ECON 1102 Test 4 (120414) ECON 1102: Test 4 Do all 40 questions Use the table below, which gives the demand for a monopolist’s output, to answer questions 1, 2 and 3. Quantity (units) Price (dollars per unit) 1 8 2 7 3 6 4 5 5 4 6 3 1) Between which two quantities is marginal revenue equal to 2? A) 4 and 5 B) 3 and 4 C) 2 and 3 D) 1 and 2 2) Between which two quantities is demand inelastic? A) 6 and 5 B) 5 and 4 C) 4 and 3 D) 3 and 2 3) What is the marginal revenue when output is increased from 5 to 6 units? A) $18 B) $4 C) $3 D) -$2 4) A single-price monopoly A) charges all consumers the lowest price that they want to pay for each unit purchased. B) produces less output than it would if it could price discriminate. C) eliminates all the consumer surplus. D) creates a smaller deadweight loss than it would if it could price discriminate. 5) A single-price monopolist determines A) its output but not its price. B) its price but not its output. C) both its output and its price. D) neither its output nor its price. 6) In monopolistic competition, the presence of a large number of firms making a differentiated product means that A) each firm has some ability to effect the price of its particular good or service. B) each firm must charge the same price. C) the price is established by agreements among the different firms. D) each firm must produce the same quantity. 7) Firms in monopolistic competition have rivals that A) match their price increases. B) match their price decreases. C) agree on a common price. D) set their prices according to the demand curves they face. ECON 1102 Test 4 (120414) 8) When firms in monopolistic competition are making an economic profit, firms will A) enter the industry, and demand will increase for the original firms. B) exit the industry, and demand will increase for the firms that remain. C) exit the industry, and demand will decrease for the firms that remain. D) enter the industry, and demand will decrease for the original firms. 9) Firms in monopolistic competition charge prices that are ________ those of the other firms in the market. A) close to B) very different from C) the same as D) completely unrelated to 10) A monopolistically competitive firm has ________ power to set the price of its product because ________. A) no; there are no barriers to entry B) some; there are barriers to entry C) no; of product differentiation D) some; of product differentiation 11) Monopolistically competitive firms and perfectly competitive firms are alike because both types of firms I. face downward sloping demand curves. II. have marginal revenue curves that lie beneath their demand curves. III. can make only zero economic profit in the long run. A) I and II B) I and III C) III only D) I only 12) Dole Co. operates in a monopolistically competitive market. Whi ...

1. ECON 1102 Test 4 (120414)
ECON 1102: Test 4
Do all 40 questions
Use the table below, which gives the demand for a monopolist’s
output, to answer questions 1, 2 and 3.
Quantity
(units)
Price
(dollars per unit)
1 8
2 7
3 6
4 5
5 4
6 3

2. 1) Between which two quantities is marginal revenue equal to
2?
A) 4 and 5
B) 3 and 4
C) 2 and 3
D) 1 and 2
2) Between which two quantities is demand inelastic?
A) 6 and 5
B) 5 and 4
C) 4 and 3
D) 3 and 2
3) What is the marginal revenue when output is increased from
5 to 6 units?
A) $18
B) $4
C) $3
D) -$2
4) A single-price monopoly

3. A) charges all consumers the lowest price that they want to pay
for each unit purchased.
B) produces less output than it would if it could price
discriminate.
C) eliminates all the consumer surplus.
D) creates a smaller deadweight loss than it would if it could
price discriminate.
5) A single-price monopolist determines
A) its output but not its price.
B) its price but not its output.
C) both its output and its price.
D) neither its output nor its price.
6) In monopolistic competition, the presence of a large number
of firms making a differentiated product
means that
A) each firm has some ability to effect the price of its particular
good or service.
B) each firm must charge the same price.
C) the price is established by agreements among the different
firms.

4. D) each firm must produce the same quantity.
7) Firms in monopolistic competition have rivals that
A) match their price increases.
B) match their price decreases.
C) agree on a common price.
D) set their prices according to the demand curves they face.
ECON 1102 Test 4 (120414)
8) When firms in monopolistic competition are making an
economic profit, firms will
A) enter the industry, and demand will increase for the original
firms.
B) exit the industry, and demand will increase for the firms that
remain.
C) exit the industry, and demand will decrease for the firms that
remain.
D) enter the industry, and demand will decrease for the original
firms.

