Question 1

When the demand for medical care _______, the real hourly wage for physicians should _______.
A) increases; increase
B) decreases; increase
C) increases; stay the same
D) increases; decrease
E) decreases; stay the same

Accepted Answer

When the demand for medical care increases, the demand for physicians increases. This leads to an increase in the price of medical care, which leads to an increase in the real hourly wage for physicians.

Question 2

In the long-run, economic profits will be zero in monopolistic competition.

Accepted Answer

In the long-run, firms in monopolistic competition will enter or exit the industry until economic profits are driven to zero. This is because there is low barriers to entry and exit, and products are differentiated, meaning that there is some level of competition.

Question 3

Suppose that the inverse market demand for a new vaccine is P = 21,000 - 5Q, and the marginal cost is $10 per vaccine. Assuming that the manufacturer is profit-maximizing, what will be the market price of this new vaccine?
A) 15,000
B) 17,250
C) 15,750
D) 14,000
E) 13,500

Accepted Answer

To find the profit-maximizing quantity, we set the marginal revenue (MR) equal to the marginal cost (MC):

MR = d(PQ)/dQ = P + Q(dP/dQ)

MC = 10

Setting MR = MC:

21,000 - 10Q = 10

10Q = 20,990

Q = 2,099

To find the market price, we can plug Q back into the inverse demand function:

P = 21,000 - 5Q

P = 21,000 - 5(2,099)

P = 15,750

Therefore, the market price of the new vaccine is $15,750.

Question 4

A decrease in the demand for medical care will cause the real hourly wage of physicians to increase.

Accepted Answer

A decrease in demand for medical care means fewer patients seeking medical care, which could lead to a decrease in physicians' income. The decrease in demand could also result in the reduction of physicians' wages to maintain profitability, rather than an increase.

Question 5

If the market price is greater than the marginal cost, a profit-maximizing firm will choose to produce less.

Accepted Answer

If the market price is greater than the marginal cost, a profit-maximizing firm will continue to produce as long as the price exceeds the average variable cost. This is because producing more will increase their profits, even if the marginal cost is greater than the market price. Only if the price falls below the average variable cost will the firm choose to produce less or shut down in the short run.

Question 6

If a large number of nurses chose to leave the profession in pursuit of alternative careers, what would be the likely impact on the market?
A) permanent surplus
B) temporary shortage
C) temporary surplus
D) permanent shortage
E) none of the above

Accepted Answer

A large number of nurses leaving the profession would likely lead to a temporary shortage in the market, as the supply of nurses would decrease until new nurses are trained and enter the profession to fill the gap.

Question 7

If there is an increase in the number of registered nurses and the demand for medical services remains unchanged, what should be expected to happen to the real hourly wage for registered nurses?
A) The real hourly wage should increase.
B) The real hourly wage should only increase if the demand for medical services is inelastic.
C) The real hourly wage should only decrease if the demand for medical services is elastic.
D) The real hourly wage should decrease.
E) The real hourly wage should only increase if the demand for medical services is elastic.

Accepted Answer

An increase in the supply of registered nurses with unchanged demand for medical services means a surplus of nurses, which would lead to a downward pressure on wages. Therefore, the real hourly wage for registered nurses should decrease.

Question 8

Product differentiation may stem from which of the following?
A) Location
B) Quality
C) Advertising
D) All of the above
E) None of the above

Accepted Answer

Product differentiation is the process of distinguishing a product from others to make it more attractive or desirable to a particular target market. This can be achieved through various means, such as location, quality or advertising. Therefore, all of the above options - location, quality, and advertising - can contribute to product differentiation.

Question 9

Collusion among firms is most likely to take place within which type of industry?
A) Perfect Competition
B) Monopolistic Competition
C) Oligopolies
D) Monopolies
E) None of the above

Accepted Answer

Collusion is only possible in an oligopoly market where a few firms dominate the industry, and there are significant barriers to entry. In a perfect competition industry, firms are too small to influence market prices, while in monopolies, there is only one dominant player. Monopolistic competition is characterized by a large number of firms with differentiated products, making collusion difficult.

