Ecology Exam 2

How many pizzas will they purchase to maximize utility? A. 1 pizza D. 4 pizzas B. 2 pizzas E. 5 pizzas C. 3 pizzas

C. 3 Pizzas

Walmart is thinking about offering a 25% discount on a brand of shoes. If the elasticity of demand is two, then the discount would be expected to increase sales by A. 2% B. 25% C. 50% D. 200%

C. 50%

Walmart is thinking about offering a 25% discount on a brand of shoes. If the elasticity of demand is two, then the discount would increase sales by: A. 2% B. 200% C. 50% D. 25%

C. 50%

Which of the following would be most price inelastic? A. a spring break vacation to Cancun B. a vacation home in the Smoky Mountains C. a cavity filled at the dentist D. a pair of casual shoes at a large shoe store at the mall

C. a cavity filled at the dentist

At the current level of output produced by a perfectly competitive firm, the market price is less than marginal cost. If the firm wants to maximize profits, then the firm should decrease its level of production (T or F)

True

If it takes a week to obtain a vendor's license and buy a hot dog stand, the week would be considered as the long run for the hot dog stand industry. (T or F)

True

If the price of bread falls by 20% and the quantity demanded of bread increases by 10%, then the [rice elasticity of demand equals 0.5 (T or F)

True

In the long run, all costs are variable costs. (T or F)

True

Sean receives 40 utils from consuming a burger that costs $4 and 30 utils from consuming French fries that costs $2. If Sean wants to maxamize his utility, then he should eat more French fries. (T or F)

True

The more responsive buyers are to a change in price, the greater is the price elasticity of demand. (T or F)

True

Which of the following is useful for determining the cost-efficient size or scale of a firm's production capacity? a. Fixed cost b. Variable cost c. Total cost d. Marginal cost e. Average cost

a. Fixed cost

A business owner will always prefer zero economic profit to zero accounting profit. (T or F)

True

If the market price is $6 and the firm chooses output to maximize profits or minimize losses, then how much profit or loss will the firm have? A. -$3 B. -$1 C. $0 D. +$1 E. +$4

A. -$3

Jeremy's level of satisfaction from consuming the first cookie was 25 utils. The second cookie increased the level of satisfaction by 20 utils. After eating three cookies, Jeremy's total level of satisfaction 60. What is the marginal utility for the third cookie? A. 15 B. 25 C. 45 D. 60 E. None of the above

A. 15

Which statement is descriptive of the long run rather than the short run? A. A firm is deciding how much of its equipment to sell so that it can reduce its monthly loan payments for equipment. B. The firm must pay an electric bill that varies each month as well as a mortgage payment of $10,000 each month. C. The firm is trying to increase its amount of output by adding an extra shift so that its equipment is in use more hours of the day. D. A firm is deciding how many workers to use in its production line.

A. A firm is deciding how much of its equipment to sell so that it can reduce its monthly loan payments for equipment.

Which of the following would you expect to have highly price elastic demand curves? A. Name brand products B. Gasoline C. Drugs for serious illnesses D. Eggs

A. Name brand products

When consumers are very loyal to a particular product and the product's price increases, what happens to the producer's total revenue? A. Total revenue increases B. Total revenue decreases C. Total revenue stays the same D. It is not possible to determine the effect on total revenue based on the information provided.

A. Total revenue increases

A business owner will always prefer zero economic profit to zero accounting profit. A. True B. False

A. True

A firm producing a product that is not necessary and has many substitutes can increase revenues by decreasing prices. A. True B. False

A. True

An important difference between corporations and partnerships is that corporations have limited liability but partnerships have unlimited liability. A. True B. False

A. True

As the length of time increases, the elasticity of demand for products tends to increase. A. True B. False

A. True

At the current level of a perfectly competitive firm's level of output, the market price is greater than marginal cost. The firm should increase its level of production. A. True B. False

A. True

If a firm earns an additional $1,500 in revenue by selling 10 additional units of output, then its marginal revenue is $150. A. True B. False

