ECON 300 Exam 2
A firm that generates zero economic profit usually faces: A. negative business profit. B. positive business profit. C. zero business profit. D. business profit equal to half the total revenue.
B
Partnerships
The smallest proportion of firm type Shared liability
Rent seeking is any effort and/or expenditure to gain a rent or a profit from government actions. T or F
True
"Consumer surplus is the monetary difference between what a consumer is willing to pay for the quantity of the good purchased and what the good actually costs." T or F
True
"Given that social welfare is the sum of consumer surplus plus producer surplus, a competitive equilibrium maximizes social welfare." T or F
True
"The dollar-denominated consumer surplus of several individuals can be easily compared, whereas the utility of several individuals cannot be easily compared." T or F
True
Once one considers the resources used for rent-seeking behavior, such as hiring lobbyists and engaging in advertising to influence legislators, the deadweight loss from tariffs and quotas ______ the true loss to society.
Understates
A firm will shut down in the short run if A. total revenue from operating would not cover variable costs. B. total revenue from operating would not cover fixed costs. C. total fixed costs are too high. D. total revenue from operating would not cover all costs.
A
A production function tells the firm A. the maximum output it can expect to produce with a given mix of inputs. B. the minimum output it can expect to produce with a given mix of inputs. C. the average level of production for other firms in the industry. D. the average output it can expect to produce with a given mix of inputs.
A
Consumer surplus is: A. the area under the new demand curve and above the new price up to the new equilibrium quantity. B. the area under the original demand curve and above the original price up to the original equilibrium quantity. C. the area under the original demand curve and above the new price up to the original equilibrium quantity. D. the area under the new demand curve and above the original price up to the original equilibrium quantity.
A
Deadweight loss occurs when A. the maximum level of total welfare is not achieved. B. producer surplus is greater than consumer surplus. C. an inferior good is consumed. D. consumer surplus is reduced.
A
Does a competitive long−run equilibrium require cost−minimization? A. Yes, if firms fail to be as efficient as their competitors they are driven out of the market. B. No, in the long−run firms make zero profits. C. Yes, if they didn't even less efficient firms would enter the industry. D. No, because competition ensures their survival.
A
If a farmer produces 1000 bushels of corn using ten acres of land and one tractor and is able to produce 2000 bushels of corn using twenty acres of land and one tractor, the farmer has A. increasing Returns to Scale. B. decreasing Returns to Scale. C. constant Returns to Scale. D. no Returns to Scale.
A
If a firm buys a building so as to have office space for its workers, the monthly opportunity cost of the building is best measured as A. the rent the firm could earn if it rented the building to another firm. B. the monthly mortgage payment the firm must pay. C. the price the firm paid divided by twelve. D. zero.
A
If a firm makes zero economic profit, then the firm A. it is indifferent between staying and exiting the industry. B. has no incentive to stay in the industry. C. it will shut down. D. is better off exiting the industry.
A
If both the price of labor and capital rise in the same proportion, which of the following will occur (holding production costs constant)? A. The isocost line makes a parallel shift inward. B. The isocost line becomes steeper. C. The isoquant makes a parallel shift outward. D. The isocost line becomes flatter. E. The isocost line shifts outward.
A
If consumers view the output of any firm in a market to be identical to the output of any other firm in the market, the demand curve for the output of any given firm A. will be horizontal. B. cannot be determined from the information given. C. will be identical to the market demand curve. D. will be vertical.
A
If the average productivity of labor equals the marginal productivity of labor, then A. the average productivity of labor is at a maximum. B. the marginal productivity of labor is at a maximum. C. Both A and B above. D. Neither A nor B above.
A
If the cost of labor increases, the isocost line will A. rotate inward around the point where only capital is employed in production. B. shift inward in parallel fashion. C. shift outward in parallel fashion. D. stay the same.
A
In a perfectly competitive market, A. firms can freely enter and exit. B. transaction costs are high. C. firms sell a differentiated product. D. All of the above.
A
Learning by doing will result in A. lower long−run costs than short−run costs. B. a rotation in the isocost curves. C. a larger long−run marginal cost than long−run average cost. D. an upward sloping long−run average cost curve.
A
Long−run market supply curves are downward sloping if A. input prices fall as the industry expands. B. the number of firms is restricted in the long run. C. firms are identical. D. All of the above.
