Econ test 3

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's profit-maximizing level of output is ______.

800

Which of the following is a defining characteristic of all perfectly competitive markets?

All firms sell the same standardized product.

Refer to the accompanying figure. At quantities less than 50 doughnuts per day

average cost is declining because marginal cost is less than average cost.

A price-taker faces a demand curve that is

horizontal at the market price.

When plotting marginal and average cost curves, the ______ cost curve always crosses the ______ cost curve at its ______.

marginal; average total; minimum

Average variable cost is defined as

variable cost divided by total output.

Suppose 30 employees can produce 50 units of output per day. Assuming the presence of diminishing marginal returns, producing 100 units of output per day would require

more than 30 additional employees.

If a firm spends $100 to produce 10 units of output and spends $200 to produce 18 units, then between 10 and 18 units of output, the marginal cost of production is:

$12.50.

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's total revenue at its profit-maximizing level of output is ______.

$2,400

If a firm spends $400 to produce 20 units of output and spends $880 to produce 40 units, then between 20 and 40 units of output, the marginal cost of production is:

$24

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's total cost at its profit-maximizing level of output is ______.

1600

If the market for mugs is perfectly competitive, and mugs sell for $7.50 each, then Aiko should make ______ mugs per day.

4

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit if output is $15, what is this firm's profit-maximizing level of output?

60

Which of the following would be considered a factor of production in the provision of bus service?

Bus drivers

In the graph above, the average variable cost curve is labeled _____, the average total cost curve is labeled _____, and the marginal cost curve is labeled ______.

C; B; A

MC of total cost of production

Change in cost of production/change in output

TC

FC+VC

Which of the following is NOT true of a perfectly competitive firm?

It seeks to maximize revenue.

TR

P x Q

ATC

TC/Q

MC

TC/Q

AVC

TVC/Q or ATC-AFC

The price equals marginal cost rule for profit maximization is a specific example of which core principle?

The Cost-Benefit Principle

Which of the following is the most likely to be a fixed factor of production at a farm?

The land on which the farm is located

Variable cost (VC)

a cost that depends on the quantity of output produced

The short run is best defined as

a period of time sufficiently short that at least one factor of production is fixed.

Suppose a profit-maximizing firm in a perfectly competitive market is earning an economic profit of $1,345. If the firm's fixed cost increases from $200 to $300, the firm will

earn a smaller profit.

If a perfectly competitive firm produces an output level at which price is greater than marginal cost, then the firm should

expand output to earn greater profits or smaller losses

A fixed factor of production

is fixed only in the short run.

Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $15, then at this firm's profit-maximizing level of output, it will earn a ______ of ______.

loss, $60

In general, perfectly competitive firms maximize their profit by producing the level of output at which

marginal cost equals price.

If a production process exhibits diminishing returns, then as output rises

marginal cost will eventually increase.

As the market price of a service increases, more potential sellers will decide to perform that service because

more potential sellers will find that the market price exceeds their reservation price.

A profit-maximizing perfectly competitive firm must decide

only how much to produce, taking price as fixed.

Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $15, then this firm should

produce 60 units of output.

Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $9, then this firm should

shut down in the short run.

Profit maximizing

subtract new from old in regards to marginal cost price.

diminishing return

subtract new from old, must be less than price

One reason that variable factors of production tend to show diminishing returns in the short run is that

there is only so much that can be produced using additional variable inputs when some factors of production are fixed.

profit

total revenue- total cost