Microeconomics Assignment

Part 1- The Firm and Perfect Comp

Question 1

Lisa quit her $17000-per-year job to start her own economics consulting firm. At the end of her first year of operation, her total revenues were $92000. Her total explicit costs were $59000. What was her economic profit for the year? (Give response as a number, no commas, decimals, dollar signs, or otherwise.)

Question 2

The average total cost of producing electronic calculators in a factory is $16 at the current output level of 130 units per week. If fixed cost is $850 per week, then what is the firm's variable cost? (enter answer as just a number, no commas, dollar signs, or the like)

Question 3

The total cost of producing 25 tons of butter is $50000. If average variable cost is $590, then what is the firm's average fixed cost? (enter answer as just a number, no commas, dollar signs, or the like)

Question 4

To maximize profits, firms in a perfectly competitive market should produce where

marginal revenue exceeds marginal cost
marginal cost equals marginal revenue
total revenue is maximized
marginal cost exceeds marginal revenue
total cost exceeds marginal revenue
marginal cost equals total revenue

Question 5

A firm facing a price of $10 in a perfectly competitive market decides to produce 100 widgets. If its marginal cost of producing the last widget is $12 and it is seeking to maximize profit, the firm should

produce fewer widgets
shut down
produce more widgets
continue producing 100 widgets

Question 6

Refer to the graph above. If the market price is P2 the firm in the short run will produce:

Q3 and earn economic profits
Q4 and incur a loss
Q3 and earn zero economic profits
Q2 and incur a loss

Part 2 - Monopoly

Question 1

A monopolist

always earns a profit in the short run but not the long run
can never incur losses
can earn profits or incur losses in the short run
always earns a profit in the short run and the long run

Question 2

Refer to the graph above and provide the correct numbers (no units or dollar signs) in the spaces provided.

Profit maximizing output:
Profit maximizing price:
Loss of surplus to society (deadweight loss):
Consumer surplus transferred to monopolist:

Question 3

The DeBeers Company is a profit-maximizing monopolist that exercises monopoly power in the distribution of diamonds. If the company earns positive economic profits this year, then the price of diamonds will

exceed the marginal cost of diamonds but be equal to the average total cost of diamonds
exceed both the marginal cost and the average total cost of diamonds
be equal to the average total cost of diamonds
be equal to the marginal cost of diamonds

Question 4

A monopoly that arises because of economies of scale is referred to as a...

network monopoly
local monopoly
legal monopoly
regulated monopoly
natural monopoly.