Econ test 2

at what level of output are ATC, AC, AFC, and MC increasing

10

which of the following costs always declines as output increases

AFC

Several years ago, Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world. This market was not perfectly competitive because this situation violated the:

price-taking assumption and the free entry assumption

Farmer Jones bought his farm for $75,000 in 1975. Today the farm is worth $500,000, and the interest rate is 10 percent. ABC Corporation has offered to buy the farm today for $500,000 and XYZ Corporation has offered to buy the farm for $530,000 one year from now. Farmer Jones could earn net profit of $15,000 (over and above all of his expenses) if he farms the land this year. What should he do?

sell to big C / ABC corporation

refer to figure 7.2.1 above. the diagram contains _______ cost curves

short- run

if the market price for a competitive firms output doubles, then:

the MR doubles

the difference between the economic and accounting costs of a firm are:

the opportunity costs of the factors of production that the firm owns

at the profit maximizing level of output, what is relationship between the total revenue (TR) and total cost (TC) curve?

they must have the same slope

if current output is less than the profit maximizing output, then the next unit produced

will increase revenue more than it increases cost

in 1985, Alice paid 20,000 for an option to purchase ten acres of land. by paying the 20,000 she bought the right to buy the land for 100,000 in 1992. Should Alice exercise this option

yes

consider the following statements when answering this question: 1. whenever a firms average variable costs are falling as output rises, marginal cost must be falling too. 2. when a firms average cost are rising, average variable costs must be rising too.

1. is false 2. is true

Your firm owns an old truck that is used to make local deliveries. The truck is fully depreciated and only costs $1.20 per hour to operate, but you could rent it to another firm for $15.00 per hour. What is the opportunity cost of operating this truck in your business? $15.00 per hour Less than $1.20 per hour $16.20 per hour $1.20 per hour

15/ hour

The total cost (TC) of producing computer software diskettes (Q) is given as TC = 200 + 5Q. What is the marginal cost?

5

the total cost (TC) of producing computer software diskettes (Q) is given as: tc=200+5Q. What is marginal cost?

5

the TC of producing computer software diskettes tc= 200 + 5Q what is ATC

500 + (200/q)

at what level of output is average total cost closest to marginal cost

???

which of the following relationships is not valid

A) rising marginal cost implies that average total cost is also rising

In the short run, suppose average total of cost is a straight line and marginal cost is positive and constant. Then, we know that fixed costs must:

ATC is positive and constant snd ATC equals marginal cost are correct

which of the following costs always declines as output increases

Average fixed cost

Carolyn knows ATC and AVC for a given level of output. which if the following costs can she not determine given this info?

Carolyn can determine all these costs given info provided

which of the following statements identifies a key difference between condominiums and cooperative housing

Co-op owners have more control over who can move into their building.

For any given level of output: A) marginal cost must be greater than average cost B) average variable cost must be greater than average fixed cost. C) average fixed cost must be greater than average variable cost. D) fixed cost must be greater than variable cost E) none of the above is necessarily correct

E

suppose your firm operates in a perfectly competitive market and decides to double its output. how does this affect the firms marginal profit

Marginal revenue increases but marginal cost remains the same

because of the relationship between a perfectly competitive firm's demand curve and its margins revenue curve, the profit maximization condition for the firm can be written as:

P=AC

If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth,

They are more likely to become takeover targets of profit-maximizing firms.

a price taker is

a buyer or seller that is unable to affect the market price

In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive, but can be resold, and are therefore an example of

a fixed cost

We typically think of labor as a variable cost, even in the very short run. However, some labor cost may be fixed. Which of the following items represents an example of a fixed labor cost?

a salaried manager who has a three-year employment contract

suppose we plot the TR curve with quantity on the horizontal axis and revenue on the vertical axis. Under price taking behavior the total revenue curve should be

a straight line from the origin with slope equal to the market price

suppose we plot the total revenue curve with quantity on the horizontal axis and revenue on the vertical axis, Under price-taking behavior the total revenue curve should be:

a straight line from the origin with slope equal to the market price

which of the following statements is true regarding the difference between economic and accounting costs?

accounting costs only include explicit costs

firms often use patent rights as

barrier to entry

consider the following statements when answering this question: 1. a firms marginal cost curve does not depend on the level of fixed cost 2. as output increases the difference between a firms ATC and AVC curves cannot rise.

both are true

consider the following statements when answering this question: 1. if a firm employs only one variable factor of product, labor, and marginal product.... 2. if a firm employs only one variable factor of production of labor and marginal product of labor is constant....

both are true

consider the following: 1. the marginal cost curve intersects the ATC and AVC curves at their minimum values 2. when a firm has a positive fixed costs, the output level associate with minimum AVC is less than output...

both true

An association of businesses that are jointly owned and operated by members for mutual benefits is a:

cooperative

an association of businesses that are jointly owned and operated by members for mutual benefits

cooperative

The demand curve facing a perfectly competitive firm is

downward sloping and more flat then the market demand curve

the average total cost to produce 100 cookies is .25 per cookie. the marginal cost is constant at .10 for all cookies produced

falling

which of the following is an example of a homogeneous product

gasoline

the demand curve facing a perfectly competitive firm is

horizontal

refer to figure 8.3.2 above. the demand price taker is illustrated

in panel A

Constantine purchased 100 shares of IBM stock several years ago for 150/ share. The price of the shares has fallen to $55 / share. Her investment strategy is "buy low sell high" therefore he will not sell his stock until the price rises about 150. if he sells lower than 150 he would have "bought high sold low" His decision:

is incorrect because the original price paid for the shares is a sunk cost and should have no bearing on whether the shares should be held or sold.

If current output is less than the profit-maximizing output, then the next unit produced

marginal revenue is greater than marginal cost

at the profit maximizing level of output, what is the relationship between the TR and TC curves

must have same slope

Two small airlines provide shuttle service between Las Vegas and Reno. The services are alike in every respect except that Fly Right bought its airplane for $500,000, while Fly by Night rents its plane for $30,000 a year. If Fly Right were to go out of business, it would be able to rent its plane to another airline for $30,000. Which airline has the lower costs?

neither, costs are identical

Suppose the state legislature in your state imposes a state licensing fee of $100 per year to be paid by all firms that file state tax revenue reports. This new business tax:

none of the above

the total cost (TC) of producing computer software diskettes (Q) is given as tc= 200+5Q. what is the average fixed cost

none of the above

In many rural areas, electric generation and distribution utilities were initially set up as cooperatives in which the electricity customers were member-owners. Like most cooperatives, the objective of these firms was to:

operate at zero profit in order to provide low electricity prices for the member-owners.

fixed costs are fixed with respect to changes in:

output

marginal profit is negative when

output exceeds the profit maximizing level.