5. 9) Firms in monopolistic competition charge prices that are
________ those of the other firms in the market.
A) close to
B) very different from
C) the same as
D) completely unrelated to
10) A monopolistically competitive firm has ________ power to
set the price of its product because
________.
A) no; there are no barriers to entry
B) some; there are barriers to entry
C) no; of product differentiation
D) some; of product differentiation
11) Monopolistically competitive firms and perfectly
competitive firms are alike because both types of firms
I. face downward sloping demand curves.
II. have marginal revenue curves that lie beneath their demand
curves.
III. can make only zero economic profit in the long run.

6. A) I and II
B) I and III
C) III only
D) I only
12) Dole Co. operates in a monopolistically competitive market.
Which of the following characterizes Dole
Co.'s market?
A) Dole Co. supplies a small portion of the market's output.
B) Dole Co.'s product is slightly different from its competitors.
C) Dole Co. faced no barrier to entry when it decided to enter
its market.
D) All of the above describe Dole Co.'s market.
The figure below shows the situation facing Smart Digit, Inc., a
firm in monopolistic competition that
produces calculators. Use this figure to answer questions 13, 14
and 15.
13) What is the firm's profit-maximizing price?
A) $12

7. B) $10
C) $8
D) $4
ECON 1102 Test 4 (120414)
14) What is the firm's economic profit per day?
A) zero
B) between $1 and $700
C) between $701 and $900
D) more than $901
15) The firm's markup is ________ per calculator.
A) zero
B) $2
C) $4
D) $6
The figure below shows the demand curve for Gap jackets (D),
and Gap's marginal revenue curve (MR),

8. marginal cost curve (MC), and average total cost curve (ATC).
Use this figure to answer questions 16 to 20.
16) Gap maximizes its profit if it sells ________ jackets per
day.
A) 100
B) 64
C) 129
D) 133
17) Gap maximizes its profit if it charges ________ per jacket.
A) $130
B) $80
C) $115
D) $100
18) What is Gap's economic profit?
A) zero
B) $5,000

9. C) -$5,000
D) -$1,160
19) The market for jackets ________ in long-run equilibrium,
and there is ________ for new firms to enter.
A) is; no incentive
B) is; an incentive
C) is not; an incentive
D) is not; no incentive
20) What is Gap's excess capacity?
A) 32 jackets per day
B) zero
C) 4 jackets per day
D) 132 jackets per day
ECON 1102 Test 4 (120414)
21) Expenditures on advertising ________.
A) can lower average total cost if the advertising increases the
quantity sold by a large enough amount

10. B) cannot lower average total cost because when a firm
advertises it increases its costs
C) always lower average total cost because whenever a firm
advertises, it increases the quantity sold
D) are variable costs so do not affect the average total cost
22) The loss of efficiency that occurs in monopolistic
competition has to be weighed against the gain of
A) higher wages for employees.
B) an increase in employment.
C) greater product variety.
D) reduced environmental damage.
23) If firms in an industry differentiated their products and
made economic profits in the short-run, what
other characteristic would be important to determine if this is an
oligopoly or a monopolistically competitive
market?
A) the number of firms in the market
B) the number of close substitutes for the good being produced
C) the number of buyers in the market

11. D) if the good being sold is a normal or inferior good
24) In ________ market structure, a firm's output depends
________.
A) an oligopoly; only on its own marginal revenue and marginal
cost curves
B) a monopolistically competitive; in part on its competitors'
price and quantity decisions
C) an oligopoly; in part on its competitors' price and quantity
decisions
D) a monopolistically competitive; only on its marginal revenue
curve
25) The small town of Narberth has two pizza stores. Which of
the following statements are correct?
I. The profits of each store depend on the price of the pizza at
the other store.
II. Both stores would increase their profit if they cooperated in
setting their prices.
A) I only
B) II only
C) Both I and II
D) Neither I nor II

12. 26) In the market for batteries, the four largest firms earn 90%
of the total revenue and there are 35 firms in
the industry. This industry is best described as
A) oligopoly.
B) monopoly.
C) monopolistic competition.
D) perfect competition.
27) In what type of market is a cartel possible?
A) a market in which there are only a few firms and barriers to
entry exist
B) a market in which firms sell a homogeneous good
C) a market in which firms sell a differentiated good
D) a market in which there are many firms
28) Once a cartel determines the profit-maximizing price,
A) each firm faces the temptation to cheat by raising its price.
B) each firm faces the temptation to cheat by lowering its price.
C) changes in the output of any member firm will not affect the
market price.

