect it.

Question 6 options:

	actions; rivals; reactions
	price changes ; total revenue in a positive way; reactions
	actions rarely; rivals; actions
	price increases; total revenue in the long run only; large but not small price changes

Question 7 (10 points)

 

A concentration ratio is used to measure:

Question 7 options:

	efficiency.
	diseconomies of scale.
	marginal cost.
	market dominance.

Question 8 (10 points)

 

An industry dominated by a few firms, where each of those firms recognizes that its own choices will affect the choices of its rivals and that its rivals' choices will affect it, is a(n):

Question 8 options:

	monopoly.
	oligopoly.
	monopolistic competition.
	perfect competition.

Question 9 (10 points)

 

Price for a firm under monopolistic competition is:

Question 9 options:

	equal to marginal revenue.
	greater than marginal revenue.
	less than marginal revenue.
	greater than total revenue.

Question 10 (10 points)

 

Unwritten or unspoken understandings through which firms collude to restrict competition are called:

Question 10 options:

	cartelization.
	oligopolization.
	overt collusion.
	tacit collusion.

Profit Maximization for a Firm in Monopolistic Competition

Question 11 (10 points)

 

(Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC' Before the innovation reduced the cost, the firm's maximum economic profit was:

Question 11 options:

	$0.
	$30.
	$750.
	$4,500.

Question 12 (10 points)

 

(Exhibit: Profit Maximization for a Firm in Monopolistic Competition.) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC' After the innovation reduced the cost, the firm's maximum economic profit is:

Question 12 options:

	$0.
	$30.
	$1,500.
	$3,000.

Question 13 (10 points)

 

(Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC' Suppose further that after the innovation reduced the cost to ATC?, it costs a total of $18 per unit to produce 170 units per day. If the firm charges a price equal to marginal cost, total net profit will be:

Question 13 options:

	$1,700.
	$1,190.
	$3,060.
	$3,400.

 

   

 

ECON201 Week 8 Course Reflection

Did you find the subject to be more applicable to your everyday life than you expected?
What surprised you the most of the content in this course?
Please do not hesitate to share additional comments outside of the scope of these questions.

 

     

 

ECON201 Week 8 Final Exam SCORE 100 PERCENT

Quiz

Question 1 (5 points)

 

One defining characteristic of pure monopoly is that:

Question 1 options:

	The monopolist is a price taker
	The monopolist uses advertising
	The monopolist produces a product with no close substitutes
	There is relatively easy entry into the industry, but exit is difficult

Question 2 (5 points)

 

Which is a barrier to entry?

Question 2 options:

	Close substitutes
	Diseconomies of scale
	Government licensing
	Price-taking behavior

Question 3 (5 points)

 

Other things equal, which reduces competition in an industry?

Question 3 options:

	Patent laws
	Freedom of entry for new firms
	An increase in the number of producers
	An increase in the number of buyers

Question 4 (5 points)

 

The representative firm in a purely competitive industry:

Question 4 options:

	Will always earn a profit in the short run
	May earn either an economic profit or a loss in the long run
	Will always earn an economic profit in the long run
	Will earn an economic profit of zero in the long run

Question 5 (5 points)

 

An example of a monopolistically competitive industry would be:

Question 5 options:

	Steel
	Soybeans
	Electricity
	Retail clothing

Question 6 (5 points)

 

Firms in an industry will not earn long-run economic profits if:

Question 6 options:

	Fixed costs are zero
	The number of firms in the industry is fixed
	There is free entry and exit of firms in the industry
	Production costs for a given level of output are minimized

Question 7 (5 points)

 

Marginal product is:

Question 7 options:

	the increase in total output attributable to the employment of one more worker.
	the increase in total revenue attributable to the employment of one more worker.
	the increase in total cost attributable to the employment of one more worker.
	total product divided by the number of workers employed.

Question 8 (5 points)

 

The law of diminishing returns indicates that:

Question 8 options:

	as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.
	because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped.
	the demand for goods produced by purely competitive industries is downsloping.
	beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.

Question 9 (5 points)

 

Which of the following is most likely to be a variable cost?

Question 9 options:

	fuel and power payments
	interest on business loans
	rental payments on IBM equipment
	real estate taxes

Question 10 (5 points)

 

If average total cost is declining, then:

Question 10 options:

	marginal cost must be greater than average total cost.
	the average fixed cost curve must lie above the average variable cost curve.
	marginal cost must be less than average total cost.
	total cost must also be declining.

