ECON Exam 3

c. variable cost

A perfect competitive firm will competitive firm will continue producing in the short run as long as it can cover its: a. total cost b. total cost c. variable cost d. fixed cost

b. 10 chairs per hour

Assume the Wooden Chair Factory currently employs 2 workers. What is the marginal product of labor when the factory adds a 3rd worker? a. 5 chairs per hour b. 10 chairs per hour c. 20 chairs per hour d. 25 chairs per hour

b. cost of a typical unit of output, if total cost is divided evenly over all the units produced.

Average total cost tells us the a. total cost of the first unit of output, if total cost is divided evenly over all the units produced. b. cost of a typical unit of output, if total cost is divided evenly over all the units produced. c. cost of the last unit of output, if total cost does not include a fixed cost component. d. variable cost of a firm that is producing at least one unit of output.

What is the average variable cost of producing 3 units of output? 20 /What is the marginal cost of the 8th unit of output? 32

Can you answer specific questions like: What is the average variable cost of producing 3 units of output? What is the marginal cost of the 8th unit of output?

c. $520

Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. What is the total daily cost of producing at a rate of 55 chairs per hour if the factory operates 8 hours per day? a. $480 b. $576 c. $520 d. $616

c. entry; exit

Economic profits in a perfectly competitive industry induce _____ and losses induce _______ a. exit; entry b. entry; entry c. entry; exit d. exit; exit

b. small; standardized; little, if any

If a Florida strawberry wholesaler is in. perfectly competitive market, that wholesaler will have a ______ share of the market, and consumers will consider her strawberries to be _____. Therefore, ______ advertising will take place in this market. a. large; standardized; no b. small; standardized; little, if any c. small; differentiated; no d. large; differentiated; extensive

d. marginal utility; fall; marginal utility; rise

If a consumer buys more of good X and less of good Y, the _______ of good X will _______, and the ________ of good Y will _______. a. total utility; fall; marginal utility; rise b. marginal utility; rise; total utility; rise c. marginal utility; rise; marginal utility; fall d. marginal utility; fall; marginal utility; rise

a. MUx/Px > MUy/Py.

If a consumer derives more utility by spending an additional $1 on good X rather than on good Y, then: a. MUx/Px > MUy/Py. b. Px/MUx > Py/MUy. c. MUx/Px = MUy/Py. d. MUx/Px < MUy/Py.

b. more of A and less of B.

If a consumer purchases a combination of commodities A and B such that MA/PA = 100 and MUB/PB = 80, to maximize utility, the consumer should buy: a. more of both A and B. b. more of A and less of B. c. less of A and more of B. d. less of both A and B.

d. more of X and less of Y.

If a consumer purchases a combination of commodities X and Y such that MUx/Px = 20 and MUy/Py = 10, to maximize utility, consumers should buy. a. less of X and more of Y. b. more of both X and Y. c. less of both X and Y. d. more of X and less of Y.

a. $10

If a perfectly competitive firm sells 30 units of output at a price of $10 per unit its marginal revenue is: a. $10 b. more than $10 c. less than $10 d. $300

a. Fall; fall

If firms are expecting economic oses in the short run, firms will leave the industry and industry output will _____ and economic losses will ______ in the long run. a. Fall; fall b. rise; fall c. rise; rise d. fall; rise

d. all of the above will occur

If firms are making positive economic profits in the short run, then in the long run: a. the short-run industry supply curve will shift rightwards b. firms will enter the industry c. industry output will rise and prices will fall d. all of the above will occur

b. produce at a profit

If the price is greater than the average total cost at the profit-maximizing quantity of output in the short run a perfectly competitive firm will: a. produce at a loss b. produce at a profit c. shut down production d. produce more than the profit-maximizing quantity

c. not do anything until more information is available.

