Hoda Exam 3

5.Refer to Figure 13-3. Which of the following statements best captures the nature of the underlying production function (not pictured)?

a. Output increases at a decreasing rate with additional units of input.

23. Which of the following would be an example of an implicit cost? (i) - forgone investment opportunities (ii) - wages of workers (iii) - raw materials costs

a. (i) only

46. Refer to Figure 14-7. Which line segment best reflects the short-run supply curve for this firm?

a. ABCF

30. In a competitive market the current price is $7, and the typical firm in the market has ATC = $7.50 and AVC = $7.15.

a. In the short run firms will shut down, and in the long run firms will leave the market.

17. Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

c. exactly $2.50

29. A difference between explicit and implicit costs is that

c. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

2.An example of an explicit cost of production would be the

c. lease payments for the land on which a firm's factory stands.

12. When a firm experiences diseconomies of scale,

c. long-run average total cost increases as output increases.

32. Refer to Figure 14-2. If the market price is P4, in the short run the firm will earn

c. negative economic profits and will shut down.

1. If Tanya sells 200 glasses of fruit punch at $0.50 each, her total revenues are

A. $100

15. Refer to Figure 13-10. The firm experiences diseconomies of scale if it changes its level of output from

a. Q1 to Q2.

16.Refer to Figure 13-10. The firm experiences economies of scale if it changes its level of output from

a. Q1 to Q2.

3. Which of the following expressions is correct?

a. accounting profit = total revenue - explicit costs

10. The average fixed cost curve

a. always declines with increased levels of output.

44. A long-run supply curve is flatter than a short-run supply curve because

a. firms can enter and exit a market more easily in the long run than in the short run.

37. In the short-run, a firm's supply curve is equal to the

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

43. Timmy's Trophies operates in a perfectly competitive market. If trophies sell for $20 each and average total cost per trophy is $15 at the profit-maximizing output level, then in the long run

a. more firms will enter the market.

31. Refer to Figure 14-2. If the market price is P1, in the short run the firm will earn

a. positive economic profits.

25. Refer to Scenario 13-11. Zach's economic profit for the year was

b. $-6,000.

48. Refer to Figure 14-3. The firm will earn zero economic profit if the market price is

b. $6

4. Suppose a certain firm is able to produce 165 units of output per day when 15 workers are hired. The firm is able to produce 176 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is

b. 11 units of output.

50. Refer to Figure 14-10. If there are 700 identical firms in this market, what is the value of Q1?

b. 210,000

34. Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10. In this situation,

b. Jose's restaurant should shut down immediately.

42. In a competitive market with free entry and exit, if all firms have the same cost structure, then

b. all firms will operate at their efficient scale in the long run.

9. When marginal cost exceeds average total cost,

b. average total cost must be rising.

13. When a firm's long-run average total costs do not vary as output increases, the firm exhibits

b. constant returns to scale.

19. Mrs. Smith operates a business in a competitive market. The current market price is $8.10. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

b. continue to operate in the short run but shut down in the long run.

39. When new firms have an incentive to enter a competitive market, their entry will

b. drive down profits of existing firms in the market.

28. In the short run, a firm operating in a competitive industry will shut down if price is

b. less than average variable cost.

11. Economies of scale occur when

b. long-run average total costs fall as output increases.

45. Carol owns a running shoe store that operates in a perfectly competitive market. If running shoes sell for $120 per pair and the average total cost per pair of shoes is $125 at the profit-maximizing output level, then in the long run

b. some firms will exit from the market.

41. Profit is defined as

b. total revenue minus total cost.

36. A sunk cost is one that

b. was paid in the past and will not change regardless of the present decision.

21. Refer to Table 14-4. For a firm operating in a competitive market, the marginal revenue is

c. $15.

22. Refer to Table 14-4. For a firm operating in a competitive market, the price is

c. $15.

49. Refer to Figure 14-3. If the market price is $10, what is the firm's total cost?

c. $35

24. Refer to Scenario 13-11.Zach's accounting profit for the year was

c. $6,000.

35. Refer to Figure 14-5. When market price is P7, a profit-maximizing firm's short-run profits can be represented by the area

c. (P7 - P5) Q3.

20. A market is competitive if: (i)- firms have the flexibility to price their own product. (ii) -each buyer is small compared to the market. (iii) -each seller is small compared to the market.

c. (ii) and (iii) only

40. In a perfectly competitive market, the process of entry and exit will end when (i) - accounting profits are zero. (ii) - economic profits are zero. (iii) - price equals minimum marginal cost. (iv) - price equals minimum average total cost.

c. (ii) and (iv) only

7. Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the average total cost of production when the firm hires 7 workers?

c. 81 cents

27. In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the

c. price is greater than average variable cost.

8. Refer to Figure 13-8. Quantity C represents the output level where the firm

c. produces at the efficient scale.

38. A certain firm manufactures and sells computer chips. Last year it sold 2 million chips at a price of $10 per chip. For last year, the firm's

c. total revenue was $20 million.

47. Refer to Figure 14-3. If the market price is $10, what is the firm's total revenue?

d. $50

26. Which of the following statements is correct?

d. Only for competitive firms does average revenue equal marginal revenue.

6. Fixed costs can be defined as costs that

d. are incurred even if nothing is produced.

14. Refer to Figure 13-10. The three average total cost curves on the diagram labeled ATC1, ATC2, and ATC3most likely correspond to three different

d. factory sizes.

18. The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

d. profit is maximized.

33. Refer to Figure 14-2. If the market price is P2, in the short run the firm will earn

d. zero economic profits.