ECON CH 6
When the firm uses 9 employee-hours, it will experience _______ in labor costs.
$126
Assume that the firm uses 13 employee-hours and an office to produce 100 units of output. The price of output is $5, the wage rate is $10, and rent is $200. The firm has total labor costs of _____.
$130
If the firm spends $200 to produce 17 units of output and spends $455 to produce 34 units, then the marginal cost of increasing production from 17 to 34 units is
$15.
The total cost of producing 120 units of output is
$176.
The total labor cost of 99 units of output is
$20
The total labor cost of 132 units of output is
$35.
Which of the output levels in the table allow the firm to earn the largest profit?
120 units.
Assume that the output price rises from $2 to $2.50. The profit maximizing level of output is _______ and the firm will earn a _________.
160; profit of $140
Which of the following is not true of a perfectly competitive firm?
It seeks to maximize revenue.
Which of the following factors of production is likely to be variable in the short run?
The number of employee-hours.
Which of the following would cause supply to shift to the left?
Wages rise.
When Texaco makes a donation to Public Broadcast Service (PBS), the expenditure is an example of
a goal of Texaco that is secondary to profit maximization.
If the firm's demand curve is perfectly elastic, the firm must be
a perfect competitor.
The long run is define as
a period in which all factors of production are variable.
Suppose 40 employee-hours can produce 80 units of output. Assuming the law of diminishing marginal returns is present, to produce 160 units of output will require
a total of 81 or more employee-hours.
As price increases, firms find that it is
beneficial to produce more units of output.
A perfectly competitive firm finds that it
can sell all it wants to at the market price.
Suppose a firm is collecting $1250 in total revenues and the total costs of its variable factors of production are $1000 at its current level of output. One can predict that the firm
continue to operate.
A decrease in the price the firm receives for its output will cause the firm to
contract output and earn smaller profits or larger losses.
If the firm produces an output level where price is less than marginal costs, then the firm should
contract output to earn greater profits or smaller losses.
The firm's output price is $8 and the firm is producing 77 units with a marginal cost of $11. The firm should
decrease production.
For a linear supply curve with a positive y-intercept, if the price elasticity of supply is 1.2 at a price of $7, then at a price of $5 the elasticity must be
greater than 1.2.
An imperfectly competitive firm is one that
has some degree of influence over the price it charges for its output.
If not for the existence of unique or essential factors of production, supply curves would be
highly elastic.
If the percentage change in quantity supplied is smaller than the percentage change in price, supply is classified as
inelastic.
Suppose a 1% decrease in the price of a good results in a 1/2% decrease in quantity supplied. Supply would be categorized as being
inelastic.
The law of diminishing marginal returns
is a short run concept.
When some factors of production are fixed, equal sized increases in production will eventually require
larger increases in the variable factor.
The long run price elasticity of supply for a particular good will be __________ its short run elasticity.
larger than
If the firm experiences an increase in the cost of a fixed factor of production it will
leave its output decision unchanged.
Assuming the output price is 50 cents and rent decreases from $75 to $50, the firm will
leave output unchanged because marginal costs are unchanged.
Assuming the output price is 50 cents and rent increases from $75 to $100, the firm will
leave output unchanged because marginal costs are unchanged.
Suppose a firm collects total revenues of $1000 when it produces 200 units; the marginal costs of producing 200 units is $5. The firm should
leave production unchanged because price equals marginal costs.
The fewer the number of alternative factors of production that can be used to produce a good, the ________ will be.
less elastic supply
In general, if the price of a fixed factor of production increases,
marginal costs are unchanged.
The easier it is for the firm to acquire additional amounts of the factors of production they use, the
more elastic supply will be.
A profit maximizing perfectly competitive firm must decide
only on how much to produce, taking price as fixed.
If the price elasticity of supply is greater than one, this means the
percentage change in quantity supplied is greater than the percentage change in price.
If the numerical value of the price elasticity of supply is infinity, supply is categorized as being
perfectly elastic.
The proper sequence of supply elasticity categories from least responsive to most responsive is
perfectly inelastic, inelastic, elastic, perfectly elastic.
If the numerical value of the price elasticity of supply is zero, supply is categorized as being
perfectly inelastic.
The general relationship between employee-hours and output is
positive.
Suppose the firm knows that it is not going to shutdown but it is going to earn a loss. It should pick the output level where
price equals marginal costs.
To maximize profits, the firm should produce the output level where
price equals marginal costs.
Suppose a firm has marginal costs of $8 when producing 550 units of output. In order for this to be a point of profit maximization,
price must be equal to $8.
Assuming the firm is experiencing diminishing marginal returns to its variable factors of production, as output price falls the firm will
produce less.
If rent increases from $75 to $100, the marginal cost of increasing output from 135 units to 180 units
remains constant at 62 cents.
Improvement in production technology causes an increase in
supply by firms and an increase in market supply.
A reduction in the interest rate will cause the firm's
supply curve to shift right.
The upward sloping portion of the marginal cost curve is the firm's
supply curve.
Marginal cost is calculated as
the change in total costs divided by the change in output.
