ECON 101 Exam 2
At 600 units of output, total fixed cost is equal to $1,000 and total variable cost is equal to $12,000. Total cost is equal to _______.
$13,000
The table below shows a company's long-run total cost associated with producing 12,000, 22,000 and 30,000 units of a good in factories of varying sizes. If market demand is 10,000 units, which factory size should the company choose?
Factory Size 1
The table below shows a company's long-run total cost associated with producing 12,000, 22,000 and 30,000 units of a good in factories of varying sizes. If market demand is 22,000 units, which factory size should the company choose?
Factory Size 2
As a firm increases output, long-run average costs typically _________.
Fall, hit a minimum, then rise
Assume firms have adjusted their hiring to be at optimum. A college-educated worker has a marginal product twice that of a worker with only a high-school education. The college-educated worker should expect that her wages will be ...
Twice the amount of the high-school graduate
A firm's long-run total cost curve is ________.
Upward sloping
Assume a firm is operating in the long-run. At the current level of output, MPL =10 and MPK = 30. Also assume that in this industry, W = 10 and R = 10. Keeping output the same, how can this firm lower production costs?
Use more K and less L
Using the information in the question above, if Samantha's average cost to bind books is $2.50 before hiring the additional book binder, her average cost to bind books will ______________ if she hires the additional worker.
increase
Suppose that the cost of capital decreases and the firm must now adjust its inputs accordingly. As the firm adjusts, which of the following best describes the effect on inputs? The marginal product of labor will ________; the marginal product of machines will ________.
increase; decrease
Assume a constant-cost industry in a competitive market. What are the short-term effects of the following change? An increase in the demand for the good will ______________ the equilibrium price and ______________ equilibrium quantity in the goods' market.
increase; increase
Assume an increasing-cost industry in a competitive market. What are the long term effects of the following change? An increase in the demand for the good will ______________ the equilibrium price and ______________ equilibrium quantity in the goods' market.
increase; increase
What is true about the long-run for a firm?
All inputs can be changed
The fixed cost of producing surfboards is $5,000 per month. The variable cost for producing 15 surfboards is $36,000 per month. The average cost of producing 15 surfboards in a month is ______.
$2,733.33
If accounting profits equal $10 million for a firm and the owners could likely earn $7 million in a similar business, the firm's economic profit is ________.
$3 million
Frank is willing to pay $1,000 for the first class he takes this semester, $850 for the second, $700 for the third and $500 for the fourth. Using the information above, what is Frank's consumer surplus?
$350
Working from the table, assume that instead of the cost of the three computer workstations and space being $5,000 per month, it is $10,000 per month. Match the number of workers to the correct marginal cost. 0 1 2 3 4 5 6 7
0 30 25 23 30 40 120 150
A firm's total cost function is given by TC = C(Q) = 100 + 10Q + 0.5Q What is the firm's fixed cost?
100
Calculate the economic losses for Firm 2 if they decide to produce -$____.
100
Assume that the individual continues to watch movies 11, 12, and 13, which provide marginal utilities of 1 unit, 0 units and -1 unit respectively. After watching which movie will total utility be maximized?
12
What is the marginal utility of the 2 pound of apples?
15
Suppose that a factory is producing two automobiles per hour. The total fixed cost is $20,000. The total variable cost is $10,000. The average cost is ______________.
15000.0
Given the previous question, suppose that we now increase production by one automobile per hour. If the cost of that additional automobile is $18,000, what is the new average?
16000.0
Frank is willing to pay $1,000 for the first class he takes this semester, $850 for the second, $700 for the third and $500 for the fourth. If the price of a class is $750, how many classes will he take?
2
If apples cost $3 per pound and bananas cost $5 per pound, how many pounds of apples should Bill buy if he wants to maximize his utility and he has $31 to spend?
2
Using the graph, if the price of an ice cream cone is $2.00, consumer surplus will equal ______.
2
See the table below. Suppose the firm has firm size K = 1. If the firm was attempting to minimize average costs with this level of capital, what output level would they choose?
200
The production of 12,000 candy bars per day requires 60 workers. The average product of each worker is ______________ candy bars per day.
200
Given the following data, calculate profit as an economist would measure it $___.
