How to do problem 1-8? thank you

Microeconomics: Sample Exam 2 Important Note: Completing this Sample Exam 2 by yourself is necessary but not sufficient: all course material after Exam 1 should be carefully reviewed as well. Part I: Multiple Choice. Choose the one alternative that best completes the statement or answers the question. 1) Economists define the short run as a period of time so short that A) the amount of output cannot be changed at all. B) at least one factor of production cannot be varied. C) the amount of output cannot be changed except under diminishing marginal returns. D) only one factor of production can be varied. 1) _______ 2) When the demand for electricity peaks during the hottest days of summer, Florida Power and Light Company can generate more electricity by using more fuel and increasing the working hours of many of its employees. The company cannot, however, increase electric power production by building additional generating capacity. This means that the company is in the A) market run. B) intermediate run. C) short run. D) long run. 2) _______ 3) Which of the following statements is correct? A) As output increases, total cost and total fixed cost increase by the same amount. B) As output increases, total cost and total fixed cost increase but not necessarily by the same amount. C) Total fixed cost plus total variable cost equals total cost. D) As output increases, total cost increases and total fixed cost decreases. 3) _______ 4) A firm has fixed costs A) in the short run and in the long run. B) neither in the long run nor in the short run. C) in the long run but not in the short run. D) in the short run but not in the long run. 4) _______ 5) Which of the following would be classified as a fixed cost for the local supermarket? A) The salary and any overtime paid the store's manager. B) The cost of the boxes of cereal sold in the store. C) The Social Security tax the store pays the federal government on the workers' income. D) The rent from the six-year lease for the building the store uses. 5) _______ 6) Marginal cost is equal to A) quantity divided by total cost. B) total cost divided by quantity. C) the change in total cost divided by the change in total revenue. D) the change in total cost divided by the change in quantity. 6) _______ 7) Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. If he increases production to 220 earmuffs, his total cost increases to $2100, and his fixed cost remains $400. What is Ernie's marginal cost per earmuff? A) $105 B) $9.55 C) $35 D) $5 7) _______ 8) By using more labor to produce more output, a firm can always reduce its A) average fixed cost. B) marginal cost. C) average variable cost. D) average total cost. 8) _______ 9) The average total cost curve A) diminishes initially because average fixed costs diminish. B) increases eventually because of diminishing returns. C) is U-shaped. D) All of the above answers are correct. 9) _______ 10) The vertical distance between the total variable cost curve and the total cost curve ________ as output increases; the vertical distance between the average variable cost curve and the average total cost curve ________ as output increases. A) decreases; remains the same B) increases; remains the same C) is constant; becomes smaller D) increases; becomes smaller at first but then increases Labor (workers per week) 0 1 2 3 4 5 6 10) ______ Output (units per week) 0 20 50 70 85 95 100 11) In the table above, the marginal product of the 5th worker is ________ units pe r week. A) 2 B) 10 C) 5 D) 19 11) ______ 12) The table above gives a firm's total product schedule. Suppose labor is the only variable input. The price of labor is $500 per week and total fixed costs are $600 per week. What is the total cost of producing 70 units? A) $1,700 B) $1,900 C) $2,300 D) $2,100 12) ______ 13) The table above gives a firm's total product schedule. Suppose labor is the only variable input. The price of labor is $500 per week and t otal fixed costs are $600 per week. If 95 units are produced, the average total cost is A) $26.32. B) $32.63. C) $6.31. D) $17.45. 13) ______ Labor (workers) 0 1 2 3 4 5 Output (units per day) 0 3 8 12 14 15 14) In the above table, the total fixed cost is A) $20. B) $0. Cost schedule Total variable cost (dollars) 0 20 40 60 80 100 Total cost (dollars) 30 50 70 90 110 130 14) ______ C) $30. D) $50. 15) In the above figure, which of the following statements is FALSE? A) The vertical gap between curves B and C gets smaller as AFC decreases. B) The vertical gap between curves B and C equals marginal fixed cost. C) Average fixed cost decreases as output decreases. D) Curve A is the marginal cost curve. 15) ______ 16) Which of the following statements is true? A) In the long run, the firms' fixed costs are greater than its variable costs. B) In the long run, the quantities of all inputs are fixed. C) In the long run, the average cost curve is always downward sloping. D) In the long run, all costs are variable costs. 16) ______ 17) A firm's long run cost is the cost of production when the firm A) can vary the amount of output it produces. B) uses the economically efficient quantities of capital and labor. C) adds together all of its short run costs. D) calculates its cost at least one year into the future. 17) ______ 18) A firm experiences ________ when its ________ downward at larger outputs. A) diminishing marginal returns; long-run average cost curve slopes B) diseconomies of scale; average total cost curve slopes C) economies of scale; long-run average cost curve slopes D) diminishing marginal returns; average total cost curve shifts 18) ______ 19) Diseconomies of scale definitely means that as the firm increases its output, its A) short-run average total cost increases. B) short-run average total cost decreases. C) long-run average total cost increases. D) long-run average total cost decreases. 