Question

The accompanying table shows the dollar amount of sales in 2012 for the four largest firms in the above-ground pool industry. Total indusstry sales in 2012 were $467,000. Use this table to answer the questions that follow 25. Refer to the accompanying graph. The maximum short-run economic profit earned by this monopolistic competitive firm is: ATC Price l NC Dollar Amount of Sales in 2012) Firm Name 20.17 Blue Water Island, Inc. 1817 $112.000 16.87 Backyard Paradise, Inc. 15.87 547000 Tropical Waters, Inc. $19.000 6.57 Poolside Plastics Inc. $14.000 Demand All other frms in industry combined 8276 000 20 25 30 35 Quantily a. $272 b. $66 c. inconclusive; the maximum short-run profit can't be determined from the information given. d. none; this firm must shut down or lose all of its fixed cost. e $20 22. What is the four-firm concentration ratio in this industry? a. 68% b, 41% c. 94% d. 78% e. 24% 23. Refer to the accompanying table. If Jane confesses, John will spend jail if he also confesses and jail if he keeps quiet. 26. Which of the following is true in long-run equilibrium for both a competitive market and monopolistic competition? a. Accounting profit is zero. b. Price equals marginal revenue. c. Productive efficiency is achieved. d Long-run average cost is minimized. years in years in Cetess e. Economic profit is zero. 10 mas iah 25 mrs a 27. Thomas has developed a new social media site that he feels can compete heavily with Facebook Unfortunately he cannot find someone to lend him enough money to market his product to consumers. Thomas is facing which kind of barrier to entry? a. control of resources b. patents and copyright law c. problems raising capital d licensing e. economies of scale 10 ms ial ate Ka at25m i ja a. 10; 10 b. 10; 25 c. 25; 25 d. 0; 10 e. 10; 0 24. To maximize profits, a monopolist chooses the quantity where: a. costs are minimized. b. marginal revenue equals marginal cost. c. marginal revenue equals zero. d. revenues are maximized. cost equals zero. e. marginal IIII Grs RESERVED us PT NO u

Answer 1

22. D
(Total sales = 467,000
Four firm concentration ratio = (112,000/467,000) + (47,000/467,000) + (19,000/467,000) + (14,000/467,000)
= 0.2398 + 0.1006 + 0.0407 + 0.03 = 0.41111 = 41%)

23. B
(If Jane confesses; John spends 10 years if he confesses and 25 years if he doesn't confess.)

24. B
(Profit is maximized where MR = MC)

25. B
(Profit maximizing quantity, Q = 20 is determined where MR = MC
Profit = (P - ATC)*Q = (20.17 - 16.87)*20 = 3.3*(20) = 66)

(Note: post 4 MCQs at a time.)