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ECON 2100 (Summer 2015 – Sections 07 & 08)
Exam #3D – Answer Key
1.
I am taking ______________ of the exam.
D.
Version D
2.
___________________ is a market structure in which there is one single seller of a unique good
(with no “close substitutes”) and in which there are “barriers to entry” which prevent rival firms
from entering the market
D.
Monopoly
3.
“Average Fixed Costs of Production”
D.
More than one (perhaps all) of the above answers are correct. [A, B, & C are correct]
4.
New firms will enter a monopolistically competitive firm in the long run if for the typical firm in
the short run
B.
price is greater than Average Total Costs of production.
5.
In the Short Run, the only variable input which “Company X” hires is labor. Suppose that the
Marginal Product of Labor is always positive. When increasing the amount of labor hired from
80 units to 81, output increases from 1,200 units to 1,210 units. If the production process of this
firm is such that the Marginal Product of Labor is “diminishing,” then _______ units of output
would be produced if 82 units of labor were hired.
B.
more than 1,210 but fewer than 1,220
6.
Katie opens a lemonade stand for 3 hours. She spends $10 for ingredients and sells $40 of
lemonade. During these three hours she could have instead mowed a neighbor’s lawn for $25
(using the neighbor’s lawn mower and gas). It follows that from running the lemonade stand she
has an accounting profit of _____ and an economic profit of _____.
B.
$30; $5.
7.
Disneyland Resort in Anaheim, CA offers a season pass to residents of Southern California and
Northern Baja California for $284. The regular price for this annual pass is $389. To receive the
lower price, a consumer must present a valid I.D. at the time of purchase, showing that they
reside in a Southern California town with a ZIP Code in the range of 90000 to 93599 or a
Northern Baja California town with a Postal Code in the range of 21000 to 22999. This pricing
behavior is an example of
B.
Third Degree Price Discrimination (or “Segmented Pricing”).
8.
For this firm, Fixed Costs of production are:
B.
$4,890.
9.
Marginal Revenue is greater than Marginal Cost for which of the following ranges of output?
B.
1,200 up to 4,955
10.
The current market price of this firm’s output is
B.
above the minimum value of Average Total Costs.
11.
If the price of this firm’s output were to increase, then the maximum profit of the firm would be
D.
greater than $7,720.
12.
A competitive firm’s short-run supply curve is the portion of its ________________ curve above
its ________________ curve.
D.
Marginal Cost; Average Variable Cost.
13.
If a monopolist’s fixed costs were lower, then its price would have been ________ and its profit
would have been ________.
B.
the same; higher.
14.
If this firm were able to engage in 3rd Degree Price Discrimination (instead of engaging in
standard monopoly pricing, treating the two segments as one single market), then it would choose
to sell __________ units in Market Segment “A” and __________ units in Market Segment “B.”
C.
1,000; 1,625.
15.
If this firm were able to engage in 3rd Degree Price Discrimination (instead of engaging in
standard monopoly pricing, treating the two segments as one single market), then
B.
consumers in Segment “B” would be better off.
16.
Consider a monopolist who is charging a price of $7 for each unit of output sold in order to sell
1,750 units of output. At this point along the demand curve, price elasticity of demand is equal to
  2.50 . This monopolist has constant Marginal Costs of Production of $5 for each unit (so
that Variable Costs are simply VC (q )  5q ). Finally, Fixed Costs are equal to $3,250. This
monopolist is
D.
not maximizing profit, but is earning a positive profit.
17.
Fixed Costs of production for this firm are equal to
B.
$39,200.
18.
If the per unit price of output in this market were $5.00, then this firm would
D.
“shutdown” and produce zero units of output.
19.
At which of the following per unit prices of output would this firm be able to earn a positive
profit in the Short Run?
A.
$14.
20.
Which of the following best describes the outcome of “excess capacity” which results in a
monopolistically competitive market?
D.
The amount of output which is produced by a typical firm is less than the output level
which would minimize Average Total Costs of production.
21.
Ryan sells wheat in a perfectly competitive market. If he increases his quantity sold by 25%, his
total revenue will
C.
increase by exactly 25%.
22.
The value of the “Four Firm Concentration Ratio (C4)”
A.
increased between 2003 and 2009, and then increased further between 2009 and 2015.
23.
The value of the “Herfindahl-Hirschman Index (HHI)” in this market in 2003 was ______.
A.
1,942
24.
This industry was least competitive (i.e., closest to monopoly)
D.
in 2015 according to C4 and in 2015 according to HHI.
25.
Kurt sells potatoes in a perfectly competitive market. During the month of June he: produced
10,000 pounds of potatoes, sold each pound of output at a price of $4, had fixed costs of $15,000,
and earned a profit of $2,500. If instead Fixed Costs had been $18,000 then
B.
his maximum short run profit would have instead been negative.
26.
If this monopolist must charge a common price for every unit of output sold, then they will
maximize profit by charging a price of ________ for each unit sold.
D.
$10.80
27.
Again suppose that this monopolist must charge a common price for every unit of output sold.
When the monopolist charges the price and sells the quantity of output which maximize profit,
B.
Consumers’ Surplus will be equal to “areas a+b.”
28.
If this monopolist is able to engage in “First Degree Price Discrimination” (or “Perfect Price
Discrimination”), then
B.
Deadweight-Loss would be equal to zero.
29.
In a perfectly competitive market,
B.
all goods offered for sale are identical to each other.
30.
“Counterintuitive Technologies” is the sole producer of “Good X.” They were able to become
the only producer of this good, primarily because total production costs of “Good X” are lowest
when only one single firm produces all units of output. Thus, “Counterintuitive Technologies”
can be described as a ______________.
C.
Natural Monopoly
31.
Consider a firm with: Revenue of $20,000; Variable Costs of $17,000; and Fixed Costs of $2,000.
For this firm, Profit is ________ and Producer’s Surplus is ________.
D.
$1,000; $3,000.
32.
Considering Market Supply, the total quantity supplied at a price of $7.20 would be ________.
B.
120,000
33.
It appears as if the Minimum Value of Average Variable Costs of Production (i.e., AVCmin ) for a
“Type D” firm is
C.
between $7.20 and $9.00.