ECON Ch. 6, 7, 8

A rise in the price of Pepsi that causes a household to shift its purchasing pattern toward Coke and away from Pepsi is the​ ________ effect of a price change.

substitution

The main decision for a profit maximizing perfectly competitive firm is not what​ ________ but what​ ________.

price to​ charge; level of output to produce

Refer to the information provided in the figure at right to answer the question that follows. This​ farmer's profit-maximizing level of output is​ _____ units of output.

1,000

If the marginal product of labor is greater than the average product of​ labor, then the

average product must be increasing.

The marginal cost curve intersects the​ ________ at its minimum.

average total cost curve

If the marginal cost curve is below the average variable cost​ curve, then

average variable costs are decreasing

The law of diminishing marginal utility refers to

a​ consumer's decrease in additional satisfaction as she consumes more and more units of a good.

When the marginal product of labor​ ________ the average product of​ labor, then the average product is maximized.

equals

Marginal cost is​ ________ average variable cost when​ ________.

equal​ to; average variable cost is minimized.

Diminishing marginal utility sets in after the​ _____ soda per day.

first

In the short​ run, a firm

has at least one fixed factor of production

Marginal revenue for a perfectly competitive firm is

horizontal

A perfectly competitive industry consists of firms that produce​ ________ products.

identical

Assuming that households confine their choices to products that improve their​ well-being, a decline in the price of any​ product, ceteris paribus​:

makes the household unequivocally better off.

The added revenue that a firm takes in when it increases output by one additional unit is​ ________ revenue.

marginal

Kathy eats five slices of pizza on a Saturday night but admits each slice of pizza​ doesn't taste as good as the previous one. This suggests that for Kathy the

marginal utility of a slice of pizza is positive but decreasing.

A person maximizes utility when he equalizes the​ ________ across products.

marginal utility per dollar spent

​Joe's Butcher Shop is producing where MR​ = MC​, Joe's Butcher Shop must be

maximizing profits

When total product is​ maximized, marginal product

is zero but average product is positive.

Average fixed costs

falls as output rises

In the long​ run,

there are no fixed factors of production.

If a​ firm's total costs are​ $80 when 10 units of output are produced and​ $90 when 11 units of output are​ produced, the marginal cost of the 11th unit is

$10

Refer to the information provided in the table below to answer the question that follows. Number of Earrings .... If Sherry produces zero​ earrings, her total fixed costs are

$100

If the average variable cost of the fifth hat is​ $30, then the total variable cost of five hats is

$150

Jane has​ $500 a week to spend on clothing ​(c​) and food ​(f​). The price of clothing is​ $25 and the price of food is​ $10. What is the equation for​ Jane's budget​ constraint?

$25 x Clothing + $10 + Food = $500

Darius has​ $1,200 a month to spend on clothing ​(c​) and food (f​). The price of clothing is​ $60 and the price of food is​ $10. What is the equation for​ Darius's budget​ constraint, assuming he spends his entire​ budget?

$60 times× Clothing​ + $10 times× Food​ = $1,200

​Wilbur's Widgets, a widget​ company, produces 100 widgets. Its average fixed cost is​ $5 and its total variable cost is​ $300. What is the total cost of producing 100​ widgets?

$800

You own and are the only employee of a company that customizes bicycles. Last year your total revenue was​ $60,000. Your costs for rent and supplies were​ $25,000. To start this business you invested an amount of your own capital that could pay you a​ $45,000 a year return. Your economic profit last year was

-10,000

A lawn service company has the following production possibilities. With​ one, two,​ three, and four​ workers, the company can mow​ 4, 9,​ 12, and 14 lawns per​ day, respectively. The marginal product of the fourth worker is

2

The Lawn​ Ranger, a landscaping​ company, has total costs of​ $4,000 and total variable costs of​ $1,000. The Lawn​ Ranger's total fixed costs are

3,000

You are the owner and only employee of a company that sets odds for sporting events. Last year you earned a total revenue of​ $100,000. Your costs for rent and supplies were​ $50,000. To start this business you invested an amount of your own capital that could pay you a return of​ $20,000 a year. Your economic profit last year was

30,000

You own and are the only employee of a company that customizes bicycles. Last year your total revenue was​ $60,000. Your costs for rent and supplies were​ $25,000. To start this business you invested an amount of your own capital that could pay you a​ $45,000 a year return. Your accounting profit last year was

35,000

At the Pampered Pet Salon the marginal products of the​ first, second, and third workers are​ 20, 16, and 10 dogs​ washed, respectively. The total product​ (number of dogs​ washed) of the two worker is

36

At the Larson Bakery the marginal products of the​ first, second, and third salesclerks are​ 20, 17, and 11 customers​ served, respectively. The total product​ (number of customers​ served) of the two salesclerks is

37

A lawn service company has the following production possibilities. With​ one, two,​ three, and four​ workers, the company can mow​ 4, 9,​ 12, and 14 lawns per​ day, respectively. The average product of labor with three workers is

4

Assume the total product of three workers is 120 and the total product of four workers is 160. The average product of four workers is​ ________, and the marginal product of the fourth worker is​ ________.