If, for a particular consumer, the marginal utility of ties is greater than the marginal utility of shirts, this consumer should: a. buy the same amount of each. b. buy more ties and fewer shirts. c. not do anything until more information is available. d. buy more shirts and fewer ties.

b. all firms produce at the minimum point of their average total cost curves

In a perfectly competitive long-run equilibrium: a. all firms make positive economic profits b. all firms produce at the minimum point of their average total cost curves c. the industry supply curve must be upward sloping d. all firms face the same price, but the value of marginal cost will vary directly with firm size.

d. all of the above are true

In perfect competition: a. a firm's total revenue is found by multiplying market price by the firm's quantity of output b. the firm's total revenue curve is a linear upward-sloping line c. at any price the greater the quantity sold the greater is a firms total revenue d. all of the above are true

d. have no ability to affect the price of a good in a market

Price-takers are individuals in a market who: a. select a price from a wide range of alternatives b. select the lowest price available in a competitive market c. select the average of prices available in a competitive d. have no ability to affect the price of a good in a market

b. minimizes average variable costs.

Quantity B represents the output level where the firm a. maximizes profits. b. minimizes average variable costs. c. produces at the efficient scale. d. minimizes marginal costs.

d. consume more Reese's Butter Cups and fewer apples.

Sally Garcia devotes all of her income to the consumption of two goods, apples and Reese's Peanut Butter Cups. She has just discovered that at her current level of consumption the marginal utility of an apple is 6 and the marginal utility of a Reese's Peanut Butter Cup is 8. Suppose the price of an apple is $0.20, while the price of a Reese's Peanut Butter Cup is $0.25. To maximize her total utility, assuming that the goods are divisible, she would: a. consume more apples and fewer Reese's Butter Cups. b. consume less of both goods. c. There is not enough information to justify a change in her current level of consumption d. consume more Reese's Butter Cups and fewer apples.

d. the sixth worker

The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker? a. the third worker b. the fourth worker c. the fifth worker d. the sixth worker

C

The efficient scale of production (minimum ATC) occurs at which quantity?

a. ATC

The figure shows cost curve for a firm operating in a perfectly competitive market. N is the ________ curve a. ATC b. MR c. MC d. AVC

b. q3; make a profit

The figure shows cost curve for a firm operating in a perfectly competivie market. If the market price is P4 the firm will produce quantity ______ and _______ in the short run. a. q1; break-even b. q3; make a profit c. q4; break-even d. non of the above

c. at their minimum

The figure shows the cost curves for a firm operating in a perfectly competitive market. Curve M must cross curves N and O: a. at their maximum b. to the left of their minimum c. at their minimum d. to the right of their minimum

c. q2; incur a loss

The figure shows the cost curves for a firm operating in a perfectly competitive market. If the market price is P3 the firm will produce quantity ______ and__________ in the short run. a. q2; make a profit b. q1; break even c. q2; incur a loss d. q4; incur a loss

c. shut down

The figure shows the cost curves for a firm operating in a perfectly competitive market. If the market price is less than p2 the firm will _____ in the short run. a. produce q1 and break even b. produce q1 and incur a loss c. shut down d. do none of the above

b. AFC is represented in this figure by the vertical distance between curve N and Curve O at any level of output

The figure shows the cost curves for a firm operating in a perfectly competitive market. which of the following is true? a. AFC is represented in this figure by the vertical distance between Curve M and Curve N at any level of output b. AFC is represented in this figure by the vertical distance between curve N and Curve O at any level of output c. This figure illustrates the long run because all costs are variable d. Quantity q2 is to the left of the shutdown point

a. negative.

The law of diminishing marginal utility indicates that the slope of the marginal utility curve eventually becomes: a. negative. b. horizontal. c. positive. d. vertical.

a. $3.25/lb

The market for beef is in a long run equilibrium at a price of $3.25/lb. The announcement that mad cow disease has been discovered in the US reduces the demand for beef sharply and the price falls. to $2.00/lb. If the long run supply curve is horizontal, then when long run equilibrium is re-established the price will be: a. $3.25/lb b. $2/lb c. greater then $2/lb. but less the $3.25/lb d. more information is needed

b. a standardized product

The market for breakfast cereal contains hundreds of similar products such as fruit loops corn flakes and rice Krispies that are considered to be different products by different buyers. This situation violates the perfect competition assumption of: a. many buyers and sellers b. a standardized product c. complete information d. ease of entry and exit

a. shows the total quantity supplied by all firms in an industry for each possible price, when the number of producers is given

