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Exam 4 with Answers Key for Principles of Microeconomics | ECON 2020, Exams of Microeconomics

Material Type: Exam; Professor: Finck; Class: PRINCIPLES OF MICROECONOMICS; Subject: Economics; University: Auburn University - Main Campus; Term: Spring 2011;

Typology: Exams

2010/2011

Uploaded on 05/01/2011

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VERSION 1
Name _________________
ECON 2020 Exam #4
DIRECTIONS: Read each question and EVERY possible answer VERY carefully.
Select the best answer from the alternatives. Good luck!
1. Which of the following is a characteristic of monopolistic competition?
A. imperfect information
B. high barriers to entry
C. no close substitutes
D. many, small buyers and sellers
E. “What do tigers dream of when they take a little tiger snooze?”
Use the following graph to answer questions 2 – 3.
2. If the above firm decreases price from P1 to P2, then total revenue
A. “’Cause we’re the three best friends that anyone could have. . .”
B. increases by area A and decreases by area C
C. decreases by area A and increases by area C
D. increases by area A and decreases by area B
E. decreases by area A and increases by area B
3. If the above firm sells Q1 units at a price of P1, then the marginal revenue from
the last unit sold will be
A. greater than P1
B. less than P1
C. equal to P1
D. “I tend to think of myself as a one-man wolf pack.”
4. Which of the following conditions is necessary for price discrimination?
A. prevention of resale
B. some degree of market/monopoly power
C. two or more groups of buyers with different incomes
D. all of the above
E. A and B only
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Download Exam 4 with Answers Key for Principles of Microeconomics | ECON 2020 and more Exams Microeconomics in PDF only on Docsity!

Name _________________ ECON 2020 Exam # DIRECTIONS: Read each question and EVERY possible answer VERY carefully. Select the best answer from the alternatives. Good luck!

  1. Which of the following is a characteristic of monopolistic competition? A. imperfect information B. high barriers to entry C. no close substitutes D. many, small buyers and sellers E. “What do tigers dream of when they take a little tiger snooze?” Use the following graph to answer questions 2 – 3.
  2. If the above firm decreases price from P1 to P2, then total revenue A. “’Cause we’re the three best friends that anyone could have.. .” B. increases by area A and decreases by area C C. decreases by area A and increases by area C D. increases by area A and decreases by area B E. decreases by area A and increases by area B
  3. If the above firm sells Q1 units at a price of P1, then the marginal revenue from the last unit sold will be A. greater than P B. less than P C. equal to P D. “I tend to think of myself as a one-man wolf pack.”
  4. Which of the following conditions is necessary for price discrimination? A. prevention of resale B. some degree of market/monopoly power C. two or more groups of buyers with different incomes D. all of the above E. A and B only
  1. Which of the following statements about monopolistic competition is FALSE? A. Monopolistically competitive firms create excess capacity by producing an output below the output where ATC is minimized. B. Advertising increases search and information costs. C. Monopolistically competitive firms set their price above marginal cost. D. A and C only E. B and C only
  2. Which market characteristic implies that long run profits can be greater than zero? A. few, mutually interdependent sellers B. differentiated products C. high barriers to entry D. imperfect information E. “Not at the table, Carlos!” Use the following game to answer question 7. Alan Garner Collude Cheat $40,000 profit $80,000 profit Collude $40,000 profit -$10,000 profit Mr. Chow -$10,000 profit $0 profit Cheat $80,000 profit $0 profit
  3. With respect to the above “game,” which of the following statements is FALSE? A. The players maximize total producer welfare by cheating. B. The players maximize their individual welfare by cheating. C. Consumers are better off when the players collude. D. A and C only E. B and C only
  4. Which of the following factors will break down collusion? A. a small number of sellers B. standardized products C. antitrust policy D. A and B only E. B and C only

Use the following graph to answer questions 15 – 16. MC ATC $ $ $ $ D Q 40 58 66

  1. A profit-maximizing producer will sell ____ units at a price of ___. A. 74; $ B. 40; $ C. 66; $ D. 58; $ E. 58; $
  2. If the above firm operates in a monopoly market structure, what will happen in the long run? A. firms will enter the market, firm demand will increase, and profit = zero. B. firms will enter the market, firm demand will decrease, and profit = zero. C. firms will exit the market, firm demand will decrease, and profit = zero. D. firms will exit the market, firm demand will increase, and profit = zero. E. profit will not change in the LR due to high barriers to entry Use the following information to answer question 17. MC = 12 + 2Q P = 76 – 3Q
  3. For the monopolist facing this demand curve with these costs, the profit- maximizing level of output is ___ units and price is ____. A. 9; $ B. 11; $ C. 13; $ D. 8; $ E. 8; $

MR

  1. Which of the following is NOT a type of barrier to entry? A. technological advance B. control of an essential resource C. economies of scale D. government created barriers E. all of the above ARE types of barriers to entry
  2. When an industry exhibits allocative efficiency, A. P = min ATC B. social welfare is maximized C. P = MC D. A and B only E. B and C only
  3. The demand curve faced by a firm in a monopoly is A. equal to the marginal revenue curve faced by a firm in a monopoly B. less elastic than the marginal revenue curve faced by a firm in a monopoly C. more elastic than the marginal revenue curve faced by a firm in a monopoly D. more elastic than the demand curve faced by a firm in perfect competition E. “I'm not supposed to be within two hundred feet of a school... or a Chuck E. Cheese.” Use the following table to answer questions 21 -- 22. Price $14.00 $13.50 $13.00 $12.50 $12. Quantity 3 4 5 6 7 Total Revenue $42 $65 B Marginal Revenue $13 A $
  4. What is the correct value for the blank labeled A? A. $ B. $ C. $ D. $ E. “Your language is offensive!”
  5. What is the correct value for the blank labeled B? A. $ B. $ C. $ D. $ E. $