A
Mary purchased a stuffed animal toy for $5. After a few weeks, someone offered her $100 for the toy. Mary refused. One can conclude that Mary's consumer surplus from the toy is A. at least $95. B. $105. C. less than $5. D. at least $100.
A
Producer surplus is equal to A. the difference between price and marginal cost for all units sold. B. the area under the supply curve. C. the difference between price and average cost for all units sold. D. the firm's profit when fixed costs exist.
A
Skateboards are produced according to the production function, q = 10K^0.25 x L^0.5 − L. At what quantity of labor does total product begin to decline given that capital is fixed at 16 units in the short run? A. L = 100. B. L = 10. C. L = 5. D. Not enough information is given.
A
Suppose a competitive firm's total revenue is $1,000,000 where MR = MC, its explicit variable costs are $900,000, its fixed costs are $90,000 of which $60,000 are sunk in the short run.. If its implicit opportunity costs are $50,000, the firm should A. produce even though its economic profit is negative. B. produce because its economic profit is zero. C. produce because its economic profit is positive. D. shut down.
A
Suppose that each worker must use only one shovel to dig a trench, and shovels are useless by themselves. In the long run, the firm will experience A. constant returns to scale. B. decreasing returns to scale. C. increasing returns to scale. D. The returns to scale cannot be determined from the information provided.
A
Suppose that for each firm in the competitive market for potatoes, long−run average cost is minimized at $0.20 per pound when 500 pounds are grown. If the long−run supply curve is horizontal, then A. the long−run price will be $0.20 per pound. B. each consumer will purchase $100 worth of potatoes. C. some firms will enjoy long−run profits because they operate at minimum average cost. D. the long−run price will be set just above $0.20 per pound.
A
Suppose that for each firm in the competitive market for potatoes, long−run average cost is minimized at $0.20 per pound when 500 pounds are grown. The demand for potatoes is Q = 10,000/p. If the long−run supply curve is horizontal, then how many firms will this industry sustain in the long run? A. 100 B. 50,000 C. 0 D. There is not enough information to answer.
A
Tariffs and quotas create a loss in social welfare because A. consumer surplus declines. B. revenues from tariffs are misspent. C. producer surplus declines. D. All of the above.
A
The Average Product of Labor is A. the ratio of output to the number of workers used to produce that output. B. equal to the marginal product of labor when the average product is increasing. C. the amount of output that can be produced by a given amount of labor. D. the change in total product resulting from an extra unit of labor, holding other factors constant.
A
The Marginal Product of Labor is A. the change in total product resulting from an extra unit of labor, holding other factors constant. B. the relationship between the quantities of inputs used and the maximum quantity of output that can be produced. C. the amount of output that can be produced by a given amount of labor. D. the ratio of output to the number of workers used to produce that output.
A
The above figure shows the market for rice in Japan where price is expressed in dollars. S represents the domestic supply curve, and the horizontal line at P = 1 represents the world supply curve. Suppose a free market exists. An import quota of Q2 units would A. have no effect. B. increase producer surplus by "d." C. cause consumer surplus to fall by "e." D. cause social welfare to fall by "j."
A
The difference between a fixed and a variable input is that a A. fixed input cannot practically vary in the short run and a variable input can easily vary during the relevant period. B. variable input can be changed in the long run and a fixed input can only be changed in the short run. C. fixed input changes and a variable input does not. D. None of the above.
A
The figure at right shows supply and demand curves for milk. In an effort to help farmers, the government passes a law that establishes a $3 per gallon price support. To maintain the price support, government expenditures must equal A. f + g + h + i + j + k. B. k + i. C. f + g + h + i + j + k + e. D. f + g + h + i + j.
A
The production function for a firm that uses only labor and capital shows A. the maximum amount of output that can be produced from given levels of labor and capital. B. the maximum amount of input that can be produced from every level of labor and capital. C. every amount of output that can be produced from given levels of labor and capital. D. every amount of output that can be produced from every level of labor and capital.
A
The production function is a relationship between A. inputs and outputs. B. inputs and cost. C. cost and output. D. fixed and variable inputs.
A
The services of real estate brokers are provided in a competitive market. If the state Board of Realtors enacts several requirements that limit the number of real estate brokers, then consumer surplus will most likely A. decrease. B. remain unchanged. C. increase. D. There is not enough information to answer.
