If the government desires to raise a certain amount of revenue by taxing a monopoly, an ad valorem tax will A) generate the same loss of consumer surplus as a specific tax. B) generate a greater loss of consumer surplus than a specific tax. C) generate a smaller loss of consumer surplus than a specific […]
Date: September 9th, 2020
Suppose a firm has the following total cost function: TC = 100 + 4q2. What is the minimum price necessary for the firm to earn profit? Below what price will the firm shut down in the short run? What will be an ideal response? ANSWER AC = 100/q + 4q. This is minimized when […]
Date: September 9th, 2020
The existence of a deadweight loss associated with a monopoly can be seen because A) consumers are willing to pay more for the last unit of output than it costs to produce. B) the cost of the last unit produced is more than consumers are willing to pay for it. C) the producer surplus is […]
Date: September 9th, 2020
The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called A) deadweight loss. B) comparative loss. C) Lerner Loss. D) Consumer Value Loss. ANSWER A
Date: September 9th, 2020
In a graph of a firm’s short-run total costs and total revenue, the total cost and the total revenue curves, respectively, will intersect the vertical axis A) above the origin, above the origin. B) above the origin, at the origin. C) at the origin, at the origin. D) below the origin, below the origin. […]
Date: September 9th, 2020
Suppose a competitive firm’s total revenue is $1,000,000 where MR = MC, its explicit variable costs are $900,000, its fixed costs are $90,000 of which $60,000 are sunk in the short run. If its implicit opportunity costs are $50,000, the firm should A) produce because its economic profit is positive. B) produce because its economic […]
Date: September 9th, 2020
Suppose there are 20 competitive firms in a market. The supply curve of each firm is q = 2p. The market demand is Q = 200 – 2p. What is the residual demand curve facing a typical firm? What will be an ideal response? ANSWER The residual demand curve is equal to the market […]
Date: September 9th, 2020
If a profit-maximizing firm finds that, at its current level of production, MR < MC, it will A) decrease output. B) increase output. C) shut down. D) operate at a loss. ANSWER A
Date: September 9th, 2020
If a firm sets marginal revenue equal to marginal cost, it will make an economic profit. Indicate whether the statement is true or false ANSWER False. When a firm sets MR=MC it maximizes profits but the profit-maximizing level of output might still be negative (the smallest loss possible).
Date: September 9th, 2020
Suppose a monopolist has TC = 40 + 10Q + Q2, and the demand curve it faces is p = 130 – 2Q. What is the Lerner index of this profit-maximizing monopolist? A) 0.222 B) 0.35 C) 0.444 D) 0.50 ANSWER C
Date: September 9th, 2020
