Download exam three – ec201 – summer 2001 - Pdx

PORTLAND STATE UNIVERSITY
PRINCIPLES OF MICROECONOMICS – EC 201
EXAM THREE
SUMMER 2001
Jack A. Richards, Instructor
______________________
(Name)
OPEN BOOKS AND OPEN NOTES - if you erase on your scantron, write the correct answer to RIGHT side of
the scantron.
1. The total revenue of almond growers will rise when:
a. Demand for almonds is inelastic and price falls.
b. The price of almonds rises and demand is elastic.
c. The price of close substitute walnuts rises, regardless of the elasticity of demand for almonds.
d. Both “b” and “c” are correct.
e. None of the above are ‘correct.
2. College student Jason’s part-time portrait photography service offers a package at the going rate of $150.
On a weekly basis, Jason’s fixed cost is $100 and his total variable cost for 1 through 4 packages is: $50, $150,
$300, $500. How many packages should Jason produce per week?
a. 4
b. 2
c. 1
d. 0
e. None of the above are correct.
3. The profit from the last unit produced by Jason’s photography service (question 2) if three units are produced
is?
a. Zero
b. $2.00
c. $250
d. $150
e. None of the above are correct.
4. In which of the following market structures will the firm reduce output and increase price when MC is
greater than MR:
a. Monopoly
b. Oligopoly
c. Perfect competition
d. Both “a” and “b” are correct.
e. All of the above are correct.
5. The Campus Crustacean Company is currently charging $2 per box for its crawfish. Given the following
information, what should the company do?
PAGE TWO – EXAM THREE – EC201 – SUMMER 2001
Price
$2
3
4
5
a.
b.
c.
d.
e.
Quantity Demanded
1,600
900
650
200
Total fixed costs =$1,000
Variable costs = $1 per box
Shut down
Leave price at $2 and remain open
Raise price to $3 and remain open
Raise price to $4- and remain open
None of the above are correct.
6. A firm can sell 10 units, at $12 per unit and 9 units at $13 per unit. The marginal revenue from the tenth unit
is:
a. $1
b. $3
c. $12
d. $120
e. None of the above are correct.
7. In which of the following market structures will profit be eliminated in the longer run thru entry of new firms
or expansion of
existing firms:
a. Perfect competition
b. Monopoly
c. Monopolistic competition
d. Oligopoly
e. Both “a” and ”c” are correct.
8. Suppose that a competitive firm calculates that at present output and sales, marginal cost is $2.00 and
marginal revenue is $1.00, the firm could maximize profits by:
a. Decreasing price and increasing output
b. Increasing price and decreasing output
c. Increasing output
d. Decreasing output
e. None of the above are correct.
9. A monopolist is selling 6 units at a price of $12. If the marginal
can conclude that the:
a. Price of the seventh unit is $10.
b. Price of the seventh unit is $11.
c. Price of the seventh unit is greater than $12.
d. Firm’s demand curve, is perfectly elastic.
e. None of the above are correct.
revenue of the seventh unit is $5, we
PAGE THREE – EXAM THREE – EC201 – SUMMER 2001
10. The price elasticity of demand for oranges is - 0.8. Assuming no change in the demand for oranges, a 16
percent increase in sales implies that prices have been reduced by:
a. 1 percent
b. 12 percent
c. 12.8 percent
d. 20 percent
e. None of the above are correct.
11. If the wage paid by a firm is increased, this will:
a. Cause the marginal revenue product curve to shift to the left.
b. Cause the marginal revenue product curve to shift to the right.
c. Cause the price of input such as labor (MFC) to increase.
d. Both “b” and “c” are correct.
e. None of the above are correct.
12. In which of the following market structures is economic profit expected to be zero in the longer run:
a. Perfect competition
b. Monopolistic competition
c. Oligopoly
d. Both “a” and “b” are correct.
e. All of the above are correct.
Use this information to answer questions 13 thru 18. Arthur’s Tuna Fishing has
determined that his average catch per trip is a function of the number of crewmembers
that he uses. Labor is his only variable input and costs $100 per day. The firm has fixed
costs of $600 per trip. Based on past production records, he has estimated the following:
Number of crew members:
9
10
11
Catch per trip
(Hundred pounds)
34
34
33
1
2
3
4
5
6
7
8
2
6
11
18
24
28
31
33
13. What is the minimum market price (per pound of fish) that would cause this firm to
hire eight workers?
a. $0.50
b. $0.75
c. $0.80
d. $1.00
e. None of the above are correct.
14. If the market price is $1.00 per pound of fish, the firm-should produce how many
pounds of fish per:
a. 2400
b. 2800
c. 3100
d. 3300
e. None of the above are correct.
PAGE FOUR – EXAM THREE – EC201 – SUMMER 2001
15. If the firm maximizes profit when it receives a market price of $1.00 per pound, it
will earn a profit of:
a. $1,680
b. $2,500
c. $2,700
d. $1,900
e. None of the above are correct.
