Micro HW Ch. 6

c. $4

A firm's marginal cost has a minimum value of $2; its average variable cost has a minimum value of $4; and its average total cost has a minimum value of $5. Then the firm will shut down if the price of its product falls below Select one: a. $2 b. $3 c. $4 d. $5 e. There is not enough information given to answer the question.

e

A firm's total profit equals Select one: a. marginal benefit minus marginal cost. b. (price - average total cost) times the quantity sold. c. (price * quantity sold) - total costs. d. Answers a, b and c are different ways of calculating total profit. e. Answers b and c are different ways of calculating total profit.

c. increase production

A perfectly competitive firm is producing 37 units with a marginal cost of $3. The prevailing price for the output is $5. The firm should Select one: a. lower its price. b. decrease production. c. increase production. d. raise its price. e. layoff workers.

c.

A profit maximizing perfectly competitive firm must decide Select one: a. only on what price to charge, taking output as fixed. b. both what price to charge and how much to produce. c. only on how much to produce, taking price of the good as fixed. d. only on which industry to join, taking price and output as fixed. e. only on how much revenue it wishes to collect.

e.

Assume that the firm uses 13 employee-hours and an office to produce 100 units of output. The price of output is $5, the wage rate is $10, and rent is $200. The firm will earn a _____ of _____. Select one: a. profit; $370 b. loss; $200 c. profit; $200 d. loss; $170 e. profit; $170

c

Assuming the firm is experiencing diminishing marginal returns to its variable factors of production, as output price falls the firm will Select one: a. produce more. b. earn profits. c. produce less. d. earn losses. e. shutdown.

C'

Because of the relationship between marginal costs and the supply curve, points on the supply curve represent the extra Select one: a. benefit of all units produced. b. profit of all units produced. c. cost of the last unit produced. d. revenue of the last unit produced. e. cost of all units produced.

d. perfect competitior

If the firms demand curve is perfectly elastic, the firm must be Select one: a. a monopoly. b. an imperfectly competitor. c. an oligopoly. d. a perfect competitor. e. a revenue maximizer.

d .

In a market with 1,000 identical firms, the short-run market supply is Select one: a. the marginal cost curve (above average variable cost) for the typical firm in the market. b. the quantity supplied by the typical firm in the market. c. the sum of the prices charged by each of the 1,000 individual firms. d. the sum of the quantities supplied by each of the 1,000 individual firms. e. perfectly elastic.

e,

In the short run, if the firm experiences an increase in the cost of a fixed factor of production it will most likely Select one: a. increase output. b. raise its price. c. decrease output. d. lower its price. e. leave its output decision unchanged.

d

Marginal cost is calculated as Select one: a. total revenue minus total costs. b. the change in output divided by the change in total costs. c. the percentage change in total costs divided by the percentage change in output. d. the change in total costs divided by the change in output. e. total revenue minus fixed costs.

c/

One reason that variable factors of production tend to show diminishing returns in the short run is that Select one: a. costs are too high. b. too much capital equipment is idle. c. there are too many workers using a fixed amount of productive resources. d. the firm has become too large to effectively manage workers. e. the cost of hiring additional workers increases as firms seek to hire more.

b. more than 30 additional employee hours

Suppose 30 employee-hours can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output will require Select one: a. an additional 30 employee-hours. b. more than 30 additional employee-hours. c. a total of 60 or less employee-hours. d. less than 30 additional employee-hours. e. a total of 90 or more employee-hours.

b

Suppose a perfectly competitive firm confronts a price of $6 and produces 650 units. For this to be a point of profit maximization, Select one: a. total costs must exceed total revenues. b. the marginal cost of producing 650 units must be $6. c. total revenues must exceed total costs. d. the marginal cost of producing 650 units must be less than $6. e. total revenues must equal total costs

b. P=MC

Suppose a perfectly competitive firm knows that it is not going to shutdown but it is going to earn a loss. It should pick the output level where Select one: a. total costs are minimized. b. price equals marginal costs. c. total revenues are maximized. d. the costs of the variable factors of production are minimized. e. price is greater than marginal costs.

c. supply curve

The __________ of a perfectly competitive firm coincides with the portion of its marginal cost curve which lies above the AVC curve. Select one: a. production curve b. total cost curve c. supply curve d. diminishing marginal returns curve e. Gipper effect curve

c,

To produce 150 units of output, the firm must use 3 employee-hours. To produce 300 units of output the firm must use 8 employee-hours. Apparently, the firm is Select one: a. more profitable when the output level is 150 units. b. more profitable when the output level is 300 units. c. experiencing diminishing marginal returns. d. not using any fixed factors of production e. failing to maximize profit.

a.

When a competitive firm triples the amount of output it sells, Select one: a. its total revenue triples. b. its variable cost triples. c. its fixed cost triples. d. its marginal cost triples. e. its profit triples.

C..

When some factors of production are fixed, equal sized increases in production will eventually require Select one: a. smaller increases in the variable factor. b. equal sized increases in the variable factor. c. larger increases in the variable factor. d. larger increases in the fixed factor. e. higher profits.

upward sloping

When the marginal return to the variable factor of production is diminishing, the marginal cost curve is