Econ Final Exam

The marginal cost curve and the supply curve are not the same when price:

Falls below the average variable cost curve

Which of the following statements is false?

For a price searcher, price equals marginal revenue for all units except the first.

A firm should shut down production when:

P < minimum AVC.

At the profit-maximizing level of output, what is relationship between the total revenue (TR) and total cost (TC) curves?

They must have the same slope.

Which of the following is not a legal barrier to entry?

economies of scale

For a perfectly competitive firm, MR = MC at 250 units of output. At 250 units, ATC is greater than AVC. It follows that

if the firm is not allowed to shut down, then Q=250 is the optimal output level

If a factory has a short-run capacity constraint (e.g., an auto plant can only produce 800 cars per day at maximum capacity), the marginal cost of production becomes ________ at the capacity constraint.

infinite

average-marginal rule states that if the marginal magnitude is

less than the average magnitude, the average magnitude falls.

If a monopoly firm produces the quantity of output at which MR = MC,it necessarily

maximizes its profit or minimizes its loss

the profit maximization rule requires:

price = marginal cost

In the short run, the best policy for a perfectly competitive firm is to

produce and sell its product as long as price is greater than average variable cost.

Equilibrium price is $8 in a perfectly competitive market. For a perfectly competitive firm, MR = MC at 150 units of output. At 150 units, ATC is $11, and AVC is $10. The best policy for this firm is to __________ in the short run. Also, total fixed cost equals __________ and total variable cost equals __________ for this firm.

shut down; $150; $1,500

Technological improvements cause:

All other choices.

Which of the following characterizes a competitive market?

All the firms sell at the equilibrium price for the market.

If a perfectly competitive firm wanted to maximize its total revenues, it would produce:

As much as it is capable of producing.

If a perfectly competitive firm can sell 200 computers at $700 each, in order to sell one more computer, the firm:

Can sell the 201st computer at $700.

Consider the following statements when answering this question I. If a firm employs only one variable factor of production, labor, and the marginal product of labor is constant, then the marginal costs of production are constant too. II. If a firm employs only one variable factor of production, labor, and the marginal product of labor is constant, then short-run average total costs cannot rise as output rises.

I and II are both true.

Use the following statements to answer this question: I. An increase in the firm's fixed costs will also shift the firm's short-run supply curve to the left. II. An increase in the firm's fixed costs will not shift the firm's short-run supply curve to the right or left, but it may alter how much of the marginal cost curve is used to form the short-run supply curve.

I and II are false.

What happens in a perfectly competitive industry when economic profit is greater than zero?

New firms may enter the industry.

Which of the following is true?

The MC curve is eventually upward-sloping.

Marginal revenue is equal to __________ divided by __________

change in total revenue; change in quantity of output

If the market price for a competitive firm's output doubles then

the marginal revenue doubles

Which of the following is probably the worst real-world example of a perfectly competitive market?

the market for automobiles

the firm's marginal revenue curve is

the same as the firm's demand curve.

Explicit costs:

the sum of actual monetary payments made for resources used to produce a good.