Micro Ch 3

Which of the following are correct about fixed costs?(i) They do not change with the level of production in the short run.(ii) They include variable costs.(iii) They are present even when the firm is producing zero units.(iv) They are irrelevant to marginal cost.

(i), (iii), and (iv)

What is quantity supplied?

It is the amount of an item that a seller is willing to sell at a particular price.

Variable costs are the costs that

vary with the quantity of output produced

Which of the following scenarios depicts a seller who is following the Rational Rule for Sellers? a. Mindy sets up a lemonade stand and calculates the cost of an additional cup of lemonade at 50 cents, and sells it for 25 cents. b. An auto-rickshaw driver in New Delhi, India, calculates a trip to have a marginal cost of 350 rupees and accepts a ride request for 315 rupees. c. American Airlines determines the marginal cost of an extra passenger to be $75 and sells a discount seat for $250. d. Andy's Diner finds that the marginal cost of a fish and chips meal is $7 and lists the item for sale at $6.50.

American Airlines determines the marginal cost of an extra passenger to be $75 and sells a discount seat for $250.

Why are supply curves typically upward-sloping? a. They slope upward due to the law of demand. b. They slope upward because sellers demand more when prices are lower. c. They slope upward because sellers prefer to sell more when prices are lower. d. They slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services.

They slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services.

Substitutes-in-production

allows a business to have alternative uses of its resources by manufacturing other products using the same inputs.

A bakery hires a baker who can make 15 cakes per day. The bakery then decides to hire a second baker who will use the kitchen at the same time as the first baker. The bakery finds that the second baker can produce only an additional nine cakes per day. What concept does this scenario illustrate?

diminishing marginal product

The Rational Rule for Sellers says that a seller should sell one more unit of an item if the price is:

greater than or equal to the marginal cost

If a seller expects prices to rise in the future

it will stock up today and sell the goods when the price rises

A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you: a. multiply the individual supply of one of the suppliers by ten. b. find the average quantity produced by the ten suppliers. c. take the individual supply of one supplier. d. take one-tenth of the individual supply of each supplier and add it up.

multiply the individual supply of one of the suppliers by ten.

Daisy is a milk farmer in a perfectly competitive market where there are many milk farmers. The market price of milk is $0.15 per gallon, which is also the marginal cost per gallon of milk. If Daisy charges $0.25 per gallon, she will

not sell any milk

When you calculate marginal costs, they should include:

only variable costs

A business manages to become more efficient. As a result of this improved efficiency, it will

shift its supply curve to the right

If the price of jet fuel rises, the a. supply of airline flights decreases. b. supply of jet fuel decreases. c. supply of jet fuel increases. d. quantity supplied of jet fuel falls.

supply of airline flights decreases.

Peanut butter and peanut oil are complements-in-production. When the price of peanut butter rises, the

supply of peanut oil rise

An individual supply curve is

the marginal cost curve

Which of the following is NOT a factor that can shift supply? a. The expected future price of a product. b. The price of a substitute-in-production. c. The price of a complement-in-production. d. The market price of a product.

the market price of a product

A large amount of harvested grain used to make flour grows mold due to flooding. How will this affect the supply of flour in the market?

the supply of flour will decrease in the market