2000000.0
Fill in the missing value for B from the table below.
240
If apples cost $3 per pound, how much marginal utility per dollar is Bill getting with the 4 pound of apples?
3
Fill in the missing value for C in the table below.
30
What is the marginal utility of the 4 pound of bananas?
30
How many pounds of bananas should Bill buy if he wants to maximize his utility and he has $23 to spend?
4
Using the information from the table below, what is the marginal product of the 4 worker?
45.00 office chairs
If apples cost $3 per pound and bananas cost $5 per pound, how many pounds of bananas should Bill buy if he wants to maximize his utility and he has $31 to spend?
5
In the table below, what is the marginal product of the third worker?
55 units
If Bill spends all his money on bananas that cost $5 per pound and Bill has $31 to spend, how many whole pounds can he buy?
6
Fill in the missing value for B in the table below
64
Fill in the missing value for C from the table below.
70
Using the graph, if the price of an ice cream cone is $1, consumer surplus will equal ______.
8
Fill in the missing value for A from the table below.
80
Assume that instead of the cost of the three computer workstations and space being $5,000 per month, it is $10,000 per month. Match the number of workers to the correct marginal cost.
A = $30.00, B = $25, C = $23.08
Which of the following is an example of long-run decision for a firm?
A car manufacturer builds a new factory
Assume that competitive firms and a competitive market are in long-run equilibrium. In the short run, what will be the effects of an increase in variable costs on the output of a typical firm in a competitive market?
A decrease in output
Using the table below, calculate the marginal cost of the 4, 6, and 8 units of output.
A=90, B=110, C=125
If the goal is to produce 200 web pages each day for the foreseeable future, which size of office should the firm build, AC, AC, or AC?
AC1
Which of the following most likely represents a short-run business decision?
Aaron hires two additional workers to help cover the holiday rush at his shop.
In the long run, firms can vary _________.
All inputs
Economic profits are ______________ than accounting profits.
Always less
What does diminishing marginal productivity mean?
As you increase the amount of a variable input, its marginal product eventually gets smaller.
If average product is increasing as the variable input increases, which of the following is true?
Average cost must be decreasing
Over what range of output does this farmer experience constant returns to scale?
Between the third and fourth bushels
Suppose that the price of a pizza is $10 and the price of a video game is $30. Currently, Aaron is consuming such that the ratio of his marginal utility of pizza to marginal utility of video games is ¼. If he wants to maximize his utility, what should he do?
Buy fewer pizzas and more video games
If the long-run average cost curve is horizontal, it implies that the firm is experiencing _________.
Constant returns to scale
In the case of an increase in fixed costs, what will happen to the economic profits of the typical competitive firm? Economic profits will ________.
Decrease
When a firm is experiencing economies of scale, the long-run average cost curve is _________.
Downward sloping
When can diseconomies of scale occur?
In the long-run
If David buys more coffee and less ice cream, the ______________ of coffee will ______________ , and the ___ of ice cream will ______________.
Marginal utility; fall; marginal utility; rise
Will a change in fixed costs change marginal cost?
No
In the long-run, the law of diminishing marginal product is the cause of _________.
None of the above
Assume the following data. The marginal product of labor is 150 washed cars per day. The daily wage is $60. If the marginal product of machines that would wash cars is 200 per day and the rent for the machines is $80, what will the firm do?
Not change the number of machines or workers
See the table below. At what long-run output levels would it be best to choose firm size K = 2?
Output levels between 300 and 400
Accounting profits at a firm's economic profit break-even point are ________.
Positive
If a perfectly competitive industry is in long-run equilibrium, then which of the following is true?
Price equals minimum average cost.
A single firm in a perfectly competitive market is a _________.
Price-taker
Select all implicit costs from the list below.
Profit earned in similar businesses
Which of the following is NOT one of the reasons a firm might be expected to experience economies of scale?
Reducing issues with diminishing marginal product of labor
Which of the following is an example of a short-run decision for a firm?
Reducing the number of workers at the firm
In the long run, what will diminishing marginal returns be?