A. True

If a firm earns an additional $1,500 in revenue by selling 10 additional units of output, then its marginal revenue is $150. A. True B. False

A. True

If it takes a week to obtain a vendor's license and buy a pushcart, then a week would be the long run for the hot dog stand business. A. True B. False

A. True

If the market price is $7, then the firm is making normal profits. A. True B. False

A. True

If the price of music CDs falls by 10% and the quantity demanded of CDs increases by 20%, then the price elasticity of demand equals 2. A. True B. False

A. True

Marginal cost is the addition to total cost derived from the production of one additional unit. A. True B. False

A. True

Measuring elasticities in percentage terms allows us to compare the sensitivity of demand curves, compare characteristics of dissimilar products, and not worry about the magnitude of changes. A. True B. False

A. True

The more responsive buyers are to a change in price, the greater the price elasticity of demand. A. True B. False

A. True

There are no fixed costs in the long run. A. True B. False

A. True

To say a firm is earning normal profits means accounting profits are large enough to cover the firm owner's opportunity costs. A. True B. False

A. True

Total utility is the total satisfaction derived from the consumption of given quantity of a good. A. True B. False

A. True

When choosing the amounts of two or more goods to purchase, maximization of total utility occurs when the marginal utility per dollar is equal for all of the goods. A. True B. False

A. True

When there are many substitutes for a product, the demand tends to be relatively elastic. A. True B. False

A. True

Which factor would cause the price elasticity of demand to increase the most? A. an increase in the number of tablets brands being offered B. a decrease in the proportion of one's income spent on televisions C. a service such as high-speed internet access that has become a greater necessity D. a shorter time period to make decisions

A. an increase in the number of tablet brands being offered

When the market price is $4, what is the profit maximizing or loss minimizing level of output? A. 10 C. 14 E. 20 B. 12 D. 15

C. 14

An increase in the price a perfectly competitive firm receives for output will induce the firm to A. expand output and earn greater profits or smaller losses. B. leave output unchanged and earn greater profits. C. leave output unchanged and earn larger losses. D. reduce output and earn smaller losses.

A. expand output and earn greater profits or smaller losses.

Jack is making a normal profit by selling firewood in a perfectly competitive market. His price is $100 per load. If the market price goes up to $120, then he can expect A. more competition in the future. B. less competition in the future. C. about the same amount of competition in the future. D. more customers in the future.

A. more competition in the future.

A product's price changes from $2 to $6 and its quantity demanded changes from 6 to 4 units. This is an example of A. price inelastic demand. B. price elastic demand. C. unitary price elasticity of demand. D. price inelasticity of supply.

A. price inelastic demand

Which sequence describes the long-run adjustment process in a competitive market when firms experience short-run economic losses? A. some firms exit, industry supply decreases, market price rises B. some firms exit, industry supply decreases, market price falls C. market price rises, some firms exit, industry demand decreases, market price falls D. market price falls, some firms exit, industry supply falls E. None of the above

A. some firms exit, industry supply decreases, market price rises

What is the average fixed cost of producing 2 units of output? A. $2 B. $3 C. $6 D. $7.50 E. None of these

B. $3

Suppose consumer has $18 to spend, the price of a movie ticket is $6 and the price of a pizza slice is $2. Use the following chart showing marginal utility (not total utility) to answer questions 42-43. 42. ____ How many movie tickets will they purchase to maximize utility? A. 1 ticket D. 4 tickets B. 2 tickets E. 5 tickets C. 3 tickets

B. 2 tickets

A news report said that with an expected 30% increase in the price of bread, producers expect sales to be reduced by 10%. From this we can infer that the demand for bread is elastic. A. True B. False

B. False

As the length of time increases, the elasticity of demand for products tends to decrease. A. True B. False

B. False

In the long run, if firms are making a normal profit, then new entrants would be encouraged to move into the industry. A. True B. False

B. False

Some costs remain fixed even in the long run. A. True B. False

B. False

Suppose the price of DVDs increases. As a result, Mary increases the number of DVDs she purchases. This will lead to higher marginal utility from the last DVD purchased. A. True B. False

