Microeconomics unit 5

The average variable cost of producing 240 units is

$.19

The average total cost of producing 240 units is

$.32

If the market price is $6, what is the firms short-run economic profit?

$0

Brady Industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firm's total fixed costs equal

$1,000

Refer to table 13-7. What is the value of B?

$100

Refer to table 13-7. What is the value of C?

$100

Refer to table 13-7. What is the value of E?

$100

Refer to table 14-4. What is the average revenue when 4 units are sold?

$120

Refer to table 14-4. What is the marginal revenue from selling the 3rd unit?

$120

If the market price is $10, what is the firms short-run economic profit?

$15

Refer to table 13-7. What is the value of F?

$150

Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business?

$170

In a competitive market the price is $8. A typical firm in the market has ATC=$6, AVC=$5, and MC=$8. How much economic profit is the firm earning in the short run?

$2 per unit

Marcus sells 300 candy bars at $0.50 each. His total costs are $125. His profits are

$25

If the market price is $10, what is the firms total cost?

$35

Suppose that for a particular form the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that the average total cost when 5 units of output are produced is $30, and the marginal cost of the 6th unit of output it $60. What is the average total cost when six units are produced?

$35

Refer to table 14-4. What is the total revenue from selling 4 units?

$480

If the market price is $10, what is the firms total revenue

$50

Refer to Table 13-7. What is the value of A?

$50

Refer to table 13-7. What is the value of D?

$50

Cindy's Car Wash has average variable costs of $2 and average fixed costs of $3 when it produces 100 units of output (car washes). The firms total cost is

$500

Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. What is the total daily cost of producing at a rate of 55 chairs per hour if the factory operates 8 hours per day?

$520

The firm will earn zero economic profit of the market price is

$6

The firm's short-run supply curve is its marginal cost curve above

$6

When market price is P(7), a profit maximizing firms short run profits can be represented by the area

(P(7) - P(5))•Q(3)

Assume the Wooden Chair Factory currently employs 5 workers. What is the marginal product of labor when the factory adds a 6th worker?

15 chairs per hour

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 181 units of output per day when 16 workers are hired, holding other inputs fixed. The marginal product of the 16th worker is

16 units of output

Refer to Table 13-3. At which number of workers does diminishing marginal product begin?

2

If the firms fixed cost of production is $3, and the market price is $10, how many units should the firm produce to maximize profit?

3 units

If there are 300 identical firms in this market, what level of output will be supplied to the market whej oride is $1

30000

The firm should not produce an output level beyond

5 units

In order to maximize profits, the firm will produce

5 units of output because marginal revenue equals marginal cost.

What is the marginal product of the third worker?

60 units

Refer to table 13-3. The Marginal product of the second worker is

80 units

Refer to figure 13-6. Which of the curves is most likely to characterize the short-run average total cost curve of the smallest factory?

ATC(A)

Which of the following statements is correct?

Assuming that implicit costs are positive, accounting profit is greater than economic profit.

When market price of P2, a profit maximizing firms losses can be represented by the area

At a market price of P2 the firm has losses, but the reference pinta in the figure don't identify the losses

A firm produces 400 units of output at a total cost of $1,200. If the total variable costs are $1000,

Average fixed cost is 50 cents

Refer to figure 13-5. Which of the following statements is correct?

Average variable cost is declining for quantities less than B because marginal cost is lower than average variable cost.

Bev is opening her own court-reporting business. She financed the business by withdrawing money from her personal savings account. When she closed the account, the bank representative mentioned that she would have earned $300 in interest next year. If Bev hadn't opened her own business, she would have earned a salary of $25,000. In her first year, Bev's revenues were $30,000, and she spent $1000 on materials and supplies. Which of the following statements is correct?

Bev's economic profit is $3,700

The efficient scale of production occurs at which quantity

C

Tom produced commemorative t-shirts in a competitive market. If Tom decides to decrease his output, this will

Decrease his revenue, since his output has decreased and the price remains the same

Refer to table 13-9. The marginal products of hiring additional workers are

Decreasing

Which of the following statements regarding a competitive firm is correct?

For all firms, average revenue equals the price of the good.

