Econ 202 Exam 2- TAMUG

In perfectly competitive markets, an implication of entry and exit in response to economic profit and loss is that:

firms will produce the quantity that minimizes ATC in the LR

If it is possible to make change that will help some people without harming others, then the situation is:

inefficient

Implicit costs

measure the forgone opportunities of the firm's owners for the resources they supply

A firm earns a normal profit when its: A)economic profit is 0 B)accounting profit is positive C)accounting profit is 0 D)economic profit is positive

A

An imperfectly competitive firm is characterized by a marginal revenue curve that is A) downward sloping B) horizontal C) vertical D) decreases continually

A

In perfect competition, the market demand for the good ______ perfectly elastic and the demand for the output of one firm ________ perfectly elastic A)is not;is B)is not; is not C) is; is D) is; is not

A

In the short run, a profit-maximizing firm will not shut down if its TR is: A)greater than or equal to its VC B)greater than or equal to its fixed costs C)positive D)greater than or equal to its TC

A

A price-taker faces a demand curve that is: A) vertical at the market price B)horizontal at the market price C)upward sloping D)downward sloping

B

Constant returns to scale is A) the plant size that yields the most profit B) Level of operation where long-run average cost are lowest C) the level of output where diminishing returns have not set in yet D) the smallest output level where the firm finally reaches productive efficiency

B

Which of the following is the most likely to be a fixed input at a pizza restaurant? A)the amount of electricity B) the size of the resurant C)the amount of pizza dough D) the number of waiters

B

One reason that variable factors of production tend to show diminishing returns in the short run is that: A)capital equipment is often idle in the short run B)large firms cannot effectively manage their resources C)there is only so much that can be produced using additional variable inputs when some factors of production are fixed D)the cost of employing additional resources increases as firms employ more of those resources

C

Small pizza parlors exist in just about every town. Anyone can open a pizza parlor and the pizzas from one parlor typically havve different tastes and sizes been pizzas from another parlor. Thus, the pizza industry is an example of A) Perfect competition B) Oligopoly C)Monopolistic competition D) Monopoly

C

The return that the entrepreneur can obtain in the best alternative business is called the A)MR B) MP C) normal profit D) economic profit

C

Which of the following is TRUE for a single price monopolist at the optimal output? A) P=MR B) P= elasticity of demand C)P>MR D)P<MR

C

the most important challenge facing a firm in a perfectly competitive market is deciding A)what price to charge B)whether to maximize its profits C)how much to produce D) whether to advertise

C

A perfectly competitive firm is characterized by A) high barriers to entry B)firms that are price setters C) firms facing a downward sloping demand curve D)easy entry into the industry

D

Diminishing marginal returns means the the firm definitely is experiencing A)constant returns to scale B)diseconomies of scale C)Both A&B D)Neither A&B

D

For a perfectly competitive firm, the shutdown point is the A) Price at which economic profit is 0 B)Amount of output at which price = minimum ATC C)Price at which total opportunity cost is 0 D)Amount of output at which P = minimum AVC

D

Imperfectly competitive firms maximize profit by producing the amount of output where A) P=MC B)P=MR C)TR is maximized D) MR=MC

D

Suppose firms in perfectly competitive industry are incurring an economic loss. As firms exit, the price _______ and the economic loss of the surviving firms __________. A) rise, increases B) falls, increases C) falls, decreases D) rises, decreases

D

Which of the following statements regarding the marginal product curve is FALSE? A) the law of diminishing returns applies in the short run B) increasing marginal returns is due to greater efficiency from specialization in the production process C) Along the marginal product curve, increasing marginal returns occur first and the diminishing marginal returns D) When total product is increasing, marginal returns always increase as the number of workers increases

D

ATC=

TC/Q

A price ceiling that is set below the equilibrium price will result in

a shortage of the good

Total fixed cost

does not change as output changes

in the LR, in a perfectly competitve industry:

economic profit and loss are driven to 0 by entry and exit

If Gateway Computer Company could produce more computers at lower LRAC by increasing the size of its factory, Gateway definitely would experience

economies of scale

If AVC is decreasing as output increases, then MC is definitely

less than AVC

Suppose all firms in a perfectly competitive industry are earning an economic profit. One would expect that, over time, the number of firms in the industry will ________ and the market price will ________

rise; fall

Economic rent is:

the difference between the payment made to the owner of a factor of production and the owner's reservation price

Marginal Product is

the increase in output that results from a one-unit increase in the quantity of labor employed with al other inputs remaining the same