Relevant if one input is changed while the other input is held constant or reduced
Assume an additional waiter can increase the number of customers served in a restaurant by 100 customers per day. The waiter will cost the restaurant $50 per day. On the other hand, a new microwave oven will speed the cooking process and allow each customer to be served more quickly. The microwave will allow 200 more customers to be served with no additional labor. The oven can be rented for $75 per day. What should the restaurant do?
Rent a microwave, because the increase in output per dollar spent is greater than the increase in output per dollar spent from hiring another worker
The addition of a single firm in a competitive market will cause the market ______________ to ______________.
Supply; increase
The marginal product of labor (MPL) can be defined as which of the following?
The change in output level as the result of hiring another worker
A grocery store is trying to figure out how many delivery trucks it should purchase for the delivery of online grocery purchases. It currently has one delivery truck but business is expanding, so the company is considering adding up to 3 more trucks. The fixed and variable costs of owning a fleet of 2, 3 or 4 delivery trucks for 100, 200 or 300 grocery orders per week is shown in the table below. Currently the grocery store is delivering 100 orders per week. A neighboring grocery store has the same cost structure and is also facing 100 orders per week., what should they do to minimize cost?
The grocery stores should team up for delivery and share the cost of 3 trucks between them.
Which of the following would cause an increase in consumer surplus in the market for cars?
The price of steel decreases.
A production function can best be described as which of the following?
The relationship between the quantity of inputs and quantity of outputs produced in a given amount of time
Suppose a firm doubles its inputs in the long run, and as a result, output doubles. Which of the following is true?
This firm is experiencing constant returns to scale
Which of the following is an example of the income effect?
When the price of tuition increases, Amy eats fewer restaurant meals.
Using the table below, calculate the marginal cost of producing 80, 120, and 160 computers per month.
X = 45.00, Y= 55.00, Z = 62.50
What are economic profits at a firm's break-even point?
Zero
If the price of a good falls and, because of the income effect, consumption of the good also decreases, we know that the good is __________.
an inferior good
Assume a constant-cost industry in a competitive market. What are the long-term effects of the following change? A decrease in variable costs in the long run will cause the equilibrium price to ______________ and the equilibrium quantity in the market to ______________.
decrease; increase by more than in the short run
Suppose Frank chooses to buy hot dogs at their current price. When the price of hot dogs increases, Frank's consumer surplus ________.
decreases
The law of diminishing marginal returns is the cause of ______________ marginal product and ______________ marginal cost.
decreasing; increasing
In a model with only labor and capital as inputs, in the short run the amount of ______________ is fixed, while in the long run the amount of ______________ is variable.
either labor or capital; both labor and capital
Currently, the marginal product of labor is 32 units per week. The average product of labor at the current level of output is 48 units per week. If the employer hires one more worker, the marginal product of labor will be 30 units per week. The average product of labor will ______________.
fall
An increase in the prices of an input will cause long-run average costs to __________.
increase
If a consumer is currently maximizing her satisfaction, what will happen to the marginal utility of a good when its price increases and the consumer adjusts consumption accordingly? The marginal utility will __________.
increase, because the consumer will decrease her consumption of the good.
Assume a constant-cost industry in a competitive market. What are the long-term effects of the following change? An increase in fixed costs will ______________ the equilibrium price and ______________ equilibrium quantity in the market.
increase; decrease
Assume a constant-cost industry in a competitive market. What are the short-term effects of the following change? An increase in fixed costs will ______________ the equilibrium price and ______________ equilibrium quantity in the market.
not change; not change
Variable cost ______________ while fixed cost ______________ as output ______________ in the short run.
rises; stays the same; increases
For a firm in a perfectly competitive market, average revenue equals ________.
the market price
In the theory of firm behavior, we assume that firms attempt to maximize _________.
total economic profits
Select all explicit costs from the list below.
wages, raw materials, rent
For any firm, what is the long-run average cost curve?
A function which shows the lowest average cost of producing any output level
Using the graph, if the price increases from $1 to $1.50, consumer surplus will decrease by _____.
$3.50
A firm's total cost function is given by TC = C(Q) = 100 + 10Q + 0.5Q What is average total cost?
(100/Q) + 10 + 0.5Q
Why can't a single firm in a perfectly competitive industry influence the market price?
Its production level is too small to affect the market
If the price of a hot dog is $2 and your willingness to pay is $3, then your consumer surplus is _____.
