Econ Quiz unit 7
Consider a firm whose unit cost (the cost of producing one unit of output) is the same at all output levels. Which of the following statements are correct?
Every price-quantity combination lies on an isoprofit curve. Isoprofit curves slope downward when the price is above the unit cost.
Suppose that the unit cost of producing a pound of cereal is $2, irrespective of the level of output. Which of the following statements is correct?
The average cost and the marginal cost curves coincide.
A firm's cost of production is £12 per unit of output. If P is the price of the output good and Q is the number of units produced, which of the following statements is correct?
Points (Q, P) = (2,000, 20) and (4,000, 16) are on the same isoprofit curve.
Consider a firm with fixed costs of production. Which of the following statements about its average cost (AC) and marginal cost (MC) is correct?
When AC = MC, the AC curve has a zero slope.
A shop sells 20 hats per week at $10 each. When it increases the price to $12, the number of hats sold falls to 15 per week. Which of the following statements are correct?
A 20% increase in the price causes a 25% fall in demand. The elasticity of demand is approximately 1.25.
Which of the following statements is correct?
Consumer surplus is the difference between the consumers' willingness to pay and what they actually pay.
Which of the following statements is correct?
If a firm's technology exhibits constant returns to scale, doubling the inputs leads to doubling of the output level. If a firm's technology exhibits economies of scale, costs per unit will fall as the firm expands its production. If a firm's technology exhibits diseconomies of scale, doubling the inputs leads to less than doubling of the output level.
This figure shows the marginal cost and marginal revenue curves for Beautiful Cars. Which of the following statements is correct, based on the information shown?
Profit is greater when Q = 20 than when Q = 10.
Figure 7.11 depicts the demand curve for Beautiful Cars, together with the marginal cost and isoprofit curves. The quantity-price combination at point E is (Q*, P*) = (32, 5,440). The average cost of producing 50 cars is the same as the average cost of producing 32. Suppose that the firm keeps the price at P = $5,440 but now produces 50 cars instead of 32. Which of the following is correct?
The firm's profit is now reduced.
Suppose that in a small town a multinational retailer is planning to build a new superstore. Which of the following arguments could be correct?
The new retailer argues that the close substitutability of some of the goods implies a high elasticity of demand, leading to healthy competition and lower prices for consumers. The local protestors argue that once the local retailers are driven out, there will be no competition, giving the multinational retailer more market power and driving up prices.
Figure 7.11 depicts the demand curve for Beautiful Cars, together with the marginal cost and isoprofit curves. At point E, the quantity-price combination is (Q*, P*) = (32, 5,440) and the profit is $63,360.
The profit is reduced to $62,080.
Figure 7.11 depicts the demand curve for Beautiful Cars, together with the marginal cost and isoprofit curves. Suppose that the firm decides to switch from P* = $5,440 and Q* = 32 to a higher price, and chooses the profit-maximizing level of output at the new price. Which of the following statements is correct?
The quantity of cars produced is reduced.