UNIT 10

If a firm has revenues of $100, explicit costs of $50, and implicit costs of $50, then its accounting profit is:

$50

Profit maximization occurs when:

MR = MC

The following are marginal cost curves for selling chicken in a Mom & Pop (MCM) store and in a Big-Box retailer (MCB). MCM = 2 + 2QM MCB = 4 + QB If there are 7 total chickens being sold, how many chickens does each firm sell?

Mom & Pop: 3; Big-Box: 4

The following are marginal cost curves for selling chicken in a Mom & Pop (MCM) store and in a Big-Box retailer (MCB). MCM = 2 + 2QM MCB = 4 + QB If the price of a chicken is $12, how many chickens does each store supply?

Mom & Pop: 5; Big-Box: 8

Entrepreneurs have the incentive to:

Move resources out of low-value industries and into high-value industries

Competitive firms want to produce the quantity such that:

P = MC

In the long run, competitive firms want to exit industries in which:

P<AC

Competitive firms want to enter industries in which

P>AC

A student trying to maximize her semester GPA already studies as many hours as possible but can perhaps use that time more efficiently. A marginal hour spent studying economics will raise her GPA by 0.05. A marginal hour spent studying literature will raise her GPA by 0.02. Should she reallocate her time?

She should spend more time studying economics and less time studying literature

This figure shows the production costs of two firms that produce bird feeders. If these two firms represent total production in the industry, how should they allocate the production of 200 bird feeders to minimize costs?

Firm 1 should produce 150 bird feeders, and Firm 2 should produce 50 bird feeders

Above-normal profits are eliminated by ______, and below-normal profits are eliminated by ______

entry; exit

Suppose that you own two farms on which to grow corn. In order to lower the cost of production, you determine to increase production on Farm 1 and reduce it on Farm 2. This implies that the marginal cost of production on Farm 1 is:

less than the marginal cost of production on Farm 2

The pursuit of profits in a competitive market:

minimizes total industry costs.

Under perfect competition, the rate of profit tends to be ______ in all industries, so the marginal value of resources is ______ in all industries

the same; the same

Normal profits in a perfectly competitive industry refer to ______ run profits

zero long

Refer to the table. Suppose that we want to produce seven barrels of oil. To minimize costs, we should produce:

three barrels of oil from Oil Pump One and four barrels of oil from Oil Pump Two