Ch. 8 HW Quiz Part 1

Which of the following industries is most likely an oligopoly?

airline industry

Salary payments are ________.

explicit costs

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,

Monopolistic competition:

is more similar to perfect competition than to monopoly.

The greeting card industry is:

most likely monopolistically competitive and has low markups.

Natural resources and labor are two factors of what?

production

Product differentiation:

refers to firms' attempts to make real or apparent differences in essentially substitutable products look different in the minds of consumers.

Which of the following are forms of labor?

the natural ability of a worker the skills a worker has acquired

By looking at the full set of short-run cost curves for a firm, we can determine:

the profit-maximizing level of output. (incorrect)

Total variable cost for 5 units of output is _____.

$190

The cookie company in the mall hires workers to produce cookies. The workers are paid $75 per day, and the cost of renting the space in the mall is $250 per day. Number of workers Daily output (cookies) 1 200 2 400 3 600 4 700 The fixed costs of production are

$250

Audrey owns a horse ranch. Her total costs are $550,000 per year, and her fixed costs are $205,000 per year. This means that her variable costs are:

$345,000.

The cookie company in the mall hires workers to produce cookies. The workers are paid $75 per day, and the cost of renting the space in the mall is $250 per day. Number of workers Daily output (cookies) 1 200 2 400 3 600 4 700 The total costs when three workers are hired is

$475

Lauren is the owner of a bakery. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her accounting profit was:

$53,000.

Use the following scenario to answer the questions that follow. Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes. Steve's average variable cost was __________ per bike.

$625

Lauren owns a bakery. Her total costs are $150,000 per year, and her variable costs are $85,000. This means that her fixed costs are:

$65,000.

A pizza business has the cost structure described below. The firm's fixed costs are $20 per day. Output (pizzas per day) Total cost of output (fixed + variable) 0 $20 5 $80 10 $120 15 $150 20 $175 25 $195 30 $210 35 $230 40 $255 What are the firm's average variable costs (AVC) at an output of 25 pizzas?

$7.00

The cookie company in the mall hires workers to produce cookies. The workers are paid $75 per day, and the cost of renting the space in the mall is $250 per day. Number of workers Daily output (cookies) 1 200 2 400 3 600 4 700 If two workers are hired, the variable costs are

$150

One critical characteristic of monopolistic competition is:

there are many small firms in the industry.

Marginal product, mathematically, is the slope of the:

total product curve

If a producer increases the amount of labor used in production, holding other inputs constant:

total product will increase at a decreasing rate

Which is an example of an almost perfectly competitive market?

farmer's market

Monopolistic competition means:

firms differentiate their output, which makes them price-makers, but barriers to entry are low or non-existent.

A price-maker:

has some control over the price it charges.

Diseconomies of scale arise ________.

in the long run

A monopoly:

is characterized by a single seller who produces a well-defined product for which there are no good substitutes.

Sunk costs ________.

should have no effect on output decisions

Using the curve above point B is the point

that ATC is at its minimum

When a market is characterized by mutual interdependence:

the actions of one firm have an impact on the price and output of its competitors.

When the total product curve reaches its maximum point, the value of the marginal product at that point is ________.

zero

Implicit costs are ________.

a forgone opportunity to do something else with your resources

Which of the following does not represent an implicit cost for a business owner?

a worker's salary

# of workers Bagels 0 0 1 5.000 2 15,000 3 30,000 4 42,000 5 51,000 6 57,000 7 60,000 8 50,000 9 47,000 Using the table above diminishing returns begin with the addition of the _____ worker

4th

# of workers Bagels 0 0 1 5.000 2 15,000 3 30,000 4 42,000 5 51,000 6 57,000 7 60,000 8 50,000 9 47,000 Using the table above, the marginal product of the fifth worker is:

9,000

Which of the following is most likely to be a fixed cost?

Mortgage payments

Marginal product refers to:

The quantity of additional output produced when the firm adds additional workers to the production process.

Average product refers to:

The quantity of output divided by the amount of labor used to produce it.

Total product refers to:

The quantity of output produced from a given amount of labor, holding other inputs constant.

When an economist uses the term "technology," what they mean is

The specific processes used to produce a product

The table below lists costs for producing Big Macs, a product of McDonald's. Based on the table, what are total fixed costs associated with Big Mac production? Use Figure. Click to view graphic.

$100

A pizza business has the cost structure described below. The firm's fixed costs are $20 per day. Output (pizzas per day) Total cost of output (fixed + variable) 0 $20 5 $80 10 $120 15 $150 20 $175 25 $195 30 $210 35 $230 40 $255 What are the firm's average total costs (ATC) at an output of 10 pizzas?

$12

Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's accounting profit.

$30,000

Suppose that a firm produces 10 units of output. Its Average Variable Cost (AVC) = $25, Average Fixed Cost (AFC) = $5, and Marginal Cost (MC) = $30. The firm's total cost is:

$300

All of the things used in the process of production are called:

Factors of production Inputs

Economists distinguish between the short run and the long run as follows:

In the long run, all resources are variable; in the short run, at least one resource is fixed.

The term ________ is used to describe the additional cost of producing one more unit.

Marginal Cost

Capital is a factor of production that has been produced for use in the production of other goods and services. Which of the following are examples of capital?

-airports -computer software

The following table shows a short-run production function for laptop computers. Use the data to determine where diminishing product begins. Number of Workers Total output of laptop computers 0 0 1 50 2 120 3 200 4 260 5 310 6 325 7 320 8 310

4

Using the cost graphs above, curve 1 crosses the average variable cost curve at:

3 units of output

Economies of scale may arise from which of the following activities?

