Solution 1 For a price taking firm marginal revenue a is the addition to total revenue from producing one more unit of output decreases as the firm
Solution For a price taking firm marginal revenue a is the addition to total revenue from producing one more unit
Solution For a price taking firm marginal revenue a is the addition to total revenue
firm marginal revenue a is the addition to total revenue from producing one more unit of output decreases as the firm
Solution For a price taking firm marginal revenue a is the addition
to total revenue from producing one more unit of output decreases as the firm
Solution For a price taking firm marginal revenue a is
Solution For a price taking
(Solution) 1 For a price-taking firm, marginal revenue a. is the addition to total revenue from producing one more unit of output. decreases as the firm...

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1 For a price-taking firm, marginal revenue a. is the addition to total revenue from producing one more unit of output. b. decreases as the firm produces more output. c. is equal to price at any level of output. d. both a and b e. both a and c 2 In a perfectly competitive industry the market price is $25. A firm is currently producing 10,000 units of output; average total cost is $28, marginal cost is $20, and average variable cost is $20. The firm should a. raise price because the firm is losing money. b. keep output the same because the firm is producing at minimum average variable cost. c. produce more because the next unit of output increases profit by $5. d. produce less because the next unit of output decreased profit by $3. e. shut down because the firm is losing money. The next three questions refer to the following: The graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry. The graph on the right shows current industry demand and supply. 3 If the firm's demand and marginal revenue curves were drawn in the left-hand graph, what would be the elasticity of demand? a. zero b. 6 c. 0.6 d. infinitely elastic e. unitary 4 What is the marginal revenue for the FIRM from selling the 250th unit of output? a. $10 b. $8 c. $6 d. $4 e. zero 5 What output should the firm produce? a. 200 b. 250 c. 150 d. 300 The next two questions refer to the following figure: The graph shows demand and marginal cost for a perfectly competitive firm. 6 If the firm is producing 100 units of output, increasing output by one unit would ______ the firm's profit by $______. a. increase, $3 b. increase, $2 c. decrease, $1 d. increase, $1 e. decrease, $2 7 If the firm is producing 300 units of output, decreasing output by one unit would ______ the firm's profit by $______. a. decrease, $2 b. increase, $2 c. increase, $3 d. decrease, $5 e. increase, $5 The next five questions refer to the following figure: These are the cost curves for a perfectly competitive firm. If market price is $5, how much output will the firm produce? 0 units 200 units 500 units. 600 units 9 If market price is $5, how much profit will the firm earn? a $600 b. $900 c. $3,000 d. $600 10 If market price is $3, how much profit will the firm earn? a. $200 b. $200 c. $400 d. $400 11 If market price is $2, how much profit will the firm earn? a. $600 b. $600 c. zero d. $400 12 The firm will break even if price is: a. $2 b. $3.80 c. $5 d. $6 13 Which of the following is a characteristic of a monopoly market? a. one firm is the only supplier of a product for which there are no close substitutes b. entry into the market is blocked c. the firm can influence market price d. all of the above 14 A firm with market power a. can increase price without losing all sales. b. faces a downward-sloping demand curve. c. is the only seller in a market. d. both a and b e. all of the above 15 In a monopolistically competitive market, a. firms are small relative to the total market. b. no firm has any market power. c. there is easy entry and exit in the market. d. a and b e. a and c 16 Which of the following would indicate a relatively large amount of market power? a. Highly price elasticity demand b. Low cross-price elasticity with other products c. Low Lerner index d. all of the above e. none of the above Use the following figure to answer the next 3 questions. The figure shows the demand and cost curves facing a firm with market power in the short run. 17 The profit-maximizing level of output is a. 60 units. b. 70 units c. 80 units Graph (MC=MR) d. 90 units. e. 100 units. 18 The firm will sell its output at a price of a. $2. b. $3. c. $3.75. Q up to Demand = P$ d. $5. e. $6. 19 The firm earns profits of a. $ 75. b. $120. c. $150. d. $180. $5-$3 = $2 x 60 units = $120 $300. The next 6 questions refer to the following figure: The figure above shows the demand and cost curves facing a price-setting firm. 20 What is marginal revenue when output is 100 units? a. $10 b. $20 c. $25 d. $30 e. $35 21 At what output is marginal revenue $20? a. 100 units b. 200 units c. 300 units d. 400 units e. 500 units 22 The profit-maximizing (or loss-minimizing) level of output is a. 100 b. 200 c. 300 d. 400 e. 450 23 In profit-maximizing (or loss-minimizing) equilibrium, the price-setting firm earns $______ in total revenue, which is ___________ the maximum possible total revenue of $________. a. $7,500; equal to; $7,500 b. $8,000; more than; $7,500 c. $7,650; less than; $8,000 d. $8,000; equal to; $8,000 e. $7,500; less than; $8,000 24 The maximum profit the firm can earn is $________. a. $4,500 b. $1,500 c. $7,500 d. $7,650 e. $8,000 25 Oligopolists face interdependent profits because a. there are few firms in the market. b. the product is differentiated. c. industry sales are large. d. all of the above 26 Actions taken by oligopolists to plan for and react to actions of rival firms represent a. strategic behavior. b. interdependence. c. cooperative behavior. d. game theory. e. all of the above. 