EXAM two Micro

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"My son is a smart entrepreneur. Rather than borrow money from others, he used his own savings to start his music business, and thereby avoided paying interest on loans." An economist would respond by saying

"your son might have avoided paying interest, but he also avoided earning interest."

A firm produces 4,000 units of output using 500 workers. Marginal cost is $10, the wage rate is $160, and total fixed cost is $100,000. What is average variable cost?

$20

Suppose that the firm's only variable input is labor. When 50 workers are used, the average product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total cost of the fixed input is $500.What is the marginal cost?

2.8

Sport Tee Corporation manufactures T-shirts bearing the logos of professional football teams. The wholesale market for sport T-shirts is perfectly competitive. The manager forecasts the wholesale price of T-shirts next year to be $7.00. The firm's estimated marginal cost is SMC = 12 - 0.005Q + 0.0000008Q2 where Q is the number of T-shirts produced and sold each month. Sport Tee Corporation will have a fixed cost of $2,000 per month. Monthly profit will be

2250

Which of the following would be classified as a short-run decision?

A bakery hires two new workers The firm starts to cut lights off more often

Which of the following would be classified as a short-run decision?

A firm's decision to decrease the amount of electricity used in day-to-day operations by encouraging employees to adopt conservation strategies, e.g., shut off lights when leaving a room.

A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the:

AVC Curve

Which of the following is NOT a condition of a perfect competition:

Agreements between sellers

When marginal costs are greater than average total costs, then:

Average total costs are rising

If marginal costs are increasing, then

Average variable costs may be increasing or decreasing

Which of the following is not a characteristic of perfect competition?

Firms face downward-sloping demand functions.

implicit costs

Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur

Diminishing returns refers to the decrease in

MArginal Product

Suppose Marv, the owner-manager of Marv's Hot Dogs, earned $82,000 in revenue last year. Marv's explicit costs of operation totaled $36,000. Marv has a Bachelor of Science degree in mechanical engineering and could be earning $40,000 annually as mechanical engineer.

Marv's economic profit is $6,000.

Suppose that the firm's only variable input is labor. When 50 workers are used, the average product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total cost of the fixed input is $500.What is the marginal cost?

None of these (1.80)

Which of the following is NOT a characteristic of long-run equilibrium for a perfectly competitive firm?

Price is greater than long-run average cost.

Which of the following is true of the typical relationship between marginal product (MP) and average product (AP)?

The MP curve intersects the AP curve at maximum AP.

Which of the following statements is definitely true when price is less than average total cost for a firm producing the profit-maximizing level of output in the short run?

The firm is incurring an economic loss.

In a constant cost industry,

The long-run average cost curve is horizontal

In the short run, a firm should shut down its operation if:

Total revune is less than VC

Economies of scale are illustrated by:

a downward sloping long-run average cost curve.

In a perfectly competitive market,

a firm can sell as much as it wants at the existing market price.

When a firm is producing at the profit maximizing level of out put and P > ATC, the firm is:

earning an economic profit.

The amount of money that could have been made by renting a piece of land to be used for building an office building instead of using the land for employee parking is a(n):

implicit cost.

If marginal revenue exceeds marginal cost, profit maximizers should:

increase output until they are equal

If a firm is experiencing decreasing marginal returns to labor, the firm's production function is ________ at a(n) ________ rate.

increasing; decreasing

A necessary condition for "perfect competition" is

larger number of buyer and sellers

You overhear a businessman say: "We want to be big because there are economies associated with bigness." What he means is that

long run average cost decreases as more is priduced

Does the proprietor of a grocery store who owns the building in which his business is located have lower costs than a grocery store proprietor who must pay rent for the building in which his store is located?

no

Diseconomies of scale exist over the range of output for which the long-run average cost curve is:

rising

If a professor gives up her job to open a shoe store, which of the following costs would an accountant tend to ignore?

the $3,600 of income forgone

The "minimum efficient scale" of operation in an industry is defined as:

the lowest level of output needed to reach the minimum value of long-run average cost

The average product of a variable input is calculated as:

total product divided by the total quantity of the variable input.

When economic profit is positive,

total revenue exceeds total economic cost.


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