$1
At 1,000 units of output, the fixed cost of production is $12,500 per week. Total cost of producing 1,000 units per week is $28,500 per week. The variable cost of producing 1,000 units of output per week is equal to _____.
$16,000
Assume that Jill is consuming at the utility-maximizing point. If the utility from the last soda she consumes is 40 and its price is $2, and the utility from the last bucket of popcorn is 20, then we know that the price of the bucket of popcorn is ____.
$1
If the average product of labor is 12 units of output per worker per day when eight workers are hired, eight workers will be able to produce ______________ units per day.
96
If Bill spends all his money on apples that cost $3 per pound and Bill has $31 to spend, how many whole pounds can he buy?
10
A firm's total cost function is given by TC = C(Q) = 100 + 10Q + 0.5Q What is average variable cost?
10 + 0.5Q
A firm's total cost function is given by TC = C(Q) = 100 + 10Q + 0.5Q What is average fixed cost?
100Q
If the average product of labor is seven units of output per worker per day, the total output of 15 workers will be ______________ units per day.
105
A firm's total cost function is given by TC = C(Q) = 100 + 10Q + 0.5Q What is the firm's variable cost?
10Q + 0.5Q
Calculate the economic losses for Firm 2 if they decide not to produce -$____.
120
In the case of an increase in demand, what will happen to the economic profits of the typical competitive firm? Economic profits will ________.
Increase
Assume that competitive firms and a competitive market are in long-run equilibrium. Assume a constant cost industry. In the short-run, an increase in demand will cause firm output to ______________ and the market price to ______________.
Increase; increase
In the short run, an increase in wages (the price of the variable input) will cause average cost to ______________ and marginal cost to ______________.
Increase; increase
In the short run, an increase in the price of one of the fixed inputs will cause average cost to ______________ and marginal cost to ______________.
Increase; not change
If the price of a normal good decreases, the substitution effect ______________ the quantity demanded of that good.
Increases
A paper company doubles its workforce in the short run. After the expansion, its output triples. The paper company is experiencing:
Increasing marginal returns
Accountants tell a franchise owner that she earned $30,000 in profits last year. The owner knows that most of her business acquaintances earned at least $70,000 in profits in comparable franchises. Which of the following is true? Her firm earned an economic __________.
Loss of $40,000
If a good is provided for free, it is likely to have a marginal utility that is relatively ______________ and be ______________ the marginal utility that could be gained from consuming some other good which must be paid for.
Low; less than
Economies of scale happen when increases in output result in _________.
Lower average costs
A perfectly competitive firm that chooses to produce will maximize profits at the output level where which of the following is true?
Marginal cost is equal to marginal revenue
An effective price ceiling in a competitive industry will mean that which of the following is true?
Marginal cost is equal to marginal revenue.
Marginal cost is the slope of ___________.
the total cost curve
In the short run, how will a decrease in variable costs affect the output of a typical firm in a competitive market?
An increase in output
In the short run, how will an increase in demand affect the output of a typical firm in a competitive market?
An increase in output
Calculate the economic losses for Firm 1 if they decide not to produce -$____.
10
Consider two students, each earning 1300 on the quantitative and verbal portions of the SAT. The average SAT score for our group of two is 1300, of course. (1300 + 1300)/2. Suppose we add one more student to the group and calculate the new average. What will the new average be if the third student has an SAT that is equal to 1300?
1300
Calculate the economic losses for Firm 1 if they decide to produce: $____.
15
Given the following data, calculate profit as an accountant would measure it (give your answer in millions of dollars).
3
The production of 75 sofas per week requires 15 workers. The average product of each worker is ______________ sofas per week.
5
Marcus has four employees. The four employees produce 55 floral arrangements in a day. Marcus hires a fifth employee. The five employees produce 60 floral arrangements in a day. The fifth employee's marginal product is __________.
5 floral arrangements in a day
If the quantity of an input is variable in the short run, its total cost will ______________ as output increases.
Increase
Given all the characteristics of perfect competition, which of the following is the main factor that affects consumers' decisions on which firm to purchase a good from?
Price
In the short run, perfectly competitive firms will produce where which of the following is true?