40;40

A lawn service company has the following production possibilities. With​ one, two,​ three, and four​ workers, the company can mow​ 4, 9,​ 12, and 14 lawns per​ day, respectively. The marginal product of the second worker is

5

You own and are the only employee of a company that customizes bicycles. Last year your total revenue was​ $60,000. Your costs for rent and supplies were​ $25,000. To start this business you invested an amount of your own capital that could pay you a​ $45,000 a year return.

70,000

The​ profit-maximizing level for all​ firms, regardless of industry​ structure, is the output level where

MC=MR

A​ utility-maximizing consumer buys so as to make​ ________ for all pairs of goods.

MUx Px ------ = ------ MUy Py

The formula for AVC is

TVC/q

The version of the law of diminishing returns that applies to production

applies only in the short run

If the marginal product of labor is less than the average product of​ labor, then the

average product must be decreasing. C. marginal product must be decreasing. D. Both B and C

Total variable cost​ ________ as output​ increases, and total fixed cost​ ________ as output increases.

increase, does not change

Marginal cost

is the increase in total cost resulting from producing one more unit.

​________ are likely a fixed cost of a firm.

lease payments for office space

If an individual perfectly competitive firm charges a price above the industry equilibrium​ price, it will

not sell any of what it produces

In perfect​ competition,

price always equals marginal revenue.

The process by which inputs are​ combined, transformed, and turned into outputs is called

production

Total revenue minus total cost is equal to

profit

Assume​ Robbie's Robots operates in a perfectly competitive market producing​ 3,000 robots per day. At this output​ level, the selling price is​ $800 per robot and the marginal cost is​ $625 per robot. It follows that producing one more robot will cause this​ firm's

profits to increase

If an individual perfectly competitive firm charges a price below the industry equilibrium​ price, it will

sell all that it produces but gain less revenue than competing firms will.

In the short​ run, as output​ increases,

the difference between average total cost and average variable cost decreases.

A firm has no fixed factors of production in

the long run

Tyrell is consuming X and Y so that he is spending his entire income and MUx​/Px = 7 and MUy​/Py = 7. To maximize​ utility, he should consume

the same amount of X and Y since he is already maximizing utility.

A fall in the price of a product might cause a household to shift its purchasing pattern away from substitutes toward that product. This shift is​ called:

the substitution effect of a price change.

Total utility is

the total amount of satisfaction yielded by the consumption of a good or service.

A lawn service company has the following production possibilities. With​ one, two,​ three, and four​ workers, the company can mow​ 4, 9,​ 12, and 14 lawns per​ day, respectively. Diminishing returns to labor set in with the​ _____ worker.

third

​Profit-maximizing firms want to maximize the difference between

total revenue and total cost

If labor is a variable input in​ production, the law of diminishing marginal returns implies that in the short run

​ labor's marginal product decreases after a certain point.

You own a building that has four possible​ uses: a tailor​ shop, a​ pharmacy, a sports​ bar, and an antique mall. The​ building's value in each use is​ $4,000; $6,000;​ $8,000; and​ $10,000, respectively. You decide to open a sports bar. The opportunity cost of using this building for a sports bar is

​$10,000, the value if you rented the building to someone else to use as an antique mall.

Jim has​ $600 a week to spend on clothing and food. The price of clothing is​ $30 and the price of food is​ $5. The clothing and food pairs in​ Jim's choice set include​ ________ units of clothing and​ ________ units of food.

​10; 60

Marginal utility is the​ ________ satisfaction gained by consuming​ ________ of a good.

​additional; one more unit

Assume that fruit baskets are sold in a perfectly competitive market. The market price of a fruit basket is​ $15. To maximize​ profits, Exotic Fruit should sell​ _____ fruit​ basket(s) and their profit is​ _____.

​five; −​$21

If the price of a normal good​ falls, the substitution effect suggests that we will purchase​ ________ of that​ good, and the income effect suggests that we will purchase​ ________ of that good.

​more; more