ECON Unit 3 2/15/2019

In the long run: a. all inputs are variable. b. all inputs have marginal product equal to zero. c. all inputs are fixed. d. at least one input is variable and one input is fixed. e. inputs are neither variable nor fixed.

a. all inputs are variable.

The vertical difference between curve B (atc) and curve C (avc) at any quantity of output is: a. average fixed cost. b. marginal cost. c. fixed cost. d. average variable cost. e. profit.

a. average fixed cost.

When an increase in the firm's output reduces its long-run average total cost, it experiences: a. economies of scale. b. variable returns to scale. c. diminishing returns to scale. d. diseconomies of scale. e. constant returns to scale.

a. economies of scale.

When economic profits in an industry are zero: a. it means that firms are doing as well as they could do in other markets. b. the price will tend to decrease as more firms enter the market. c. firms are really doing badly. d. the industry is not in long-run equilibrium. e. firms should exit, so they can make an economic profit in some other market.

a. it means that firms are doing as well as they could do in other markets.

We assume that for firms, economic profit is: a. less than accounting profit. b. greater than accounting profit. c. positive in the short run but negative in the long run. d. negative in the short run. e. equal to accounting profit.

a. less than accounting profit.

The demand curve for a perfectly competitive firm is: a. perfectly elastic. b. perfectly inelastic. c. relatively, but not perfectly elastic. d. downward-sloping. e. non-existent.

a. perfectly elastic.

As production increases and the fixed cost is divided by larger quantities of output, this leads to lower average fixed cost. This is referred to as the ________ effect. a. spreading b. constant cost c. increasing returns d. marginal returns e. diminishing returns

a. spreading

Profit is the difference between ________ and ________. a. total revenues; total costs b. total revenues; total sales c. total profits; total costs d. total sales; total revenues e. marginal costs; marginal revenues

a. total revenues; total costs

If Marie's Marionettes is operating under conditions of diminishing marginal product, the marginal costs will be: a. constant b. equal to ATC. c. increasing. d. decreasing. e. equal to zero.

c. increasing.

When a firm produces 2 units, the average fixed cost is $60. What is the average fixed cost of producing 3 units? a. $40 b. $20 c. $60 d. $30 e. $10

a. $40

If a firm produces 10 units of output and incurs $30 in average variable cost and $35 in average total cost, total fixed cost is: a. $85. b. $50 c. $3. d. $35. e. $300.

b. $50

Zoe's Bakery operates in a perfectly competitive industry. Suppose that when the market price is $5, the profit-maximizing output level of pastries is 150 units, with average total cost of $4, and average variable cost of $3. From this we know Zoe's marginal cost is ________, and her short-run profits are ________. a. $5; $300 b. $5; $150 c. $2; $150 d. $1; $150 e. $1; $300

b. $5; $150

A total product curve indicates the relationship between: a. output and a fixed input. b. a variable input and output. c. a variable input and variable cost. d. output and price. e. a variable input and price.

b. a variable input and output.

The ________ curve continually declines as more output is produced in the short run. a. average total cost b. average fixed cost c. total variable cost d. marginal cost e. average variable cost

b. average fixed cost

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

b. is equal to its average revenue.

The short-run supply curve for a perfectly competitive firm is its: a. average total cost curve below its marginal cost curve. b. marginal cost curve above its average variable cost curve. c. marginal revenue curve to the right of its marginal cost curve. d. marginal cost curve at all prices. e. demand curve above its marginal revenue curve.

b. marginal cost curve above its average variable cost curve.

If a perfectly competitive firm sells 30 units of output at a price of $10 per unit, its marginal revenue is: a. $0. b. $300. c. $10. d. $3. e. $30.

c. $10.

Suppose Cyd knows the average cost of producing 9 scones is $5, while the average cost of producing 10 scones is $5.20. What is the marginal cost of the 10th unit? a. $5 b. $5.20 c. $7 d. $0.20 e. $10.20

c. $7

Which of the following cost concepts is correctly defined? a. ATC = VC + FC b. TC = AVC + AFC c. ATC = AVC + AFC d. TC = AVC + MC e. MC = change of total cost / change of L

c. ATC = AVC + AFC

Profit computed using explicit costs as the only measure of costs is: a. implicit profit. b. explicit profit. c. accounting profit. d. economic profit e. normal profit.

c. accounting profit

If marginal cost is greater than average total cost, then: a. average variable cost is decreasing. b. average total cost is decreasing. c. average total cost is increasing. d. marginal cost is decreasing. e. average total cost is unchanged.

c. average total cost is increasing.

If firms are making positive economic profits in the short run, then in the long run: a. firms will leave the industry. b. the price will decrease to where price equals average variable cost. c. firms will enter the industry. d. industry output will rise and price will rise. e. the short-run industry supply curve will shift leftward.

c. firms will enter the industry.

A perfectly competitive firm operating in the short run producing 100 units of output has ATC = $6 and AFC = $2. The market price is $3 and is equal to MC. In order to maximize profits (or minimize losses), this firm should: a. do nothing; the firm is already maximizing profits. b. increase output. c. shut down and produce zero units of output. d. raise the price of the product until the firm is earning break-even profits. e. reduce output, but continue to produce a positive amount of output.

c. shut down and produce zero units of output.

