Econ - Exam 3

C

A firm participating in a competitive market with these costs would be indifferent about producing or shutting down if the price is Price Average Fixed Cost Average Variable Cost $2 $5 $6 $4 $3 $4 $6 $1 $5 $8 $0.50 $7 a. $6. d. $2. b. $8. e. either $6 or $8. c. $4

E

A company produces at an output level where marginal revenue is equal to marginal cost and has the following revenue and cost levels: Marginal cost curve intersects the average variable cost curve at $150. Marginal cost curve intersects the average total cost curve at $200. Marginal cost curve intersects the marginal revenue curve at $170. What would you suggest this firm should do in the short run? a. The firm should continue to produce at a profit level of $20 per unit. b. The firm should continue to produce at a profit level of $30 per unit. c. The firm should continue to produce at a profit level of $50 per unit. d. The firm should shut down. e. The firm should continue to produce at a loss

D

An explicit cost for a business that manufactures bicycles would be the a. value of the products that the firm's employees could produce at another company. b. salary that the owner of the business could earn elsewhere. c. goods and services provided by the government with the taxes the firm pays. d. wages paid to employees. e. various products that could be made with the steel used to make bicycles.

B

Another term for factors of production is a. outputs. b. inputs. c. profits. d. revenues e. costs.

A

As a firm hires more labor and each worker is able to specialize, what happens to each additional worker's marginal productivity? a. It increases at first, then decreases. b. It increases continuously. c. It decreases continuously. d. It decreases at first, then increases. e. It remains constant, no matter how much labor is hired.

A

Belinda is the owner of a department store. Last year, her total revenue was $525,000 and her total labor costs were $200,000. Her overhead expenses, including insurance and legal fees, were $175,000. The rent on the building was $45,000. Belinda could earn $105,000 per year working at a nearby department store. If her total revenue increases to $600,000 this year and all of her other expenses are held constant, we know that her economic profit is now a. $75,000. b. $600,000. c. $0.00. d. $105,000 e. $200,000.

E

Kareem owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Kareem sold 1,200 bikes. Kareem's average fixed cost was ________ per bike. a. $600 d. $2,000 b. $625 e. $375 c. $1,000

C

Economies of scale exist a. only for monopolists. b. when long-run average total costs increase. c. when long-run average total costs decrease. d. when long-run average total costs are constant. e. when governments create barriers to entry.

C

Firms will always stay in the market in the short run if the price they charge is a. less than their minimum average total cost (ATC). b. less than their minimum average variable cost (AVC). c. greater than their minimum average variable cost (AVC). d. greater than their minimum average total cost (ATC) but not greater than their minimum average variable cost (AVC). e. equal to their minimum average variable cost (AVC).

e

Gerald owns a factory that produces, among other things, wheelbarrows. He currently has 7 employees; with 7 employees, his factory can produce 12 wheelbarrows per day. If he hired an eighth employee, he'd be able to produce 16 wheelbarrows per day. Therefore, the marginal product of the eighth employee is ________ wheelbarrow(s). a. 2 b. 1 c. 8 d. 16 e. 4

B

If a firm hires another worker and her marginal product of labor is negative, we know that the firm's total output is a. increasing. b. decreasing. c. equal to the marginal product of that worker. d. unchanged. e. zero.

B

If a firm hires another worker and her marginal product of labor is zero, we know that the firm's total output is a. zero. b. unchanged. c. increasing. d. decreasing. e. equal to the marginal product of that worker.

D

Lukas owns a bookstore. He currently sells 1,200 books per year. If he doubles the size of his store so he can sell 2,400 books per year and his long-run average total cost per book decreases, we know that Lukas is experiencing a. diseconomies of scale. d. economies of scale. b. diminishing marginal product. e. constant returns to scale. c. increasing marginal product.

B

Matilda owns an office supply store. If she decided to expand the size of her store in order to sell more supplies, how would she know if she is experiencing diseconomies of scale? a. Her total cost of selling supplies decreases. b. Her average cost of selling supplies increases. c. Her total cost of selling supplies remains unchanged. d. Her average cost of selling supplies remains unchanged. e. Her average cost of selling supplies decreases

B

Suppose a perfectly competitive broccoli farm can produce 35 crates at an output level where marginal revenue equals marginal cost. The price per crate of broccoli is $25 and the average total cost is $30. What is the total profit or loss that this farm is earning? a. $175.00 d. $5 b. -$175.00 e. -$5 c. $875.00

A

The change in total output divided by the change in input is known as a. marginal product. b. marginal cost. c. specialization. d. total product. e. marginal profit.

A

The profit-maximizing rule for a monopolist is a. marginal revenue = marginal cost. b. price = marginal cost. c. price = marginal revenue. d. average total cost = marginal revenue. e. average total cost = marginal cost.

D

To maximize profits, a monopolist chooses the quantity where a. revenues are maximized. d. marginal revenue equals marginal cost. b. marginal revenue equals zero. e. costs are minimized. c. marginal cost equals zero

A

Under perfect competition what would happen to a firm that sets its price slightly above market price? a. The firm would lose all of its customers. b. The firm could sell as much as it wanted in the market. c. The firm would earn a lot of profit as long as the other firms charge the market price. d. It would continue to earn a profit but revenue would be lower. e. It would earn lower profits than other firms, but the level of reduction would depend on the elasticity of demand.

C

What happens when a firm adopts a new technology? a. The firm must increase its losses. b. The firm must increase its profit. c. The firm will have a new production function. d. The firm must have higher costs. e. The firm must have higher revenue.

D

When a monopolist lowers a price from $80 to $70, the quantity that the firm is able to sell increases from 100 to 150. The change in revenue associated with the price effect is equal to a. $3,500. d. -$1,000. b. -$3,500. e. $4,000. c. $1,000.

A

Which of the following conditions will result in the firm making an economic profit? a. P > ATC d. P = AVC b. P < ATC e. ATC > P > AVC c. P = ATC

C

Which of the following is a characteristic of a monopoly but not a characteristic of a competitive market? a. A monopoly contains many firms. b. A monopoly produces an efficient level of output. c. A producer in a monopoly may earn long-run economic profits. d. A producer in a monopoly has no market power. e. A producer in a monopoly is a price taker.

E

Why do governments issue patents? a. Patents foster economies of scale. b. Inventors have a moral right to control their inventions. c. Patents ensure that socially beneficial goods are affordable. d. Firms benefit from the publicity associated with patents. e. The prospect of large profits is an incentive to innovation.