Econ 200 - Exam 2

1. if an economic agent possesses more information than a fellow transactor

D. there exist asymmetric information

2. which of the following activities create a negative consumption externality

C. smoking cigarettes and drinking alcohol

3. if the social benefits of consuming a good or service exceeds the private benefit

B. a positive externality exits

4. A firm is producing where ATC = $17. The minimum point on the ATC curve is also at $17. The firm is achieving.

C. productive efficiency

5. which of the following does not cause market failure?

D. symmetric information

6. A price-taking firm

A. cannot influence the price of the product it sells

7. A coffee market consist of three firms. The first firm supplies 1000 cups of coffee; the second firm supplies 280 cups of coffee; and a third firm supplies 220 cups of coffee. What is the market supply of coffee?

D. 1500

8. Monopolistic competition is similar to

B. Monopoly, in that firms faced downward sloping demand curve, and similar to perfect competition, in that long-run economic profit is zero.

9. Refer to figure 1. A company releases harmful chemicals during the production process. The social and private costs are given in the figure above. What is the dead weight loss?

C. i

10. Refer to figure 1. A company releases harmful chemicals during the production process. The social and private cost are given in a figure above. What of the following statements is true?

A. There is over-production in this market

11. Which of the following is true of a natural monopoly?

D. a firm can supply the entire market at a lower cost than two or more firms

12. The main reason a Monopoly engages in price discrimination is

A. to increase its profit

13. A cartel is most likely to occur in

D. oligopoly as firms act together to raise prices and increase profits

14. 95 percent of mass media and news outlets are controlled by three major cooperation in the US namely AT&T, Comcast, and Walt Disney. This market structure is called

B. Oligopoly

15. Which of the following describes the market structure of perfect competition?

C. many firms no or low barriers enter your exit, no control over price, and identical products.

16. Refer to figure 2. The graph shows three curves for a firm in a competitive market. MR stands for marginal revenue; ATC is the average total cost; and MC is marginal cost. Which of the following statements is true for the firm?

A. The firm is making a profit

17. if a firm has a total revenue of $120 million, explicit cost of $20 million, and implicit costs of $40 million. The firm also has an average variable cost of $50. It’s economic profit is

C. $60 million

18. Apple Inc. sells noise canceling headphones for $450. The variable cost per unit is $200. The fixed costs (including the cost of research) or $750,000. How many headphones should Apple sell just to be breakeven?

C. 3000

19. Refer to figure 3. Each graph illustrates short-run cost curves for a firm, where ATC is the average total cost, MC is a marginal cost, and AVC is the average variable cost. Based on what you know about the relationships between these curves, which is most likely graph of the cost curves for the firm.

B. Graph B

20. The supply curve of a product is based on the:

B. Behavior of the firm or producer theory

21. Economies of scale refer to

B. the range of output over which the long-run average cost falls as output increases.

22. Economic theory assumes that the goal of a firm is to:

C. Maximize economic profit

23. At present output levels, a firm in a perfectly competitive industry is the following position: output = 200 units, market price = $4, total cost = $420, fixed cost = $200, marginal cost = 4$. To achieve optimum output, the firm should:

C. Leave output unchanged

24. The primary distinction between the short-run and the long-run Is that in the short run

D. some costs of production are fixed, but in the long run, all costs are variable

25. The supply curve for a firm is:

A. Marginal cost curve above the average variable cost curve

26. In the past, lighthouse was used to aid ship captains in safety landing their vessels. The light from the lighthouse is…….. and……..

D. non-excludable; non-rival

27. In economics, the term “free rider” refers to

D. A person who enjoys the benefit benefits of public good without paying for it.

28. Two examples of rivalrous goods are:

A. apples and restaurant meals.

29. Refer to table 1. The average variable cost (AVC) for a quantity of 6,000:

A. 5.5

30. Refer to table 1. The average total cost (ATC) for a quantity of 4,000:

B. 16

31. Refer to table 1. The marginal cost (MC) of increasing production from 8,000 to 9,000:

C. 27