Zach took $400,000 out of the bank and used it to start his new cookie business. The B.

$-6,000
bank account pays 3 percent interest per year. During the first year of his business, Zach
sold 6,000 boxes of cookies for $2.50 per box. Also, during the first year, the cookie
business incurred costs that required outlays of money amounting to $9,000. Total revenue =
6,000*$2.50 = $15,000
Zach's economic profit for the year was:
Explicit costs = $9,000
A. $-506,000.
Implicit costs =
B. $-6,000.
$400,000*3% = 12,000
C. $3,000.
=> economic profits =
D. $6,000. $15,000-(9,000+12,000)
= $-6,000

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 A. The farmer is able to
workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers produce 5,600 bushels
(marginal products = 4,400 – 3,000 = 1,400). Which of the following possibilities is of wheat when he hires
consistent with the property of diminishing marginal product? 4 workers.

A. The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers
(marginal products = 5,600 – 4,400 = 1,200 < 1,400).

B. The farmer is able to produce 5,800 bushels of wheat when he hires 4 workers.

C. The farmer is able to produce 6,000 bushels of wheat when he hires 4 workers.

D. All of the above are correct.

Dolores used to work as a high school teacher for $40,000 per year but quit in order to B. Louis says her profit
start her own catering business. To buy the necessary equipment, she withdrew is $34,100 and Greg
$20,000 from her savings (which paid 3% interest) and borrowed $30,000 from her says her lost is $6,500
uncle, whom she pays 3% interest per year. Last year, she paid $25,000 for ingredients
and had revenue of $60,000. She asked Louis, the accountant, and Greg, the economist
to calculate her profit for her. Accounting profit =
$60,000 - $25,000 -
A. Louis says her profit is $34,100 and Greg says her profit is $6,500
$30,000*3% = $34,100
B. Louis says her profit is $34,100 and Greg says her lost is $6,500

C. Louis says her profit is $35,000 and Greg says her lost is $5,000
Economic profit =
D. Louis says her profit is $35,000 and Greg says her profit is $33,500 $34,100 – implicit costs
= $34,100 – $20,000*3%
- $40,000 = $-6,500
 Finish the table

Output Fixed Variable Total Average Average Average Marginal

costs costs costs fixed cost variable cost total cost cost

0 1,080 0 1,080 - 0 - -

1 1,080 400 1,480 1,080 400 1,480 400

2 1,080 850 1,930 965 450

3 1,080 1,350 2,430 =1,080/3 =1,350/3 =2,430/3 = 2,430 –

1,930

= 500

4 1,080 1,900 2,980 475 550

5 1,080 2,500 3,580 216

6 1,080 3,200 4,280 700

7 1,080 4,100 5,180

8 1,080 5,400 135

9 1,080 7,300

10 1,080 10,880 980

Suppose a firm in a competitive market received $1,000 in total revenue and had a marginal D. $10 and 100
revenue of $10 for the last unit produced and sold. What is the average revenue per unit,
and how many units were sold? MR = MC = Price = Average revenue/ unit
MR = P = $10
A. $5 and 50
Q = TR/P =
B. $5 and 100
$1,000/$10
C. $10 and 50

D. $10 and 100

Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's C. $10,985 and
marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $1,003
$12 per unit. At Q = 999, the firm's total cost and profit amounts to:

A. $10,985 and $993

Total cost (at Q=1000)
B. $10,989 and $997 = 1,000*11 = $11,000

C. $10,985 and $1,003 Total cost (at Q=999)

D. $10,989 and $1,007 = 1,000*$11 - $15

= $10,985

Total revenue (at

Q=999) = 999*$12 =
$11,988

The short-run supply curve for a firm in a perfectly competitive market is D. the portion of its
marginal cost curve
A. horizontal.
that lies above its
B. likely to slope downward. average variable cost.

