ECON 2000 Chapter 7: Consumer, Producers and Efficiency of Markets.

Which of the following is an example of an implicit cost?

foregone rent on office space owned and used by the firm

David's firm experiences diminishing marginal product for all ranges of inputs. The total cost curve associated with David's firm

gets steeper as output increases.

Industrial organization is the study of

how firms' decisions regarding prices and quantities depend on the market conditions they face.

When new entrants into a competitive market have higher costs than existing firms,

market price will rise.

By comparing marginal revenue and marginal cost, a firm in a competitive market is able to adjust production to the level that achieves its objective, which we assume to be

maximizing profit.

The efficient scale of the firm is the quantity of output that

minimizes average total cost.

Which of the following is the best example of a variable cost? . annual insurance payments for a warehouse b. annual property tax payments for a building c. monthly rent payments for a warehouse d. monthly wage payments for hired labor

monthly wage payments for hired labor

Suppose a firm in each of the two markets listed below were to increase its price by 15 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?

#2 lead pencils and college textbooks

Scenario 13-11 Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each. Refer to Scenario 13-11. An economist would calculate the total profit for one birdhouse to be

$11

Which of the following is not a property of a firm's cost curves?

Average total cost will cross marginal cost at the minimum of marginal cost.

To an economist, the field of industrial organization answers which of the following questions?

How does the number of firms affect prices and the efficiency of market outcomes?

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.50 and AVC = $5.15.

In the short run firms will shut down, and in the long run firms will leave the market.

Which of these assumptions is often realistic for a firm in the short run?

The firm can vary the number of workers it employs but not the size of its factory.

Marginal cost tells us the

amount by which total cost rises when output is increased by one unit

Which of the following expressions is correct? a.average total cost = (total cost)/(quantity of output) b. total cost = variable cost + marginal cost c. average variable cost = (quantity of output)/(total variable cost) d. marginal cost = (change in quantity of output)/(change in total cost)

average total cost = (total cost)/(quantity of output)

In setting the production level, a firm's cost curves

by themselves do not tell us what decisions the firm will make

A student might describe information about the costs of production as a. dry and technical. b. boring. c. All of the above could be correct. d. crucial to understanding firms and market structures.

c. all of the above could be correct.

When a firm's long-run average total costs do not vary as output increases, the firm exhibits

constant returns to scale.

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?

corn and satellite radio

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

double.

A firm that shuts down temporarily has to pay

its fixed costs but not its variable costs.

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers

labor to be variable and capital to be fixed.

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith described a visit he made to a

pin factory.

Tom produces commemorative t-shirts in a competitive market. If Tom decides to decrease his output, this will

​decrease his revenue, since his output has decreased and the price remains the same.

In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith credits economies of scale to

specialization.

Patrice owns a travel agency. Her accountant most likely includes which of the following costs on her financial statements?

the cost of utilities for operating the storefront

When entry and exit behavior of firms in an industry does not affect a firm's cost structure,

the long-run market supply curve must be horizontal.

In the long run, each firm in a competitive industry earns

zero economic profits.