Micro Exam

Darren runs a barbershop with average fixed costs equal to $60 per day and a total output of 50 haircuts per day. What is his weekly total fixed cost if he is open six days per week? A) $18,000 B) $3,000 C) $60 D) The answer cannot be determined with the information available.

A) $18,000

Oscar has negotiated a lease for his sporting goods store in which he is required to pay $2,500 per month in rent. Oscar pays his staff $9 per hour to sell sporting goods and his monthly electricity bill averages $700, depending on his total hours of operation. Oscar's fixed costs of production equal: A) $2,500 per month. B) $3,200 per month. C) $9 per hour multiplied by total hours of work plus $700. D) $9 per hour multiplied by total hours of work plus $3,200

A) $2,500 per month.

If an eyeglass business produces 10 pairs of eyeglasses and incurs $35 in average total cost and $5 in average fixed cost, then average variable cost is: A) $30. B) $35. C) $50. D) $300.

A) $30.

When a cherry orchard in Oregon adds a worker, the total cost of production increases by $24,000. Adding the worker increases total cherry output by 600 pounds. Therefore, the marginal cost of the last pound of cherries produced is: A) $40. B) $19. C) $4,000. D) $24,000.

A) $40

If marginal cost is greater than average total cost, then: A) average total cost is increasing. B) average total cost is decreasing. C) average total cost is unchanged. D) marginal cost is decreasing.

A) average total cost is increasing.

When an increase in the firm's output reduces its long-run average total cost, it achieves: A) economies of scale. B) diseconomies of scale. C) constant returns to scale. D) variable returns to scale.

A) economies of scale.

For every restaurant in Cleveland, the average total cost curve ________ at ________ levels of output, then ________ at ________ levels. A) falls; low; rises; higher B) rises; low; falls; higher C) rises; higher; rises; low D) falls; higher; falls; low

A) falls; low; rises; higher

The marginal cost curve intersects the average variable cost curve at: A) its lowest point. B) its maximum. C) its end point. D) no point; the curves don't intersect.

A) its lowest point.

When diseconomies of scale occur, the: A) long-run average cost curve rises. B) marginal cost curve declines. C) average total cost curve declines. D) average variable cost curve declines

A) long-run average cost curve rises.

The long run is a planning period: A) over which a firm can consider all inputs as variable. B) that is at least 5 years in length. C) that must be over 6 months in length. D) that must be between 6 months and 5 years.

A) over which a firm can consider all inputs as variable

The larger the output, the greater the quantity of output over which fixed cost is spread. Called the ________ effect, this leads to a ___________. A) spreading; lower average fixed cost. B) spreading; higher average fixed cost. C) diminishing returns; lower average variable cost. D) diminishing returns; higher average variable cost.

A) spreading; lower average fixed cost.

You own a small deli that produces sandwiches, soups, and other items for customers in your town. Which of the following is a fixed input for the production function at your deli? A) the dining room where customers eat their meals B) the loaves of bread used to make sandwiches C) the cans of tomato sauce used to make soups D) the employees hired to help make the food

A) the dining room where customers eat their meals

The sum of fixed and variable costs is: A) total cost. B) marginal cost. C) variable cost. D) average cost.

A) total cost.

For Heidi, the marginal cost of producing one additional photograph equals the change in ________ divided by the change in the ________. A) total cost; number of photographs B) marginal cost; number of photographs C) total cost; marginal product of photographs D) average cost; number of photographs

A) total cost; number of photographs

The costs associated with variable inputs are ________ costs and the costs associated with ________ inputs are ________costs. A) variable; fixed; fixed B) fixed; fixed; variable C) variable; fixed; variable D) fixed; fixed; fixed

A) variable; fixed; fixed

Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. If the market price declines from $30 per unit to $29 per unit, marginal revenue for the eleventh unit is: Select one: a. $19. b. $1. c. $9. d. $29.

A. 19

If a perfectly competitive firm is producing a quantity where MC < MR, then profit: Select one: a. can be increased by increasing production. b. can be increased by decreasing the price. c. is maximized. d. can be increased by decreasing production.

A. Can be increased by increasing production

In a two player game, if both players will be worse off at the noncooperative equilibrium of the game than they would be at the collusive outcome of the game because they both have an incentive to cheat under colllusion, the situation is referred to as a: Select one: a. prisoners' dilemma. b. tit-for-tat strategy. c. price leadership model. d. price leadership model.

A. Prisoner's dilemma

Austin's total fixed cost at the bakery is $3,600 a month. Austin employs 20 workers and pays each worker $8 an hour. The marginal product of the twentieth worker is 12 iced cupcakes an hour. What is the marginal cost of the last cupcake produced by the last worker Austin hired? A) $0.26 B) $0.66 C) $3.81 D) $8

B) $0.66

If an eyeglass business produces 10 pairs of eyeglasses and incurs $30 in average variable cost and $5 in average fixed cost, then average total cost is: A) $30. B) $35. C) $50. D) $300.

