Exam 2 Econ 160 second set

________ are costs that require a monetary payment. Implicit costs Explicit costs Accounting costs Both B and C

Both B and C

Which of the following statements about a perfectly competitive market is incorrect? There are many sellers, each supplying a small quantity. Buyers and sellers cannot enter exit the market freely. There are many buyers, each purchasing a small quantity. The market sell homogeneous products.

Buyers and sellers cannot enter exit the market freely.

Which of the following is/are not a characteristic of a perfectly competitive market? a small number of firms in a market selling a standardized product an individual firm having no control over price no barriers to entry

a small number of firms in a market

In the long run: all factors of production are variable. all factors of production are fixed. some factors of production are variable, while at least one factor of production is fixed. None of the above are correct.

all factors of production are variable.

A maximum price set below the equilibrium price will: Correct! cause excess demand and decrease total surplus. cause excess supply and decrease total surplus. cause excess demand and increase total surplus. cause excess supply and increase total surplus.

cause excess demand and decrease total surplus.

Alex's Furniture Mart produces and sells tables in a perfectly competitive market. When Alex's Furniture Mart produces and sells 250 tables, its marginal cost is equal to $200, and AVC is rising. If the market price of tables is equal to $150, Alex's Furniture Mart should: increase its level of table production. continue producing 250 tables. decrease its level of table production. raise the price of its tables.

decrease its level of table production.

Since rent control ________ the total surplus of the market, the policy generates a ________. increases; producer surplus decreases; producer surplus decreases; deadweight loss increases; deadweight loss

decreases; deadweight loss

When at least one factor of production is fixed, firms require more and more workers to produce each additional unit of output. This describes: learning by doing. short-run adjustments. diminishing marginal returns. increasing marginal returns.

diminishing marginal returns.

Suppose that in 2012 MBI Corp. produced 100 million units of a good at an average cost of $6, and in 2013 MBI Corp. expanded its plant capacity and produced 200 million units at an average cost of $6.20. In this range, one can conclude that MBI Corp. is experiencing: diseconomies of scale. economies of scale. neither economies of scale or diseconomies of scale. increasing marginal product.

diseconomies of scale.

If a firm in a perfectly competitive market is currently producing the output where price = marginal cost > average total cost, the firm is: suffering an economic loss. earning a positive profit. earning a zero profit. all of the above

earning a positive profit.

If a firm in a perfectly competitive market is currently producing the output where price = marginal cost = average total cost, the firm is: earning a zero economic profit. suffering an economic loss. earning a positive economic profit. all of the above

earning a zero economic profit.

A firm scaled up its operation by increasing all inputs by 100%. If the firm experienced 150% increase in the output, the firm's long-run average cost exhibits: diseconomies of scale at the current output level. economies of scale at the current output level. diminishing marginal returns at the current output level. a constant long-run average cost at the current output level.

economies of scale at the current output level.

In the case of rent control, a maximum price will cause ________ and ________ the total surplus of the market. excess demand; increase excess demand; reduce excess supply; increase excess supply; reduce

excess demand; reduce

If a firm is a price taker, the demand curve faced by the firm is: horizontal. upward sloping. downward sloping. vertical.

horizontal.

Kevin's Golf-a-Rama sells golf balls in a perfectly competitive market. At its current level of golf ball production, Kevin has marginal costs equal to $1, and AVC is rising. If the market price of golf balls is $2, Kevin should: increase the production of golf balls. continue producing the current level of production. decrease the level of golf ball production. shut down and produce no golf balls.

increase the production of golf balls.

An import restriction ________ the market price and ________ the total surplus of the market. increases; increases decreases; decreases decreases; increases increases; decreases

increases; decreases

Ceteris paribus, if the demand for gasoline is relatively inelastic, and the government decides to place a tax on it, there should be a relatively ________ price hike to eliminate the excess ________ caused by the tax. small; supply small; demand large; supply large; demand

large; demand

If demand is inelastic and the government decides to raise the tax on water, the price of water will increase by a ________ amount and water consumers will bear a ________ share of the tax. large; small small; large large; large small; small

large; large

Average variable costs are minimized when: marginal costs begin to decrease. marginal cost is greater than average total cost. marginal cost equals average variable cost. marginal costs begin to increase.

marginal cost equals average variable cost.

If a competitive firm is in short-run equilibrium, then: price is greater than marginal revenue. price is greater than marginal cost. marginal revenue is equal to marginal cost. price is equal to average variable cost.

marginal revenue is equal to marginal cost.

Marginal product in the short run: may initially decrease, then eventually increase. diminishes at all levels of production. may initially increase, then eventually decrease. increases at all levels of production.

may initially increase, then eventually decrease.

