Econ 201 Fan Final Exam review

The marginal cost curve intersects the _______ curves at their ______ points.

average total cost and average variable cost; minimum

In a graph of a typical firm's AFC, ATC, and AVC curves, the

distance between the ATC curve and the AVC curve equals the AFC.

Keith is a perfectly competitive carnation grower. The market price is $2 per dozen carnations. Keith's average total cost to grow carnations is $2.50 per dozen. In the long-run, Keith will

exit the industry if the price and his costs do not change.

Economies of scale can occur as a result of which of the following?

greater specialization of labor and capital as the firm increases its size

The average product curve

initially rises and then falls

John fishes for a living. Last year, he sold $100,000 of fish. Bait, nets and other fishing supplies cost John $10,000 and he paid $40,000 in salaries to his helpers. Depreciation on his boat and other equipment, as calculated using IRS rules, was $15,000. What was John's profit as would be calculated by an accountant?

$35,000

A perfect competitive firm

sells a product that has perfect substitutes

Which of the following contributes to increasing marginal returns?

specialization of labor

The law of decreasing returns applies to

changes in a variable input with a given quantity of fixed inputs.

If a perfectly competitive seller is maximizing profit and is making zero economic profit, which of the following will this seller do?

continue at the current output, make zero economic profit

Which of the following curves are U-shaped? i. average variable cost curve ii. average fixed cost curve iii. average total cost curve

i and iii

Which of the following variables do you need to know to calculate marginal cost? i. change in total cost ii. marginal product of labor iii. change in quantity of labor used iv. change in output

i and iv

If the average product of labor curve is rising i. the average variable cost curve is falling ii. the marginal cost curve is definitely falling iii. the marginal product cuve has reached its maximum

i only

Cost curves shift if i. technology changes ii. the prices of factors of production changes iii. productivity changes

i, ii, and iii

In part, perfect competition arises if i. each firm's minimum efficient scale is large relative to demand ii. each firm produces a good and service identical to those produced by its many competitors iii. there are significant barriers to entry

ii only

Diseconomies of scale can occur as a result of which of the follwoing?

management difficulties as the firm increases its size

In the short run, a perfectly competitive firm ____ make an economic profit and _____ incur an economic loss.

might; might

Alice, Bud, and Celia can produce rubber bands in a perfectly competitive market. If they enter the market, the minimum average total cost for a bundle of rubber bands, for the three of them is $2, $3, and $4, respectively. If the market price is $2.10 per bundle, then

only Alice will enter the market

The short-run average total cost, average variable cost, and marginal cost curves are all U-shaped because of i. constant fixed cost ii. increasing and then decreasing marginal returns as more labor is hired iii. economies and diseconomies of scale as the plant size increases

only iii

As a result of firms leaving the perfectly competitive frozen yogurt market in the early 2000s, the market

supply curve shifted leftward.

If firms in a perfectly competitive industry are earning an economic profit and new firms enter the industry, then

the existing firms' economic profit decreases.