B) $35.

A farm can produce 1,000 bushels of wheat per year with two workers and 1,300 bushels of wheat per year with three workers. The marginal product of the third worker is: A) 100 bushels. B) 300 bushels. C) 1,300 bushels. D) 2,300 bushels.

B) 300 bushels.

Suppose that when a coal-production firm hires one, two, three, four, and five workers, the corresponding total outputs are 10, 15, 19, 22, and 24 tons, respectively. The marginal product of the third worker is ________ tons. A) 3 B) 4 C) 15 D) 19

B) 4

An input whose quantity cannot be changed in the short run is: A) a marginal input. B) a fixed input. C) an incremental input. D) a variable input.

B) a fixed input.

When an additional unit of a variable input adds less to total product than the previous unit, the firm must be experiencing: A) increasing returns. B) diminishing marginal returns. C) diminishing total returns. D) diminishing marginal returns and diminishing total returns

B) diminishing marginal returns.

The long-run average cost curve will be upward sloping when the firm is experiencing: A) economies of scale. B) diseconomies of scale. C) constant returns to scale. D) diminishing returns.

B) diseconomies of scale.

A cost that does not depend on the quantity of output produced is called a: A) marginal cost. B) fixed cost. C) variable cost. D) average cost

B) fixed cost.

A firm's marginal cost is: A) the ratio of the change in fixed cost to the change in the quantity of output. B) the slope of the total cost curve. C) the slope of the average variable cost curve. D) the ratio of the change in total output to the change in the quantity of labor.

B) the slope of the total cost curve.

The marginal product of labor is: A) the change in labor divided by the change in total product. B) the slope of the total product of labor curve. C) the change in average product divided by the change in the quantity of labor. D) the change in output that occurs when capital increases by one unit.

B) the slope of the total product of labor curve.

Average total cost is: A) the change in cost divided by the change in output. B) total cost divided by output. C) the change in output divided by the change in costs. D) total cost times output.

B) total cost divided by outpu

Diminishing returns to an input occur: A) when all inputs are fixed. B) when some inputs are fixed and some are variable. C) when all inputs are variable. D) only in the long run.

B) when some inputs are fixed and some are variable.

The total product curve: A) shows the relation between output and the quantity of a variable input for varying levels of the fixed input. B) will become flatter as output increases if there are diminishing returns to the variable input. C) will be downward sloping if there are diminishing returns to the variable input. D) will become horizontal when the marginal product of the variable input is constant.

B) will become flatter as output increases if there are diminishing returns to the variable input.

If two firms are identical in all respects except that one has more capital than another, the total product curve for the firm with more capital: A) must equal the total product curve for the firm with less capital. B) will lie above the total product curve for the firm with less capital. C) will lie below the total product curve for the firm with less capital. D) will show no diminishing marginal returns.

B) will lie above the total product curve for the firm with less capital.

Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits. If the price of memory cards is $9, Mikail's output is 3,000 cards a month, and his monthly average total cost is $7, what are his monthly profits? Select one: a. $2. b. $6000. c. $27000. d. $21000.

B. $6000

An industry is made up of five firms. Three of the firms make up 20% of the total market sales, one firm makes up 25% of the total market sales, and the remaining firm makes up 15% of the total market sales. What is the HHI for this industry? Select one: a. 100 b. 1,200 Incorrect c. 2,050 d. 1,800

B. 1,200

Which of the following cost concepts is correctly defined? A) MC = TC / FC B) ATC = VC + FC C) ATC = AVC + AFC D) TC = AVC + AFC

C) ATC = AVC + AFC

The ________ curve continually declines as more output is produced in the short run. A) marginal cost B) average variable cost C) average fixed cost D) average total cost

C) average fixed cost

The idea of diminishing returns to an input in production suggests that if a local college adds more custodians, the marginal product of labor for the custodial staff will ________. A) increase at an increasing rate B) increase at a decreasing rate C) decrease D) not change

C) decrease

When marginal cost is below average variable cost, average variable cost must be: A) at its minimum. B) at its maximum. C) falling. D) rising.

C) falling.

The ________ is the increase in output that is produced when hiring an additional worker. A) average product B) total product C) marginal product D) marginal cost

C) marginal product

In economics, the short run is defined as: A) less than 1 year. B) less than 6 months. C) period in which some inputs are considered to be fixed in quantity. D) period in which some inputs are fixed, but it cannot exceed 1 year.

C) period in which some inputs are considered to be fixed in quantity.

In the short run: A) all inputs are fixed. B) all inputs are variable. C) some inputs are fixed and some inputs are variable. D) all costs are variable.

C) some inputs are fixed and some inputs are variable.

The total cost curve for a snowmobile dealership shows how ________ cost depends on the quantity of ________. A) total; fixed inputs B) average; variable C) total; output D) marginal; output

C) total; output

In the long run, all costs are: A) fixed. B) constant. C) variable. D) marginal.

