ECON2020 SEALS EXAM 4

When a restaurant stays open for lunch service even though few customers patronize the restaurant for lunch, which of the following principles is (are) best demonstrated? a. Fixed costs are sunk in the short run. b. In the short run, only fixed costs are important to the decision to stay open for lunch. c. If revenue exceeds variable cost, the restaurant owner is making a smart decision to remain open for lunch.

a & c

# of workers, output, FC, VC, TC 0 0 $50 $0 $50 1 90 $50 $20 $70 2 170 _____$40 _____ 3 230 $50 $80 $130 what is the average fixed cost when making 90 units a. $0.56 per unit b. $1 per unit c. $1.56 per unit d. none of the above

a. $0.56 per unit AFC=FC/Q so $50/90=$0.56

Katherine gives piano lessons for $15 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are a. $100, & her economic profits are $25 b. $100, & her economic profits are $75 c. $25, & her economic profits are $100 d. $75, & her economic profits are $125

a. $100, & her economic profits are $25

# of workers, output (number of students tutored per week) 0,0 1,20 2,45 3,60 4,70 what is the marginal product of the third worker? a. 15 students b. 20 students c. 25 students d. 30 students

a. 15 students

Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Together, Eldin and Murphy can paint five houses per week. What is Murphy's marginal product? a. 2 houses b. 3 houses c. 4 houses d. 8 houses

a. 2 houses

The ingredients that it takes to make a pizza at Pieology Pizzeria cost $2 per pizza. Some months, Pieology Pizzeria may spend $6000 on ingredients. Some months, Pieoogy Pizzeria may spend $3000 on ingredients. This cost of ingredients is an example of a a. variable cost (it varies with how many pizzas are produced that month). b. fixed cost (they pay the same amount on ingredients in a month, regardless of how many pizzas are produced that month). c. marginal cost. d. total cost.

a. variable cost (it varies with how many pizzas are produced that month).

A monopolist's profit-maximizing price and output correspond to the point on a graph a. where marginal revenue equals marginal cost and charging the price on the market demand curve for that output. b. where price is as high as possible. c. where total costs are the smallest relative to price. d. where average total cost is minimized

a. where marginal revenue equals marginal cost and charging the price on the market demand curve for that output.

Why does a firm in a competitive industry charge the market price? a. If a firm charges less than the market price, it loses potential revenue. b. If a firm charges more than the market price, it loses all its customers to other firms. c. The firm can sell as many units of output as it wants to at the market price. d. All of the above are correct.

all of the above

The total cost of producing 3 pitchers of lemonade is $5. The total cost of producing 4 pitchers of lemonade is $7. What is the marginal cost of the 4th pitcher of lemonade? a. $1 b. $2 c. $3 d. $4

b. $2

in the long run, a. output is fixed b. all inputs can be varied c. all inputs are fixed d. some inputs are variable & other inputs are fixed

b. all inputs can be varied

Pieology Pizzeria rents out the space of their restaurant for $500 a month. This cost of their rent ($500 a month) would be considered a a. variable cost (it varies with how much pizza is produced that month). b. fixed cost (they have to pay the $500 per month, regardless of how much pizza is produced). c. marginal cost. d. total cost

b. fixed cost (they have to pay the $500 per month, regardless of how much pizza is produced).

The entry of new firms into a competitive market will a. increase market supply & increase market price. b. increase market supply and decrease market price. c. decrease market supply and increase market price. d. decrease market supply and decrease market price

b. increase market supply & decrease market price

In the short run, a firm operating in a competitive industry will shut down if price is a. less than average total cost. b. less than average variable cost. c. greater than average variable cost but less than average total cost. d. greater than marginal cost

b. less than average variable cost

Economists normally assume that the goal of a firm is to a. maximize its total revenue b. maximize its profit c. minimize its explicit costs d. minimize its total costs

b. maximize its profit

# of workers, output, FC, VC, TC 0 0 $50 $0 $50 1 90 $50 $20 $70 2 170 _____$40 _____ 3 230 $50 $80 $130 what is the total cost when they produce 170 units a. $40 b. $50 c. $90 d. $100

c. $90 this is because fixed cost will always be $50 & then you would add fixed+variable together to get total

# of workers, output (number of students tutored per week) 0,0 1,20 2,45 3,60 4,70 Charles math tutoring company experiences diminishing marginal productivity with the addition of the a. 1st worker b. 2nd worker c. 3rd worker d. 4th worker

c. 3rd worker

the amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is a. an explicit cost b. an accounting cost c. an implicit cost d. foregone accounting profit

c. an implicit cost

Profit is defined as total revenue a. plus total cost b. times total cost c. minus total cost d. divided by total cost

c. minus total cost

Which of the following is not a characteristic of a monopoly? a. barriers to entry b. one seller c. one buyer d. a product without close substitutes

c. one buyer

The demand curve for a monopoly's product is a. undefined. b. more inelastic than the market demand for the product. c. the market demand for the product. d. more elastic than the market demand for the product.

c. the market demand for the product

You purchase a $30, nonrefundable ticket to a play at a local theater. Ten minutes into the show you realize that it is not a very good show and place only a $10 value on seeing the remainder of the show. Alternatively you could leave the theater and go home and watch TV or read a book. You place an $8 value on watching TV and a $12 value on reading a book. Applying the principle of sunk costs, what should you do? a. You should stay and watch the remainder of the show. b. You should go home and watch TV. c. You should go home and read a book. d. You should go home and either watch TV or read a book.

c. you should go home & read a book

Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? a. $5 and 50 units b. $5 and 100 units c. $10 and 50 units d. $10 & 100 units

d. $10 & 100 units

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. William can arrange 18 bouquets per day. What would be the total daily output of Kate's firm if she hired her husband? a. 18 bouquets b. 19 bouquets c. 20 bouquets d. 38 bouquets

d. 38 bouquets

Which of the following is not an example of a barrier to entry? a. Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. b. A pharmaceutical company obtains a patent for a specific high blood pressure medication. c. A musician obtains a copyright for her original song. d. An entrepreneur opens a popular new restaurant

d. an entrepreneur opens a popular new restaurant

which of the following is a characteristic of a competitive market a. many buyers, few sellers b. firms sell different products c. many barriers to entry d. buyers & sellers are price takers

d. buyers & sellers are price takers

In the long run, a profit-maximizing firm will choose to exit a market when a. average fixed cost is falling. b. variable costs exceed sunk costs. c. marginal cost exceeds marginal revenue at the current level of production. d. total revenue is less than total cost.

d. total revenue is less than total cost