B. False

The difference between total utility and marginal utility is that total utility looks at societal satisfaction while marginal utility looks at the satisfaction of an individual person. A. True B. False

B. False

The market for toothbrushes in the land of Econia has 1,000 producers. There are no barriers to entry. Some producers are able to charge higher prices than others because of small differences in their toothbrushes. What type of market exists for toothbrushes in Econia? A. Perfect competition B. Monopolistic competition C. Oligopoly D. Monopoly

B. Monopolistic competition

Which is an example of a fixed cost of production? A. The cost of electricity B. Monthly rent on a year-long lease C. The cost of raw materials D. Wages paid to workers E. None of the above

B. Monthly rent on a year-long lease

If Glass Inc. produces 80 window panes per day at the market price of $60 in a perfectly competitive market, what would happen to market prices if Glass Inc. increases production to 120 window panes, all else being equal? A. The price would fluctuate in an unknown pattern. B. The price would remain the same. C. The price would increase as production by Glass Inc. rises. D. The price would decrease as production by Glass Inc. rises. E. There is not enough information to answer this question.

B. The price would remain the same.

Economists calculate profits as total revenue minus A. depreciation. B. explicit and implicit (opportunity) costs. C. explicit costs and depreciation. D. costs of raw materials.

B. explicit and implicit (opportunity) costs.

If a firm shuts down for the holiday, it must still pay its A. marginal cost. B. fixed costs. C. variable costs. D. sunk costs.

B. fixed costs

Suppose the marginal utility per dollar for bottled water is greater than the marginal utility per dollar for bags of chips. To maximize total utility, the consumer should buy A. more bags of chips and less bottled water. B. more bottled water and fewer bags of chips. C. more of both goods. D. less of both goods.

B. more bottled water and fewer bags of chips.

Suppose the marginal utility per dollar for bottled water is greater than the marginal utility per dollar for bags of chips. To maximize total utility, the consumer should buy A. more bags of chips and less bottled water. B. more bottled water and fewer bags of chips. C. more of both goods. D. less of both goods. E. None of the above

B. more bottled water and fewer bags of chips.

___ Used to determine whether or not a firm is earning a profit or loss. ____ Used to determine how much output a firm should produce, under the assumption that the firm is seeking to maximize profits. ____ Used to determine the size or scale of a firm's production capacity. A. Fixed cost B. Variable cost C. Total cost D. Marginal cost E. Average cost

C, D, A

If the market price is $7 and the firm chooses output to maximize profits or minimize losses, then how much profit or loss will the firm have? A. -$3 B. -$1 C. $0 D. +$1 E. +$4

C. $0

At a quantity of 15, what are the firm's average total costs? A. $2 C. $5 E. None of these B. $4 D. $75

C. $5

Suppose the price of tomatoes is $2 each and JoAnne sells 25 tomatoes at the perfectly competitive local farmer's market. The total revenue is ____ and the marginal revenue is ____. A. $12.50; $12.50 B. $12.50; $2.00 C. $50.00; $2.00 D. $50.00; $12.50

C. $50.00; $2.00

Farmer Bob sells cotton in a perfectly competitive market. At his current level of production, the marginal cost of a pound of cotton is $14, his average total cost is $14, and his average variable cost is $12. The industry price for cotton is $14. To maximize profits or minimize losses, Farmer Bob should A. increase production. B. decrease production. C. continue at his current level of production. D. shutdown.

C. continue at his current level of production.

A bicycle factory finds that it can lower costs if it also produces tricycles and unicycles. This is an example of A. economies of scale. B. economies of opportunities. C. economies of scope. D. economies of comparative advantage.