C) variable.

Zoe's Bakery operates in a perfectly competitive industry. When the market price of iced cupcakes is $5, the profit-maximizing output level is 150 cupcakes. Her average total cost is $4, and her average variable cost is $3. Zoe's marginal cost is ________, and her short-run profits are: Select one: a. $1; $150 b. $5; $300 c. $5; $150 d. $1; $300

C. $5; $150

If a perfectly competitive firm is producing a quantity where P = MC, then profit: Select one: a. can be increased by increasing production. b. can be increased by decreasing the price. c. is maximized. d. can be increased by decreasing the quantity.

C. Is maximized

To practice effective price discrimination, a monopolist must be able to: Select one: a. calculate the utility level of each buyer in the market. b. avoid detection by government regulatory agencies. c. prevent the resale of goods among groups of buyers. Correct d. estimate its own production and cost functions.

C. prevent the resale of goods among group of buyers

If an eyeglass business produces 10 pairs of eyeglasses and incurs $30 in average variable cost and $5 in average fixed cost, then total cost is: A) $35. B) $50. C) $300. D) $350.

D) $350.

The term diminishing returns refers to: A) a falling interest rate that can be expected as one's investment in a single asset increases. B) a reduction in profits caused by increasing output beyond the optimal point. C) a decrease in total output due to the firm hiring uneducated workers. D) a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

D) a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

An input whose quantity can be changed in the short run is: A) a marginal input. B) a fixed input. C) an incremental input. D) a variable input.

D) a variable input.

The average total cost of producing cell phones in a factory is $20 at the current output level of 100 units per week. If fixed cost is $1,200 per week: A) average fixed cost is $20. B) total cost is $3,200. C) variable cost is $2,000. D) average variable cost is $8.

D) average variable cost is $8.

The larger the output, the greater the amount of variable input required to produce additional units. Called the ________ effect, this leads to a ___________. A) spreading; lower average fixed cost. B) spreading; higher average fixed cost. C) diminishing returns; lower average variable cost. D) diminishing returns; higher average variable cost.

D) diminishing returns; higher average variable cost

If a perfectly competitive gardening shop sells 30 evergreen bushes at a price of $10 per bush, its marginal revenue is: Select one: a. less than $10. b. more than $10. c. $300. d. $10.

D. 10

In a perfectly competitive industry, the market demand curve is usually: Select one: a. relatively elastic. b. perfectly inelastic. c. perfectly elastic. d. downward sloping.

D. downward sloping

If a monopoly is producing at the profit-maximizing level of output, then we can assume that at that level of output, demand is: Select one: a. price-inelastic. b. price unit-elastic. c. perfectly price-inelastic. d. price-elastic.

D. price-elastic

When firms in a particular industry informally charge the same price as the largest firm in that industry without any written agreement, this is called: Select one: a. satisfying. b. price extortion. c. overt collusion d. tacit collusion.

D. tacit collusion

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 10 units is $_____. a. 210 b. 200 c. 20 d. 10

b. 200

Suppose that the Yankee Cap Company is a profit-maximizing firm that has a monopoly in the production of baseball caps. The firm sells its baseball caps for $25 each. For this information, we can assume that the Yankee Cap Company is producing a level of output at which: Select one: a. average total cost equals $25. b. marginal cost equals marginal revenue. c. average total cost is greater than $25. d. marginal revenue equals $25.

b. marginal cost equals marginal revenue.

For a perfectly competitive firm, the short-run supply curve is the: Select one: a. entire MC curve. b. rising part of the MC curve beginning at the shut-down point. c. rising part of the MC curve beginning at the point at which the firm starts earning economic profit. d. MC curve below the shut-down point.

b. rising part of the MC curve beginning at the shut-down point.

A perfectly competitive small organic farm that produces 1,000 cauliflower heads in the short run has an ATC = $6 and AFC = $2. The market price is $3 per head and is equal to MC. In order to maximize profits (or minimize losses), this farm should: Select one: a. reduce output but continue to produce a positive amount of output. b. shut down. c. increase output. d. do nothing; the firm is already maximizing profits.

b. shut down.

The break-even price for a perfectly competitive firm is equal to: Select one: a. the minimum value of average variable cost. b. the minimum value of average total cost. c. the marginal revenue, provided that marginal revenue is equal to marginal cost. d. the average fixed cost at the output level at which the firm is producing.

b. the minimum value of average total cost.

There are benefits resulting indirectly from pollution because: Select one: a. we obtain goods and services we enjoy even though in the process we create pollution. b. firms pollute the environment only if it allows them to provide people with goods and services they desire at a higher cost. c. businesses and consumers receive a perverse satisfaction from polluting. d. it can often be beneficial to wildlife.

c. businesses and consumers receive a perverse satisfaction from polluting.