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59. If = $10 per unit at some output level q, and AFC = $6 per unit at half the above output q, then AVC at output q must be equal to: (a) $4/unit (b) $6/unit (c) $7/unit (d) $22/unit (e) none of the above.

60. Which of the following is necessary for price discrimination to occur? (a) a completely monopolized industry (b) different demands by different categories of consumers (c) a transferable product or service (d) easy arbitre (e) all of the above.

61. Books Incorporated is a monopohst producer of books selling at a constant of $5 into the following demand curve:

Quandty Demanded (Q) 0 1 2 3 4 5 6 Price per Book (P) $20 $17 $14 $11 $8 $5 $2

The monopolists profits are: (a) $14 (b) $5 (c) $8 (d) $18 (e) none of the above.

62. In the above problem, the welfere loss to society from monopolizing the book industry is about (a) $0 (b)$18 (c)$24 (d)$27 (e) none of die above.

63. In the mid-west floods of 1993, certain upstream towns along the Mississippi sandbagged their communities to prevent flooding, thereby causing increased flooding and sandbagging in downstream communities. Which of the following is false? (a) the provision of upstream sandbagging was a public good in those communities (b) we cannot reasonably rely upon the Coase Theorem to solve any potential efficiency problem in this case (c) the marginal social costs of upstream sandbagguig must have exceeded the marginal social benefits or it wouldnt have occurred (d) upstream sjmdbagguig involved negative externalities (e) less flood control in upstieam communities may be a more efficient allocation of resources.

64. If a monopoly with typical "U" shaped cost curves is currendy selling where its linear demand curve is unit elastic, then: (a) it should decrease output (b) its marginal revenue is zero (c) it may or may not be earning some profit (d) it should increase price (e) all ofthe above.

65. A kinked demand curve is most consistent with which one of the following market stiuctures? (a) pure competition (b) pure monopoly (c) oli-

gopoly (d) discriminadng monopoly (e) monopolistic competition.

66. A market suucture in which average total costs definitely decline over most of the range of market demand is: (a) oligopoly (b) monopoly (c) monopoly with price discrimination (d) natural monopoly (e) competidon.

67. Recently the California Attorney Generals Office filed an antitrust complaint against several oil producer/refiners, alleging in effect, that they formed a joint profit maximizing cartel in the manufacturing of gasoline in that year. If the economic profits of the defendants were super-normal and the market elasticity of demand was 0.40, what would be your testimony as an expert witness in this litigation? (a) both the elasticity and profits are conclusive proof of the charge

(b) the findings are inconsistent with each other and hence cannot both be correct (c) the elasticity is conclusive proof that the charge is false and the profits could be the consequence of an increase in world oil prices (d) both the elasticity and the profits are evidence that the charge is false, but they are not conclusive proof (e) all of the above.

68. When firms in a perfecdy compedtive industry have identical cost curves, an increase in the long run market demand means that: (a) firms will earn long run profits (b) the number of furms in the industry will increase, but not the long run price (c) prices will increase, but not the number of firms (d) both the long run price and mmiber of firms will increase (e) long rim price will be greater than minimum average total cost.

69. Assuming typical "U" shaped cost curves, average fixed cost: (a) exceeds (b) is less than

(c) always exceeds AVC (d) always declines as production increases (e) both (b) and (d).

70. Monopolistic competition involves a welfare loss because: (a) too many firms enter the market

(b) is below MC curve (c) in long run equilibrium MC is less than price (d) P = where MC is above (e) none of the above.

71. Given typical "U" shaped curves, when is rising: (a) MC is below (b) MC is constant

(c) AFC is increasing (d) AVC is increasing (e) none of the above.

72. Suppose you are in long run equilibrium in a perfectly competitive industry. If your employees decide to unionize and increase wages while those of your com-peutors do not, then your firm will: (a) raise price to cover costs (b) use more machines instead of workers

(c) charge a price equal to MC (d) sdll operate, but produce less output than before (e) go out of business.

73. If a firm is not earning a positive economic profit in the long run, then the industry most likely is: (a) a natural monopoly or kinked oligopoly (b) efficient (c) perfecdy compeddve or monopolisdcally compeddve (d) inefficient (e) unionized.

74. Assume die 1994 World (Soccer) Cup will cost approximately $12,000,000 to stage. If the average variable cost was $10 per person for a crowd of 400,000, what would the average fixed cost be for a crowd half that size? (a) $6 (b) $12 (c) $40

(d) $80 (e) $120.

75. Ted Turner Inc. is a compedtive firm in the yacht building industry. His short run cost schedule is:

Number of yachts:

0 1 2 3 4 5

Total cost (in $):

100,000 150,000 190,000 250,000320,000 400,000

How many yachts would he produce if the price of a yacht was $40,000? (a) 0 (b) 2 (c) 3 (d) 4 (e) 5.

76. You are one of only a few firms in an industry and you have noticed that if you decrease the price of your product, your total revenue decreases, but if you increase price, the same thing happens. Which of the following t\pes of market structures best describes this industry? (a) perfect compeddon (b) cartel oligopoly (c) kinked demand oligopoly (d) natural monopoly (e) monopolisdc compeddon.

77. Professional sports are thought to be a type of rrionopsonic labor market. If this is true, then when basketball star Shaqudle ONeal entered the Nadonal Basketball Association, he should expect: (a) to be paid a higher salary than if he were entering a more competidve market (b) to be paid a wage equal to the additional revenue he brings in (c) the price of basketball tickets to decrease (d) to be paid a lower salary than if he were entering a more competitive market (e) the wage rate of all other basketball players to decrease.