Price equals marginal cost
Assume that competitive firms and a competitive market are in long-run equilibrium. What will happen in the long run in that same constant cost industry? Prices will ______________ and the market output will ______________ when compared to the levels prior to the increase in demand.
Remain the same; have increased
If the quantity of an input is fixed in the short run, its total cost will ______________ as output increases.
Stay the same
If the fixed cost of producing 50 units of output is $100,000 per year, the fixed cost of producing 100 units of output per year is _____.
$100,000
Working from the table, if Patricia is currently producing 450 web pages per month. If her landlord increases her rent such that her fixed costs rise from $5,000 per month to $6,000 per month, calculate her new _______. Variable cost Total cost Average cost Marginal cost
$12,000 18,000 40 30
Working from the table, if the wage of web page designers increases from $3,000 per month to $3,250 per month. If Patricia produces 450 web pages per month calculate her new _____. Variable Cost Total cost Average cost Marginal cost
$13,000 18,000 40 32.50
Alicia is currently spending $6,000 per week on total variable costs to produce 500 hats. To produce 505 hats per week, she would have to spend $6,100 per week. The marginal cost per hat is ______.
$20
Using the information from the table below, what is the marginal cost of increasing output from 32 to 40 knit scarves per week if the weekly wage is $200?
$25
If at 500 units of output, total fixed cost is equal to $10,000 and total variable cost is equal to $15,000. Total cost is equal to _____.
$25,000
Peter can produce 50 lunches per hour for $1,250. If he hires one more cook for $15 an hour, he can produce 55 lunches per hour. The marginal cost of expanding hourly lunch production from 50 to 55 is _____.
$3.00
Suppose Gail is willing to pay $89 for a new pair of shoes and Karen is willing to pay $60. What is the gain in total consumer surplus if the price of the shoes falls from $70 to $50?
$30
At 2,000 units of output, the variable cost of production is $12,500 per week. Total cost of producing 2,000 units per week is $45,500. The fixed cost of producing 2,000 units of output per week is equal to ______.
$33,000
Using the information from the table above, if the monthly wage of an office chair factory worker is $2,160, what is the marginal cost of increasing output from 190 office chairs per month to 235 office chairs per month?
$48.00
Samantha is evaluating whether to increase production at her book bindery. If she hires one more worker, she can increase output by 50 books per week. A book binder's weekly wage is $250. Samantha's marginal cost of increasing output by 50 books per week is ________.
$5.00
Consider this example: The total cost of producing 1,000 units of output is equal to $55,000 per week. The total cost of producing 1,010 units is equal to $55,500 per week. The marginal cost of increasing output from 1,000 units per week to 1,010 units per week is:
$50
How many pounds of apples should Bill buy if he wants to maximize his utility and he has $23 to spend?
1
Assume Anna is consuming two goods, movies and books, and at her current level of consumption, the marginal utility of the last movie is 60 and the marginal utility of the last book is 30. The price of a movie is $12 and the price of a book is $4. In order to maximise her utility, what should Anna do?
Decrease her consumption of movies and increase her consumption of books
When the cost of inputs is constant, diminishing marginal returns means that marginal product will eventually ______ and marginal cost will eventually _______.
Decrease; increase
Diminishing marginal returns means that marginal product will eventually ______________ and the total product function will ______________ as production increases.
Decrease; not change
If the price of a normal good increases, the income effect ______________ the quantity demanded of that good.
Decreases
Which of the following is a characteristic of perfect competition?
Easy entry for firms
A paper company doubles its factory size as well as its workforce. After the expansion, its output triples. The paper company is experiencing:
Economies of scale
An electric power plant most likely experiences which of the following?
Economies of scale
What are two of the reasons that average cost tends to have a "bowl" shape?
Fixed costs tend to dominate low levels of output and variable costs tend to dominate high levels of output
When a firm earns zero economic profits, it does which of the following?
Has a positive accounting profit
Consider the table below showing different average costs for three different firm sizes across a range of output levels. At a long-run chosen output level of 400, which firm size (amount of capital) would the firm want to use?
K = 2
See the table below. At a long-run chosen output level of 500, which firm size (amount of capital) would the firm want to use?
