Econ 4 and 5

If Sara can produce 25 muffins for a total cost of $15, but her production process is subject to increasing marginal costs, which of the following could be the total cost of producing 100 muffins?

$80.

In 2010 American Electric Power (AEP), an electric utility with operations from Texas to Michigan, produced 206 million megawatt-hours of electricity (a megawatt-hour measures the output of an electricity-generating plant). The company also had 19,000 U.S. employees. What is the average labor productivity of AEP (in megawatt-hours per worker)?

10842.1

In 2010 American Electric Power (AEP), an electric utility with operations from Texas to Michigan, produced 210 million megawatt-hours of electricity (a megawatt-hour measures the output of an electricity-generating plant). The company also had 19,000 U.S. employees. What is the average labor productivity of AEP (in megawatt-hours per worker)?

11052.6

A business has revenues of $4 million per month and costs of $3 million per month. It's annual profits are

12 million

If a local car dealership can sell 8 cars per day at a price of $25,000 each, but must reduce the price to $24,000 to sell one more car, what is the marginal revenue of the 9th car?

16,000

If a local diner can sell 50 burgers per day at a price of $5 each, but must reduce the menu price to $4.95 to sell one more burger, what is the marginal revenue of the 51st burger?

2.45

A business has revenues of $5 million per month and costs of $3 million per month. It's annual profits are

24 million

The local department store used to be ___________ before technological change.

a monopoly

Inputs to production do NOT include

average product.

Output divided by the number of hours worked or by the number of workers is called

average product.

Theodore can make 6 pizzas in one hour. If Theodore's labor has a diminishing marginal product, what must be true about the number of pizzas that Theodore can make in three hours?

It must be less than 18

The total cost of production is determined by adding which of the following costs?

Labor, capital and land, intermediate inputs, and accumulating business know-how.

The extra amount of output a business can generate by adding one more hour of labor is called

Marginal product

In the long run, monopolistic competition starts to look like

Perfect competition.

The __________ summarizes the output of the business, given the level of inputs.

Production

What word describes the money that customers pay for the output of a business

Revenue

___________ is the amount of money a company receives for selling its product or service.

Revenue

When a business expands production and increases sales, what generally happens to revenue?

Revenue rises because the business is selling more output.

In a simple grass-mowing business, the lawn mower and labor would be

inputs

What word describes the goods and services that are used to produce outputs for a business?

inputs

The goods or services purchased by a business for immediate use in the production process are known as

intermediate inputs.

AT&T is an example of a business that used market power to

invest in important research benefiting society.

The hours of work supplied by various types of workers are referred to by economists as

labor

Which of the following is NOT an example of a barrier to entry?

lower costs.

In perfect competition, a profit-maximizing business will expand until its _________ equals the market price.

marginal cost

The added expense of producing one more unit of output is called the

marginal cost.

As the market price of a good rises, businesses will respond by producing more of that good because

marginal revenue exceeds marginal cost after the price increase.

All other things equal, a business making shirts would choose not to expand when

marginal revenue per shirt equals $7 and the marginal cost per shirt equals $10

The additional money a business gets from producing and selling one more unit of output is

marginal revenue.

From World War II to the early 1970s, GM, Ford, and Chrysler enjoyed

market power.

A market where there is only one seller, and buyers have no good alternative, is called a(n)

monopoly.

In general, as markets have

more competition, production rises and costs fall over the long run

A profit-maximizing monopolist will always charge _______ a perfect competitor would

more than

A _______ monopoly is an industry in which it makes economic sense to have only one provider.

natural

A good example of monopolistic competition is

neighborhood restaurants.

A profitable business will attract

new competitors.

Average product is not as reliable an indicator of how a business is doing as it used to be because of

outsourcing labor

If music was perfectly competitive, then all performers would

play the same music and charge the same price for concerts.

What is the economic process of turning inputs into outputs that a business will sell to customers?

production

The main objective of a business in a market economy is

profit maximization.

Companies will often spend considerable amounts of money to create a ____________ in regards to their brand name.

reputation effect

In a market where businesses are earning high profits, new entrants will cause the supply curve to shift to the _________ and the market price to _________.

right; fall

Marginal cost generally ________ quantity produced.

rises with

In short-run profit maximization, businesses focus on the ______, holding fixed costs constant.

short term production function

Variable costs are also known as

short-term costs

If all of the restaurants in a small town colluded and agreed to raise dinner prices, this would lead to a loss to society because

some dinners that could be served are not.

Natural monopolies have been slowly eroded by

technological change.

In perfect competition, higher-cost businesses

tend to go out of business if unable to adjust.

Natural monopolies include

the local water company.

Many hospitals and private universities are nonprofit institutions. This means

they do not seek to maximize their profits

The easiest way to have a monopoly today is

to have the government protect you.

A business can escape perfect competition by building a better, more innovative product.

true

A production function tells you, given the inputs, what the output will be.

true

In a market with perfect competition, given enough time and no barriers to entry, profits will tend toward zero in the long run.

true

In perfect competition, all buyers and sellers are price takers.

true

In perfect competition, if there are no barriers to entry, only the lowest-cost businesses survive over the long run.

true

Marginal cost is the added expense of producing one more unit of output.

true

Revenue is the money that customers pay for the output of a business.

true

Under the right circumstances, competition could be a win-win proposition for companies and consumers

true

Consider the following products. For each one, identify whether the market has one, few, or many sellers.

A) Apples in the grocery store ( Many seller) B) plane tickets from new york to seattle ( many sellers) C) tickets to a professional football game in your town ( few sellers ) D) Passenger train service ( few seller)

__________ is paid communication with potential customers in a public medium, such as newspapers and television.

Advertising

Businesses will generally shut down if they lose money for one or two years.

False

In perfect competition, a profit-maximizing business will expand until its marginal cost equals the market price.

False

Marshall Field's and Sterns Department Stores are examples of low-cost producers in a perfect competition market.

False

_________ collusion can occur even when oligopolistic businesses do not directly communicate with each other.

Implicit

______ shows the potential cost for each level of output.

The cost function

The profit-maximizing rule says that a seller will expand output up to the point

Where marginal revenue equals marginal cost.

Does the stock market resemble a perfectly competitive market?

Yes, the stock market does resemble a perfectly competitive market.

Monopolistic competition is characterized by

a large number of sellers with a similar product.

An example of an oligopoly is the

airline industry.

If two drugstores in a market agree that they will both sell Fritos at a higher price, and neither will undercut the other, this is called

collusion

If two or more oligopolistic companies work together to keep their prices high and split the market between them, this is called

collusion

What word describes the money that a business pays for its inputs?

cost

Profit is the difference between revenue and

cost.

If you add too many inputs, your business may experience

diminishing marginal product

Cost is what a business receives after subtracting expenses from revenue.

false

Inputs for a business are the goods and services that it sells to its customers.

false

The average product is calculated by dividing input by the number of hours worked.

false