Microeconomics Unit 2 Exam
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
$200,000 and its economic profits were $0
Which of the following distinguishes the short run from the long run in pure competition?
Firms can enter and exit the market in the long run but not in the short run
Which type of goods is most adversely affected by recessions?
Goods for which the income elasticity coefficient is relatively high and positive
The main determinant of elasticity of supply is the
amount of time the producer has to adjust inputs in response to a price change
Which of the following is most likely to be an implicit cost for Company X?
forgone rent from the heavy equipment owned and used by Company X
The price elasticity of supply measures how
responsive the quantity supplied of X is to changes in the price of X
A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating
marginal revenue and marginal cost
In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $1.00. The firm's total costs are
$1,500
The first taco yields Jane 18 units of utility and the second yields her an additional 12 units of utility. Her total utility from three tacos is 40 units of utility. The marginal utility of the third unit is
10 units of utility
The supply of product X is elastic if the price of X rises by
5 percent and quantity supplied rises by 7 percent
The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Creamy Crisp's economic profit is
94,000
In the short run, a purely competitive firm will always make an economic profit if
P > ATC
Which of the following is not characteristic of the demand for a product that is elastic?
Total revenue increases if price is increased
For a purely competitive seller, price equals
average revenue, marginal revenue, total revenue divided by output
The law of diminishing marginal utility states that
beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer
AFC Average fixed cost
declines continually as output increases
The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to
decrease by approximately 12 percent
Suppose that the total-revenue curve above is derived from a particular linear demand curve. That demand curve must be
inelastic for price declines that increase quantity demanded from 6 units to 7 units
The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range
is elastic
Mary says, "You would have to pay me $100 to attend that concert." For Mary, the marginal utility of the event is
negative
If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then
new firms will enter this market
In which of the following instances will total revenue decline?
price rises and demand is elastic
Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm
should continue producing in the short run but leave the industry in the long run if the situation persists
Suppose you find that the price of your product is less than minimum AVC. You should
shut down because, by producing, your losses will exceed your total fixed costs
Total utility may be determined by
summing the marginal utilities of each unit consumed
When LED 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
the LED television industry us a decreasing-cost industry
Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in
the price of some other product
Suppose that, when producing 10 units of output, a firm's AVC is $20, its AFC is $5, and its MC is $30. This firm's
total cost is $250
In the short run, a purely competitive firm that seeks to maximize profit will produce
where total revenue exceeds total cost by maximum amount