Profit is the difference between ________ and ________. a. marginal costs; marginal revenues b. total profits; total costs c. total revenues; total costs d. total revenues; total sales e. total sales; total revenues

c. total revenues; total costs

A firm is currently producing with the following output and costs: Q = 20, TC = $100, TVC = $40. What is AFC? a. $1200 b. $2.00 c. $7.00 d. $3.00 e. $5.00

d. $3.00

If a firm produces 10 units of output and incurs $30 in average variable cost and $5 in average fixed cost, total cost is: a. $25. b. $35. c. $300. d. $350 e. $50.

d. $350

A perfectly competitive industry is currently in a state of long-run equilibrium. Which of the following must be true? a. P > MR = MC = AVC b. P = MR = MC > ATC c. P = MR = MC = AVC d. P = MR = MC = ATC e. P > MR = MC > ATC

d. P = MR = MC = ATC

A perfectly competitive firm is definitely earning an economic profit when: a. MR > AVC. b. P > MC. c. MR > MC. d. P > ATC. e. P > AVC.

d. P > ATC.

Diminishing marginal returns occur when: a. an additional variable factor adds the same amount to total output as the previous unit. b. each additional unit of a variable factor adds more to total output than the previous unit. c. the marginal product of a variable factor is increasing, but at a decreasing rate. d. an additional variable factor adds less to total output than the previous unit. e. total product decreases.

d. an additional variable factor adds less to total output than the previous unit.

When an additional unit of a variable input adds less to total product than the previous unit, the firm must be experiencing: a. increasing marginal returns. b. diminishing marginal returns and diminishing average returns. c. constant marginal returns. d. diminishing marginal returns. e. diminishing average returns.

d. diminishing marginal returns.

The marginal cost curve intersects the average variable cost curve at: a. its maximum. b. no point; the curves don't intersect. c. all points; the curves are the same. d. its lowest point. e. its endpoint.

d. its lowest point.

The ________ is the increase in output obtained by hiring an additional worker. a. average variable cost b. total product c. marginal cost d. marginal product e. average product

d. marginal product

In the long run: a. inputs are less expensive to employ than in the short run. b. inputs are neither variable nor fixed. c. at least one input is free. d. the firm has time to change the level of all inputs. e. all inputs are more expensive.

d. the firm has time to change the level of all inputs.

Marginal cost is the change in: a. total cost resulting from a one-unit change in a variable input. b. total variable cost resulting from a one-unit change in a variable input. c. average cost resulting from a one-unit change in output. d. total cost resulting from a one-unit change in output. e. total cost resulting from a one-unit change in average cost.

d. total cost resulting from a one-unit change in output.

In the long run: a. at least one input is variable and one input is fixed. b. inputs are neither variable nor fixed. c. all inputs have marginal product equal to zero. d. all inputs are fixed. e. all inputs are variable

e. all inputs are variable

The ________ curve continually declines as more output is produced in the short run. a. marginal cost b. average total cost c. average variable cost d. total variable cost e. average fixed cost

e. average fixed cost

Total cost divided by the quantity of output produced is: a. always decreasing. b. marginal cost. c. average profit. d. always increasing. e. average total cost.

e. average total cost.

If a perfectly competitive firm is producing a quantity that generates MC > MR, then profit: a. is negative and the firm should exit the market. b. can be increased by increasing production. c. can be increased by decreasing the price. d. is maximized. e. can be increased by decreasing production.

e. can be increased by decreasing production.

In the short run, if P < AVC, a perfectly competitive firm: a. produces output and earns zero economic profit. b. does not produce output and earns an economic profit. c. produces output and incurs an economic loss. d. produces output and earns an economic profit. e. does not produce output and incurs an economic loss.

e. does not produce output and incurs an economic loss.

An assumption of the model of perfect competition is: a. difficult entry and exit. b. cooperation and interdependence between sellers. c. few buyers and sellers. d. extensive advertising and product differentiation. e. identical goods

e. identical goods

If it produces, a perfectly competitive firm will maximize profits at the output where: a. price exceeds marginal cost. b. price equals minimum average variable cost. c. marginal revenue equals price. d. price equals average total cost. e. marginal revenue equals marginal cost.

e. marginal revenue equals marginal cost.

Rebecca knows that Becca Furniture's marginal cost curve is above the average total cost curve. This means Becca Furniture's average total cost curve: a. must be falling. b. must be horizontal. c. is at its minimum point. d. is at its maximum point. e. must be rising.

e. must be rising.

The long-run average total cost curve is tangent to an infinite number of: a. short-run average variable cost curves. b. short-run total cost curves. c. short-run marginal product curves. d. short-run marginal cost curves. e. short-run average total cost curves.

e. short-run average total cost curves.

Perfect competition is characterized by: a. fierce quality competition. b. widely recognized brands. c. rivalry in advertising. d. an inefficient quantity of output being produced. e. the inability of any one firm to influence price.

e. the inability of any one firm to influence price.

Jacquelyn is a student at a major state university. Which of the following is an example of an implicit cost of her attending college? a. a calculator for her calculus class. b. textbooks c. tuition d. computer lab fees e. the salary that she could have earned working full-time

e. the salary that she could have earned working full-time

Assuming that all other factors of production are held constant, marginal product is the change in ________ output resulting from a one-unit change in ________ . a. total; a fixed input b. total; consumption c. total; average product d. per unit; a fixed input e. total; a variable input

e. total; a variable input