16. If the firm maximizes profit when it receives a market price of $90 per pound, the
revenue produced by the last worker employed is:
a. Zero
b. $2970
c. $200
d. $190.00
e. None of the above are correct.
17. If the market price is $0.90 and the firm maximizes profit, it will employ how many
workers:
a. 3
b. 8
c. 6
d. 9
e. None of the above are correct.
18. If the firm’s fixed costs increase to $800 per trip and it receives a market price of
$1.00 per pound, if this firm maximizes profit it will earn a profit of:
a. $380
b. $580
c. $1,700
d. Zero
e. None of the above are correct.
Use the, following information to answer questions 19 thru 26. These questions refer
to a contractor that builds 1 to 11 pole barns each month. All data are monthly and total
costs (TC) and market prices are in thousands of dollars. The firm can sell its product in
a competitive market for $18,000 each.
Output =
10
Total Cost =
156
0
11
8
200
1
2
3
4
5
6
7
8
9
32
45
50
56
64
74
89
106
126
19. If this firm produces pole barns only for its competitive market, and maximizes
profit, it will be able to earn a profit of:
a. $37
b. $36
c. $38
d. $44
e. None of the above are correct.
PAGE FIVE – EXAM THREE – EC201 – SUMMER 2001
For questions 20 through 23, assume that this firm develops a unique style pole
barn and that it has a monopoly in selling in this market. The market demand schedule in
this monopoly market is given below:
20. If this firm sells only in its monopoly market and maximizes
profit, it will charge what price for each barn that it produces?
a. $33,000
b. $30,000
c. $27,000
d. $24,000
e. None of the above are correct.
Demand
Price
Quality
42
40
37
35
33
30
27
14
21
18
1
2
3
4
5
6
7
8
9
10
21. The marginal revenue for the 5th pole barn sold in the
monopoly market is:
a. $29,000
b. $25,000
c. $15,000
d. $9,000
e. None of the above are correct.
22. The average fixed cost when 4 pole barns are produced each month:
a. a. $2200
b. b. $2000
c. c. $2400
d. d. $4200
e. e. None of the above are correct.
23.
This firm sells only in its monopoly market and maximizes profit, it can expect to
earn a net profit of:
a. $162,000
b. $82,000
c. $180,000
d. $106,000
e. None of the above are correct.
For questions 24 thru 26, assume that this firm can use price discrimination between its
competitive and monopoly markets.
24. If this firm uses price discrimination, it will sell how many pole barns in its
competitive market?
a. 2
b. 5
c. 6
d. 3
e. None of the above are correct.
PAGE SIX – EXAM THREE – EC201 – SUMMER 2001
25. If this firm uses price discrimination it will charge what price in its monopoly
market?
a. $18
b. $24
c. $33
d. $27
e. None of the above are correct.
26. If this firm uses price discrimination, it will earn a net profit of what amount?
a. $113
b. $82
c. $101
d. $308
e. None of the above are correct.
END OF QUESTIONS RELATING TO POLE BARN CONSTRUCTION.
27. If production of an item entails substantial external benefits and no external costs,
then market (price) allocation will result in:
a. Too much of the good will be produced.
b. Too little of the good will be produced.
c. The market price will be too high unless production is subsidized.
d. Only “a” and “c” are correct.
e. Only “b” and “c” are correct.
28. Assuming that the price of a good substitute product declines, while all other factors
remain unchanged, Sito Company can be certain that which of the following, if any, will
always happen?
a. Their total revenue will decrease.
b. Their competitors’ total revenue will decrease.
c. Their total revenue will increase
d. Both “a” and “b” will always happen.
e. None of the above are correct,
USE THE FOLLOWING INFORMATION TO ANSWER QUESTION 29, WHICH
RELATES TO TONS OF ENVIRONOMENTAL POLLUTION PRODUCED DAILY
IN A SINGLE COMMUNITY.
Quantity of Pollution
(TONS)
1
2
3
Total Benefits of Pollution
Control
45
80
110
Total Costs of Pollution
Control
25
50
75
4
5
130
145
100
125
29. This community should utilize what quantity of pollution control (in tons) if it wishes
to maximizes the net benefits from this program.
a. 3
b. 2
c. 1
d. 4
e. none of the above
are correct.
ANSWERS TO EXAM THREE – EC201 – PSU – SUMMER 2001
1.
2.
3.
4.
5.
6.
–c
–b
–a
–d
–d
–b
7.
8.
9.
10.
11.
12.
–e
–d
–b
–d
–c
–d
13.
14.
15.
16.
17.
18.
–a
–d
–d
–e
–b
–c
19.
20.
21.
22.
23.
24.
–c
–b
–b
–b
–d
–d
25.
26.
27.
28.
29.
–c
–a
–e
–a
–a