wiggens chapter 9.1-9.5 quiz questions

A perfectly competitive firm's marginal revenue

is equal to its price.

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?

$15

If the market price is $25 in a perfectly competitive market, the marginal revenue from selling the fifth unit is

$25

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is

$700

Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC) and average total cost (ATC). Which of the following equations is equal to a firm's profit?

(P × Q) - TC

Which of the following statements best describes the economic short run?

It is a period during which at least one of the firm's inputs is fixed.

Which of the following statements is true?

As output increases, average fixed cost becomes smaller and smaller.

Which of the following is not true for a firm in perfect competition?

Average revenue is greater than marginal revenue.

Which of the following statements is false?

Economists consider all costs to be implicit costs.

Economic costs include implicit costs but not explicit costs.

False

Which of the following statements is false?

Marginal cost will equal average total cost when marginal cost is at its lowest point.

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

Restaurants do not sell identical products.

Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open. Which of the following is true?

The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost.

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?

The firm will not sell any output.

If price is equal to average variable cost, then a perfectly competitive firm breaks even.

false

Which of the following is not a characteristic of a perfectly competitive market structure?

There are restrictions on exit of firms.

Which of the following is an example of a long-run adjustment?

Walmart builds another Supercenter.

Which of the following statements is false?

When marginal cost equals average total cost, average total cost is at its highest value.

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The fixed cost of production is $20,000. The price of each good is $10. Should the firm continue to produce in the short run?

Yes, it should continue to produce because the firm's revenues cover the total variable cost of $16,000.

Which of the following is the best example of a perfectly competitive firm?

a corn farmer in Illinois

Which of the following would be categorized as an opportunity cost? a. not being able to spend your $10,000 savings if you sink the money in your business b. the cost of purchasing supplies for your house-cleaning business c. the cost of purchasing auto insurance for your dry-cleaning delivery business

a only

Marginal cost is calculated for a particular increase in output by

dividing the change in total cost by the change in output.

If fixed costs do not change, then marginal cost

equals the change in variable cost divided by the change in output.

The rules of accounting generally require that ________ costs be used for purposes of keeping a company's financial records and for paying taxes. These costs are sometimes called ________ costs.

explicit; accounting

If a perfectly competitive firm's price is above its average total cost, the firm

is earning a profit.

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm

is incurring a loss.

If a firm shuts down in the short run,

its loss equals its fixed cost.

The long run refers to a time period

long enough for a firm to vary all of its inputs, to adopt new technology, and change the size of its physical plant.

The price of a seller's product in perfect competition is determined by

market demand and market supply.

When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell

nothing at all; the firm shuts down.

Average total cost is equal to

total cost divided by the level of output.

Which of the following is an implicit cost of production?

rent that could have been earned on a building owned and used by the firm

If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, then the firm

should shut down.

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

sunk costs.

In perfect competition,

the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic.

Implicit costs can be defined as

the non-monetary opportunity cost of using the firm's own resources.

The minimum point on the average variable cost curve is called

the shutdown point.

The basic activity of a firm is

to use inputs to produce outputs of goods and services.

Which of the following costs will not change as output changes?

total fixed cost

An increase in a firm's fixed cost will not change the firm's profit-maximizing output in the short run.

true