K = 3
Match the input to its correct category. Cow Robotic drill press Computer software Lawyer Fresh water Tractor trailer
Land Capital Capital Labor Land Capital
The marginal utility from drinking one more glass of water is likely to be ______________ the marginal utility from going to one more movie.
Less than
What is the main source of diseconomies of scale?
Limited ability to manage and coordinate larger amounts of inputs
Suppose that the cost of all inputs (both labor and capital) decreases. What will happen to the long-run cost curve? The curve will _____, illustrating that _______.
Shift downward; any level of output can now be produced at a lower average cost
Consider a perfectly competitive firm. When the market price is greater than both the firm's marginal cost and average variable cost, the firm ________.
Should increase its level of output
A perfectly competitive firm is experiencing the following short-run price and costs: P = $0.80, ATC = $2.20, AVC = $1.30, MC = $0.80. What short-run decision should this firm make?
Shut down production
In the previous question, what will happen if the wage increases to $75 per day and the rent of the machines increases to $100 per day?
The firm should expect that its average costs will increase.
Why are perfectly competitive markets considered economically efficient?
The opportunity cost of society for making the good is equal to society's value of the good.
Grace likes eating pizza and going to the movies. If she has $120 to spend in a month, and pizza and movies each cost $10, she decides to eat 5 pizzas and see 7 movies. If the price of movies increases to $12 what is likely to happen?
The substitution effect would predict that she consumes more pizzas and fewer movies; the income effect would predict that she would consume fewer of both
With increasing marginal cost, if marginal cost is equal to average cost, average cost at this point must be ______________.
at its minimum point
Fill in the missing value for A in the table below.
12
Assuming a good is a normal good, a decrease in price will lead to a substitution effect that does what?
Along with the income effect, increases quantity
Match the input to its correct category. Land computer Salmon Janitor Accountant Corner lot Office building
Capital land labor labor land capital
The slope of a firm's production function will ______ as the amount of a variable input used increases if the input experiences diminishing marginal productivity.
Decrease
Assuming a fixed budget, when the price good X increases, consumers will adjust their consumption patterns in a way that the marginal utilities of all other goods will _________.
Decrease, but the marginal utility of good X will increase.
A consumer is maximizing her satisfaction and currently consuming three goods. If her tastes change so that the marginal utility she gains from movies increases, what will happen to her consumption of the other two goods - hamburgers and football games?
Her consumption will decrease because the ratio of their marginal utilities to their prices is now less than the ratio of the marginal utility of movies to the price of a movie.
When Jane's income doubles, she increases her consumption. For all normal goods that Jane consumes, what is true?
Her marginal utility per dollar will decrease
Fred just ate a hamburger and received total utility of 15 from consuming it. If he eats another one, which of the following will be true?
His total utility will likely increase
Use the information from the table. If the weekly wage is $200, the marginal cost of increasing weekly production from 10 to 22 scarves per week is ______________ than the marginal cost of increasing weekly production from 40 to 46 scarves per week because the marginal product of the second worker is ______________ than the fifth worker.
Lower, higher
If the price of a good changes, why does an income effect exist?
The price change causes a change in real income
What is the average score if the third student has an SAT score equal to 1000?
1200
A grocery store is trying to figure out how many delivery trucks it should purchase for the delivery of online grocery purchases. It currently has one delivery truck but business is expanding, so the company is considering adding up to 3 more trucks. The fixed and variable costs of owning a fleet of 2, 3 or 4 delivery trucks for 100, 200 or 300 grocery orders per week is shown in the table below. If the company has to deliver 100 orders per week, how many delivery trucks should they have?
2
What is the consumer surplus at a price of $5? $______
225
Santa Claus's only variable input is labor. The wage he must pay is 200 candy canes per week. What is Santa's total weekly variable cost if he hires 200 elves?
40,000 candy canes
Using the table below, calculate the average cost of producing 80, 120, and 160 computers per month.
A = 197.50 , B = 150.00 , C = 128.13
At a bakery, which of the following operating characteristics might result in economies of scale?
A giant mixing container costs twice as much to operate as a small one but can mix 6 times as much dough daily.
For a firm, the short-run is defined as being __________.
A period of time in which at least one of the firm's inputs is unchangeable
Which of the following is not true regarding a firm in perfect competition?
A single firm can influence the demand for its product by advertising.
