MGT 449 Exam 1 review (Econ review)
Which characteristic does not describe a perfectly competitive market?
Industry-level price elasticity is finite
If a firm can sell its product for more than its fixed costs, but not for more than its total costs:
It will continue to operate in the short run at a loss
Which of the following variables does not influence the quantity of product that a firm is able to sell?
Plant production costs
Which of the following cost line items would be a fixed cost
Rent
Which of the following best describes marginal cost?
The incremental cost of producing one more unit of output
The basic law of demand says that all other things being the same:
The lower the price of the product, the more if it consumers will purchase
Which of the following best describes average cost?
The per-unit-of-output cost for a product at a given quantity
Which of the following would not be a characteristic of a good with an elastic demand?
The product has high switching costs
If a firm is producing as efficiently as it knows how, then how will the total cost function slope?
Upward
Which characteristic is present in a perfectly competitive market?
-firms produce identical or nearly identical products -market price is beyond the control of any individual firm -a firm's demand curve is perfectly horizontal at the market price -firms can enter and exit the market very easily
Suppose a factory is producing 100 units and the price of each unit is $10. If raising the price to $12 per unit results in a drop in sales 12 units, what is the price elasticity of demand?
.6 Change in Q/Qo / Change in P/Po
What is a sunk cost?
A cost incurred no matter what the decision is and cannot be avoided
Suppose an entrepreneur starts a business earning $2M in revenue in 2009 while at the same time incurring $1.8M in costs. If the entrepreneur's best outside alternative employment opportunity is to earn $300K, what are the firms accounting and economic profits?
Accounting - $200K Economic - -$100K
In what special situation might the law of demand not hold?
If high prices confer prestige
