Econ set 3

A negative externality will cause a private market to produce

more than is socially desirable.

When total revenue is less than total variable costs, a firm in a perfectly competitive market will

shut down.

When a negative externality exists in a market, the cost to the producers

will be less than the cost to society

Which of the following is not a characteristic of a perfectly competitive market?

It is very difficult for new firms to enter the market.

When new firms have an incentive to enter a perfectly competitive market, their entry will

drive down profits of existing firms in the market.

When firms are neither entering nor exiting a perfectly competitive market,

economic profits must be zero.

Suppose that in a perfectly competitive market the market equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

exactly $2.50

The demand curve for a firm in perfect competition (competitive firm) is

horizontal

In the long run, a firm that produces and sells computers gets to choose

how many workers to hire. the size of its factories. the amount of equipment to use ALL OF THE ABOVE ARE CORRECT

Which of the following statements best reflects a price-taking firm?

If the firm were to charge more than the market price, it would sell none of its goods.

Charles's Car Wash has average variable costs of $2 and average fixed costs of $3 when it produces 100 units of output (car washes). The firm's total cost is

$500.

Zoe sells 200 glasses of lemonade at $0.50 each. Her total costs are $25. Her profits are

$75.

Which of the following statements best expresses a firm's profit-maximizing decision rule assuming that price exceeds average variable cost?

If marginal revenue is greater than marginal cost, the firm should increase its output. If marginal revenue is less than marginal cost, the firm should should decrease its output. If marginal revenue equals marginal cost, the firm should produce exactly the current output. ALL OF THE ABOVE ARE CORRECT

Negative externalities occur when one person's actions

adversely affect the well-being of a bystander who is not party to the action.

What does a Laffer Curve look like (in general shape)?

an upside-down U.

If marginal cost is greater than average total cost, then

average total cost increases.

If marginal cost is equal to average total cost, then

average total cost stays constant

The marginal product of labor can be defined as

change in profit/change in labor.

An example of an explicit cost of production would be the

lease payments for the land on which a firm's factory stands.

Economies of scale occur when a firm's

long-run average total costs are decreasing as output increases.

The amount by which total cost increases when the firm produces one additional unit of output is called

marginal cost

The total cost of production for a firm is the

market value of the inputs a firm uses in production.

Economists normally assume that the goal of a firm is to

maximize its profit.

A production function is a relationship between inputs and

quantity of output.

Assuming that the total revenue will exceed the total variable costs, if the price of corn is $5.00 per bushel and the marginal cost of producing another bushel of corn is $4.85,

the farmer should produce that extra bushel.

If education produces positive externalities, we would expect

the government to subsidize education.

When the entry and/or exit of firms in an perfectly competitive industry does not affect the costs of the firms in the industry,

the long-run market supply curve will be horizontal.

Average total cost can be calculated as

the total fixed costs divided by the quantity of output

Profit is defined as

total revenue minus total cost