Ec110 (test 3)- PRACTICE test

A. less than price, as it is for a perfectly competitive firm.

For a monopolist, marginal revenue is a. less than price, as it is for a perfectly competitive firm. b. equal to price, whereas marginal revenue is less than price for perfectly competitive firm. c. less than price, whereas marginal revenue is equal to price for a perfectly competitive firm. d. equal to price, as it is for a perfectly competitive firm.

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Given the information in the table, what is the profit maximizing output? a. units b. 8 units c. 6 units d. 7 units

B. a one-unit decrease in output will increase the firm's profit.

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenu then a. total revenue exceeds total cost. b. a one-unit decrease in output will increase the firm's profit. c. total cost exceeds total revenue d. a one-unit increase in output will increase the firm's profit.

C. $ 0.32

The average total cost of producing 240 units is a. $0.13 b. $0.19. c. $0.32 d. $0.80

B. The $20 million spent on the factory is a sunk cost that cost should not affect the decision.

A corporation has been steadily loosing money on one of its product lines, plastic flamingo lawn ornaments. The firm produces plastic flamingos in a factory that cost $20 million to build 10 years ago. The firm has received an offer from another company to buy that factory for $15 million. Which of the following statements about the decision to sell or not is correct? a. The $20 million spent on the factory is an implicit cost, which should be included in the decision. b. The $20 million spent on the factory is a sunk cost that cost should not affect the decision. c. The firm should turn down the purchase offer because the factory cost more than $15 million to build. d. The firm should sell the factory only if it can reduce its costs elsewhere by $5 million.

C. Average variable cost is $3

A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100, a. average total cost is $4 b. average fixed cost is $10 c. average variable cost is $3 d. average total cost is $5

C. Price is less than average variable cost

A profit-maximizing firm will shut down in the short run when a. Average revenue is greater than marginal cost b. Price is less than average total cost c. Price is less than average variable cost d. Average revenue is greater than average fixed cost

D. $120

A proft-maximizing monopolist would earn profts of a. $117 b. $126. c. $96 d. $120

A. Economies of Scale

At levels of output less than M, the firm experiences a. Economies of scale b. constant returns to scale. c. both diminishing marginal productivity and coordination problems d. diseconomies of scale.

B. $0.25

Based thi is information, what is the marginal cost (MC) at 240 units of output? a. $45 b. $0.25 c. $5 d. $0.80

C. Profits

Economists assume that the goal of the firm is to maximize total a. satisfaction. b. costs c. profits d. revenue

D. Positive economic profits in the short run

If the market price rises above $6.30, the firm will earn a. Zero economic profits in the short run b. Negative economic profits in the short run but remain in business c. Negative economic profits and shut down d. Positive economic profits in the short run

B. Have a negligible impact on the market price.

In a competitive market, the actions of any single buyer or seller will a. discourage entry by competitors. b. have a negligible impact on the market price. c. influence the profits of other firms in the market. d. None of the above is correct

A. $20

In order to maximize profits, the monopolist should charge a price of a. $20 b. $23 c. $9 d. $12

A. 18 bouquets

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 38 bouquets per day. What is William's marginal product? a. 18 bouquets b. 38 bouquets c. 22.5 bouquets d. 58 bouquets

D. $100, and her economic profits are $0.

Katherine gives piano lessons for $20 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmers market. Katherine's accounting profits are a. $0, and her economic prots profits are are $100 b. $0, and her economic prots profits are are $-100 c. $100, and her economic profits are $100 d. $100, and her economic profits are $0.

C. Continue flying until the lease expires and then drop the run

Maui Airlines flies between Honolulu and Kahului. The company leases planes on a year-long contract at a cost that averages $1200 per flight. Other costs (fuel, flight attendants, etc.) amount to $1100 per flight. Currently, Maui's revenues are $2,000 per flight. All prices and costs are expected to continue at a at their present levels. If it wants to maximize profit, Maui Airlines should a. continue the flight. b. drop the flight now but renew the lease if conditions improve. c. continue flying until the lease expires and then drop the run d. drop the flight immediately

D. Marginal revenue exceeds his marginal cost

Mr. Rogers sells colored pencils. The colored-pencil industry is competitive. Mr. Rogers hires a business sultant to analyze his company's financial records. The consultant recommends that Mr. Rogers increases his production. The consultant must have concluded that Mr. Roger's a. marginal revenue exceeds his total cost. b. total revenues equal his total economic costs. c. marginal cost exceeds his marginal revenue. d. marginal revenue exceeds his marginal cost

B. Continue to operate in both the short run and long run.

Mrs. Smith operates a business in a competitive market. The current market price is $8.50. At her profit maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should a. continue to operate in the short run but shut down in the long run. b. continue to operate in both the short run and long run c. shut down in both the short run and long run. d. shut down her business in the short run but continue to operate in the long run

30. D. $65,000 31. A. $89,000 32. A. $51,000 33. A. $75,000

Questions 30-33 use the following information. Julia prepares tax returns and does bookkeeping. Last year her revenues from the tax and bookkeeping business were $140,000, and her expenses for the bookkeeping business were $65,000. When she started her tax and bookkeeping business, Julia gave up her supplemental job doing in-home pet a pet sitting. She charges $20 per hour for dog sitting and worked 1200 hours as a pet sitter last year. Assume she has no other cost for her pet sitting business. 30. The total explicit ( accounting ) costs of her accounting operations is equal to a. $89,000 b. $75,000 c. $35,000 d. $65.000 31. What is the total cost (all opportunity costs) for Julia's bookkeeping business for last year? a. $89,000 . b. $75,000 c. $35,000 d. $65,000 32. Julia's economic profit equals a. $ 51,000 b. $65,000 c. $35,000 d. $75,000 33. Julia's accounting profit equals a. $75,000 b. $51,000 c. $140,000 d. $35,000

B. $2,400

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, total revenue will be a. $2,000 b. $2,400. c. $4,200. d. We do not have enough information to answer the question.

B. Labor to be variable and capital to be fixed.

Suppose that a pet day care firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers a. both labor and capital to be variable b. labor to be variable and capital to be fixed. c. capital to be variable and labor to be fixed d. both labor and capital to be fixed

A. Barriers to entry

The fundamental source of monopoly power is a. barriers to entry b. many buyers and sellers. c. rising average total costs. d. low fixed costs.

B. economic profit

Total revenue minus both explicit and implicit costs is called a. accounting profit b. economic proft. c. average total cost. d. total cost.

C. 40 units

What is the marginal product of the fourth worker? a. 60 units b. 80 units c. 40 units d. 20 units

A. $120. ??

What is the marginal revenue from selling the 5th unit? a. $120 b. $140 c. $55 d. $137

C. average total cost must be rising

When marginal cost exceeds total costs, a. marginal cost must be falling b. average fixed cost must be rising c. average total cost must be rising d. average total cost must be falling

D. ABCF

Which line segment best reflects the short-run supply curve for this firm a. BCD b. DF c. CD d. ABCF

C. composition, typesetting, and jacket design for the book

Which of the folwing costs of publishing a book is a fxed cost? [Hint which of these costs do not vary as output changes?] a. the costs of paper and binding b. shipping and postage expenses c. composition, typesetting, and jacket design for the book d. author royalties of 5 % per book

C. Less than average variable costs

in the short run, a firm operating in a competitive industry will shut down if price is a. greater than marginal cost b. greater than average variable cost but less than average total cost c. less than average variable cost d. less than average total cost.