C. determined by forces external to the firm.

D. the portion of its marginal cost curve that lies above its average variable cost. (b/c in the short-run if
price is below average
variable cost, a firm in
a competitive market
will shut-down)

B. an eventual
increase in the
number of firms in
the market and a new
long-run equilibrium
at point C

Refer to the figure. Assume that the market starts in equilibrium at point A in panel (b). An
increase in demand from Demand0 to Demand1 will result in:

A. a new market equilibrium at point D

 B. an eventual increase in the number of firms in the market and a new long-run
equilibrium at point C

C. rising prices and falling profits for existing firms in the market.

D. falling prices and falling profits for existing firms in the market

A fundamental source of monopoly market power arises from C. barriers to entry

A. perfectly elastic demand

B. perfectly inelastic demand

C. barriers to entry

D. availability of “free” natural resources, such as water or air

Which of the following is an example of a barrier to entry?(i) A key resource is owned by a D. All of the above…
single firm.(ii) The costs of production make a single producer more efficient than a large
((i) – monopoly
number of producers.(iii) The government has given the existing monopoly the exclusive
resources
right to produce the good.
(ii) – the production
A. (i) and (ii)
process
B. (ii) and (iii)
(iii) – government
C. (i) only regulation)

D. All of the above are examples of barriers to entry.

B. Industry B

(concentration ratio =
sum of percentage of
output supplied by
the top 4 firms in one
industry)

Refer to Table 16-1. Which industry has the highest concentration ratio?

A. Industry A

B. Industry B

C. Industry C

D. Industry D
 C. 150 units of output
and price of $15 per
unit

Profit = (P-ATC)*Q

Refer to the figure. To maximise total surplus, a benevolent social planner would choose
which of the following outcomes?

A. 100 units of output and price of $10 per unit

B. 150 units of output and price of $10 per unit

C. 150 units of output and price of $15 per unit

D. 200 units of output and price of $10 per unit

Refer to the figure. The monopolist's maximum profit and deadweightloss caused by a profit- D. cannot be
maximising are: determined from the
diagram and and
A. $800 and $250
$250
B. $1,000 and $150

C. $1,250 and $150

D. cannot be determined from the diagram and and $250

Imagine that two oil companies, Big Petro Inc. and Gargantuan Gas, own adjacent oil fields. D. $28 million
Under the fields is a common pool of oil worth $48 million. Drilling a well to recover oil costs
$2 million per well. If each company drills one well, each will get half of the oil and earn a
$22 million profit ($24 million in revenue - $2 million in costs). Assume that having X percent (=48/3*2 – 2*2 = $28)
of the total wells means that a company will collect X percent of the total revenue. If Big
Petro Inc. were to drill a second well, what would its profit be if Gargantuan Gas did not drill Profit for Gargantuan
a second well? Gas in this situation

A. $22 million = 48/3*1 – 2 = $18

B. $24 million (If Gargantuan also

drill the second well,
C. $26 million the 2 firm has same
profit = $48/2-2*2 =
 D. $28 million $20 million)

Imagine that two oil companies, Big Petro Inc. and Gargantuan Gas, own adjacent oil fields. B. Gargantuan Gas
Under the fields is a common pool of oil worth $48 million. Drilling a well to recover oil costs will always drill a
$2 million per well. If each company drills one well, each will get half of the oil and earn a second well.
$22 million profit ($24 million in revenue - $2 million in costs). Assume that having X percent
of the total wells means that a company will collect X percent of the total revenue. Refer to
the Scenario: Gargantuan Gas's dominant strategy would lead to what sort of well-drilling
behavior?

A. Gargantuan Gas will never drill a second well.

B. Gargantuan Gas will always drill a second well.

C. Gargantuan Gas will drill a second well only if Big Petro Inc. drills a well.

D. Gargantuan Gas will drill a second well only if Big Petro Inc. does not drill a well.

A. $200.00

Price = $80

Consumer surplus is
the area below
demand curve and
above price

=> consumer surplus

= ½*(100-80)*20 =
$200

Refer to Figure 17-5. This figure depicts a situation in a monopolistically competitive market.
How much consumer surplus will be derived from the purchase of this product at the
monopolistically competitive price?