Question 11 (5 points)

 

The selling of stock is debt financing for a corporation.

Question 11 options:

	True
	False

Question 12 (5 points)

 

Average fixed costs diminish continuously as output increases.

Question 12 options:

	True
	False

Question 13 (5 points)

 

Patents and copyrights were established by the government to reduce oligopoly and monopoly power.

Question 13 options:

	True
	False

Question 14 (5 points)

 

Prices in oligopolistic industries are predicted to fluctuate widely and frequently compared to other market structures.

Question 14 options:

	True
	False

Question 15 (5 points)

 

The positive view of advertising suggests that it contributes to economic efficiency in the economy.

Question 15 options:

	True
	False

Question 16 (5 points)

 

Price fixing is illegal under Section 1 of the Sherman Act.

Question 16 options:

	True
	False

Question 17 (5 points)

 

Rent-seeking behavior refers to activities designed to transfer income or wealth to a particular firm or resource supplier at someone else's or society's expense.

Question 17 options:

	True
	False

Question 18 (5 points)

 

A purely competitive firm is a price maker, but a monopolist is a price taker.

Question 18 options:

	True
	False

Short-Run Costs

Question 19 (5 points)

 

(Exhibit: Short-Run Costs) At the given price, the most profitable level of output occurs at quantity:

Question 19 options:

	N
	P
	S
	T

Question 20 (5 points)

 

(Exhibit: Short-Run Costs) If the price declines, the minimum quantity of output supplied in the short run is quantity:

Question 20 options:

	O.
	Q.
	R.
	S.

Question 21 (5 points)

 

(Exhibit: Short-Run Costs) If the price declines, production will continue in the short run, even though the firm incurs a loss, between quantities:

Question 21 options:

	O and Q.
	Q and R.
	R and S.
	S and T.

Question 22 (5 points)

 

(Exhibit: Short-Run Costs) This firm's supply curve begins at quantity:

Question 22 options:

	Q.
	R.
	S.
	T.

Profit Maximization in Monopolistic Competition

Question 23 (5 points)

 

(Exhibit: Profit Maximization in Monopolistic Competition) A firm in monopolistic competition will maximize profits by producing the level of output where:

Question 23 options:

	P = MC
	MR = MC
	P = MR
	price minus ATC (i.e., economic profit per unit) is the largest.

Question 24 (5 points)

 

(Exhibit: Profit Maximization in Monopolistic Competition) In the short run, a firm in monopolistic competition may experience economic profits as shown in Panel (a) as the distance:

Question 24 options:

	PS.
	PS times the quantity 0M.
	PS times the quantity Q.
	PT times the quantity Q.

Question 25 (5 points)

 

(Exhibit: Profit Maximization in Monopolistic Competition) If other firms see economic profits in the industry, they will enter it, and the demand curve for firms already in the industry will shift to the ________ ; in the long run, this will result in economic profit _______ and price _______ .

Question 25 options:

	right; = 0; = ATC; = minimum ATC
	right; > 0; > ATC
	left; < 0; < ATC
	left; = 0; = ATC; > minimum ATC

Question 26 (5 points)

 

(Exhibit: Profit Maximization in Monopolistic Competition) In monopolistic competition, long-run equilibrium is characterized by:

Question 26 options:

	P > MR.
	P < MR.
	P = MR.
	profit maximization, which occurs where P = MR = MC.

Question 27 (5 points)

 

(Exhibit: Profit Maximization in Monopolistic Competition) In Panel (a), if the firm raises its price above P, it will:

Question 27 options:

	lose all its customers.
	still have some customers.
	not lose any customers.
	have none of the above occur.

Question 28 (5 points)

 

(Exhibit: Profit Maximization in Monopolistic Competition) In determining the price in monopolistic competition:

Question 28 options:

	the price to the firm is given by supply and demand for the industry.
	the firm is a price taker.
	the firm applies the marginal decision rule.
	A and B are true.

Short Essay

Question 29 (20 points)

 

Which of the following is (are) most likely to be produced under conditions resembling perfect competition - automobiles, beer, corn, diamonds, and eggs. Defend your answer in economic terms.