C. economies of scope.

Home heating gas tends to have _____ demand because _____. A. elastic; it has many close substitutes B. elastic; it is a necessity C. inelastic; people do not have time to adjust their consumption patterns D. inelastic; people spend a large share of their incomes on heat

C. inelastic; people do not have time to adjust their consumption patterns

At an all-you-can eat buffet, a person will stop eating when A. total utility increases at a diminishing rate. B. marginal utility increases at a diminishing rate. C. marginal utility is equal to zero. D. total utility is equal to zero. E. None of the above

C. marginal utility is equal to zero

Knowing a product's price elasticity allows economists to A. respond quickly to tariff changes. B. predict how changes in consumer incomes will affect sales. C. predict the amount by which quantity demanded changes in response to a change in price. D. predict the amount by which quantity supplied will change in response to a change in price.

C. predict the amount by which quantity demanded changes in response to a change in price.

When firms in an industry are earning normal profits A. they are likely to be investigated for price gouging. B. they are earning zero accounting profits. C. the number of firms in the industry is stable. D. their stocks are not valued by investors.

C. the number of firms in the industry is stable.

Suppose the additional utility you would get from buying and eating another piece of cake is positive. This means A. you could eat another piece of cake, but would prefer apple pie instead. B. you could eat another piece of cake, but might not if the price of cake is too low. C. you could eat another piece of cake, but might not if the price of cake is too high. D. nothing, since eating cake never affects anyone's utility.

C. you could eat another piece of cake, but might not if the price of cake is too high.

What market price will produce normal profits for the firm, assuming costs include opportunity costs? A. $1 C. $4 E. $8 B. $2 D. $5

D. $5

A grocery store announced a 50% decrease in the price of local honey. Sales increased by 200%. Based on the information, the price elasticity of honey is: A. 0.25 B. 0.04 C. 0.4 D. 4

D. 4

Which of the following is a clear example of the law of diminishing marginal utility? A. Young Joey wants his mother to read him the same story over and over again and he is equally thrilled every time she reads it. B. As the price of his favorite candy bar rises, Martin buys fewer and fewer candy bars. C. Marta develops an allergy to milk. She drinks less of it each month as the allergy gets worse. D. Julia eats three cookies. She takes 20 seconds to eat the first one, 1 minute to eat the second one, and 3 minutes to finish the third one.

D. Julia eats three cookies. She takes 20 seconds to eat the first one, 1 minute to eat the second one, and 3 minutes to finish the third one.

Which statement is not a characteristic of perfect competition? A. There are many firms and consumers in the market. B. Firms produce identical products. C. There are no barriers to entry into or exit from the market. D. There are many firms in the industry, but some firms can affect the market price. E. No firm has sufficient market power to affect market price.

D. There are many firms in the industry, but some firms can affect the market price.

Which is the better buy? A new top-quality motorcycle or a used older model motorcycle? A. The new motorcycle is the better buy. B. The used motorcycle is the better buy. C. Both are equally good buys. D. There is not enough information to answer this question.

D. There is not enough information to answer this question.

What do sole proprietorships, partnerships, and corporations have in common? A. They all have limited liability. B. They all can sell stock. C. They all dissolve upon the death of the chief executive officer. D. They all react to the profit incentives of the market.

D. They all react to the profit incentives of the market.

The prices per pound of apples, pears, and grapes are $1, $2, and $3, respectively. Clara's marginal utility for the last pound bought of each is 20 MU for apples, 30 MU for pears, and 90 MU for grapes. If Clara wants to maximize utility out of her limited budget for fruit, she should A. buy apples, pears, and grapes in the same amounts. B. buy more apples and fewer grapes. C. buy more pears and fewer apples. D. buy more grapes and fewer pears.

D. buy more grapes and fewer pears.

If the Clearwater Candy Company lays off workers and shuts down, it incurs costs of $30,000. If it produces at full capacity, it incurs costs of $90,000. We can conclude that A. fixed costs are $90,000. B. variable costs at half-capacity are $45,000. C. fixed costs are $60,000. D. the cost of variable inputs at full capacity is $60,000.

D. the cost of variable inputs at full capacity is $60,000.

If a perfectly competitive firm can sell a bushel of soybeans for $19 per bushel and it has an average variable cost of $20 per bushel, and the marginal cost is $22 per bushel, it should A. expand output. B. reduce output. C. increase price. D. decrease price. E. shutdown.