A. $200.00

B. $312.50

C. $400.00
 D. $800.00

C. G

Which area represents the deadweight loss from monopoly?

A. A+B

B. C+F

C. G

D. A+B+C+F

A similarity between monopoly and monopolistic competition is that, in both market C. sellers are price
structure, makers rather than
price takers
A. strategic interactions among sellers are important

B. there are a small number of sellers

C. sellers are price makers rather than price takers

D. product differentitation is important

 A. The firm is
currently in the short-
run, making profit
and other firms will
be more likely to
enter the market

Profit = (P-ATC)*Q

= (600-500)*10 =
$1,000

Refer to the figure, the firm in this figure is monopolistically competitive. Choose the correct
answer.

A. The firm is currently in the short-run, making profit and other firms will be more
likely to enter the market

B. The firm is currently in the long-run, making loss and other firms will be more likely
to exit the market

C. The firm is currently in the short-run, incurring profit and other firms will be more
likely to enter the market

D. The firm is currently in the long-run, earning zero profit and other firms have no
incentives to enter or exit the market

Bonus: Calculate the profit generated by the firm.

A. Low price, $500

Refer to the table. If grocery store 2 sets a low price, what price should grocery 1 set? And
what will grocery store 1’s payoff equal?

A. Low price, $500

B. High price, $800

C. Low price, $100

D. High price, $100

Refer to the table. If grocery store 2 sets a high price, what price should grocery 1 set? And A. Low price, $800
what will grocery store 1’s payoff equal?

A. Low price, $800

 B. High price, $5650

C. Low price, $100

D. High price, $800

Refer to the table. What is the nash equilibrium of this price-setting game? A. Low price for both
store
A. Low price for both store

B. High price for both store

C. Low price for store 1 and High price for store 2

D. Low price for store 2 and High price for store 1

1. Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She
withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and
the interest rate on her savings account is 2%.
a. Emily’s explicit cost of capital is…

Explicit costs = what Emily pays out by cash = $200,000*6% = $12,000

b. Emily’s implicit cost of capital is…

Implicit costs = what Emily does not pay out by cash but still gives up = $100,000*2% = $2,000

c. Emily’s total opportunity cost of capital is…

Opportunity costs = Explicit costs + Implicit costs = $12,000 + $2,000 = $14,000

Lưu ý: $100,000 withdraw from savings account is NOT opportunity costs => WHY? => bởi vì nếu Emily
không rút $100,000 này ra để mở nhà hàng thì cô ấy vẫn có thể để $100,000 đó trong savings account
hoặc là mang đi làm việc khác => $100,000 này không mất đi bất kể trường hợp nào.

2. a. In the long run Irene’s Ice Cream Parlor incurs total costs of $2,500 when output is 1,250 units
and $4,000 when output is 1,500 units. For this range of output, Irine’s exhibits economies of
scale/ diseconomies of scale/ constant return to scales?

Economies of scale: tăng output => average total costs giảm

Constant return to scale: tăng output => average total costs giữ nguyên

Diseconomies of scale: tăng output => average total costs tăng

At Q=1,250 => ATC = $2,500/1,250 = $2

At Q=1,500 => ATC = $4,000/1,500 = $2.67 > $2

=> As output increases, average total costs increase => Irine’s exhibits diseconomies of scale.

b. In the long run Willie’s Chocolate Factory incurs total costs of $2,500 when output is 1,250
units and $2,750 when output is 1,500 units. For this range of output, Willie’s exhibits
economies of scale/ diseconomies of scale/ constant return to scales?
At Q=1,250 => ATC = $2,500/1,250 = $2

At Q=1,500 => ATC = $2,750/1,500 = $1.83 < $2

=> As output increases, average total costs decrease => Irine’s exhibits economies of scale.

c. In the long run Al’s Sandwich Shop incurs total costs of $2,500 when output is 1,250 units and
$3,000 when output is 1,500 units. For this range of output, Al’s exhibits economies of scale/
diseconomies of scale/ constant return to scales?