A
The steeper an isoquant is (labor measured on the horizontal axis): A. the greater is the marginal productivity of labor relative to that of capital. B. the greater is the need to keep capital and labor in fixed proportions. C. the greater is the level of output. D. the greater is the substitutability between capital and labor.
A
The total cost of producing one unit is $50. The total cost of producing two units is $75. At a production level of two units, the cost function exhibits A. economies of scale. B. rising average costs. C. constant returns to scale. D. increasing marginal costs.
A
The total welfare associated with a market that includes a government sales tax equals A. consumer surplus plus producer surplus plus government tax revenue. B. consumer surplus plus producer surplus minus government tax revenue. C. consumer surplus plus producer surplus. D. the government tax revenue.
A
Thomas Malthus' prediction of mass starvation resulting from diminishing marginal returns has not been fulfilled because A. Malthus ignored other factors like technological change. B. relative to Malthus' day, a larger percentage of today's labor works in the agricultural sector. C. the law of diminishing marginal returns did not hold in this case. D. All of the above.
A
Under what conditions could large sunk costs be a barrier to entry? A. When business success is uncertain or capital markets do not work well. B. Only when capital markets do not work well. C. Only when business success is uncertain. D. Never. Sunk costs are irrelevant when considering whether to enter a market.
A
Why do many people choose NOT to read the manuals included with their new computer? A. They perceive that learning by doing decreases costs faster than learning by reading. B. They perceive that learning by doing is more enjoyable than learning by reading. C. They perceive that learning by reading is not sophisticated. D. They believe that the manuals are not accurate.
A
Joey's Lawncutting Service rents office space from Joey's dad for $300 per month. Joey's dad is thinking of increasing the rent to $400 per month. As a result Joey's marginal cost of cutting grass will A. not change. B. increase by $100 divided by the amount of grass cut. C. increase by $100. D. decrease by $100.
A
A small business owner earns $50,000 in revenue annually. The explicit annual costs equal $30,000. The owner could work for someone else and earn $25,000 annually. The owner's business profit is ________ and the economic profit is ________. A. $20,000, $20,000 B. $20,000, −$5,000 C. $25,000, $20,000 D. $25,000, −$5,000
B
An isoquant represents levels of capital and labor that A. incur the same total cost. B. yield the same level of output. C. have constant marginal productivity. D. All of the above.
B
An individual's ________ surplus is the area ________ the ________ curve and above the ________ up to the quantity ________. A. consumer; above; supply; choke price, the consumer buys. B. consumer; under; demand; market price, the consumer buys. C. producer; supply; under; choke price, the producer sells. D. producer; under; supply; market price, the producer sells.
B
A firm's marginal cost can always be thought of as the change in total cost if A. the firm buys one more unit of capital. B. the firm produces one more unit of output. C. the firm moves to the next highest isoquant. D. the firm's average cost increases by $1.
B
Deadweight loss occurs when A. consumer surplus is reduced. B. the maximum level of total welfare is not achieved. C. producer surplus is greater than consumer surplus. D. an inferior good is consumed.
B
Economic costs of an input include A. only explicit costs. B. both implicit and explicit costs. C. only implicit costs. D. whatever management wishes to report to the shareholders.
B
Economic efficiency entails A. producing a given amount of output with the least number of inputs. B. producing a given amount of output with the cheapest mix of inputs. C. producing a given amount of output with the most inputs. D. producing a given amount of output with the most expensive mix of inputs.
B
Economists claim that measuring society's welfare as CS + PS A. is not commonly accepted. B. treats the gains to consumers and producers equally. C. is inappropriate since ultimately everyone is a consumer. D. is valid only when the same person could be either a consumer or a producer.
B
Economists define a market to be competitive when the firms A. watch each other's behavior closely. B. are price takers. C. spend large amounts of money on advertising to lure customers away from the competition. D. All of the above.
B
If a firm buys a building so as to have office space for its workers, the monthly opportunity cost of the building is best measured as A. the monthly mortgage payment the firm must pay. B. the rent the firm could earn if it rented the building to another firm. C. zero. D. the price the firm paid divided by twelve.
B
If a firm is currently in a short-run equilibrium earning a profit, what impact will an increase in variable factor prices have on its production decision? A. The firm will not change output and earn a higher profit. B. The firm will decrease output and earn a lower profit. C. The firm will decrease output to earn a higher profit. D. The firm will not change output but earn a lower profit.
