Flag question: Question 7

Below are the short-run data of a representative firm in a perfectly competitive industry. The market price is $2.0, and you know that the firm is maximizing profits. What is the profit of the firm (rounded to one digit after the decimal point)?

Q	MC	AVC	ATC
1	1	1.0	1.5
2	1.2	1.1	1.35
3	1.4	1.2	1.37
4	1.6	1.3	1.43
5	1.8	1.4	1.5
6	2	1.5	1.58
7	2.2	1.6	1.67
8	2.4	1.7	1.76
9	2.6	1.8	1.86
10	2.8	1.9	1.95

Group of answer choices

$0.5

$2.0

$5

$0.4

$2.5

Flag question: Question 8

Conceptually, which statement applies only to a market under monopolistic competition and not to a market under a monopoly?

Group of answer choices

A firm operating in the market can make positive economic profits in the short run

A firm operating in the market maximizes profits where marginal revenue is equal to marginal cost

Firms face a downward-sloping demand curve

None of the other answers (i.e., all of the other answers apply to both market structures)

If economic profits are being made, new firms will enter the market

Flag question: Question 9

Firms X and firm Y are maximizing profits. At their respective profit-maximizing price, Firm X's own-price elasticity is -2 and Firm Y's own-price elasticity is -3. Which statement is correct?

Group of answer choices

The share of markup in the optimal price (Lerner Index) for firm X is equal to 50%

Firm Y can charge a higher markup than firm X

Everything else held constant, if firm Y increases its price it will lead to an increase in its revenue

Firm X's consumers are more price sensitive than firm Y's consumers

Firm X is a price taker

Flag question: Question 10

Food4You is a new grocery delivery service that is attempting to lure consumers from more established services such as Instacart. Which of the following should not be a consideration for Food4You when it is setting its prices?

Group of answer choices

The fixed costs of developing the Food4You app

Whether there are switching costs between Food4You and Instacart

The costs of providing urgent customer service support, which depend on the number of customers served

The own-price elasticity of demand for their delivery services

The cross-price elasticity of demand between Instacart and Food4You

Flag question: Question 11

Gooble Pay is a pay-per-view movie provider that has zero marginal cost and faces the following (inverse) demand function for its representative movie watcher: P=200.4Q. Gooble Pay decides to use volume pricing to maximize profits. What is the optimal flat fee Gooble Pay should charge the representative watcher for unlimited access?

Group of answer choices

$500

$25

$50

$1,000

$20

Flag question: Question 12

Wolfgang is living with his parents in LA, and he is considering spending a month in his ancestral Berlin for the summer. He calculated that it would cost him $2,000 for travel (in total) and $3,000 for renting an apartment in Berlin. His other expenditures such as food and entertainment amount to $1,000, and these would be the same in LA and Berlin. Wolfgang has also been offered a Research Assistant position for the same month that would require him to stay in LA, and for which he would be paid $1,800. What is his total economic cost of going to Berlin?

Group of answer choices

$6,800

$7,800

$1,000

$1,800

$5,000