2. Mink farming is a perfectly competitive industry and all mink farms have the same cost curves.
When the market price is $38 a mink, farms maximize profit by producing 400 mink a week. At this output, average total cost is $36 and average variable cost is $22 a mink. Minimum average variable cost is $17 a mink. If the price of a mink falls to $17, the mink farmer will ______.
A.produce the profit-maximizing output
B. shut down
C.continue to produce 400 mink a week
D.attempt to raise the price back to $38 a mink
Which of these is a monopolistic competition?
Canned soup market
Athletic shoe market
Orange juice market
Digital camera market
Mildred and Robert are the only buyers in the market for DVDs.
Mildred buys 9 DVDs when the price of a DVD is $6.00, 8 DVDs when the price of a DVD is $8.00, and 7 DVDs a month when the price of a DVD is $10.00.
Robert buys 17 DVDs a month when the price of a DVD is $6.00, 4 DVDs when the price of a DVD is $8.00 and zero DVDs when the price of a DVD is $10.00.
In the market for DVDs, the quantity demanded _______.
A. increases as the price rises
B .at $8.00 a DVD is 8 DVDs a month
C. at $6 a DVD is less than the quantity demanded at $8.00 a DVD
D. increases as the price falls
E .at $6.00 a DVD is 4 DVDs a month
5. Sally’s Salon is a single price monopoly. The table shows the demand schedule for Sally’s haircuts (column 1 and 2) and the firm’s total cost schedule (columns 2 and 3). Calculate Sally’s total revenue and marginal revenue schedules.
8 Tony and Patty produce skis and snowboards. The first table shows Tony’s production possibilities and the second table shows Patty’s production possibilities. Each week, Tony produces 3 snowboards and 24 skis and Patty produces 6 snowboards and 3 skis. Tony and Patty decide to specialize and trade.
______specializes in snowboards and produces__________
______Specializes in skis and produces________
A. Patty, 12 snowboards, Tony, 30 skis
B. Patty, 3 snowboards, Tony, 3 skis
C. Patty, 30 Snowboards, Tony, 12 skis
D. Tony, 6 snowboards, Patty, 24 skis
E. Tony, 12 snowboards, Patty, 30 skis
9. The table shows a bank’s balance sheet. The bank has no excess reserves and there is no currency drain. Suppose the bank sells $3 million of government securities to the central bank in an open market operation. As soon as the sale happens, the bank can create $ ???? million of new money.
Reserve at Fed 30 Checkable deposit 105
Cash in vault 25 Savings deposit 125
As soon as the sales happen, the bank can create $____ million of new money
the bank’s actual reserve ratio is ________(3 decimal places)
The total quantity of new money created when the bank has no excess reserve is $_______million (1 decimal place)
10. Which of the following are a monopoly
Multiplex Cinema in downtown Minneapolis
The only limousine company licensed to operate at an airport
The US Postal Service
12. You want to watch Football and play poker. You think hard about how to allocate the next hour between football and playing poker. You decide to spend the first 35 minutes watching football and the remaining 25 minutes playing poker. Youe decision is an example of:
A making an all or nothing choice
B making a choice at the margin
C. making a choice such that the marginal cost exceeds the marginal benefit
D. misallocating your time
13. Tulip growing is a perfectly competitive industry, and all tulip growers have the same cost curves. The market price of tulips is $5.00 per bunch, and each grower maximizes profit by producing 600 bunches a week. The average total cost of producing tulips is $11.00 a bunch. Minimum average variable cost is $5.00 a bunch, and the minimum average total cost is $7.00 a bunch.
What is the economic profit that each tulip grower is making in the short run per week?
Because firms in the industry are _____________, some firms will __________the market in the long run.
The number of tulip growers will________
A. incurring an economic loss, exit,decrease
B. making zero economic profit, shut down and exit, decrease
C. making an economic profit; enter, increase
D. incurring an economic loss, enter and some firms will exit, increase or decrease depending on the relative number of entering and exiting firms
E. making an economic profit, exit and some firms will enter, increase or decrease depending on the relative number of entering and exiting firms
16. The table shows the demand and supply schedules for campus housing.
If the campus puts a rent ceiling on rooms of $750 a month, rent is ????? and the number of rooms rented is????
The on campus housing market is_______
Rent Demand Supply
500 5000 4500
550 4500 4500
600 4000 4500
650 3500 4500
700 3000 4500
750 2500 4500
18. The table shows the CPI in Australia.
Calculate Australia’s inflation rates in 2004 and 2005. Did the price level rise or fall in 2005? Did the inflation rate increase or decrease in 2005?
Inflation rate in 2004 was ??? %
Inflation rate in 2005 was ???? %
In 2005, Australia’s price level _____ and it’s inflation rate _______
28 When the price of a good increased by 6% , the quantity demanded of it decreased 3%.
Most likely, this good is ______and _______
A. is a necessity, has good substitutions
B. is a luxury, is narrowly defined
C. is broadly defined, is a luxury
D. has poor substitutes, is a luxury
E. is a necessity, has poor substitutes
30. Will runs a hot dog cart at the sports stadium. Will has no skills, no experience and no alternative employment. Entrepreneurs in the hot dog cart business earn $ 11,000 a year.
Will pays rent of $1000 per year, and his total revenue is $19,000 a year. He borrowed $1100 at 10% a year to buy equipment. At the end of the year, Will was offered $900 for his business and all its equipment.
Will’s explicit costs are $_____
Will’s implicit costs are $ _____
Will’s economic profit in the first year is $_______
37 The table shows a nations marginal benefit and marginal cost schedules.
The marginal benefit from growing 2 pounds of bananas is _______coffee?
The marginal cost of growing 2 pounds of bananas is ______coffee?
Bananas Willing to give up Must give up
1 3 1
2 2 2
3 1 3