8AM final guide

____ 1. The amount of money that a firm receives from the sale of its output is called

____ 2. Which of the following expressions is correct about profit?

____ 3. The marginal product of labor can be defined as

____ 4. For a firm, the production function represents the relationship between

____ 5. A firm's production function is

____ 6. Variable cost divided by quantity produced is

____ 7. Average total cost tells us the

8. A firm experiences decreasing marginal product of labor. Average total cost will be

____ 9. The average fixed cost curve

____ 10. Which of the following statements about costs is correct?

____ 11. If the firm doubles its output from 3 to 6 units, total revenue will

____ 12. If the firm finds that its marginal cost is $11, it should

____ 13. This firm will exit the market for any price on the line segment

____ 14. A firm's short-run supply curve is part of which of the following curves?

____ 15. The irrelevance of sunk costs is best described by which of the following business decisions?

____ 16. When a restaurant stays open for lunch service even though few customers patronize the restaurant for lunch, which of the following principles is (are) best demonstrated?

____ 17. Firms in a competitive market have the following cost structure:

The long-run supply curve for this market is

18. Assume that the only source of water is the underground aquifer that lies directly below the town. Suppose only one resident owns all the wells in town. Which of the following statements is most likely going to be true of the market for water?

____ 19. A firm that has a monopoly on water (which is a necessity) can charge a high price for water only if or even if ____

_____20. When a monopolist increases the amount of output that it produces and sells, its average revenue

____ 21. If the monopoly firm is currently producing Q3 units of output, then a decrease in output will necessarily cause profit to

____ 22. Suppose your investment loses asset value at a rate of 10 percent per year continuously. The value will be cut in half when?

____ 23. Let P = price; MR = marginal revenue; and MC = marginal cost. For a profit-maximizing monopolist,

____ 24. For a monopoly, the supply curve is a portion of its

____ 25. For a profit-maximizing monopolist, output should be increased to enhance economic well-being as long as

____ 26. The economic inefficiency of a monopolist can be measured by the

____ 27. If the monopoly operates at an output level below Q0, then an increase in output toward Q0 (but not so large an increase as to exceed Q0) would

____ 28. Policymakers are discussing various proposals regarding how to deal with natural monopolies. Senator Huff wants to regulate natural monopolies by equating price with average total cost. Huff contends that such a policy will ensure that monopolies make every effort to reduce costs. Senator Puff wants the government to own natural monopolies. Puff argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies. Which senator's argument is correct?

29. Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to about 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.

What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price discriminating policy?

____ 30. For a firm to price discriminate, it must

____ 31. A rational pricing strategy for a profit-maximizing monopolist is

____ 32. A market force that can prevent firms from price discriminating is

____ 33. Assume oligopoly firms are profit maximizers, they do not form a cartel, and they take other firms' production levels as given. Then the output effect

____ 34. For cartels, once the number of firms (members of the cartel) increases,

____ 35. As the number of firms in an oligopoly increases,

____ 36. Oligopolies can end up looking like competitive markets if the number of firms is

____ 37. Which of these events would likely weaken the extent of collusion among firms in the ocean shipping industry?

____ 38. Firms do not need to be concerned about striking a balance between the price effect and the output effect when making production decisions in which of the following types of markets?

____ 39. The prisoners' dilemma provides insights into the

____ 40. The Sherman Antitrust Act did what?

41. Assume that a local bank sells two services, checking accounts and ATM card services. Mr. Donethat is willing to pay $8 a month for the bank to service his checking account and $2 a month for unlimited use of his ATM card. Ms. Beenthere is willing to pay only $5 for a checking account, but is willing to pay $9 for unlimited use of her ATM card. To keep this example simple, assume that the bank can provide each of these services at zero marginal cost.

If the bank is unable to use tying, what is the profit-maximizing price to charge for a checking account?

____ 42. The point of tangency which characterizes long-run equilibrium for a monopolistically competitive firm always occurs at a certain level of output; call that level of output Q1. Then Q1

____ 43. A monopolistically competitive firm faces the following demand curve for its product:

____ 44. Land rent

a.is a cost to a firm or household, but a surplus for society.

b.is always a cost to society as well as individual firms and households

c.if taxed is a social cost, but if not taxed is a social surplus

d.can be eliminated by law, since land has no cost of production.

____ 45. Defenders of advertising argue that it is not rational for profit-maximizing firms to spend money on advertising for products that have

____ 46. The special interest carnival in Adventures of Jonathan Gullible shows how

_____ 47. Regarding profit maximization, theory says that

_____ 48. Once upon a time, Jack produced two bean stalks, and then he ate them. Jill down the street only produced one bean stalk with the same amount and qualilty of work and same area of land and same quality of tools. She too ate her bean stalk. We theorize regarding their wages and rent are ...?