HOMEWORK #3–MICROECONOMIC PRINCIPLES

ECN 212, Section 1006, LEC 85225–Fall Semester, 2014

Dr. Filer

TTh 1:30 P.M. to 2:45 P.M. in BAC 116

Due: End of class, Tuesday, November 25, 2014.

Multiple Choice: Answer each of these questions by darkening the bubble on your scantron sheet, as if you were taking an exam in class. Hand in only the scantron sheet. Make sure you have darkened in your name and 10-digit ASU Affiliate ID number on the scantron sheet. YOU MUST USE THE (8 1/2 INCH BY 11 INCH) SCANTRON FORM 229633 BY EXAM SYSTEM IIAVAILABLE IN THE ASU BOOKSTORE. NO OTHER TYPE OF SCANTRON WILL BE ACCEPTABLE.

Use the following to answer questions 1-6:

1.

In the figure above, at a price of $1, the firm would earn an economic profit of

A)

$12.50.

B)

$9.

C)

$13.50.

D)

0.

E)

$15.

2.

According to the figure above, if the market price was $1.50, the individual firm would

A)

be earning a positive economic profit of about $0.87.

B)

be earning a positive economic profit of about $5.

C)

be earning a negative economic profit of about $4.50.

D)

be earning a negative economic profit of about $5.

E)

be earning a positive economic profit of about $0.50.

3.

Refer to the figure above. Assume that first there is an increase in demand in the market from D1 to D2. According to the competitive model discussed in class, in the long run, the typical competitive firm

A)

will produce at quantity 9 and price $1.

B)

will produce at quantity 10 and price $1.50.

C)

will produce at quantity 9 and price $1.50.

D)

will produce at quantity 9 and price $1.25.

E)

will shut down.

4.

According to the figure above, the shift of the MR curve in the graph on the right side from MR1 to MR2 is the result of

A)

an increase in demand.

B)

a decrease in demand.

C)

more firms in the industry.

D)

fewer firms in the industry.

E)

each existingfirm becoming more efficient.

5.

According to the competitive model, the shift of the S curves in the graph on the left side from S1 to S2 to S3 represents

A)

an increased supply because more firms enter the industry.

B)

an increased supply resulting from a larger number of customers.

C)

an increased supply because each firm produces more.

D)

an increased quantity supplied resulting from a higher demand.

E)

an increased quantity supplied resulting from a higher price.

6.

According to the figure above, the long-run equilibrium point is not

A)

at the point where ATC = MC.

B)

at a quantity of 10.

C)

at the minimum point of the ATC curve.

D)

at a quantity of 9.

E)

at the point where ATC = MR.

Use the following to answer questions 7-8:

7.

What is the profit earned by the profit-maximizing firm described in the preceding figure?

A)

AEIG.

B)

0AGF.

C)

0BKJ.

D)

CEIH.

E)

ACHG.

8.

Consider the firm described in the preceding figure. The profit-maximizing output level and price are, respectively,

A)

J and B.

B)

F and E.

C)

F and A.

D)

N and P.

E)

L and D.

Use the following to answer questions 9-11:

Quantity

Total Revenue

Total Cost

15

60

$17

16

64

$19

17

68

$22

18

72

$26

19

76

$31

20

80

$37

9.

Consider the firm described in the table above. How much profit will the firm make per period if it is a profit maximizer?

A)

$46.

B)

Cannot be determined from the information given.

C)

$45.

D)

$20.

E)

$80.

10.

At the profit maximizing level of output, what is the price of the product sold by thefirm described in the table above?

A)

Cannot be determined from the information given.

B)

Varies with output level.

C)

$2.

D)

$6.

E)

$4.

11.

Consider the firm described in the table above. How many units of the good should the firm produce to maximize profit?

A)

17 units.

B)

19 units.

C)

16 units.

D)

Cannot be determined from the information given.

E)

18 units.

Use the following to answer questions 12-16:

12.

In the figure above, consumer surplus for the competitive market is

A)

the area P1P2CB.

B)

the area BCE.

C)

the area AP2C.

D)

the area ACF.

E)

the area AP1B.

13.

In the figure above, consumer surplus in the monopoly situation is

A)

the area BCF.

B)

the area 0FQ1.

C)

the area P1P2CE.

D)

the area AP2C.

E)

the area ACF.

14.

Refer to the figure above. If the competitive industry is monopolized, then the area __________ represents the consumer surplus that is transferred to the monopolist.

A)

ABF.

B)

P1P2CB.

C)

ACEP1.

D)

P1P2CE.

E)

ACP2.

15.

In the figure above, producer surplus for the competitive market is

A)

the area 0AB.

B)

the area 0BQ2.

C)

0.

D)

the area 0P1B.

E)

the area P1AB.

16.

In the figure above, what is the resulting deadweight loss if the competitive industry is monopolized?

A)

The area BCGF.

B)

The area BCE.

C)

The area BCF.

D)

The area P1P2CE.

E)

The area BEF.

Use the following to answer questions 17-20:

Gizmo’s Inc.

Quantity

Price

0

$20

1

$18

2

$16

3

$14

4

$12

5

$10

6

$8

7

$6

8

$4

9

$2

10

$0

17.

In the table above, at what level of output is total revenue maximized?

A)

4.

B)

5.

C)

3.

D)

6.

E)

7.

18.

According to the table above, Gizmo’s cannot be

A)

maximizing profits.

B)

a competitive firm.

C)

an oligopolistic firm.

D)

a very good idea in the first place.

E)

a monopoly.

19.

According to the table above, at what level of output is marginal revenue equal to $14?

A)

3.

B)

1.

C)

2.

D)

4.

E)

5.

20.

According to the table above, what is the marginal revenue of the third unit?

A)

$42.

B)

$18.

C)

$10.

D)

$14.

E)

-$2.

Use the following to answer questions 21-25:

21.

Assume the demand curve intersects the vertical axis at a price of $100. If this were a competitive industry (assuming that the horizontal sum of the ATC curves of the competitive firms in the industry is ATC2), in the short run, consumer surplus each period would be

A)

$2,000.

B)

$1,925.

C)

$3,850.

D)

$1,950.

E)

Cannot be determined from the information given.

22.

Assume the demand curve intersects the vertical axis at $100. How much is consumer surplus at the profit-maximizing level of output?

A)

Cannot be determined from the information given.

B)

$1,000.

C)

$2,000.

D)

$3,900.

E)

$50.

23.

In the preceding figure, assume that a firm with demand curve D and marginal revenue curve MR has the average total cost curve ATC2. How much will the firm earn in economic profit each period?

A)

$2,100.

B)

There is not enough information given to answer the question.

C)

$2,000.

D)

$800.

E)

$1,650.

24.

If the above figure represented a competitive industry that had an industry-total ATC curve of ATC1, in the long-run, the price of the product would be

A)

$50.

B)

Less than $30.

C)

There is not enough information given to answer the question.

D)

$35.

E)

$30.

25.

If the firm in the preceding figure were a monopoly with ATC curve ATC1

A)

In the long-run the firm would shut down.

B)

The total revenue of the firm would be zero each period.

C)

The accounting profit of the firm would be zero each period.

D)

The economic profit of the firm would be zero each period.

E)

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