Microeconomics Exam #3

Question 1

the social cost of antibiotic consumption equals the private cost of producing antibiotics plus the cost of increased bacterial resistance to antibiotics.

Answer 1

true

Question 2

***if a firm has revenues of $125, explicit costs of $25, and implicit costs of $50, then its accounting profit is

Answer 2

$100

Question 3

**buying cigarettes in Kentucky and taking them to Virginia, where the price is higher, is called:

Answer 3

arbitrage
wrongperfect price discrimination

Question 4

the power to raise price above marginal cost without fear that other firms will enter the market is

Answer 4

market power

Question 5

which of the following statements is true?
i. perfect price discrimination maximizes consumer surplus.
ii. perfect price discrimination maximizes gains from trade.
iii. under perfect price discrimination, the monopolist produces until price equals marginal cost.

Answer 5

ii and iii only

Question 6

Graph natural monopoly
This firm’s profit-maximizing price is ____ and quantity is ____

Answer 6

B,K
A natural monopoly will maximize profits by producing at the quantity where marginal revenue (MR) equals marginal costs (MC) and by then looking to the market demand curve to see what price to charge for this quantity.

Question 7

monopoly power is best described as the ability to

Answer 7

earn economic profits without causing new firms to enter the market.

Question 8

monopolists that are able to perfectly price-discriminate will produce a level of output equal to the efficient level of output produced in a competitive market.

Answer 8

true