B
If a firm is currently in a short-run equilibrium earning a profit, what impact will a lump-sum tax have on its production decision? A. The firm will increase output but earn a lower profit. B. The firm will not change output but earn a lower profit. C. The firm will not change output and earn a higher profit. D. The firm will decrease output to earn a higher profit.
B
If a profit−maximizing firm finds that, at its current level of production, MR≺MC, it will A. operate at a loss. B. decrease output. C. shut down. D. increase output.
B
If firms in a competitive market are not identical, then an increase in cost for all firms will A. shift marginal cost to the right. B. push the most inefficient firms out of the market. C. Need more information. D. push the most efficient firms out of the market.
B
If technical change is labor-saving: A. the output elasticities of labor and capital add up to one. B. the proportionate change in MPK exceeds the proportionate change in MPL. C. the output elasticities of labor and capital add up to more than one. D. the proportionate change in MPL exceeds the proportionate change in MPK.
B
In a competitive market, one would expect to see A. advertising only in the Sunday papers. B. no advertising. C. minimal advertising. D. false advertising.
B
In the long run, profits will equal zero in a competitive market because of A. constant returns to scale. B. free entry and exit. C. identical products being produced by all firms. D. the availability of information.
B
In the long−run equilibrium in perfect competition, consumer surplus is A. less than producer surplus. B. positive C. negative D. zero
B
In the short run, a firm 's output level is 10 units. Its total cost is $4,000 and its average fixed cost is $100. What is this firm's average variable cost (AVC) of producing 10 units? A. AVC = $400 B. AVC = $300 C. AVC = $250 D. AVC = $275
B
Isoquants that are downward−sloping straight lines imply that the inputs A. cannot be used together. B. are perfect substitutes. C. are imperfect substitutes. D. must be used together in varying proportions.
B
Long−run average cost is never greater than short−run average cost because in the long run A. wages always increase over time. B. the firm can move to the lowest possible isocost curve. C. capital costs equal zero. D. wages always decrease over time.
B
Many universities have either a top football program OR a top basketball program. Very few have both. These results suggest the presence of A. economies of scope. B. diseconomies of scope. C. the law of diminishing marginal returns. D. returns to scale.
B
Many used car owners and used car dealers describe their different cars for sale in the local newspapers and list their asking price. Many people shopping for a used car consider the different choices listed in the paper. The market for used cars could be described as A. perfectly competitive. B. relatively competitive. C. non−competitive. D. having high transaction costs.
B
To say that isoquants are convex is to say that: A. there are constant returns to scale. B. the marginal rate of technical substitution falls as labor increases and capital decreases. C. capital and labor are perfect substitutes. D. labor, but not capital, is subject to the law of diminishing marginal returns.
B
You have 60 minutes to take an exam with two questions. You want to maximize your score. Toward the end of the exam, the more time you spend on either question, the fewer extra points per minute you get for that question. How should you allocate your time between the two questions? (Hint: Think about producing an output of a score on the exam using inputs of time spent on each of the problems. Then use Equation 7.6 LOADING... .) Allocate your time such that A. the marginal product of spending another unit of time on the first question and the marginal product of spending another unit of time on the second question are equal to zero. B. the marginal product of spending another unit of time on the first question is equal to the marginal product of spending another unit of time on the second question. C. the marginal product of spending another unit of time on the first question and the marginal product of spending another unit of time on the second question are equal to one. D. time is divided equally between question 1 and question 2. E. all time is allocated to the question with the larger marginal product.
B
Albert's Pretzel Baking Company used to have four workers who were each in charge of making their own pretzels from start to finish. Now, one worker mixes the dough, another shapes it, the third puts the unbaked pretzels into the oven and the fourth removes the finished product. Output has doubled. This is an example of A. labor−saving technical change. B. division of labor. C. economies of scale. D. neutral technical change.
B
Joe's demand for spring water can be represented as p = 10 − Q (where p is measured in $/gallon and Q is measured in gallons). He recently discovered a spring where water can be obtained free of charge. His consumer surplus from this water is A. $100. B. $50. C. $0. D. unknown based upon the information provided.
B
Joey's snow shoveling service, with Joey being the only employee, recently traded in his snow shovel for a gasoline-powered snow blower. Joey still requires one worker per blower; however, more snow is now moved in the same amount of time as before. This is an example of A. nonneutral technical change. B. neutral technical change. C. labor saving technical change. D. organizational change.
