UNIT Test 3 Microeconomics

If accounting profits for a firm are 20% of output, and the opportunity cost of financial capital is 8% of output, then what do the firm's economic profits equal?

12% of output

Approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees?

35%

A perfectly competitive industry is a

a hypothetical extreme.

In economics, a firm that faces no competitors is referred to as _________________.

a monopoly

A firm that holds a monopoly position in the market place is

a price maker

An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________________ .

accounting profit; excluding opportunity cost

In order to determine ____________, the firm's total costs must be divided by the quantity of its output.

average cost

Occasionally, _________________ may lead to pure monopoly; in other market conditions, they may limit competition _________________ .

barriers to entry; to a few oligopoly firms

Intellectual property law is a body of law that includes

copyright legislation, as well as all of the above

If a solar panel manufacturer wants to look at its total costs of production in the short run, which of the following would provide a useful starting point?

divide total costs into two categories: fixed costs that can't be changed in the short run and variable costs that can be

When J.K. Rowling exerts copyright ownership of her literary works, she creates a monopoly by restricting

entry into the market

If the North American newsprint paper market has barriers to entry, then

entry will be blocked even if firms are earning high profits.

A __________________ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve.

natural monopoly

In order to determine the average variable cost, the firm's variable costs are divided by _______________________.

the quantity of output

The ______________ of all firms can be broken down into some common underlying patterns.

cost structure

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production.

fixed costs; do not change,

Why would a profit-seeking firm need to tailor its decisions about the quantity of labor inputs that it purchases?

to produce the profit-maximizing quantity of output at the lowest possible average cost

If a comparison between average cost and price reveals whether a firm is earning profits, then a comparison between average variable cost and price reveals

whether the firm is earning profit if fixed costs are left out of the calculation.

In order to produce 100 oatmeal cookies, GoodieCookieCo incurs an average total cost of $0.25 per cookie. The company's marginal cost is constant at $0.10 for all oatmeal cookies produced. The total cost to produce 50 oatmeal cookies is

$20

The table below shows a monopolist's demand curve and cost information for the production of its good. What quantity will it produce?

1,000

Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should

keep the business open in the short-run, but plan to go out of business in the long-run.

When a firm uses retained profits to invest in more energy efficient equipment, an economist would calculate the _________________ of investing in physical capital.

opportunity cost

Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products.

perfect competition

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it?

physical space for the gallery

When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is

preparing to exit operations.

If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers?

price of competing products

The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.

price taker

Refer to the graph shown above. Based on the information illustrated in the graph, which of the following is correct?

producing a marginal unit is increasing average costs overall

Idaho farmers can sell as large a quantity of their potato crop as they wish,

provided each is willing to accept the prevailing market price.

Fixed costs are important because, at least in the ___________, the firm _______________.

short run; cannot alter them