E. shutdown

In the long run, if the firms are making a normal profit, the new entrants would be encourages to move into the industry (T or F)

False

Suppose the MU/P for bottled water is greater than the MU/P for bags of chips. To maximize total utility, the consumer should buy more bags of chips and less bottled water. (T or F)

False

Suppose the price of t-shirts increases. As a result, Mary increases the number of t-shirts she purchases. This will lead to higher marginal utility form the last t-shirt purchased. (T or F)

False

Which of these shows characteristics of a perfectly competitive firm? a. JorDawn cannot tell which farm the peaches he purchased came from because all the peaches look alike. b. Donelli's Pizza was voted the best pizza in town by readers of the local newspaper. c. People who want to open a bank in Kansas must obtain a charter from the U.S. Comptroller of the Currency or the state of Kansas. d. Devin's new software firm is spending a lot of money on research and development.

a. JorDawn cannot tell which farm the peaches he purchased came from because all the peaches look alike.

Fixed costs do NOT include: a. electricity. b. rent. c. property taxes. d. insurance.

a. electricity

A normal rate of return on capital: a. is a return just sufficient to keep investors satisfied. b. sends a signal to investors to use their capital elsewhere. c. does not allow a business to keep its capital equipment in the long run. d. represents a positive economic profit.

a. is a return just sufficient to keep investors satisfied

Jim Delaney employs five people to make pizzas for his neighborhood. He makes $4,000 in profit per month, which he pays to himself. This firm is an example of a: a. sole proprietorship. b. partnership, because he has five employees. c. corporation, because he sells his pizzas to the public. d. nonprofit corporation.

a. sole proprietorship

(Figure: Unicycle Production Costs) If the current price is $20 in this perfectly competitive industry, we should expect: a. the presence of an economic profit to attract new firms to the industry. b. the presence of a normal profit to attract new firms to the industry. c. the presence of an economic loss to persuade some firms to leave the industry. d. that there will be no change in the number of firms in the industry.

a. the presence of an economic profit to attract new firms to the industry.

Farmer Jean sells corn in a perfectly competitive market. The market price for a bushel of corn is $6. Jean has six hundred bushels of corn to sell. If her total variable cost is $3,300 and her total fixed cost is $300, then: a. Jean is earning a positive economic profit. b. Jean is earning a normal profit. c. Jean is minimizing her losses. d. Jean should raise her price.

b. Jean is earning a normal profit.

If the price of copper pipes is $70 in a perfectly competitive market, and a firm is producing a quantity at which the marginal cost is $65, is this firm maximizing profit? a. Yes, this firm is maximizing profit. b. No, this firm should be producing more to maximize profit. c. No, this firm should be producing less to maximize profit. d. A determination cannot be made without knowing the marginal revenue.

b. No, this firm should be producing more to maximize profit.

Suppose a perfectly competitive firm faces the following situation: P = $10, output = 3,000, ATC = $8.50, MC = $9, and AVC = $7.50. Which statement is an accurate description of the firm's situation? a. The firm incurs losses and is minimizing its losses. b. The firm incurs profits but should increase output to maximize its profits. c. The firm is maximizing profits. d. The firm incurs profits but should decrease output to maximize its profits.

b. The firm incurs profits but should increase output to maximize its profits.

A competitive firm facing a price of $15 decides to produce one hundred units. If the marginal cost of producing the last unit is $20, the firm should: a. hold production constant. b. decrease production. c. increase production. d. The firm should do none of these.

b. decrease production

Economies of scale: a. only occur in the short run. b. lead to lower average costs in the long run. c. are harmful to firms. d. suggest that the firm is producing too much of a good.

b. lead to lower average cost in the long run

Table) Using the information in the table, assume the consumer has a weekly budget of $2.50; the price of a root beer is $0.50; and the price of a candy bar is $1. The consumer maximizes utility by purchasing: a. 5 root beers. b. 3 root beers and 1 candy bar. c. 1 root beer and 2 candy bars. d. 2 root beers and 1 candy bar.

c. 3 root beers and 1 candy bar

Which statement is descriptive of the long run rather than the short run? a. The firm must pay an electric bill that varies each month as well as a mortgage payment of $10,000 per month. b. The firm is trying to increase its amount of output by adding an extra shift so that its equipment is in use more hours of the day. c. A firm is deciding how much of its equipment to sell so that it can reduce its monthly loan payments for equipment. d. A firm is deciding how many workers to use in its production line.

c. A firm is deciding how much of its equipment to sell so that it can reduce its monthly loan payments for equipment.