B
Consumers seek to A. maximize choice. B. minimize expenditures. C. maximize expected consumer surplus. D. maximize profits.
C
Economists define a market to be competitive when the firms A. spend large amounts of money on advertising to lure customers away from the competition. B. watch each other's behavior closely. C. are price takers. D. All of the above.
C
Economists typically assume that the owners of firms wish to A. produce efficiently. B. maximize sales revenues. C. maximize profits. D. All of the above.
C
If Option A costs $40 and yields 20 units of output and Option B costs $50 and yields 20 units of output A. Option B and Option A are equally economically efficient. B. Option B is economically efficient relative to Option A. C. Option A is economically efficient relative to Option B. D. It is not possible to determine which option is more economically efficient.
C
If average cost is decreasing, A. marginal cost equals average cost. B. marginal cost exceeds average cost. C. marginal cost is less than average cost. D. Not enough information.
C
If consumers view the output of any firm in a market to be identical to the output of any other firm in the market and the market has many firms and transaction costs are low, the demand curve for the output of any given firm A. will be identical to the market demand curve. B. will be vertical. C. will be horizontal. D. cannot be determined from the information given.
C
In the long run, profits will equal zero in a competitive market because of A. the availability of information. B. constant returns to scale. C. free entry and exit. D. identical products being produced by all firms.
C
L−shaped isoquants imply that production requires that the inputs A. cannot be used together. B. are imperfect substitutes. C. must be used together in a certain proportion. D. are perfect substitutes.
C
One reason existing firms might lobby government to increase regulation in their industry? A. Firms cannot be trusted to treat their customers fairly and ethically. B. It increases entry and exit costs, but has no impact on producer surplus. C. It increases entry and exit costs, thereby potentially increasing producer surplus to existing firms. D. It increases entry and exit costs, thereby reducing producer surplus to existing firms.
C
Suppose that for each firm in the competitive market for potatoes, long−run average cost is minimized at $0.20 per pound when 500 pounds are grown. The demand for potatoes is Q = 10,000/p. If the long−run supply curve is horizontal, then how many pounds of potatoes will be consumed in total? A. 10,000 B. 500 C. 50,000 D. 0
C
Suppose that for each firm in the competitive market for potatoes, long−run average cost is minimized at $0.20 per pound when 500 pounds are grown. The demand for potatoes is Q = 10,000/p. If the long−run supply curve is horizontal, then how much will consumers spend, in total, on potatoes? A. $500 B. $0 C. $10,000 D. $50,000
C
Suppose the total cost of producing T−shirts can be represented as TC = 50 + 2q. The average cost of the 5th T−shirt is A. 60. B. 2. C. 12. D. 52.
C
The distinction between the short- and long-run is made in terms of A. the variation in the product. B. chronological time. C. the ability to change the factors of production. D. the phase of the product cycle.
C
The learning curve is the relationship between A. returns to scale and cumulative costs. B. marginal costs and current output. C. average costs and cumulative output. D. marginal product of labor and current output.
C
What is the principle distinction between explicit costs and implicit costs? A. Implicit costs must be paid immediately, but explicit costs need to be paid only in the long run. B. Implicit costs are usually larger than explicit costs. C. Explicit costs are direct, out-of-pocket payments, while implicit costs are all foregone opporunity costs. D. There is no real difference between explicit and implicit costs.
C
Which of the following statements best describes a production function? A. The maximum profit generated from given levels of inputs. B. All levels of output that can be generated from given levels of inputs. C. The maximum level of output generated from given levels of inputs. D. All levels of inputs that could produce a given level of output.
C
Which situation is most likely to exhibit diminishing marginal returns to labor? A. A factory that obtains a new machine for every new worker hired B. A factory that increases the amount of machinery and holds the number of workers constant C. A factory that hires more workers and never increases the amount of machinery D. None of these situations will result in diminishing marginal returns to labor.
C
A firm can minimize cost by A. picking the bundle of inputs where the lowest isocost line touches the isoquant. B. picking the bundle of inputs where the isoquant is tangent to the isocost line. C. picking the bundle of inputs where the last dollar spent on one input gives as much extra output as the last dollar spent on any other input. D. All of the above.
D
A production possibilities frontier that is a downward-sloping straight line implies A. economies of scale. B. diseconomies of scale. C. economies of scope. D. no economies of scope.