At Q = 1,250 => ATC = $2,500/1,250 = $2

At Q = 1,500 => ATC = $3,000/1,500 = $2

=> As output increases, average total costs do not change => AI’s Sandwich Shop exhibits constant
return to scales.

3. Refer to the table below and answer the following questions:

a. What is the total fixed cost for this firm?

Total fixed costs = $40 (is the cost that does not vary with the quantity of output produced)

b. What is average fixed cost when output is 40 units?

Average fixed cost at 40 units = $40/40 = $1/unit

c. What is average variable cost when output is 50 units?

Average variable cost at 50 units = (Total costs – fixed costs)/quantity = ($240 - $40)/50 = $4/unit

d. What is variable cost when output equals 30 units

Variable cost at 30 units = Total costs – fixed costs = $130 - $40 = $90

4. Refer to table below and answer the following questions

a. For a firm operating in a competitive market, the price is?

b. For a firm operating in a competitive market, the marginal

revenue is?

c. For a firm operating in a competitive market, the average

revenue is?

d. Over which range of output is average revenue equal to price?

 e. Over what range of output is marginal revenue declining?

a. Price = Revenue/quantity = $7
b. Marginal revenue = Price = $7 (because this is a firm in competitive market)
c. Average revenue = Revenue/ quantity = Price = marginal revenue = $7
d. Average revenue is equal to price over the entire range of output = Total revenue/ quantity.
e. None; marginal revenue is constant over the entire range of output.

5. Fill in the following table and answer the questions:

COSTS REVENUES

Quantity Total cost Marginal Quantity Price Total Marginal

produced cost demanded revenue revenue

0 $100 - 0 $120 0 -

1 $150 $50 1 $120 $120 $120

2 $202 $52 2 $120 $240 $120

3 $257 $55 3 $120 $360 $120

4 $317 $60 4 $120 $480 $120

5 $385 $68 5 $120 $600 $120

6 $465 $80 6 $120 $720 $120

7 $562 $97 7 $120 $840 $120

8 $682 $120 8 $120 $960 $120

a. How many unit does the firm need to sell to maximize its profit (MR=MC)? Calculate the
maximized profit?
⇨ Firm maximizes profit at the quantity of output where marginal costs = marginal revenue

⇨ At 8 units MC = MR = $120 => firm needs to sell 8 units to maximize profit.

⇨ Profits = $120*8 - $682 = $960 - $682 = $278

b. If the firm is producing at 5 units, what it should do?

⇨ Should increase the quantity produced to 8 units to maximize profit.

c. If the firm finds its marginal costs = $130/unit, what it should do?
⇨ Should decrease the quantity produced because now the marginal costs exceed the marginal
revenue (=price=$120) => decrease quantity produced helps increase profits.
 6. Look at the below figure and answer the questions

a. If the market price is P1/P2/P3/P4, in the short

run, the perfectly competitive firm will earn
negative/ positive/ zero profits?

b. Which of the four prices corresponds to a

perfectly competitive firm earning negative
economic profits in the short run but trying to
remain open? => P3

c. Which of the four prices corresponds to a

perfectly competitive firm earning negative
economic profits in the short run and shutting
down? => P4

a. Lưu ý: quantity = giao điểm của price và MC.

At P1: Price = average total revenue > ATC => positive profits
At P2: Price = Average total revenue = ATC => zero profits
Atw P3: Price = Average total revenue < ATC => negative profits
At P4: Price = Average total revenue < ATC => negative profits
b. A perfectly competitive firm earning negative economic profits in the short run but trying to
remain open when its price < average total costs but still > average variable costs (because
selling additional units would lower total fixed costs hence lower total costs) => at P3.

c. A perfectly competitive firm earning negative economic profits in the short run and shutting
down when its price < average variable costs (because selling additional units would increase
total costs) => at P4.