Jenn's marginal utility of the last candy bar consumed is 8 and her marginal utility of the last smoothie consumed is 20. If candy bars cost $2 and smoothies cost $4, which statement is true according to the utility maximization rule? a. Jenn is maximizing her utility. b. Jenn must consume more candy bars and less smoothies to maximize utility. c. Jenn must consume more smoothies and less candy bars to maximize utility. d. Jenn must consume less of both candy bars and smoothies to maximize utility.

c. Jenn must consume more smoothies and less candy bars to maximize utility.

If the market price is $60, a firm's minimum average total cost is $70, and minimum average variable cost is $50, what should the firm do in this perfectly competitive market? a. The firm should continue producing because the firm is earning an economic profit b. The firm should continue producing because the firm is earning a normal profit c. The firm should continue producing in the short run in order to minimize losses d. The firm should shut down operations in order to minimize losses

c. The firm should continue producing in the short run in order to minimize losses

Which statement explains the logic of the profit-maximization rule for a perfectly competitive firm? a. Since it must charge the market equilibrium price, the firm should produce and sell maximum output. b. The firm should choose the output level with a minimum ATC so that it earns maximum profit per unit of output. c. The firm should produce every unit of output that adds more to revenue than it adds to costs so that the firm captures all the available profit. d. The firm should reduce price by 1% for every 1% increase in output.

c. The firm should produce every unit of output that adds more to revenue than it adds to costs so that the firm captures all the available profit.

When consumers are very loyal to a particular product and the product's price increases, what happens to the producer's total revenue? a. Total revenue decreases b. Total revenue stays the same c. Total revenue increases d. It is not possible to determine the effect on total revenue based on the information provided.

c. Total revenue increase

The perfectly competitive market structure assumes all of these EXCEPT: a. ease of entry and exit. b. identical products. c. a small number of buyers and sellers. d. zero economic profit in the long run.

c. a small number of buyers and sellers.

Jim Delaney sold his pizza firm to an investor who then sold stock to the public. Jim now earns a salary of $5,000 a month and all the profits are distributed to the stockholders. This firm is an example of a: a. sole proprietorship. b. partnership because Jim Delaney partnered with an investor. c. corporation. d. nonprofit corporation.

c. corporation

A lumber company that specializes in making pine boards finds it can lower costs by also making particleboard and paper pulp. This is an example of: a. economies of scale. b. diminishing marginal returns. c. economies of scope. d. comparative advantage.

c. economies of scope.

If the marginal revenue for the next unit being produced is $50, but the marginal cost is $45, the firm should: a. hold production constant. b. decrease production. c. increase production. d. consider stopping production before more losses are incurred.

c. increase production.

Which of these is an example of a decreasing cost industry? a. auto insurance market b. fast-food franchises c. memory chips for tablets d. lumber for home construction

c. memory chips for tablets

A consumer is in equilibrium, that is, maximizing utility, when: a. an equal amount is spent on every commodity. b. the same total utility is derived from each commodity. c. the addition to total utility per dollar is the same for every commodity. d. marginal utilities are equal.

c. the addition to total utility per dollar is the same for every commodity

A student, who is currently maximizing his or her utility, buys movies and computer games. If the price of computer games drops: a. the student will not react to the price change. b. equilibrium will not be disturbed because it is a permanent condition. c. the student is temporarily in disequilibrium and will buy more games and fewer movies in order to re- establish equilibrium. d. the student is temporarily in disequilibrium and will buy more movies and fewer games in order to re- establish equilibrium.

c. the student is temporarily in disequilibrium and will buy more games and fewer movies in order to re- establish equilibrium.