D
An increase in the cost of an input will result in A. a leftward shift of the market supply curve. B. a leftward shift in the firm's supply curve. C. an upward shift of the firm's marginal cost curve. D. All of the above.
D
Assuming a horizontal long−run market supply curve, which of the following statements is (are) TRUE about competitive firms in the long run? A. p = MC B. profit = 0 C. p = AC D. All of the above.
D
A market's structure is described by A. the ease with which firms can enter and exit the market. B. the number of firms in the market. C. the ability of firms to differentiate their product. D. All of the above.
D
Economies of scope exist between book publishing and magazine publishing if A. the cost of publishing a magazine is lower for firms that publish many magazines than for firms that publish only one magazine. B. the cost of publishing a book falls over time as the publisher acquires more experience. C. the cost of publishing a book is not subject to diminishing marginal returns. D. the cost of producing the magazines and books together is less than producing them separately.
D
Efficient production is also known as: A. social efficiency. B. average efficiency. C. technological efficiency. D. marginal efficiency.
D
Fixed costs are A. a production expense that changes with the quantity of output produced. B. the amount by which a firm's cost changes if the firm produces one more unit of output. C. equal to total cost divided by the units of output produced. D. a production expense that does not vary with output.
D
If a competitive firm is producing a profit-maximizing level of output and chooses to continue operating at a loss, which of the following must be true? A. MR = MC. B. AC ≥ p ≥AVC. C. p = MC. D. All of the above.
D
If a competitive firm maximizes short−run profits by producing some quantity of output, which of the following must be true at that level of output? A. p≻AVC. B. p = MC. C. MR = MC. D. All of the above.
D
If a firm is a price taker, then its marginal revenue will always equal A. one. B. total cost. C. zero. D. price.
D
If average cost is positive A. marginal cost equals average cost. B. marginal cost exceeds average cost. C. marginal cost is less average cost. D. Not enough information
D
In the absence of any government regulation on price, if a firm has no power to set price on its own, one can safely conclude A. the market is in long−run equilibrium. B. there aren't many firms in the industry. C. the firms in this industry are not profitable. D. the demand curve for the firm's product is horizontal.
D
In the short run, if a firm operates, it earns a profit of $500. The fixed costs of the firm are $100. This firm has a producer surplus of A. $100. B. $400. C. $500. D. $600.
D
In the short-run, A. all inputs are variable. B. all inputs are fixed. C. the product is fixed. D. one or several inputs are fixed.
D
In what types of industries would you expect to see substantial learning by doing? You would expect to see the strongest effect of "learning by doing" in industries A. that are capital-intensive. B. without economies of scope. C. with stable technologies. D. producing new products. E. benefiting from increasing returns to scaleincreasing returns to scale.
D
Learning by doing is represented by A. an increase in the average total cost curve and a decrease in the marginal cost curve. B. an increase in the average total cost curve. C. no change in the average total cost curve. D. a decrease in the average total cost curve.
D
Over a five-year span, the Acme Company reduced the amount of labor it hired. At the same time, the marginal productivity of labor increased. Which of the following is a possible explanation for this observation? A. the law of diminishing marginal returns. B. organizational innovation. C. labor saving technical change. D. All of the above.
D
Returns to scale refers to the change in output when A. labor increases holding all other inputs fixed. B. specialization improves. C. capital equipment is doubled. D. all inputs increase proportionately.
D
Suppose a firm's costs are F + v × q2 where F and v are positive real numbers and the firm sells its product at the market determined price p. Profits are calculated using A. p × q − F − v × q2. B. [p − (F/q + v × q)] × q. C. [(p × q)/q − (F + v × q)/q] × q. D. Both A and B.
D
The Shaffer Auto Company has purchased a large parcel of land for $1 million. The company recently discovered that the land is contaminated and is worthless to all possible buyers. The opportunity cost of the land is A. equal to the cost of the factory that was planned to be built there. B. some amount greater than $0 but less than $1 million. C. $1 million. D. $0.
D
The competitive firm's supply curve is equal to A. the portion of its marginal cost curve that lies above AFC. B. the portion of its marginal cost curve that lies above AC. C. its marginal cost curve. D. the portion of its marginal cost curve that lies above AVC.
D
The difference between producer surplus and profit is always the associated A. opportunity costs. B. total costs. C. variable costs. D. fixed costs.
