Econ 202S Final Exam Review Part 3

B.

A purely competitive firm's short-run supply curve is: A. perfectly elastic at the minimum average total cost. B. upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve. C. upsloping and equal to the portion of the marginal cost curve that lies above the average total cost curve. D. upsloping only when the industry has constant costs.

A.

Accounting profits equal total revenue minus: A. total explicit costs. B. total implicit costs. C. total economic costs. D. economic profits.

B.

Allocative efficiency is achieved when the production of a good occurs where: A. P = minimum ATC. B. P = MC. C. P = minimum AVC. D. total revenue is equal to TFC.

B.

As the firm in the diagram expands from plant size #1 to plant size #3, it experiences: A. diminishing returns. B. economies of scale. C. diseconomies of scale. D. constant costs.

B.

Fixed cost is: A. the cost of producing one more unit of capital, for example, machinery. B. any cost that does not change when the firm changes its output. C. average cost multiplied by the firm's output. D. usually zero in the short run.

D.

For a purely competitive seller, price equals: A. average revenue. B. marginal revenue. C. total revenue divided by output. D. all of these.

C.

In a purely competitive industry: A. there will be no economic profits in either the short run or the long run. B. economic profits may persist in the long run if consumer demand is strong and stable. C. there may be economic profits in the short run but not in the long run. D. there may be economic profits in the long run but not in the short run.

A.

In the long run: A. all costs are variable costs. B. all costs are fixed costs. C. variable costs equal fixed costs. D. fixed costs are greater than variable costs.

B.

In the short run, a purely competitive firm that seeks to maximize profit will produce: A. where the demand and the ATC curves intersect. B. where total revenue exceeds total cost by the maximum amount. C. that output at which economic profits are zero. D. at any point where the total revenue and total cost curves intersect.

B.

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were: A. $100,000 and its economic profits were zero. B. $200,000 and its economic profits were zero. C. $100,000 and its economic profits were $100,000. D. zero and its economic loss was $200,000.

C.

Suppose you find that the price of your product is less than minimum AVC. You should: A. minimize your losses by producing where P = MC. B. maximize your profits by producing where P = MC. C. close down because, by producing, your losses will exceed your total fixed costs. D. close down because total revenue exceeds total variable cost.

A.

The MR = MC rule applies: A. to firms in all types of industries. B. only when the firm is a "price taker." C. only to monopolies. D. only to purely competitive firms.

B.

To economists, the main difference between the short run and the long run is that: A. the law of diminishing returns applies in the long run, but not in the short run. B. in the long run all resources are variable, while in the short run at least one resource is fixed. C. fixed costs are more important to decision making in the long run than they are in the short run. D. in the short run all resources are fixed, while in the long run all resources are variable.

A.

To the economist, total cost includes: A. explicit and implicit costs. B. neither implicit nor explicit costs. C. implicit, but not explicit, costs. D. explicit, but not implicit, costs.

C.

Which of the following best expresses the law of diminishing returns? A. Because large-scale production allows the realization of economies of scale, the real costs of production vary directly with the level of output. B. Population growth automatically adjusts to that level at which the average product per worker will be at a maximum. C. As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra or marginal output will decline. D. Proportionate increases in the inputs of all resources will result in a less-than-proportionate increase in total output.

A.

Which of the following distinguishes the short run from the long run in pure competition? A. Firms can enter and exit the market in the long run but not in the short run. B. Firms attempt to maximize profits in the long run but not in the short run. C. Firms use the MR = MC rule to maximize profits in the short run but not in the long run. D. The quantity of labor hired can vary in the long run but not in the short run.

D.

Refer to the data. Average product is at a maximum when: A. five workers are hired. B. four workers are hired. C. three workers are hired. D. two workers are hired.

C.

Refer to the data. Diminishing marginal returns become evident with the addition of the: A. sixth worker. B. fourth worker. C. third worker. D. second worker.

C.

Refer to the data. If product price is $60, the firm will: A. shut down. B. produce 4 units and realize a $120 economic profit. C. produce 6 units and realize a $100 economic profit. D. produce 3 units and incur a $40 loss.

A.

Refer to the data. If the market price for the firm's product is $32, the competitive firm will produce: A. 8 units at an economic profit of $16. B. 6 units at an economic profit of $7.98. C. 10 units at an economic profit of $4. D. 7 units at an economic profit of $41.50.

A.

Refer to the data. The average fixed cost of producing 3 units of output is: A. $8. B. $7.40. C. $5.50. D. $6.

D.

Refer to the data. The marginal product of the sixth worker is: A. 180 units of output. B. 30 units of output. C. 15 units of output. D. negative.

C.

Refer to the data. The total variable cost of producing 5 units is: A. $61. B. $48. C. $37. D. $24.

B.

Refer to the diagram. At P2, this firm will: A. produce 44 units and realize an economic profit. B. produce 44 units and earn only a normal profit. C. produce 68 units and earn only a normal profit. D. shut down in the short run.

A.

Refer to the diagram. At P4, this firm will: A. shut down in the short run. B. produce 30 units and incur a loss. C. produce 30 units and earn only a normal profit. D. produce 10 units and earn only a normal profit.

C.

Refer to the diagram. At output level Q total cost is: A. 0BEQ. B. BCDE. C. 0BEQ + BCDE. D. 0AFQ + BCDE.

A.

Refer to the diagram. At output level Q total variable cost is: A. 0BEQ. B. BCDE. C. 0CDQ. D. 0AFQ.

D.

Refer to the diagram. At the profit-maximizing output, the firm will realize: A. a loss equal to BCFG. B. a loss equal to ACFH. C. an economic profit of ACFH. D. an economic profit of ABGH.

C.

Refer to the diagram. To maximize profit or minimize losses, this firm will produce: A. K units at price C. B. D units at price J. C. E units at price A. D. E units at price B.

A.

Which of the following will not hold true for a competitive firm in long-run equilibrium? A. P equals AFC. B. P equals minimum ATC. C. MC equals minimum ATC. D. P equals MC.