exam 3 Microeconomics

8) The law of diminishing returns indicates that: A. as extra units of a variable resource are added to a fixed resource, the marginal product will decline beyond some point. B. because of economies and diseconomies of scale, a competitive firm's long-run average total cost curve will be U-shaped. C. the demand for goods produced by purely competitive industries is downsloping. D. Beyond some point, the extra unlikely derived from additional units of product will yield the consumer smaller and smaller extra amounts of satisfaction.

A- as extra units if a variable resource are added to a fixed resource the marginal product will decline beyond some point.

Consumer and producer surplus measure the _____ benefit rather than the _____ benefit. A.net; total B. marginal; additional C. subjective; objective D total; net

A- net ; total

In which of the following industry structures is the entry of new firms the most difficult? A pure monopoly B. oligopoly C. monopolistic competition D. pure competition

A- pure monopoly

Deadweight loss is A. the reduction in economic surplus resulting from a market not being in competitive equilibrium. B. the reduction in consumer expenditure resulting from market failure. C. the reduction in sales revenue resulting from market distortions. D. a measure of market equity.

A- the reduction in economic surplus resulting from a market not being in competitive equilibrium.

Any cost that remains unchanged as output changes represents a firm's A. fixed cost. B. marginal cost. C. opportunity cost. D. variable cost.

A-Fixed cost

In the graph above LRTC = long-run total cost. The firm is experiencing: A. Economies of scale B. Diseconomies of scale C. Constant returns to scale D. Minimum efficient scale

A-economies of scale

When a firm doubles its inputs and finds that its output has more than doubled, this is known as: A. Economies of scale B. Constant returns to scale C. Diseconomies of scale D. A violation of the law of diminishing returns

A-economies of scale

(6) To the economist, total cost includes: A. explicit and implicit costs. B. neither implicit nor explicit costs. C. implicit, but not explicit, costs. D. explicit, but not implicit, costs.

A-explicit and implicit costs

At an output level of 50 units per day, a firm has average total costs of $60 and average variable costs of $35. Its total fixed costs are: A.$925 B.$1,250 C.$1,750 D.$3,000

B-$1,250

Refer to the diagram. The vertical distance between ATC and AVC reflects: A.the law of diminishing returns. B.the average fixed cost at each level of output. C.marginal cost at each level of output. D.the presence of economies of scale.

B- the average fixed cost at each level of output

Cash expenditures a firm makes to pay for resources are called: A. Implicit costs B. Explicit costs C. Average cost D. Opportunity costs

B- Explicit Costs

The marginal product of labor refers to the: A. Last unit of output produced by labor at the end of each period B. Increase in output resulting from employing one more unit of labor C. Total output divided by the number of labor employed D. Smallest unit of the output produced by labor

B- Increase in output resulting from employing one more unit of labor

The equilibrium price and quantity in a competitive market usually produce allocative efficiency because: A. all consumers who want the goods are satisfied. B. marginal benefit and marginal cost are equal at that point C. equilibrium ensures an equitable distribution of output. D. the excess of goods produced at equilibrium guarantees that all will have enough.

B- marginal benefit and marginal cost are equal at that point.

In long-run equilibrium, purely competitive markets A. minimize total cost. B. maximize the sum of consumer surplus and producer surplus. C. yield economic profits to most sellers. D. inevitably degenerate into monopoly in increasing-cost industries.

B- maximize the sum of consumer surplus and producer surplus

Refer to the above graph. It shows the total product (TP) curve. At which point is marginal product smallest? A. Point a B. Point b C. Point c D. Point d

B- point b

(7) Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were: A. $100,000 and its economic profits were zero. B. $200,000 and its economic profits were zero. C. $100,000 and its economic profits were $100,000. D. zero and its economic loss was $200,000.

B-$200,000 and its economic profits were zero

If the average variable cost is $74 and the total fixed cost is $100 at 5 units of output, then the average total cost at this output level is: A. $91 B. $94 C. $97 D. $100

B-$94

(3) Marginal product of labor refers to the: A. Last unit of output produced by labor at the end of each period B. Increase in output resulting from employing one more unit of labor C. Total output divided by the number of labor employed D. Smallest unit of the output produced by labor

B-Increase in output resulting from employing one more unit of labor.

Consider the demand curve above. If the price is A, then the total revenues of sellers would be the area: A. DABE B. 0ABC C .0DEF D. CBEF

B-OABC

In the long run, a firm will choose a plant size that has the: A. Minimum of average fixed costs B. Capacity to produce the largest quantity of the product C. Minimum average total cost of producing the target level of output D. Maximum level of resource use per unit of the total product of the output

B-capacity to produce the largest quantity of the product

As output increases, average fixed costs: A. Increase B. Decrease C. Remain constant D. First increase and then decrease

B-decrease

Refer to the above graph. If the firm is producing at Q1, the area 0ADQ1 represents: A. Total costs B. Total variable costs C. Total fixed costs D. Average total costs

B-total variable costs

If you know that with 8 units of output, the average fixed cost is $12.50 and the average variable cost is $81.25, then the total cost at this output level is: A. $93.75 B. $97.78 C. $750 D. $880

C- $750

Which of the following conditions is true for a purely competitive firm in long-run equilibrium? A. P > MC = minimum ATC. B. P > MC > minimum ATC. C.P = MC = minimum ATC. D. P < MC < minimum ATC.

