MICRO TEST 2
For a purely competitive firm total revenue: A) increases by a constant absolute amount as output expands. B) is price times quantity sold. C) has all of these characteristics. D) graphs as a straight upsloping line from the origin.
C
Cash expenditures a firm makes to pay for resources are called: A) Normal profit B) Implicit costs C) Explicit costs D) Opportunity costs
C
Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in: A) the price of that same product. B) income. C) the price of some other product. D) the general price level.
C
Demand is said to be inelastic when: A) An increase in price results in a reduction in total revenue B) The elasticity coefficient exceeds one C) A reduction in price results in a decrease in total revenue D) A reduction in price results in an increase in total revenue
C
Economies and diseconomies of scale explain: A) the profit-maximizing level of production. B) why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point. C) why the firm's long-run average total cost curve is U-shaped. D) the distinction between fixed and variable costs.
C
An economy is producing at the least-cost rate of production when: A) Price and the minimum average total cost are equal B) Marginal revenue is greater than price C) Price and marginal revenue are equal D) Marginal cost is greater than average total cost
A
Block's sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs causes price to rise to $9 and Block's only manages to sell 460 bottles of perfume. The price elasticity of demand is: A) .33 and inelastic B) 3.0 and inelastic C) 3.0 and elastic D) .33 and elastic
A
Costs to an economist: A) may or may not involve monetary outlays. B) never reflect monetary outlays. C) always reflect monetary outlays. D) consist only of explicit costs.
A
If you know that when a firm produces 10 units of output, total costs are $1,030 and average fixed costs are $10, then total fixed costs are: A) $100 B) $5 C) $1,020 D) $1,040
A
Implicit costs are: A) "payments" for self-employed resources B) Equal to total fixed costs C) Always greater in the short run than in the long run D) Comprised entirely of variable costs
A
In the short run a purely competitive firm that seeks to maximize profit will produce: A) where total revenue exceeds total cost by the maximum amount. B) at any point where the total revenue and total cost curves intersect. C) where the demand and the ATC curves intersect. D) that output where economic profits are zero.
A
In which of the following instances will total revenue decline? A) price rises and demand is elastic B) price falls and demand is elastic C) price rises and supply is elastic D) price rises and demand is inelastic
A
Price elasticity of supply is: A) greater in the long run than in the short run. B) independent of time. C) positive in the short run but negative in the long run. D) greater in the short run than in the long run.
A
When a purely competitive firm is in long-run equilibrium: A) price equals marginal cost. B) minimum average total cost is less than the product price. C) total revenue exceeds total cost. D) marginal revenue exceeds marginal cost.
A
When diseconomies of scale occur: A) the long-run average total cost curve rises. B) marginal cost intersects average total cost. C) average fixed costs will rise. D) the long-run average total cost curve falls.
A
Which of the following is most likely to be a fixed cost? A) property insurance premiums B) expenditures for raw materials C) shipping charges D) wages for unskilled labor
A
A firm reaches a break-even point (normal profit position) where: A) marginal revenue cuts the horizontal axis. B) total revenue and total cost are equal. C) total revenue equals total variable cost. D) marginal cost intersects the average variable cost curve.
B
A purely competitive firm's short-run supply curve is: A) upsloping only when the industry has constant costs. B) upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve. C) perfectly elastic at the minimum average total cost. D) upsloping and equal to the portion of the marginal cost curve that lies above the average total cost curve.
B
A remote island nation is discovered, and on this island the cross elasticity of demand for coconut milk and fruit punch is 1.0. This indicates that these two goods are: A) Complements B) Substitutes C) Inferior D) Normal
B
In the short run the individual competitive firm's supply curve is that segment of the: A) marginal cost curve lying between the average total cost and average variable cost curves. B) marginal cost curve lying above the average variable cost curve. C) marginal revenue curve lying below the demand curve. D) average variable cost curve lying below the marginal cost curve.