Question 10

Collusion is most likely to occur within monopolistic competition.

Accepted Answer

Collusion is more likely in oligopolistic markets where a few firms dominate, as it's easier for a small number of firms to agree on prices or output levels. Monopolistic competition, characterized by many firms and product differentiation, makes collusion less feasible due to the large number of firms and the diversity of products.

Question 11

The net benefit received through the purchase and consumption of medical care is referred to as _______.
A) economic surplus
B) deadweight loss
C) consumer surplus
D) producer surplus
E) None of the above

Accepted Answer

Consumer surplus represents the difference between the maximum amount that consumers are willing to pay for a good or service and the actual amount they pay. In the case of medical care, it is the net benefit received through the purchase and consumption of medical care. Option A (economic surplus) is a broader term that includes both consumer and producer surplus. Option B (deadweight loss) refers to the loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved. Option D (producer surplus) is the extra profit that producers make when they sell a good or service at a price higher than the minimum price they would be willing to accept.

Question 12

Barriers to entry are not present in which type of industry?
A) Perfect Competition
B) Monopolistic Competition
C) Oligopolies
D) Monopolies
E) None of the above

Accepted Answer

Perfect competition is characterized by a large number of small firms producing homogeneous products, with no single firm able to influence the market price due to ease of entry and exit. Therefore, there are no significant barriers to entry.

Question 13

Suppose that the inverse market demand for a new vaccine is P = 21,000 - 5Q, and the marginal cost is $10 per vaccine. Assuming that the manufacturer is profit-maximizing, how many units of this new vaccine will be produced?
A) 1,200
B) 750
C) 10,500
D) 1,400
E) 1,050

Accepted Answer

The answer of Suppose that the inverse market demand for...

Question 14

If the real hourly wage paid to physicians increase, the real hourly wage paid to nurses will _______.
A) increase
B) decrease
C) stay the same
D) increase only if the number of physicians increases
E) none of the above

Accepted Answer

The real hourly wage paid to nurses is likely to increase as well due to the complementarity of labor between physicians and nurses. If physicians are paid more, it could indicate a higher demand for medical services, which would also increase the demand (and thus wages) for nurses.

Question 15

An increase in consumer income will lead to an increase in the quantity of medical care supplied.

Accepted Answer

An increase in consumer income means that consumers have more money to spend on medical care. As a result, they may demand more medical care, leading to an increase in the quantity supplied by medical providers.

Quiz 8: Structure, Conduct, Performance, and Market Analysis

When the demand for medical care _, the real hourly wage for physicians should _.

In the long-run, economic profits will be zero in monopolistic competition.

Suppose that the inverse market demand for a new vaccine is P = 21,000 - 5Q, and the marginal cost is $10 per vaccine. Assuming that the manufacturer is profit-maximizing, what will be the market price of this new vaccine?

A decrease in the demand for medical care will cause the real hourly wage of physicians to increase.

If the market price is greater than the marginal cost, a profit-maximizing firm will choose to produce less.

If a large number of nurses chose to leave the profession in pursuit of alternative careers, what would be the likely impact on the market?

If there is an increase in the number of registered nurses and the demand for medical services remains unchanged, what should be expected to happen to the real hourly wage for registered nurses?

Product differentiation may stem from which of the following?

Collusion among firms is most likely to take place within which type of industry?

Collusion is most likely to occur within monopolistic competition.

The net benefit received through the purchase and consumption of medical care is referred to as _______.

Barriers to entry are not present in which type of industry?

Suppose that the inverse market demand for a new vaccine is P = 21,000 - 5Q, and the marginal cost is $10 per vaccine. Assuming that the manufacturer is profit-maximizing, how many units of this new vaccine will be produced?

If the real hourly wage paid to physicians increase, the real hourly wage paid to nurses will _______.

An increase in consumer income will lead to an increase in the quantity of medical care supplied.