The marginal product of labor is 100 boxes of software and wages are $10 per hour. A machine that does the same work rents for $200 per hour and packages 1000 boxes per hour. If the firm is currently producing the amount it wishes, what should it do?
Expand labor and reduce capital, as the additional output for each dollar spent is greater for labor than for capital
The amount of time a firm operates with the ability to make long-run decisions is how long?
Differs by industry
A long-run average cost curve that rises through all levels of possible outputs represents which effect?
Diseconomies of scale
When a firm gets so large that coordination and management of workers and other inputs becomes costly and difficult, it is experiencing which of the following?
Diseconomies of scale
Assume that competitive firms and a competitive market are in long-run equilibrium. What will happen in the long run as a result of that increase in variable costs in the previous question? Firms will ______________ because profits have ______________.
Exit; decreased
Assume that competitive firms and a competitive market are in long-run equilibrium. What will happen in the long run if fixed costs increase? Firms will ______________ because economic profits have ______________.
Exit; decreased
A car assembly line uses workers and robots. The marginal product of a worker is currently one automobile per month. The wage and benefits of that typical worker are currently $4,000 per month. The firm could hire another robot that would cost $20,000 per month with a marginal product of four automobiles per month. If the automobile company wants to continue producing its current level of output, which of the following should it do?
Hire more labor and buy fewer robots
Which of the following is a cause of diminishing marginal productivity?
In the short run, labor runs out of available capital as more labor gets added to the production process.
Consider the effect on costs of an increase in wages in an economy. What is the increase likely to do?
Increase short-run average costs and long-run average costs.
An increase in technology will cause the total product function to ______________ and average costs to ______________.
Increase; decrease
The clothing and attire retail market has seen an increased number of firms entering the industry. Thus, there is a lot of competition in markets for many types of clothing. What is the result of this high amount of competition?
Individual buyers and sellers cannot affect the market price.
Which of the following is NOT true regarding perfectly competitive markets?
It is difficult or impossible for a firm to enter and compete in the market
Assume that competitive firms and a competitive market are in long-run equilibrium. In the short run, what will be the effects of an increase in fixed costs on the output of a typical firm in a competitive market?
No change in output
In the short run, how will an increase in fixed costs affect the output of a typical firm in a competitive market?
No change in output
In a perfectly competitive market, a single firm that sets its price a small amount above the market price will do which of the following?
Not sell any units at all
Suppose a firm doubles its inputs (therefore doubling its total costs as well). If this firm is experiencing diseconomies of scale, then __________.
Output will increase, but less than double
Which of the following is true for a single firm in a perfectly competitive industry?
P = MR
In perfect competition, the demand curve for an individual's firm product is _________.
Perfectly elastic
Assume a firm is operating in the long-run. At the current level of output, MPL = 60 and MPK = 600. Also assume that in this industry, W = 20 and R = 200. Keeping output the same, how can this firm lower production costs?
The firm is already using the optimal cost-minimizing combination of inputs for this level of output.
Suppose an additional worker can handle an additional 10 orders per hour. That will cost $15 per hour. An additional telephone answering machine will handle an additional 20 calls per hour at a cost of $10 per hour. Which of the following is correct?
The firm should increase capital and decrease labor because labor produces less per dollar spent.
See the table below. Suppose the firm chooses a permanent output level of 500 units but remains in firm size K = 2. What is the result of this?
The firm will be operating inefficiently at higher costs, therefore not maximizing profits.
Regarding input choices, which most fully describes how would a firm respond to an increase in the wage rate in the long run?
The firm would use less labor and more capital.
Regarding perfect competition, what does it mean when the goods sold by the firms in a market are homogeneous?
The good sold by one firm is a perfect substitute of the good sold by another firm in the same market.
Consider the market structure of perfect competition. What does the lack of entry barriers indicate?
There are no significant obstacles preventing firms from entering and leaving the industry
For the next three questions, the following abbreviations are used.MPL = marginal product of labor.MPK = marginal product of capital.W = wage rate (the cost of a unit of labor).R = rental rate (the cost of a unit of capital).Assume a firm is operating in the long-run. At the current level of output, MPL = 30 and MPK = 50. Also assume that in this industry, W = 5 and R = 10. Keeping output the same, how can this firm lower production costs?