Suppose that Bob has left a job that paid $50,000 per year in order to open a new sponge business. His insurance cost is $5,000, his material cost is $25,000, his lease payments are $10,000, and his sales revenue is $90,000. Bob's economic profit is: a. $50,000. b. $90,000. c. $40,000. d. $0.

d. $0

If the total cost of 3 units is $40 and the total cost of 4 units is $50, the marginal cost of the fourth unit is: a. $90. b. $50. c. $40. d. $10.

d. $10

Dan's Car Wash produces $150,000 in revenues and incurs $120,000 in labor wages, materials, rent, and other explicit costs. Moreover, Dan gave up a $40,000-a-year job as a hotel valet to start his car wash business. Dan's economic profit is _____, and he _____ earning a normal profit. a. $30,000; is b. $30,000; is not c. -$10,000; is d. -$10,000; is not

d. -$10,000; is not

Suppose the price of a bag of jelly beans rises from $1.60 to $2.00, with the result that sales of jelly beans falls from 120 bags to 80 bags a day. Using the midpoint method, what is the elasticity of demand for jelly beans? a. 0.55 b. 0.75 c. 1.33 d. 1.80

d. 1.80

If the variable cost for five shoes is $50 and the variable cost of six shoes is $80, which statement is true? a. The marginal cost for the sixth shoe is $80. b. Total costs for the sixth shoe is $130. c. Average variable cost of the sixth shoe is $10. d. Average variable cost for the fifth shoe is $10.

d. Average variable for the fifth shoe is $10

Which equation is correct? a. Economic profit = Total revenue - Implicit costs b. Economic profit = Total revenue - Opportunity costs - Implicit costs c. Economic profit = Total revenue - Normal costs d. Economic profit = Total revenue - Explicit costs - Implicit costs

d. Economic profit= total revenue-explicit costs-implicit costs

Which of the following is a clear example of the law of diminishing marginal utility? a. Young Joey wants his mother to read him the same story over and over again and he is equally thrilled every time she reads it. b. As the price of his favorite candy bar rises, Martin buys fewer and fewer candy bars. c. Marta develops an allergy to milk. She drinks less of it each month as the allergy gets worse. d. Julia eats three cookies. She takes 20 seconds to eat the first one, 1 minute to eat the second one, and 3 minutes to finish the third one.

d. Julia eats three cookies. She takes 20 seconds to eat the first one, 1 minute to eat the second one, and 3 minutes to finish the third one

Which of the following is useful for determining how much output a firm should produce, under the assumption that the firm is seeking to maximize profits? a. Fixed cost b. Variable cost c. Total cost d. Marginal cost e. Average cost

d. Marginal cost

According to this graph of a perfectly competitive firm, what is the profit-maximizing price and quantity? a. Price = $8; Quantity = 10 b. Price = $9; Quantity = 14 c. Price = $12; Quantity = 18 d. Price = $12; Quantity = 14

d. Price = $12; Quantity = 14

If you drop a course after the refund date, the nonrefundable tuition that you have paid is: a. a variable cost. b. a marginal cost. c. a fixed cost. d. a sunk cost.

d. a sunk cost

A perfectly competitive firm: a. will budget money to advertise its product. b. can adjust the price of the product so that it sells, in order to make more money. c. can make an economic profit in the long run. d. has output that is so small, relative to market supply, that it cannot influence the market price.

d. has output that is so small, relative to market supply, that it cannot influence the market price.

Tena has $50 per week to spend on lunches. Egg rolls cost $2 each and a plate of Chow Mein costs $7. Tena wants to buy five plates of Chow Mein and ten egg rolls per week. This combination of Chow Mein and egg rolls each week is: a. obtainable, but she would be spending every bit of her lunch money. b. obtainable, but she could buy more egg rolls. c. obtainable, but she could buy more Chow Mein. d. unobtainable.

d. unobtainable