19) ______ 20) A common source of diseconomies of scale is the A) growing complexity of management and organizational structure . B) diminishing marginal returns to labor. C) diminishing marginal returns to land. D) diminishing marginal returns to capital. 20) ______ 21) In the above figure, economies of scale are present up to an output level of A) 10,000 pounds of coffee. B) 13,000 pounds of coffee. C) 5,000 pounds of coffee. D) 15,000 pounds of coffee. 21) ______ 22) In perfect competition, the product of a single firm A) is sold under many differing brand names. B) has many perfect substitutes produced by other firms. C) is sold to different customers at different prices. D) has many perfect complements produced by other firms. 22) ______ 23) Which of the following is true regarding perfect competition? I. The firms are price takers. II. Marginal revenue equals the price of the product. III. Established firms have no advantage over new firms. A) II and III B) I, II and III C) I and II 23) ______ D) I only 24) Which of the following is NOT an assumption of perfect competition? A) Sellers and buyers are well informed about prices. B) Firms compete by making their product different from products produced by other firms. C) There are no restrictions on entry into the industry. D) Established firms have no advantage over new firms. 24) ______ 25) If a firm is in a perfectly competitive industry, then A) the demand for its product is perfectly elastic. B) it cannot survive in the long run. C) it will have no fixed costs in the short run. D) it cannot earn an economic profit in the short run. 25) ______ 26) If Steve's Apple Orchard, Inc. is a perfectly competitive firm, the demand for Steve's apples has A) infinite elasticity. B) unitary elasticity. C) elasticity equal to the price of apples. D) zero elasticity. 26) ______ 27) Marginal revenue is equal to A) total revenue divided by price. B) the change in total revenue divided by total output. C) price divided by quantity sold. D) the change in total revenue divided by the change in quantity sold. 27) ______ 28) A perfectly competitive firm maximizes its profit by A) manipulating demand. B) choosing to produce the quantity that sets MC equal to MR. C) setting its price so that it exceeds the marginal revenue. D) cutting wages. 28) ______ 29) A perfectly competitive firm's marginal revenue exceeds its marginal cost at its current output. To increase its profit, the firm will A) increase its output. B) lower its price. C) decrease its output. D) raise its price. 29) ______ 30) In the above figure, the line represented by the "2" is the A) average variable cost. B) average fixed cost. C) total cost. D) average total cost. 30) ______ 31) A perfectly competitive firm shuts down if the price of its product is A) greater than its minimum average variable cost. B) greater than its maximum variable cost. C) less than its minimum total cost. D) less than its minimum average variable cost. 31) ______ 32) In the above figure, if the price is P1, the firm will produce A) where MC equals ATC. B) where MC equals P1. C) where ATC equals P1. 32) ______ D) nothing. 33) In the above figure, if the firm increases its output from Q2 to Q3, it will A) decrease its profit. C) increase its marginal revenue. 33) ______ B) increase its profit. D) reduce its marginal revenue. 34) The figure above shows a perfectly competitive firm. In the short run, the firm will shut down A) only if the AVC of producing 10 units is less than $20. B) always. C) only if the AVC of producing 10 units is more than $20. D) only if the AVC curve reaches its minimum before 10 units are produced. 34) ______ 35) In the above figure, the perfectly competitive firm's shutdown point is at a price of A) $8 per unit. B) $4 per unit. C) $16 per unit. D) $12 per unit. 35) ______ 36) Homer's Holesome Donuts has determined that its profit -maximizing quantity is 10,000 donuts per year. Homer's earns $12,000 in revenue from the sale of those donuts. Homer's has two costs. First he pays $16,000 in annual rental payments for its five-year lease on its store. Second Homer incurs an additional cost of $5,000 for ingredients. Homer's variable cost is equal to A) $21,000. B) $5,000. C) 0. D) $16,000. 36) ______ 37) In a perfectly competitive market in the short run, as the market demand increases, the firms ________ their output and their profit ________. A) decrease; decreases B) increase; decreases C) increase; increases D) decrease; increases 37) ______ 38) The figure above shows Mollie's Mugs' costs of producing mugs. The mug market is perfectly competitive. If the market price of a mug falls to $5 and Mollie's shuts down temporarily, its total variable cost is ________ an hour and it incurs an economic loss of ________ an hour. A) $8; $14 B) $0; $6 C) $0; $120 D) $160; $280 38) ______ 39) Today, firms in a perfectly competitive industry are making an economic profit. In the long run, firms will ________ the industry until all firms in the industry are ________. A) exit; covering only their total fixed costs B) enter; making zero economic profit C) enter; making zero normal profit D) exit; producing at the minimum point on their long-run average cost curve 39) ______ 40) In the long-run equilibrium for a perfectly competitive industry, A) the firms' economic profits are zero. B) average total costs of production are minimized. C) there is no entry or exit. D) All of the above are correct. 