B
Resource costs increase in a purely competitive industry. This change will result in a(n): A) Decrease in average variable cost for a firm in the industry B) Decrease in the short-run supply curve for a firm in the industry C) Decrease in the marginal cost curve for a firm in the industry D) Increase in average fixed cost for a firm in the industry
B
When a firm doubles its inputs and finds that its output has more than doubled, this is known as: A) Diseconomies of scale B) Economies of scale C) Constant returns to scale D) A violation of the law of diminishing returns
B
If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then: A) there must be price fixing by the industry's firms. B) some existing firms in this market will leave. C) new firms will enter this market. D) the selling price for this firm is above the market equilibrium price.
C
The long-run equilibrium of a purely competitive industry ensures: A) Consumer and producer surplus is minimized. B) Only producer surplus is maximized. C) Consumer and producer surplus is maximized. D) Only consumer surplus is maximized.
C
The main determinant of elasticity of supply is the: A) number of uses for the product. B) number of close substitutes for the product available to consumers. C) amount of time the producer has to adjust inputs in response to a price change. D) urgency of consumer wants for the product.
C
The supply of product X is elastic if the price of X rises by: A) 7 percent and quantity supplied rises by 5 percent. B) 8 percent and quantity supplied rises by 8 percent. C) 5 percent and quantity supplied rises by 7 percent. D) 10 percent and quantity supplied remains the same.
C
The wage rate increases in a purely competitive industry. This change will result in a(n): A) Decrease in average variable cost for a firm in the industry B) Increase in short-run supply curve for a firm in the industry C) Increase in the marginal cost curve for a firm in the industry D) Decrease in average total cost for a firm in the industry
C
When a purely competitive industry is in long-run equilibrium, which statement is true? A) Marginal cost is at its maximum level B) Marginal revenue is greater than price C) Price and average total cost are equal D) Average total cost is less than marginal cost
C
A constant-cost industry is one in which: A) the total cost of producing 200 or 300 units is no greater than the cost of producing 100 units. B) a higher price per unit will not result in an increased output. C) the demand curve and therefore the unit price and quantity sold seldom change. D) if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.
D
A perfectly inelastic demand schedule: A) cannot be shown on a two-dimensional graph. B) rises upward and to the right, but has a constant slope. C) can be represented by a line parallel to the horizontal axis. D) can be represented by a line parallel to the vertical axis.
D
Creative destruction A) stimulates growth. B) forces firms to be innovative. C) contributes to the production of new goods. D) does all of the above.
D
For a purely competitive seller, price equals: A) total revenue divided by output. B) marginal revenue. C) average revenue. D) all of these.
D
In a typical graph for a purely competitive firm, the intersection of the total cost and total revenue curves would be: A) A point of minimum economic loss B) A point where MR = MC C) A point of maximum economic profit D) A break-even point
D
In the short run, output: A) Can vary as the result of changing the size of existing plants and by new firms entering or leaving the industry B) May be altered by varying the size of plant and equipment which now exist in the industry C) Is absolutely fixed D) Can vary as the result of using a fixed amount of plant and equipment more or less intensively
D
In the short-run purely competitive firms earn ________ in equilibrium while in the long-run firms earn ________ in equilibrium, respectively. A) profits; normal profit B) profits or losses; profits or losses C) normal profits; economic profits
D
In the standard model of pure competition, a profit-maximizing entrepreneur will shut down in the short run if: A) Marginal cost is greater than average revenue B) Average fixed cost is greater than average revenue C) Average cost is greater than average revenue D) Total revenue is less than total variable costs
D
Productive efficiency refers to: A) Production, where P = MC B) Setting TR = TC C) Maximizing profits by producing where MR = MC D) Cost minimization, where P = minimum ATC
D
The long-run supply curve in a constant-cost industry would be: A) Upsloping B) Vertical C) Downsloping D) Horizontal
D
The main difference between the short run and the long run is that: A) The long run always refers to a time period of one year or longer B) Firms earn zero profits in the long run C) In the long run, only one variable can be fixed D) In the short run, one or more inputs is fixed
D
When the percentage change in price is greater than the resulting percentage change in quantity demanded: A) demand is elastic. B) a decrease in price will increase total revenue. C) demand may be either elastic or inelastic. D) an increase in price will increase total revenue.
D