A period in which at least some factors of production are unchangeable defines
the short run.
In order for a firm to continue to operate and produce output it must be the case that
total revenues are greater than or equal to the cost of variable factors of production.
In order for a firm to choose to produce a positive amount of output, it must be the case that
total revenues are greater than or equal to variable costs.
The shutdown condition for a firm is where
total revenues are less than the cost of variable factors of production.
A variable factor of production is
variable in both the short run and the long run.
Suppose a firm is collecting $1700 in total revenues and the total costs of its variable factors of production are $1900 at its current level of output. One can predict that the firm
will shutdown.
When the firm uses 9 employee-hours, it will collect total revenues of
$240.
Assume that the firm uses 13 employee-hours and an office to produce 100 units of output. The price of output is $5, the wage rate is $10, and rent is $200. The firm has total costs of _____.
$330
The total cost of producing 200 units of output is
$372.
The labor cost of 135 units of output is
$42.
Assume that a firm uses 13 employee-hours and an office to produce 100 units of output. The price of output is $5, the wage rate is $10, and rent is $200. The firm will collect ________ in total revenues.
$500
The correct mathematical statement of the price elasticity of supply is
(∆Q/Q)/(∆P/P).
A vertical supply curve has a price elasticity of supply equal to
0.
A linear supply curve that passes through the origin, e.g., P = b*Q, will always have a price elasticity equal to
1.
Given P =$5 and supply is P = 2*Q, the price elasticity of supply is
1.
Given that the supply curve for motor oil is P = 2 + 4*Q, then at a price of $14 the price elasticity of supply is
1.167
To increase output from 33 to 66 units requires ______ extra employee-hours; to increase output from 66 to 99 units requires _____ extra employee-hours.
1;2
The marginal cost of increasing output from 45 units to 90 units is
31 cents.
As the firm increases employee-hours from 1 to 2, output increases by
33 units.
To increase output from 99 to 132 units requires ______ extra employee-hours; to increase output from 132 to 165 units requires _____ extra employee-hours.
3;4
To produce 132 units of output, the firm must use _______ employee-hours.
7
Assume that the wage rate increases from $14 to $17. The profit maximizing level of output is _______ and the firm will earn a _________.
80; profit of $42
Which of the following firms best represents a price taker?
A corn farmer in Iowa.
The price equals marginal cost rule for profit maximization is a specific example of which of the following core principles?
Cost-benefit.
If the wage rate falls from $7 to $6, the marginal cost of increasing output from 45 units to 90 units
decreases to 27 cents.
Suppose a firm is collecting $1345 in total revenues and the total cost of its fixed factors of production rise from $200 to $300. One can speculate that the firm will
earn smaller profits or greater losses.
Given P =$10 and supply is P =5 + 7*Q, the price elasticity of supply is
elastic.
If the percentage change in quantity supplied is greater than the percentage change in price, supply is classified as
elastic.
Supply curves of the form P = b*Q, where b >0, will always have a price elasticity of supply
equal to 1.
An increase in the price the firm receives for its output will cause the firm to
expand output and earn greater profits or smaller losses.
To produce 150 units of output, the firm must use 3 employee-hours. To produce 300 units of output the firm must use 8 employee-hours. Apparently, the firm is
experiencing diminishing marginal returns.
The price of output to a firm is $9 and the marginal cost of the last unit produced is $8.50. This means the
extra benefit of the last unit produced is greater than the extra cost.
The long run price elastic of supply is greater than the short run elasticity because
firms have more time to secure additional or different factors of production.
Along a linear supply with a positive y-intercept, as quantity increases, the price elasticity of supply becomes
more inelastic.
If the output price for this good is 50 cents, the firm should produce
more than 135 units but less than 180 units.
Suppose 30 employee-hours can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output will require:
more than 30 additional employee-hours.
If the output price for this good is 25 cents, the firm should produce
more than 45 units but less than 90 units.
The common goal shared by most all private firm is to
profit maximize.
The primary objective of all private firms is to
profit maximize.
Total revenue minus total explicit and implicit costs defines
profit.
Assume that a firm uses 13 employee-hours and an office to produce 100 units of output. The price of output is $5, the wage rate is $10, and rent is $200. The firm will earn a _____ of _____.
profit; $170
The firm earns a ___________ of __________ when it produces 200 units of output.
profit; $28
In general, if the price of a fixed factor of production decreases,
profits of the firm become larger or losses become smaller.
If rent decreases from $75 to $50, the marginal cost of increasing output from 45 units to 90 units
remains constant at 31 cents.
Supply curves of the form P = a + b*Q, where (a, b) >0, will always have a price elasticity of supply
that becomes more inelastic at higher levels of output.
The most important factor influencing the size of the price elastic of supply is
the easy with which additional units of factors of production can be acquired.
If an industry experiences an increase in the number of firms, then
the industry supply curve will shift right.
Congestion of the space and fixed factors of production at the firm explains
the law of diminishing marginal returns.
The price elasticity of supply is defined as
the percentage change in the quantity supplied divided by a one percent change in the price of a good.
