Econ MCQ

Profit is equal to TC - TR TR + TC MC - MR TR - TC MR - TC

TR-TC (Total revenue - total cost)

Which of the following is true in the long run? At least one input is fixed All inputs are variable No inputs are variable All inputs are fixed At least one input is variable

All inputs are variable

Which of the following statements is true? A. A surplus occurs when quantity demanded is greater than quantity supplied and price is above its equilibrium level. B. A shortage occurs when quantity demanded is greater than quantity supplied and price is above its equilibrium level. C. A surplus occurs when quantity supplied is greater than quantity demanded and price is above its equilibrium level. D. A shortage occurs when quantity supplied is greater than quantity demanded and price is below its equilibrium level. E. Shortages and surpluses rarely happen in markets.

C. A surplus occurs when quantity supplied is greater than quantity demanded and price is above its equilibrium level.

The vertical distance between a firm's ATC and AVC curves represents A. Profit B. TR C. AFC D. TFC E. MC

C. AFC

A government limit on the quantity of a good that can be bought or sold is a: A. price ceiling. B. price floor. C. taxation. D. equilibrium. E. quota.

E. Quota

Which of the following costs has been incurred and can not be recovered? Sunk costs Marginal costs Variable costs Fixed costs Long-run costs

Sunk costs

A perfectly competitive firm may realize either economic profit or losses in the long run. cannot earn economic profits in the short run. earns the normal profits in the long run. can earn economic profit in the long run. must break even in the short run

earns the normal profits in the long run.

When long run average total costs decline as output increases, a firm is experiencing diseconomies of scale constant returns to scale decreasing returns to scale economies of scale no returns to scale

economies of scale

The profit-maximizing quantity of output is represented graphically on the horizontal axis beneath where: the MC curve lies below the MR curve the MR curve intersects the ATC curve accounting profit exceeds economic profit the MC curve intersects the MR curve total revenue equals total cost

the MC curve intersects the MR curve

marginal revenue the change in total revenue created by the sale of one more unit of output the revenue received from sales the marginal benefit provided by an additional unit of output always increasing as more output is sold the additional cost of producing an additional unit of output

the change in total revenue created by the sale of one more unit of output

The price-taking firm's optimal output rule states that a perfectly competitive firm should produce where price equals variable cost. fixed cost. total cost. marginal cost. average total cost.

marginal cost.

Suppose that the Food and Drug Administration has written an article stating green tea reduces heart disease and many illnesses. What might be the immediate effect seen in the economy?___ A. The demand for green tea would increase, forcing the price to go up. B. The quantity demanded for green tea would increase, forcing the price to go up. C. The quantity supplied of green tea would increase, forcing the price to go up. D. The supply of green tea would increase, forcing the price to go down. E. The quantity supplied for green tea would go down, forcing the price to go up.

A. The demand for green tea would increase, forcing the price to go up.

Income elasticity of demand is ________________ for an inferior good. A. negative B. positive C. zero D. greater than 1 E. less than one

A. negative

All of the following would decrease demand for furry boots except:___ A. the price of shoes goes down. B. people prefer boots without fur. C. the price of furry boots goes up. D. people expect the boots to go out of style soon. E. a very warm winter has been forecasted.

A. the price of shoes goes down.

When demand decreases and supply increases by differing degrees, what do we know is true? A. Equilibrium price rises and quantity decreases B. Equilibrium price decreases and quantity change is indeterminate C. Equilibrium quantity increases and price is indeterminate D. Equilibrium price and quantity stay the same E. Equilibrium price and quantity always rise

B. Equilibrium price decreases and quantity change is indeterminate

On the way to the supermarket, the tractor trailer carrying peaches tips over and spills peaches all over the highway. The result will be A. The quantity supplied of peaches goes down and the price of peaches goes down. B. The quantity demanded of peaches goes up and the price of peaches goes down. C. The supply of peaches goes down and the price of peaches goes up. D. The supply of peaches goes down and the price of peaches goes down. E. The demand for peaches goes up and the price of peaches goes up.