D
The figure at right shows supply and demand curves for apartment units in a large city. At the unregulated equilibrium, producer surplus will be A. d. B. d + e. C. d + g. D. d + c + g.
D
The larger the U.S. imposed per unit import tariff on a good imported and produced in the U.S. A. the smaller the U..S consumer surplus. B. the larger the government revenue. C. the larger the U.S. producer surplus. D. All of the above.
D
The slope of the isocost line tells the firm how much A. the isocost curve will shift outward if the firm wishes to produce more. B. more expensive a unit of capital costs relative to a unit of labor. C. capital must be increased to keep total cost constant when hiring one more unit of labor. D. capital must be reduced to keep total cost constant when hiring one more unit of labor.
D
To maximize profits, a firm must produce as efficiently as possible. A firm engages in efficient production if: A. given the quantity of inputs, cannot produce more output. B. it is maximizing profit. C. it cannot produce its current level of output with fewer inputs. D. All of the above.
D
When the production of a good involves several inputs, an increase in the cost of one input will usually cause total costs to A. rise more than in proportion. B. remain unchanged. C. rise by the exact amount of the input price increase. D. rise less than in proportion.
D
Which entity produces the greatest proportion of U.S. gross national product? A. Universities. B. Government. C. Non−profit organizations such as hospitals. D. Firms.
D
Which of the following best describes the implications of a deadweight loss? A. The welfare of society is placed second to corporate profits. B. Consumers are harmed because producers are charging a price higher than marginal cost. C. Resources are being wasted on the production of goods that consumers do not value. D. Economic resources are not being allocated efficiently: either too much or not enough of the good is being produced.
D
Which of the following characterizes long−run equilibrium in perfect competition? A. P≻MC=AC B. P=MC≻AC C. P=MC≺AC D. P=MC=AC
D
Which of the following inputs is easier to increase in the short run? A. number of airplanes B. size of the airport terminal C. number of luggage carousels D. ticket-counter sales people
D
Why do economists study the perfectly competitive model? A. Perfectly competitive markets maximize societal welfare. B. It is an important model to use as a benchmark to compare with other market structures. C. Many markets have similarities to the perfectly competitive model. D. All of the above.
D
With respect to production, the short run is best defined as a time period A. lasting about six months. B. in which all inputs are fixed. C. lasting about two years. D. in which at least one input is fixed.
D
Suppose that your firm's production function has constant returns to scale. What is the expansion path? If a firm has constant returns to scale, then its expansion path A. has a slope of zero. B. is kinked. C. is undefined. D. is downward sloping. E. is a straight line.
E
Short run production: T or F Changes in fixed costs do not affect the shape or placement of the total cost curve.
F
Short run production: T or F The marginal cost at a particular output level is the slope of a line from the origin to the corresponding point on the cost curve.
F
Short run production: T or F When total cost or total variable cost is increasing, there are increasing marginal returns to the variable input.
F
"Although producing less than the competitive equilibrium (underproduction) creates a deadweight loss, overproduction does not." T or F
False
"The only way to measure social welfare , (W), is to weight consumer surplus and producer surplus equally." T or F
False
If producers or other interest groups bribe legislators to influence policy, it will increase the deadweight loss.
False
"Comparing consumer welfare across individuals can be accomplished easily by comparing differences in utility." T or F
False
Sole Proprietorships
Owned by a single individual Unlimited liability
Corporations
Owned by shareholders Limited liability
Given labor is on the horizontal axis and capital is on the vertical axis, as the price of labor increases, the isocost line becomes
Steeper
Short run production: T or F The average cost curve is everywhere above the average variable cost curve.
T
Short run production: T or F The difference between the total cost and the total variable cost is a constant.
T
Short run production: T or F The marginal cost is the slope of the total cost curve or the total variable cost curve.
T
You observe that MPL > APL and MPL is decreasing but positive as more labor input is used. Output must be _____ at a _____ rate and average productivity 'APL' must be _____
increasing; decreasing; increasing
The period it takes for all inputs to be varied, that is, the long-run period, is ______ for different types of firms.
different
You observe that MPL < APL and MPL is decreasing but positive as more labor input is used. Output must be _____ at a _____ rate and average productivity 'APL' must be _____
increasing; decreasing; decreasing
Economists assume that firm owners want to maximize _______. Profit is the difference between _______ and _______.
profit; revenue; cost