13. D) entry into the industry by rival firms will not affect the
profit of the cartel.
29) A market in which firms can enter and leave so easily that
firms in the market face competition from
potential entrants is called a
A) contestable market.
B) cartel.
C) limit pricing market.
D) monopolistic competition market.
ECON 1102 Test 4 (120414)
Disney
Thanksgiving
release
Christmas
release
Thanksgiving

14. release
D: $100
F: $80
D: $105
F: $95
Fox
Christmas
release
D: $110
F: $100
D: $95
F: $85
30) Disney and Fox must decide when to release their next
films. The revenues received by each studio
depend in part on when the other studio releases its film. Each
studio can release its film at Thanksgiving or
at Christmas. The revenues received by each studio, in millions
of dollars, are depicted in the payoff matrix
above. Which of the following statements correctly describes

15. Disney's strategy given what Fox's release
choice may be?
A) If Fox chooses a Thanksgiving release, Disney should choose
a Christmas release.
B) If Fox chooses a Christmas release, Disney should choose a
Thanksgiving release.
C) Disney should release on Thanksgiving regardless of what
Fox does.
D) Both answers A and B are correct.
31) Limit pricing is a strategy used by a firm to
A) deter entry.
B) enhance short run profits.
C) raise its prices.
D) lower its costs.
32) Antitrust law is law that
A) does not allow individuals to open trust savings accounts.
B) prohibits competition in certain industries.
C) prohibits certain kinds of market behavior by firms.
D) allows firms under special circumstances to be a monopoly.

16. 33) Southwest Airlines wants to raise $20 million to finance the
renovation of their corporate offices, and the
company wishes to raise the funds through direct finance.
Which of the following methods could it use?
A) It could issue $20 million in stocks.
B) It could sell $20 million in bonds.
C) It could borrow $20 million from a bank.
D) It could choose either A or B.
34) What is different about buying stocks and buying bonds?
A) A stock can possibly pay dividends forever, but bonds have a
fixed number of payments.
B) Differences of opinion about a stock's future may vary
considerably but there is less difference about a
bond's future.
C) The future growth of a stock is more uncertain than the
payments of a bond.
D) All these are differences between stocks and bonds.
35) If a corporate bond with face value of $1,000 has an interest
rate of eight percent paid once a year for a

17. term of 30 years, what is the size of the coupon payment?
A) $1,000
B) $300
C) $80
D) $8
ECON 1102 Test 4 (120414)
36) You have a bond that pays $60 per year in coupon
payments. Which of the following would result in an
increase in the price of your bond?
A) Coupon payments on newly-issued bonds rise to $80 per
year.
B) The likelihood that the firm issuing your bond will default
on debt increases.
C) The price of a share of stock in the company falls.
D) Coupon payments on newly-issued bonds fall to $50 per
year.
37) Generally with bond ratings, the lower the rating, the
________ the interest rate an investor will receive

18. and the ________ the risk that the issuer of the bond will
default.
A) higher; higher
B) higher; lower
C) lower; higher
D) lower; lower
38) All of the following would be considered explicit costs of
operating a business except
A) rent paid to a landlord.
B) bonuses paid to employees.
C) a normal rate of return for investors.
D) corporate income taxes.
39) What is the present value of $575 in one year if the current
rate of interest is 4 percent?
A) $410.71
B) $552.88
C) $598
D) $805

19. 40) If a stock's dividend is expected to grow at a constant rate
of eight percent in the future and it has just
paid a dividend of $1.25 a share, and you have an alternative
investment of equal risk that will earn a 12
percent rate of return, what would you be willing to pay per
share for this stock?
A) $31.25
B) $1.40
C) $1.25
D) $1.12
SOCIAL
Gideon his complete name was Clearance E. Gideon a man with
no resources to hire a lawyer once he found himself in need of
one. Gideon was a white man who was in and out of jail most of
his life. He just could make his way to settle and work and was
instead constantly gambling and doing a few thefts. Gideon
was a man who’s education had barely reach the 8th grade at the
age of 51 he was accused of burglary with other previous
accusations. Gideon was accused of the crime because a witness
protested to have seen him leaving the crime scene with money
and alcohol. A surveillance camera had also recorded the whole
act and the images were used in court. Gideon was arrested later
that morning. The Gideon case help the history of trial and in
some sense the rights of the people with low income or no
resources to hire a lawyer.