C. The supply of peaches goes down and the price of peaches goes up.

A decrease in the price of toothpaste in a tube can lead to a decrease in the purchase of toothpaste in a pump. This means:___ A. Toothpaste in a tube and in a pump are substitute goods and the demand curve for toothpaste in a tube will shift right. B. Toothpaste in a tube and in a pump are complementary goods and the demand curve for toothpaste in a tube will shift right. C. Toothpaste in a tube and in a pump are substitute goods and the demand curve for toothpaste in a pump will shift left. D. Toothpaste in a tube and in a pump are complementary goods and the demand curve for toothpaste in a pump will shift left. E. Toothpaste in a tube and in a pump are complementary goods and the demand curve for both toothpastes will shift left.

C. Toothpaste in a tube and in a pump are substitute goods and the demand curve for toothpaste in a pump will shift left.

In the long run A. all costs are fixed. B. all increases in fixed costs lead to increased variable costs. C. all costs are variable. D. all costs reach economies of scale. E. all fixed costs are reduced.

C. all costs are variable.

When the demand for a good or service increases, the result is which of the following? A. Equilibrium price decreases and quantity increases B Equilibrium price increases and quantity decreases C. Equilibrium price and quantity both decrease D. Equilibrium price increases and quantity increases E. Equilibrium price and quantity remain the same

D. Equilibrium price increases and quantity increases

When oil prices fall, what happens to supply of plastics? A. Supply shifts to the left as price of inputs decreases. B. Supply shifts left as more drivers demand gasoline. C. Supply shifts as the number of suppliers of plastic declines. D. Supply shifts to the right as price of inputs increases. E. Supply shifts as consumers demand more plastic products.

D. Supply shifts to the right as price of inputs increases.

A perfectly inelastic supply curve is: A. negatively sloped. B. positively sloped. C. horizontal. D. vertical. E. U-shaped.

D. Vertical

The price at which consumers want to buy a given quantity, the price at which producers will supply a given quantity, and the distance between them at the quota amount are known as: A. price ceiling, price floor, and equilibrium. B. supply price, demand price, and equilibrium. C. demand price, supply price, and equilibrium. D. demand price, supply price, and quota rent. E. selling price, demand price, and wage.

D. demand price, supply price, and quota rent.

Marginal product of labor is described as the change in A. quantity of labor/change in output. B. output/change in fixed input. C. output/change in fixed input + labor. D. output/change in quantity of labor. E quantity of labor/change in fixed input.

D. output/change in quantity of labor.

The cross-price elasticity of demand measures: A. the effect that a change in one good's quantity on the quantity of another good. B. the effect that a change in demand has on the slope of the demand curve. C. the effect that the quantity supplied of one good has on the demand for another good. D. the effect of the change in one good's supply on the quantity demanded of another good. E. the effect of the change in one good's price on the quantity demanded of another good.

E. the effect of the change in one good's price on the quantity demanded of another good.

An input whose quantity can be changed at any time is known as a A. production input. B. short run input. C. fixed input. D. diminished input. E. variable input.

E. variable input.

A firm is earning a normal profit when Accounting profit is equal to zero Economic profit is equal to zero Accounting profit is negative Economic profit is positive Accounting profit is equal to economic profit

Economic profit is equal to zero

A firm will continue producing a good until MC > MR. economic profit is zero. MR > MC. MR = MC. accounting profit > economic profit.

MR = MC.

The demand curve in a perfectly competitive industry is ______, while the demand curve for a single firm is ______. downward-sloping, perfectly elastic perfectly elastic, downward-sloping perfectly inelastic, perfectly elastic downward-sloping, perfectly inelastic perfectly elastic, upward-sloping

downward-sloping, perfectly elastic

Which of the following costs is considered when calculating economic profit but not accounting profit? Wages Electricity Office supplies Taxes Foregone earnings

foregone earnings