7. Sally owns the only shoe store in town. She has the following cost and revenue information. Fill
in the following table and answer the questions:

COSTS REVENUES

Quantity Total cost Marginal Quantity Price Total Marginal

produced cost demanded revenue revenue

0 100 - 0 170 0 -

1 140 40 1 160 160 160

2 184 44 2 150 300 140

 3 230 46 3 140 420 120

4 280 50 4 130 520 100

5 335 55 5 120 600 80

6 395 60 6 110 660 60

7 475 80 7 100 700 40

8 565 90 8 90 720 20

= 160 + 150 + 140 +... + 90

Di ~ 20tr
Nhân ~ 10tr
=> Nếu chị bán giá 20tr: có 1 người, nếu giá 10tr -> có 2 người.
a. Sally will maximize her profits by selling how many pairs of shoes? What is the maximized profit?
⇨ Sally will maximize her profits by selling 6 units where marginal costs = marginal revenue = $60

⇨ The profits = $110*6 - $395 = $265

b. What are Sally's fixed costs? => $100 (cost when selling 0 unit)
c. If the monopolist can engage in perfect price discrimination, what is the quantity that maximizes
economic profit? What is total profit at the profit-maximizing quantity?
⇨ If the monopolist can engage in perfect price discrimination, now the price is equal to marginal
revenue => the quantity that maximizes economic profit is where the price equals to marginal
cost => at 8 units (8 pairs of shoes)
⇨ Total profit at profit-maximizing quantity = (160+150+140+130+120+110+100+90) – 565 = $435

8. Refer to the figure below drawn for a monopolistically competitive firm and answer the
following questions.

a. What is the firm’s profit-maximizing

level of output?

b. In order to maximize profits, what

price will the firm charge?

c. Suppose that average total cost is

$18 when Q=12. What is the profit-
maximizing price and resulting profit?
(P=(P-ATC)*Q = 0)

d. If the average total cost is $15 at the

profit-maximizing quantity, then the
firm’s maximum profit is?
 e. If the ATC=20 at the profit-
maximizing level of output, which of
the following will occur in the long run
in this industry?

a. Firm maximizes profits when producing outputs at where marginal cost = marginal revenue =>
produce 12 units.
b. Price the firm will charge its where the quantity intersects the demand curve => price = $18
c. Profit maximizing price = $18, firm’s maximum profit = (Price - ATC)*Quantity =($18-$18)*12 = 0
d. Maximum profit = (Price - ATC)*Quantity =($18-$15)*12 = $36
e. If ATC = 20 at the profit-maximizing level of output => the firm is suffering loss => in the long
run, it will exit this industry.
 9. Assume that demand for a product that is produced at zero marginal cost is reflected in the
table below:
Revenue

6,600

12,000

16,200

19,200

21,000

21,600

21,000

19,200

16,200

12,000

6,600

a. What is the profit-maximizing level of production for a group of oligopolistic firms that operate as a
cartel?

=> MC = 0 => the profit-maximizing level is where revenue is maximized => at Q = 1200

b. Assume that this market is characterized by a duopoly in which collusive agreements are illegal. What
market price and quantity will be associated with a Nash equilibrium?

Assume that the market is at Q = 1200, each firm produced Q = 600

=> each firm revenue = $18*600 = $10,800. If now one firm thinks that if it decides to increase outputs
to Q = 700, now total output is 1,400 and the price it can sell is $15, it gets the revenue = $15*800 =
12,000 which is higher than produce at Q = 600. But both firms will think like this and the quantity
produced at the market now is Q’ = 800*2 = 1,600. And the price = $12 at Nash equilibrium.

Dạng bài tập short-ans/essay questions (tính toán):

1/ Tính opportunity costs, explicit/implicit costs.

2/ Xác định xem firms đang ở economies of scale/ diseconomies of scale/ constant return to scales.

3/ Cho bảng số liệu, tính fixed costs, variable costs, average fixed costs, average variable costs, average
total cost, marginal costs, marginal revenue…
4/ Xác định revenue/ profit/ output to maximize profit của firms ở competitive market/ của monopolies/
của firms trong monopolistic competition market.