78. If averse variable costs are increasing,-then: (a) MC must be higher than AVC (b) MC must be decreasing (c) must be increasing (d) MC can be lower than AVC (e) both (a) and (c).

79. As output rises, the vertical difference between the average totJil cost curve and the average variable cost curve: (a) rises at a decreasing rate (b) falls, then rises (c) falls continuously (d) rises, then falls (e) is constant.

80. Snarls Jr. is a monopolistically competitive hamburger producer whose hamburgers are demanded as follows:

P $1.10 $1.00 $0.90 $0.80 $0.70 $0.60$0.50$0.40 QI 2 3 4 567 8

If average variable cost is constant at 500 per hamburger, how many will be produced in the short run? (a) 0 (b) 2 (c) 4 (d) 6 (e) 8.

81. Ina competidve industry whose firms have typical "U" shaped cost curves, the short nm profit maximizing output will always be at a point where: (a) MC is increasing (b) MC is decreasing (c) P = min (d) P = min AVC. (e).£CQnomic profits artpLOsitiYe.

82. Which of the following are likely to cause externalities? (a) mowing your lavm (b) playing your stereo loud enough to cause the paint to flake (c) keeping a rabid dog (d) working in the cafeteria when you have a cold (e) all of the above.

83. If a regulatory agency allows a natural monopoly with continuously falling average total cost curves to make only normal profits, then the monopoly will operate where: (a) marginal revenue equals marginal cost (b) marginal revenue exceeds marginal cost

(c) marginal revenue equals average variable cost

(d) price equals average total cost and exceeds marginal cost (e) price equals both average total cost and marginal cost.

84. In which of the following markets would you be least likely to see price discrimination? (a) Amtrak tickets (ij) Econ 1 tutoring (c) manicures (d) opera tickets (e) candy bars.

85. In long run equilibrium a monopolistically competitive firm: (a) produces where average rev-

enue equals average total cost (b) operates in the region of economies of scale (c) faces a more elastic demand curve for his product than in the short run (d) all of the above (e) answers (b) and (c) only.

86. All of the following might be found producing in the center of the region of economies of scale except: (a) a monopoly (b) a member of a joint profit maximizing cartel (c) a kinked demand oligopolist (d) a compedtive firm (e) a monopolisdc compedtor.

87. V ich of the following may not occur under perfect compeddon and must occur under monopoly? (a) profits (b) price greater than marginal cost (c) average revenue greater than marginal revenue (d) price equal to minimum average total cost (e) both answers (b) and (c).

88. If marginal revenue exceeds marginal cost, a monopohst will: (a) necessarily enjoy profits (b) expand provided average variable cost can be covered in the short run (c) shutdown (d) reduce output (e) expand only if average total cost can be covered in the short run.

89. Which of the following is true? (a) TC = (ATC)Q (b) TVC = (AVC)Q (c) AR = P (d) AFC = (TFC) /q (e) all of die above.

90. The elasdcity of demand for the morning edi-don of the two newspapers published in Zero, Arizona, is 0.92 and that of the evening edidon is 1.45. If the firm which publishes these papers wants to make greater profits, it should definitely: (a) raise the price of the morning edidon (b) raise the price of the evening edidon (c) lower the price of the morning edidon and raise the price of the evening edidon (d) lower the price of both edidons (e) lower the price of the evening edition and raise the price of the morning edidon.

91. If the paper hires a manager and pays him 10% of the combined total revenues taken in by the papers, then in the quesdon above the manager will want to: (a) (b) (c) (d) (e).

92. Which of the following would render price discrimination for the purpose of profit maximizadon impossible? (a) unlimited arbitrage (b) idendcal demand curves for all categories of buyers (c) the

absence of market power (d) all of the above (e) none of the above.

93. Market power is absent in which of the following market structures? (a) government barrier monopoly (b) natural monopoly (c) kinked demand oligopoly (d) long run monopolistic compedtion (e) none of die above.

94. The absence of profit is most characterisdc of: (a) a monopolist operating in the region of diseconomies of scale (b) short run compedtion (c) long run monopolisdc competidon (d) a joint profit maximizing cartel operadng in the long run (e) kinked demand oligopoly in the short run.

95. Which of the following features can be common to both profit maximizing compedtive firms and members of a joint profit maximizing cartel? (a) operadng in the inelasdc portion of the industry demand curve (b) long run profits (c) barriers to entry (d) price greater than average revenue (e) none of the above.

96. If in long run equilibrium the marginal cost of the last unit produced by a monopolistic compedtor is $20, dien: (a) must be more dian $20 (b) MR must be less than $20 (c) profits must equal or exceed $20 (d) minimum must be less than $20 (e) at the chosen output must be less than $20.

97. Which of the following is not a feature of the kinked demand curve oligopoly model? (a) inelastic demand at all prices above the kink (b) price stability (c) competitors match price decreases below the kink price (d) a discontinuity in the marginal revenue curve (e) an elasticity of demand which varies with price.

98. Which of the following is false? (a) if only one firm uses the shipping lanes in a certain region of the world, self provision of lighthouses in this locale will be efficient (b) not all externalities are harmful (c) U.S. Highway 101 during rush hour is a public good (d) Common property resources tend to be abused (e) if marginal social costs exceed marginal private costs, an excise tax equal to the difference will optimize output.

99. The Fallen Arches Hamburger Company can produce burgers by hiring teenagers under the following production and supply conditions:

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