Use more L and less K
Will a change in fixed costs change average cost?
Yes
Will a change in fixed costs change total cost?
Yes
In a perfectly competitive industry, the industry demand curve is __________.
downward sloping
In the long run, marginal cost will be ____________ average cost if the firm is experiencing economies of scale.
below
Assume a constant-cost industry in a competitive market. What are the short-term effects of the following change? A decrease in variable costs in the short run will ______________ the equilibrium price and ______________ equilibrium quantity in the goods' market.
decrease; increase
Assume a decreasing-cost industry in a competitive market. What are the long term effects of the following change? An increase in the demand for the good will ______________ the equilibrium price and ______________ equilibrium quantity in the goods' market.
decrease; increase
Assume the price of coffee increases. If the market for tea is perfectly competitive and a constant cost industry, what will happen to the tea market in the long run? Output will ______________; prices will ______________; and economic profits will ______________Indicate whether increase, decrease, cannot tell, or no change as before the price shift is correct for each blank space.
increase; not change; not change
Assume a constant-cost industry in a competitive market. What are the long-term effects of the following change? An increase in the demand for the good will ______________ the equilibrium price and ______________ equilibrium quantity in the goods' market.
not change; increase
For a firm in a perfectly competitive industry, the demand curve for its own product is _________.
the same as the market price
If all firms in a perfectly competitive industry are required to adopt antipollution devices, the long-run results would be that the firms would be earning ______________ and the industry will be producing ______________ amounts of output.
zero economic profits; smaller
The fixed cost of producing wedding cakes is $10,000 per month. The variable cost for producing 10 wedding cakes per month is $12,000. The average cost of producing 10 wedding cakes per month is ____.
$2,200
If labor is the only variable input a firm owner uses and the wage rate is $200 per week, what is the firm owner's variable cost per week if she hires 12 workers?
$2,400
Juan wants to increase production at his confection shop. If he hires one more worker, he can increase output by 100 candies per week. A confection worker's weekly wage is $200. Juan's marginal cost of increasing output by 100 candies per week is ______.
$2.00
Working from the table, assume that instead of the cost of the three computer workstations and space being $5,000 per month, it is $10,000 per month. Match the number of workers to the correct total cost. 0 1 2 3 4 5 6 7
10,000 13 16 19 22 25 28 31
At 1,000 units of output, the fixed cost of production is $12,500 per week. Total cost of producing 1,000 units per week is $28,500 per week. If labor is the only variable input and the weekly wage is $1,600, how much labor is being used produce 1,000 units of output?
10.0
What is the consumer surplus at a price of $10, assuming the demand relationship is linear?$______
100
Assume that the individual continues to watch movies 11, 12, and 13, which provide marginal utilities of 1 unit, 0 units and -1 unit respectively. After watching which movie will disutility (unhappiness) begin to set in?
13
What is the average score if the third student has an SAT score equal to 1600?
1400
If the cost of that additional automobile is $12,000, what is the new average?
14000.0
Assume that Jill is NOT consuming at the utility-maximizing level. The marginal utility of soda is 40 and its price is $2, but the marginal utility of popcorn is now 30, and its price is $1. What should Jill do to maximize her utility?
Consume less soda and more popcorn
Assume you spend all of your income on two goods: peanuts and chips. Also assume that you are consuming the combination of peanuts and chips that maximize your utility. Which of the following statements is true?
If the price of peanuts is equal to the price of chips, then the marginal utilities must also be equal.
Will a change in fixed costs change total variable cost?
No
Currently, Frank has 10 employees. The marginal product of the 10 worker is 25 units per week. The average product of the 10 workers is 20 units per week. If Frank hires one more worker, the marginal product of the 11 worker will be 24 units per week. The average product of labor will ______________.
Rise
Currently, the marginal product of labor is 45 units per week. The average product of labor at the current level of output is 32 units per week. If the employer hires one more worker, the marginal product of labor will be 47 units per week. The average product of labor will ______________.
Rise
The reason the demand curve slopes downward is that for most goods which of the following is true?
The income effect of a price change is less than the substitution effect, and the substitution effect of a price increase always causes reductions in consumption.