20. CASE/CRIME
Gideon was convicted to 5 years in prison without the benefit of
council. He had filed a handwritten petition when he was in
prison in the State of Florida. Gideon, had four previous felony
convictions, claimed in blunt terms he'd been denied a fair
trial.” I requested the court to appoint me attorney and the court
refused" Words by the same Gideon. The court reversed
Gideon's conviction and overturned a 1942 ruling, Gideon was
retried five months later and acquitted.
LEGAL PERSPECTIVE
Because of the Gideon the Supreme court made a huge
compromise with our nation to provide counsel to even indigent
people and that everyone will have the right to counsel. We
must keep in mind that our officials, judges and legal assistants,
the people elected them, they are in those positions because
many low income people voted for them, they owe security to
the people. Every year, America's courts process thousands of
offenders "either with no lawyer at all or with a lawyer who
does not have the time, resources or, in some cases, the
inclination to provide effective representation," stated Gideon's
Broken Promise. "All too often, defendants plead guilty, even if
they are innocent, without really understanding their legal
rights or what is occurring."(Bellows Vol. 99 Issue 3, p8-8.)
TRIAL/APPEAL
Because of Gideon denial to the right to council he appeared
alone in court. On the second trial he chooses W. Fred Turner to
be his lawyer. The case was taken to the Supreme Court were
Gideon was imposed a judge and his case had a turnover. The
sixth Amendment was written to provide counsel to those who

21. could afford it. And the fourteen Amendment was written to
make people’s legal rights equal. Gideon case was one of many
cases of Supreme Court decisions that have confirmed to the
defendants these rights in criminal proceedings, upon request,
to have counsel appointed both during trial and on appeal.
HISTORICAL
The right to counsel has change greatly over the years since it
was first to originated in England and brought to the United
States. In 1789 the sixth amendment right to counsel originally
meant a court would not prevent assistant of counsel of a
defendant if the defendant was able to provide his own. Over
the years the sixth amendment has expanded, diminish and took
a abroad change clarify by different justices. The states were at
a different status to imposed a jail sentence if a defendant had
not been represented by an attorney. After the Gideon case the
law impose that even indigents have the right to counsel. “
According to the report, "Gideon's Broken Promise: America's
Continuing Quest for Equal Justice," indigent-defense services
remain in a state of crisis, lack fundamental fairness and place
poor people at constant risk of wrongful conviction.”
FUTURE RESEARCH
Comparison to other related cases.
Crucial changes of the legal system and its approach to similar
cases.
The overcome of the Gideon Promise.
References
http://libezp.nmsu.edu:2051/hottopics/lnacademic/
Copyright (c) 2013 St. Thomas Law Review
St. Thomas Law Review Summer, 2013 St. Thomas Law Review

22. 25 St. Thomas L. Rev. 373
http://libezp.nmsu.edu:2051/hottopics/lnacademic/
Copyright (c) 2003 Stetson University College of Law Stetson
Law Review Fall, 2003 33 Stetson L. Rev. 181
http://libezp.nmsu.edu:2051/hottopics/lnacademic/
Copyright (c) 2013 Washington & Lee University School of
Law
Washington & Lee Law Review Spring, 2013 Washington & Lee
Law Review 70 Wash & Lee L. Rev. 1363
Hodak, George. "March 18, 1963: Gideon v. Wainwright
decided." ABA Journal Mar. 2009: 72. Academic OneFile. Web.
14 Oct. 2014.
Document URL
http://go.galegroup.com/ps/i
Hansen, Mark. "Gideon's Promise." ABA Journal 91.3 (2005):
64. Criminal Justice Abstracts. Web. 14 Oct. 2014.Bellows,
Laurel. "The "Obvious Truth." ABA Journal 99.3 (2013): 8.
Criminal Justice Abstracts. Web. 14 Oct. 2014.
OUTLINE
Social
· Who was Gideon
· A 51 year old man with no resources
Crime
· He was accused of burglary
· Accused by a witness
Legal
· He was denied the right to counsel
· He had no resources to hire an attorney
Trial
· He was convicted to 5 years in prison
· He appeal the court’s decision
Historical
· The Sixth Amendment was written to provide counsel to those
who could
· The fourteen Amendment was written to offer equal law

23. protection