When does a firm's average variable cost exceed the average total cost? never when the average fixed cost is at its minimum when the average total cost equals the average fixed cost when the average variable cost is at its minimum

never

If the government imposes a maximum price on rental apartments that is below the equilibrium price, we can expect to see all of the following except: landlords doing less maintenance to their rental units. some building owners converting their apartments to condominiums. renters spending more time searching for apartments. new apartment units being built.

new apartment units being built.

In the long run, diminishing returns would: still exist at a lesser degree because inputs are allowed to vary. exist at a greater degree, because all inputs are allowed to vary. not exist because all inputs are held constant. not exist because no input is held constant.

not exist because no input is held constant.

Diminishing marginal returns occurs: only in the long-run. only in the short-run. both the short-run and the long-run. only in time periods that are neither long-run or short-run.

only in the short-run.

For the perfectly competitive firm: price always equals marginal cost. price always equals marginal revenue. price always equals average cost. price always equals average variable cost.

price always equals marginal revenue.

If individual firms face a horizontal demand curve at a given market price: price is equal to average variable cost. price is equal to average total cost. price is equal to marginal cost. price is equal to marginal revenue.

price is equal to marginal revenue.

If a firm suffers an economic loss, its: price is less than its marginal cost. price is less than its average total cost. price is less than its marginal revenue. none of the above

price is less than its average total cost.

In short-run equilibrium for a competitive firm: marginal revenue will be greater than marginal cost. price will equal marginal cost. price will not equal marginal revenue. price will be greater than marginal cost.

price will equal marginal cost.

A perfectly competitive firm can: affect the market price for its good. collude with its competitors to set prices. sell as much as it can produce at the market price. prevent entry of other firms into their market.

sell as much as it can produce at the market price.

Suppose Tim's Cowboy boot factory produces in a perfectly competitive market. Suppose the average total cost of cowboy boots is $65, the average variable cost of cowboy boots is $60, and the price of cowboy boots is $62. If the firm is producing the level of output where marginal cost equals price, then in the short run the firm: should shut down. can increase profit by increasing output. is earning a positive economic profit. should continue to produce since total revenue exceeds total variable

should continue to produce since total revenue exceeds total variable cost.

Suppose Robin's Clock Works produces in a perfectly competitive market. Suppose the average total cost of clocks is $95, the average variable cost of clocks is $90, and the price of clocks is $85. If the firm is producing the level of output where marginal cost equals price, then in the short run the firm: should continue to produce since total revenue exceeds total variable cost. is earning a positive economic profit. can increase profit by increasing output. should shut down.

should shut down.

If average total cost > average variable cost > price, a profit maximizing firm in a perfectly competitive market should: increase its output level to minimize its loss. shut down in the short run. continue to produce its current output level. none of the above

shut down in the short run.

If average total cost > average variable cost > price, a profit maximizing firm in a perfectly competitive market should: shut down in the short run. continue to produce its current output level. increase its output level to minimize its loss. none of the above

shut down in the short run.

If demand is elastic, and the government decides to raise the tax on new cars, the price of cars will increase by a ________ amount and car buyers will bear a ________ share of the tax. small; small large; small small; large large; large

small; small

In the short run: all factors of production are fixed. all factors of production are variable. some factors of production are variable, while at least one factor of production is fixed. None of the above are correct.

some factors of production are variable, while at least one factor of production is fixed.

If government sets a minimum price above the equilibrium price: some consumers gain at the expense of producers and the total surplus decreases. some producers gain at the expense of consumers and the total surplus decreases. some consumers gain at the expense of producers and the total surplus increases. some producers gain at the expense of consumers and the total surplus increases.

some producers gain at the expense of consumers and the total surplus decreases.

Which of the following is not a characteristic of a perfectly competitive market? substantial barriers to entry selling a standardized product an individual firm having no control over price a large number of firms in a market

substantial barriers to entry

In the short run, a firm considers its fixed cost as a(n): sunk cost. variable cost. marginal cost. implicit cost.

sunk cost

Suppose that the government sets a maximum price for milk at $5 a gallon and the equilibrium price of a gallon is $3. How much quantity traded will this maximum price lead to? the equilibrium quantity above the equilibrium quantity below the equilibrium quantity There is not sufficient information.

the equilibrium quantity

If a perfectly competitive firm charges a price that is equal to its average total cost: the firm is earning an economic profit less than zero. the firm is earning an economic profit greater than zero. the firm is earning an economic profit equal to zero. It is not possible to determine anything about the firm's profits.

the firm is earning an economic profit equal to zero.

If the price a firm charges in a perfectly competitive industry is less than average total cost: the firm is earning negative economic profit. the firm is earning positive economic profit. the firm is earning zero economic profit. it is not possible to determine anything about profits.

the firm is earning negative economic profit.