40) ______ 41) The figure above shows the marginal revenue and long -run cost curves for a perfectly competitive firm. Which of the following statements is true? A) The firm is earning posit ive economic profit. B) The firm is producing at minimum long-run average cost. C) Over time, this firm will leave this industry. D) The firm will eventually decrease its production. 41) ______ 42) The following are key features of a monopoly EXCEPT A) the monopoly has a strong influence over the price of the good or service. B) the monopoly has severe diseconomies of scale. C) the monopoly is protected by a barrier to entry. D) no close substitutes exist for the good or service. 42) ______ 43) An example of a monopoly would be A) one of the few U.S. auto makers. C) one of many U.S. wheat farmers. 43) ______ B) AT&T long distance phone service. D) the local water company. 44) When DeBeers monopolized the world's diamond supply, it was able to do so because it A) is a price setter. B) owns virtually all of a key resource. C) has a government license. D) is a public franchise. 44) ______ 45) A copyright creates a monopoly by restricting ________. A) the number of creators and inventors B) entry into the market C) the prices that can be charged D) demand for the product 45) ______ 46) Patents encourage invention by A) offering tax breaks to inventors. B) preventing others from copying an invention. C) offering subsidies to inventors. D) preventing inventors from working on the same project. 46) ______ 47) All of the following are examples of price discrimination EXCEPT A) lower ticket prices for matinee performances. B) buy-one-get-one-free offers. C) "buy now, pay later" payment options. D) "early bird specials" at a restaurant. 47) ______ 48) Firms that can price discriminate between customers do so to ________. A) increase employment B) increase their profit C) increase consumer surplus D) decrease the quantity they produce 48) ______ 49) A single-price monopoly is characterized by a marginal revenue curve that is A) horizontal. B) vertical. C) downward sloping. D) upward sloping. 49) ______ 50) A single-price monopolist A) has its marginal revenue less than its price. B) is guaranteed an economic profit. C) sets its price where its demand is inelastic. D) can always increase its profits by increasing its price. 50) ______ 51) Which of the following statements is FALSE? A) A monopoly can earn an economic profit in the long run but a perfectly comp etitive firm cannot. B) A monopoly can set its price while a perfectly competitive firm cannot. C) A monopoly is protected by barriers to entry while a perfectly competitive firm is not. D) In the short run, a monopolist might operate even though it is incurring an economic loss but in the short run a perfectly competitive firm always shuts down if it is incurring an economic loss. 51) ______ 52) The figure above shows the demand and cost curves for a single -price monopoly. The firm will produce ________ units and set a price of ________ per unit. A) 15; $20 B) 10; $30 C) 10; $20 D) None of the above answers is correct. 52) ______ 53) A key difference between a monopoly and a perfectly competitive firm is that the monopolist A) has a marginal revenue curve that lies below its demand curve. B) has no marginal cost curve. C) does not face fixed costs in the short run. D) faces a perfectly elastic demand for its product. 53) ______ 54) Compared to a perfectly competitive industry, a single-price monopoly with the same costs will A) charge a higher price. B) produce less output. C) produce more output. D) Both answers A and B are correct. 54) ______ 55) A single-price monopolist produces a ________ quantity than a perfectly competitive industry with the same costs and charges a ________ price than the perfectly competitive industry. A) greater; lower B) lesser; lower C) lesser; higher D) greater; higher 55) ______ Part II: Graphs and Numerical (50 Points, 10 points each) 1. Are the curves in the figure below drawn correctly? If not, what's wrong? Year 1 2 3 4 5 6 2. Total product (Q) 100 240 500 1,000 1,800 2,500 Total cost (dollars) 1,000 2,000 4,000 8,000 16,000 32,000 Average cost (dollars) ___ ___ ___ ___ ___ ___ Jones Production started business with a small scale plant. Fortunately for Smith, the owner of Jones Production, the business grew rapidly. It doubled its plant scale and its labor force every year for the next six years. The table above gives the total costs and the associated total products for each year. a) Complete the table by finding the average cost for each scale. b) Over what range of total product (output) did Jones Production experience economies of scale, constant returns to scale, and diseconomies of scale? 3. The above figure shows the cost curves of a profit -maximizing perfectly competitive firm. If the price equals $7, a) How much will the firm produce? b) How much is the firm's average total cost, average variable cost, and marginal cost (MC)? c) How much is the firm's total, total variable, and total fixed costs? d) How much is the firm's total revenue and economic profit? e) What will happen in this market in the long run? 4. Ron's Hamburger Joint is the only restaurant in town. The above figure represents Ron's cost, demand, and marginal revenue curves. Ro n operates as a single -price monopoly. a) How many hamburgers does Ron produce? b) What price does Ron charge for a hamburger? c) What is Ron's total revenue? d) What is his total cost? e) What is Ron's economic profit? Part III: Short Essay (30 Points, 10 points EACH) 1. Why do rent ceilings lead to persistent shortages and black markets? 2) Compare and contrast perfect competition and monopoly (common traits and differences). 3) Explain the process that drives the economic profit to zero in the long run for a perfectly competitive firm