The short-run industry supply curve: a. shows the total quantity supplied by all firms in an industry for each possible price, when the number of producers is given b. is drawn obn the assumption that the number of firms in the industry doesn't increase, but it allows for a decrease in the number of firms due to bankrupt firms leaving the industry c. is a meaningful concept only if all firms in the industry are identical d. is of limited usefulness since it is not relevant when markets are perfectly competitive

b. short-run market supply curve

The supply curve found by summing up the short run supply curves of all the firms in a perfectly competitive industry is called the: a. firms marginal cost curve b. short-run market supply curve c. the interim market supply curve d.competitive curve

Fixed cost-It is a cost that does not depend on the quantity of output produced. Example- The cost of land Variable cost- It is a cost that depends on the quantity of output produced. Example- the cost of workers

What is the difference between fixed and variable costs? Can you give an example of each?

d. paint, which you need in an amount sufficient to paint at least one entire room.

Which of the following goods is most likely to display increasing marginal utility over some range? a. chicken during the 1920s, when it was considered a luxury good. b. lobsters, which are so expensive that you must eat two to get your money's worth. c. all of the choices. d. paint, which you need in an amount sufficient to paint at least one entire room.

c. each firm sets it price equal to its average total cost

Which of the following is not an assumption economists make when using the model of perfect competition a. firm seek to maximize profits b. the products of each firm in a particular market are identical c. each firm sets it price equal to its average total cost d. there is easy entry and exit

c. Utility maximization requires seeking the greatest utility from a given budget.

Which of the following is(are) true? a. All of the choices are true. b. In consumer choice theory, we assume all goods and services are inferior. c. Utility maximization requires seeking the greatest utility from a given budget. d. A budget constraint limits what a poor consumer can spend, but there is no similar constraint on rich people.

d. All of the above are correct.

Which of the following statements is correct? a. Average total cost is rising for quantities higher than D because marginal cost is higher than average total cost. b. Average variable cost is declining for quantities less than B because marginal cost is lower than average variable cost. c. Average variable cost is minimized at B because at that quantity, marginal cost equals average variable cost. d. All of the above are correct.

c. When a customer continues to eat more pie at the Pie Palace, each additional piece of pie gives a smaller amount of marginal utility.

Which of the following statements is true because of the principle of diminishing marginal utility? a. The marginal utility of a piece of pie is maximized when the total utility of pie is zero. b. The total utility of pie is at a maximum while the marginal utility of pie is still increasing. c. When a customer continues to eat more pie at the Pie Palace, each additional piece of pie gives a smaller amount of marginal utility. d. When a customer continues to eat more pie at the Pie Palace, each additional piece of pie gives a larger amount of marginal utility.

a. continue to operate even though she is enduring an economic loss

Zoe's bakery determines that P < ATC and P > AVC. Zoe should. a. continue to operate even though she is enduring an economic loss b. continue to operate as she is making an economic profit c. shut down immediately as she is enduring economic loss d. raise the price until she has maximized her profits

c. increase output to the point that the marginal benefit of an additional unit of output is equal to the marginal cost

firms in the model of perfect competition will: a. maximize total revenue by using the marginal decision rule b. increase output up to the point that the marginal benefit of an additional unit of output is greater than the marginal cost c. increase output to the point that the marginal benefit of an additional unit of output is equal to the marginal cost d. always attempt to minimize average variable cost

d. increase in total revenue when it sells an additional unit of output

marginal revenue is a firms: a. ratio of profit to quantity b. ratio of average revenue to quantity c. price per unit times the number of units sold d. increase in total revenue when it sells an additional unit of output

b. equals the market price in perfect competition

marginal revenue: a. is the slope of the average revenue curve b. equals the market price in perfect competition c. is the change in quantity divided by the change in total revenue d. is the price divided by the changes in quantity

c. is equal to its average revenue

the marginal revenue received by a firm in a perfectly competitive market: a. is greater than the market price b. is less than the market price c. is equal to its average revenue d. increases with the quantity of output sold

b. the firm is not maximizing profits

to the left of point C a. economic profit is the vertical distance between curve B and MC b. the firm is not maximizing profits c. the firm is maximizing profits d. the firm should produce less

c. if price is less than ATC the firm will shut down in the short run

which of the following is true? a. profit per unit is price minus AVC b. total economic profit is per unit profit times quantity c. if price is less than ATC the firm will shut down in the short run d. if the price is less than the marginal cost the perfectly competitive firm should raise the price and increase output.