In a perfectly competitive market, if price is less than average total cost, but greater than average variable cost at the level of output where marginal cost equals marginal revenue: the firm should shut down. the firm is earning positive economic profit. the firm is earning negative economic profit. We cannot determine whether the firm is earning positive or negative profits.

the firm is earning negative economic profit.

A firm's marginal cost curve above the minimum of the average variable cost curve is also: the market supply curve. the firm's producer surplus curve. the firm's short-run supply curve. the firm's demand for production curve.

the firm's short-run supply curve.

Total cost divided by the quantity of output the firm chooses when it can choose a production facility of any size describes: the short-run average cost of production. the long-run marginal cost of production. the long-run average cost of production. the short-run marginal cost of production.

the long-run average cost of production.

A firm's short-run supply curve is the firm's marginal cost above: zero. the zero-profit point. the shut-down point. the point of diminishing returns.

the shut-down point.

In the short run, the firm's total cost equals: the total fixed costs + the total variable costs. the average fixed costs + average variable costs. the total variable costs only. the average fixed cost + the marginal cost.

the total fixed costs + the total variable costs.

Average fixed cost is defined as: total fixed cost divided by quantity. total variable cost divided by quantity. the change in total variable cost divided by the change in quantity. quantity divided by total variable cost.

total fixed cost divided by quantity.

You sell your good in a perfectly competitive market where the market price is $7.00. When you sell 100 units your total revenue is $700. When you sell 101 units: total revenue increases by more than $7. total revenue increases by less than $7. total revenue increases by exactly $7. total revenue may increase or decrease.

total revenue increases by exactly $7.

Marginal revenue is equal to price for a perfectly competitive firm because: firms need to lower price to increase the quantity sold. firms can increase price and still increase the quantity sold. total revenue increases by the price of the good when an additional unit is sold. total revenue increases by less than the price of the good when an additional unit is sold.

total revenue increases by the price of the good when an additional unit is sold.

If the government imposes a quantity restriction on how many shoes can be imported into a country, and the total quantity is below the market equilibrium quantity: total surplus in the market does not change. total surplus in the market decreases. total surplus in the market increases. total surplus may increase or decrease, depending on whether costs are increasing or decreasing in production.

total surplus in the market decreases.

When the firm increases output and the costs rise disproportionately faster, then the long-run average cost curve is ________ and the firm is experiencing ________. downward sloping; economies of scale downward sloping; constant returns to scale horizontal; constant returns to scale upward sloping; diseconomies of scale

upward sloping; diseconomies of scale

If the market demand increases for a good sold in a perfectly competitive market, individual firms in the market: will be able to charge a higher price for their product. will begin earning economic losses. will not be able to change their price. will need to lower price in order to remain competitive.

will be able to charge a higher price for their product.

Which of the following is true? TVC/Q = TC/Q + TFC/Q ATC = AVC - AFC ΔTC/ΔQ = ΔAVC/ΔQ ΔTC/ΔQ = MC

ΔTC/ΔQ = MC

Jane is a student at a university. She pays $10,000 per year in tuition, $4,000 per year in living expenses, and $800 per year for books. Were she not in school, she could earn $20,000 per year working as a bookkeeper and she would not live with her parents. What is her economic cost of a year in college? $10,000 $13,000 $30,800 $34,800

$30,800

In the short run, the marginal cost of the first unit of output is $20, the marginal cost of producing the second unit of output is $16, and the marginal cost of producing the third unit of output is $12. The firm's total variable cost of producing three units of output is: $12. $16. $20. $48.

$48.

Mark's Baseballs produces baseballs. Mark's Baseballs has total fixed costs of $500. Mark's average variable cost is $20, and his average total cost is $25. Mark is currently producing: 5 baseballs. 25 baseballs. 100 baseballs. a number of baseballs that cannot be determined from the information provided.

100 baseballs.

Farmer Brown sells her wheat in a perfectly competitive market. Suppose the current market price of wheat is $2.50 per bushel. Farmer Brown can charge any price for her wheat, but will maximize profit if she sells for less than $2.50. Farmer Brown can charge more than $2.50 and still sell some wheat. Farmer Brown should charge more than $2.50. Farmer Brown can sell as much wheat as she likes at $2.50 per bushel.

Farmer Brown can sell as much wheat as she likes at $2.50 per bushel.

If the firm is incurring losses in the short run, then which of the following is true? P > MC P < ATC MC > ATC P > ATC

P < ATC

If the firm is incurring losses in the short run, then which of the following is true? P > MC P > ATC MC > ATC P < ATC

P < ATC

A firm will not shut down in the short run as long as\ it is at the point where MR = MC and: P > ATC. P > MC. P > AVC. P > AFC.

P > AVC.

A firm will not shut down in the short run as long as\ it is at the point where MR = MC and: P > MC. P > ATC. P > AVC. P > AFC.

P > AVC.