C- P=MC= minimum ATC

A purely competitive firm is precluded from making economic profits in the long run because A. it is a "price taker." B. its demand curve is perfectly elastic. C. of unimpeded entry to the industry. D. it produces a differentiated product.

C- of unimpeded entry to the industry

(10) The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is: A. Allocative efficiency B. Productive efficiency C. The consumer surplus D. The producer surplus

C- the consumer surplus

At an output of 20,000 units per year, a firm's variable costs are $80,000 and its average fixed costs are $3. The total costs per year for the firm are: A. $80,000 B. $100,000 C. $140,000 D. $240,000

C-$140,000

Refer to the above graph of cost curves. Total fixed cost at output level Q2 is measured by: A. 0B B. AC C. CD D. DE

C-CD

2) The main difference between the short run and the long run is that: A. Firms earn zero profits in the long run B. The long-run always refers to a time period of one year or longer C. In the short run, some inputs are fixed and some are variable D. In the long run, all inputs are fixed

C-In the short run, some inputs are fixed and some are variable.

The vertical distance between the TC curve and TVC curve is equal to: A. ATC B. AVC C. TFC D. MC

C-TFC

Economic efficiency is A. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is not at a maximum. B. a market outcome in which the marginal benefit to consumers of the last unit produced is greater than its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. C. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. D. a government outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

C-a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

Marginal cost can be defined as the: A. Change in total fixed cost resulting from one more unit of production B. Change in total cost resulting from one more unit of production C. Change in average total cost resulting from one more unit of production D. Change in average variable cost resulting from one more unit of production

C-change in average total cost resulting from one more unit of production.

An implicit cost is A. a nonmonetary opportunity cost. B. a cost incurred in the short run. C. the highest-valued alternative that must be given up to engage in an activity. D. a cost that remains constant as output changes. E. a cost that changes as output changes.

C-the highest value alternative that must be given up to engage in an activity.

(1) Economic profits are: A. Always larger than accounting profits B. The sum of accounting profits and implicit costs C. Equal to the difference between total revenues and implicit costs D. Equal to the difference between accounting profits and implicit costs

D- equal to the difference between accounting profits and implicit costs

Which would be an implicit cost for a firm? The cost: A.Of worker wages and salaries for the firm B.Paid for leasing a building for the firm C.Paid for production supplies for the firm D. Of wages foregone by the owner of the firm

D- of wages foregone by the owner of the firm

When LCD televisions first came on the market, they sold for at least $1,000, and some for much more. Now many units can be purchased for under $400. These facts imply that A. the LCD television industry was once competitive but is now monopolistic. B. fewer firms produce LCD televisions than was the case five or ten years ago. C. the demand curve for LCD televisions has shifted leftward. D. the LCD television industry is a decreasing-cost industry

D- the LCD television industry is a decreasing-cost industry

(9) Diminishing marginal returns occurs as a firm adds more variable inputs to at least one fixed input because: A. The ability or quality of the variable inputs hired decreases as more are hired B. The firm must lower the price of its product when it produces more units of output C. The per-unit cost it must pay for variable inputs increases as more inputs are hired D. As more variable inputs are hired, the amount of the fixed input per variable input decreases

D-as more variable inputs are hired, the amount of the fixed input per variable input decreases.

At any level of output: A. Average variable cost will exceed average total cost in the short run B. Marginal cost will exceed average variable cost by the level of average fixed cost C. Average variable cost will exceed average fixed cost by the level of average total cost D. Average total cost will exceed average variable cost by the level of average fixed cost

D-average total cost will exceed average variable cost by the level of average fixed cost.

An economic surplus in a market is the sum of_____ surplus and_____ surplus. In a competitive market, with many buyers and sellers and no government restrictions, an economic surplus is at a_____ when the market is in_____. A. consumer; producer; maximum; disequilibrium B. consumer; producer; minimum; equilibrium C. consumer; government; maximum; equilibrium D. consumer; producer; maximum; equilibrium

D-consumer; producer; maximum; equilibrium

(4). The question is based on the following table that provides information on the production of a product that requires one variable input. Refer to the above table. There are negative marginal returns from the input when the: A. the Fifth unit of input is added B. Sixth unit of input is added C. Seventh unit of input is added D. Ninth unit of input is added

D-ninth unit of input is added

(11) Refer to the graph above representing the purely competitive market for a product. When the market is at equilibrium, the total economic surplus would be represented by the area: A. a + b + c + d B. a + b + c C. a+b D. b + c

D= b+c

At the point where diminishing marginal returns of an input sets in, the: A. Average product starts to decrease B. The marginal product starts to decrease C. The total product starts to decrease D. The average product exceeds the marginal product

b- marginal product starts to decrease