27 In game theory, a dominant strategy is a. a strategy used by a large firm to compete against smaller firms. b. a strategy followed by the price leader. c. a strategy involving a high risk but also a high return. d. a strategy that leads to the best outcome no matter what a rival does. e. none of the above 28 Which of the following is not an implication of oligopoly interdependence: a. strategic behavior b. the need to get into the heads of rival managers c. making decisions that result in the equating of marginal revenue and marginal cost d. thinking ahead in sequential decisions to anticipate rivals' future actions 29 A conditional strategic move, such as a threat or promise, can be credible only if a. rivals believe the manager making the threat or promise can be trusted to follow through on any commitment, threat, or promise that he or she makes. b. the strategic move harms rivals. c. it can increase each firm's payoff. d. when the time comes to carry out the threat or promise, fulfilling the threat or promise is in the best interest of the firm making the threat or promise. e. none of the above. 30 In a repeated decision for which the present value of the benefits of cheating is less than the present value of the costs of cheating, a. deciding not to cheat is a value-maximizing decision. b. deciding to cooperate is a value-maximizing decision. c. deciding to cheat is a value-maximizing decision. d. both a and b 31 In the U.S., firms that engage in cooperative efforts to coordinate pricing are always in violation of antitrust laws. may face federal charges of illegal collusion if they cannot provide evidence that the coordination of prices was in the best interest of consumers. are simply trying to reach a Nash equilibrium and are not viewed by courts as necessarily breaking any laws. both b and c. 32 In a repeated prisoners' dilemma decision, both managers can make credible threats to punish cheating because a. if either manager cheats, the other manager can increase its profit by also cheating. b. both of the cheating cells in the payoff table are strategically stable cells. c. when both firms cheat, they both avoid the Nash equilibrium cell. d. both a and c. 33 Price matching is a strategic move that seeks to make cheating unprofitable. must generally be announced publicly in order to have the desired effect. has no usefulness to managers if a simultaneous pricing decision is going to be made only one time. both a and b all of the above 34 Price matching is a strategic commitment. is a flexible pledge to match any lower prices offered by rivals. must be irreversible in order to have the desired effect. both a and c. both b and c 35 Price leadership is rather uncommon today. is a pricing arrangement in which one firm in an oligopoly agrees to act as a cartel manager and set a price that will maximize the profits of all the firms in the oligopoly market. would not be useful to a dominant firm if it could eliminate all its rivals through a price war. none of the above 36 Tacit collusion in a market represents a method for a. collusion to discourage entry into the market. b. a price-fixing agreement when such agreements are legal. c. agreeing on price without explicit communication among firms. d. cheating on a cartel price. e. none of the above 37 To successfully practice price discrimination a. the firm must be a pure monopoly b. the firm must possess market power c. it must be difficult for consumers in one market to sell to consumers in the other market d. both a and c e. both b and c 38 A probability distribution a. is a way of dealing with uncertainty. b. lists all possible outcomes and the corresponding probabilities of occurrence. c. shows only the most likely outcome in an uncertain situation. d. both a and b e. both a and c 39 The variance of a probability distribution is used to measure risk because a higher variance is associated with a. a wider spread of values around the mean. b. a more compact distribution. c. a lower expected value. d. both a and b e. all of the above 40 Risk exists when a. all possible outcomes are known but probabilities can't be assigned to the outcomes. b. all possible outcomes are known and probabilities can be assigned to each. c. all possible outcomes are known but only objective probabilities can be assigned to each. d. future events can influence the payoffs but the decision maker has some control over their probabilities. e. c and d 41 In making decisions under risk a. maximizing expected value is always the best rule. b. mean variance analysis is always the best rule. c. the coefficient of variation rule is always best. d. maximizing expected value is most reliable for making repeated decisions with identical probabilities. e. none of the above The next 5 questions refer to the following: A firm is considering two projects, A and B, with the following probability distributions for profit. 42 The expected value of project A (in $1,000s) is a. $60 b. $65 c. $70 d. $75 e. $80 43 The variance of project A is a. 7.07 b. 50 c. 440 d. 4,000 e. 380 44 What is the expected value of project B (in $1,000s)? a. $60 b. $65 c. $70 d. $75 $80 45 What is the variance of project B? a. 10 b. 21 c. 165 d. 440 e. 515 A decision maker using the analysis of variance rule would a. choose project A. b. choose project A only if risk averse. c. choose project B. d. choose project B only if risk loving. e. not be able to make a decision using that rule. 47 When we say that market prices allocate goods to the highest-valued users, we mean that a. only consumers with higher incomes will get any of the good, while lower income consumers get none of the good. b. only consumers who value the good more than the market price of the good will choose to buy the good. c. government allocation of the good is warranted because government can make sure that the good gets consumed by deserving individuals. d. there is no shortage. 48 Private provision of public goods fails to achieve economic efficiency because a. the free rider problem causes overproduction of the good. b. the free rider problem prevents collection of sufficient revenue. c. the price of the privately supplied public good must exceed zero in order to be allocatively efficient. d. both a and c e. both b and c 49 Social economic efficiency means that the market is achieving productive efficiency. allocative efficiency. maximum possible consumer surplus. both a and b all of the above 50 ___________ is/are example(s) of market failure that could justify government intervention in the market. Imperfect information Public goods A perfectly competitive bagel market A dominant firm that undertakes pricing strategies aimed at maintaining high entry barriers only a, b, and d

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