Doubling promotional expenses to expand sales more than proportionally

When a long-run average cost curve illustrates economies of scale it will be:

Downward sloping

The table below shows cost data for WipeOutSki Company, which manufactures skis for beginners. If the company's fixed costs are $30, what is the average total cost in B? Quantity Variable Cost Fixed Cost Total Cost Average Variable Cost Average Total Cost Marginal Cost 0 0 $30 1 $10 $30 2 $25 $30 A 3 $45 $30 C 4 $70 $30 5 $100 $30 B 6 $135 $30

$26.00

A firm had sales revenue of $1 million last year. It spent $600,000 on labor, $150,000 on capital and $200,000 on materials. What was the firm's accounting profit?

$50,000

Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's implicit costs.

$50,000

When the Long Run Average Cost (LRAC) curve is horizontal, it implies that there are ________.

Constant returns to scale

The upward sloping portion of a long-run cost curve illustrates:

Diseconomies of scale

Suppose a computer manufacturer is producing in the short run when capital is fixed and the only variable factor of production is labor. The firm's production data is given in the table below. What does the production function given illustrate? Labor Quantity of Computers Produced (Total Product) 0 0 1 15 2 28 3 38 4 46 5 52

Decreasing marginal productivity of labor

The term ________ describes a situation where as the quantity of output rises, but the average cost of production falls.

economies of scale

The term "constant returns to scale" describes a situation where

expanding all inputs does not change the average cost of production

constant returns to scale

expanding all inputs proportionately does not change the average cost of production

The marginal product of labor is known to be greater than the average product of labor at a given level of employment. The average product at this point would be ________.

increasing

Like a pure monopoly, an oligopoly is characterized by:

significant barriers to entry.

Which of the following is an example of a long-run fixed cost:

None of the above; there are no fixed costs in the long run

________ includes all spending on labor, machinery, tools, and supplies purchased from other firms.

Total costs

________ include all of the costs of production that increase with the quantity produced.

Variable costs

A production function describes how firms

determine the profit-maximizing quantity of output (incorrect)

Diminishing marginal product refers to marginal product that initially _____ but eventually ______.

increases; decreases

In the short run, average total costs at first decrease and then increase as more output is produced because:

marginal cost is at first less than average total costs, then rises above it.

When a firm hires another employee and, as a result, total output increases, this change in total output is also known as:

marginal product.

An entrepreneur quits a job where she was paid $75,000 to set up her own business. The new firm had sales revenue of $300,000 last year, while spending $150,000 on compensation for employees, $25,000 on capital, and $25,000 on materials. What was the firm's economic profit?

$25,000

A pizza business has the cost structure described below. The firm's fixed costs are $20 per day. Output (pizzas per day) Total cost of output (fixed + variable) 0 $20 5 $80 10 $120 15 $150 20 $175 25 $195 30 $210 35 $230 40 $255 What are the firm's average fixed costs (AFC) at an output of 5 pizzas?

$4

A pizza business has the cost structure described below. The firm's fixed costs are $20 per day. Output (pizzas per day) Total cost of output (fixed + variable) 0 $20 5 $80 10 $120 15 $150 20 $175 25 $195 30 $210 35 $230 40 $255 What are the firm's marginal costs (MC) at an output of 35 pizzas?

$4.00

The local ice cream shop is trying to figure out how many workers to hire, and part of the decision will be based on the marginal product of labor. The following table shows a short-run production function for quantity of ice cream tubs produced. Diminishing marginal returns begins after hiring which worker? Workers hired Quantity of ice cream tubs produced 1 110 2 200 3 270 4 300 5 320 6 330 7 300

2nd

A farm can produce 1,000 bushels of wheat per year with 2 workers and 1,300 bushels of wheat per year with 3 workers. The marginal product of the third worker is

300 bushels

Using the above graph. Look at the figure Long-Run and Short-run average cost curves. If a firm faced the long run average total cost curve shown in the figure and it expected to produce 100,000 units of the good in the long run, the firm should build the plant associated with:

ATC 2

Which of the following types of cost always decreases with increasing output? Refer to the figure below.

Average Fixed Cost (AFC)

As a waiter you earn $60,000 per year, including tips. Someone offers you a new job as an economic consultant, which pays $100,000 per year. In order to be a consultant, you'll need to rent an office and purchase supplies and new computer equipment. We can conclude which of the following?

If the explicit cost for the consulting job is $25,000 per year, your economic profit is equal to $15,000.

Which of the following statements are true about the activity of production?

Production is the process by which a firm combines inputs to product outputs In a successful production activity, outputs are more valuable than the inputs

When an owner uses resources they own in a business, that usage should be considered

an implicit cost

The long-run average cost curve is tangent to an infinite number of:

average total cost curves

Monopolistic competition is like monopoly in that:

both industries represent price-making firms.

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

The out-of-pocket expenses incurred in producing a good are also known as:

explicit costs.

When a total product curve is increasing at a decreasing rate, its corresponding marginal product curve is:

falling

At 76 units of labor, a firm finds that average product of labor equals 36.6 and marginal product of labor equals 42.9. We can conclude that the average product is

increasing

The production function of a restaurant includes items such as labor (i.e., cooks, waiters, a manager), capital (i.e., ovens, counters, tables, chairs, and a building), and land. In the short run, the owner of the restaurant will optimize production by employing a variable amount of __________ given a fixed amount of __________.

labor; capital and land

The market for hot dogs on the streets of New York City can be considered close to a perfectly competitive market. Because there are so many individuals buying and selling hot dogs:

market forces set the price in the market.

Competitive markets exist when:

there are so many buyers and sellers that each has only a small impact on the market price and the market output.