For the firm whose production function and costs are specified in the table, its average-total-cost curve is

Increasing

If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost. Farmer browns total cost curve is

Increasing at an increasing rate

For the firm whose production function and costs are specified in the table, its average-total-cost curve is

Increasing at and increasing rate

Refer to figure 13-3. Which of the following can be inferred from the figure above

Marginal product is increasing at a low lever of output and decreasing at a high level of output

If the market price is $5, the firm will earn

Negative economic profits and shut down

If the market price is $10, the fork will earn

Negative economic profits in the short run but remain in business

Which of the following statements is correct?

Only for competitive firms does average revenue equal marginal revenue.

Firms would be encouraged to enter this market for all prices that exceed

P4

In the short run, if the market price is higher than P(4) but less than P(6), individual firms in a competitive industry will earn

Positive profits

The intersection of a firms marginal revenue and marginal cost curves determines the lever of output at which

Profit is maximized

Which of the following represents the firms short run condition for shutting down?

Shut down if TR < VC

On a 100-acre farm, a farmer is able to produce 3000 bushels of wheat when he hires 2 workers. He is able to produce 4400 bushels of what when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

The farmer is able to produce 5600 bushels of wheat when he hires 4 workers

If the firm is maximizing profit, how much profit is it earning?

There is insufficient data to determine the firms profit

For the firm whose production function and costs are specified in the table, its average-total-cost curve is

U-shaped

If the market price is $13, the firm will earn

Zero economic profits in the short eun

The firm will earn a positive economic profit in the short run if the market price is

above $13

The average fixed cost curve

always declines with increased levels of output

Average total cost is very high when a small amount of output is produced because

average fixed cost is high

For an individual firm operating in a competitive market, marginal revenue equals

average revenue and the price for all levels of output

Marginal cost is equal to average total cost when

average total cost is at its minimum

Profit-maximizing firms enter a competitive market when existing firms in that market have

average total costs less than market price

When firms are said to be price takers, it implies that if a firm raises its price,

buyers will go elsewhere

For a firm, marginal revenue minus marginal cost is equal to

change in profit

At levels of output between M and N, the firm experiences

constant returns to scale

If the firm is currently producing 14 units, what would you advise the owners?

continue to operate at 14 units

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters

diminishing marginal product

If Farmer Brown plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds, he gets 5 bushels of wheat. If he plants 2 bags, he gets 9 bushels. If he plants 3 bags, he gets 12 bushels. A bag of seeds costs $120, and seeds are his only cost. Farmer Brown's production function exhibits

diminishing marginal product

Whenever a perfectly competitive firm chooses to change its level of output, holding the price of the product constant, its marginal revenue

does not change

In the long run a company that produces and sells popcorn incurs total costs of $1,050 when output is 90 canisters and $1,200 when output is 120 canisters. The popcorn company exhibits

economies of scale because average total cost is falling as output rises.

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?

exactly $2.50

If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will

exactly triple

Which of the following explains why long-run average total cost at first decreases as output increases?

gains from specialization of inputs

In the short run, a firm that produces and sells house paint can adjust

how many workers to hire

In the long run,

inputs that were fixed in the short run become variable

The firm will produce a quantity greater than three because at 3 units of output, marginal cost

is less than marginal revenue.

A firm that shuts down temporarily has to pay

its fixed costs but not its variable costs

Firms may experience diseconomies of scale when

large management structures are bureaucratic and inefficient

Average total cost is increasing whenever

marginal cost is greater than average total cost

Refer to figure 13-1. As the number of workers increases,

marginal product decreases

If marginal cost is rising,

marginal product must be falling

When profit-maximizing firms in competitive markets are earning profits,

new firms will enter the market

If the market price is $16, this firm will

produce 5 units of output in the short run and face competition from new market entrants in the long run.

A key characteristic of a competitive market is that

producers sell nearly identical products

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

sunk costs

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?

the cost of the steel that is used in producing automobiles

If a firm uses labor to produce output, the firm's production function depicts the relationship between

the number of workers and the quantity of output.

The short-run supply curve for a firm in a perfectly competitive market is

the portion of its marginal cost curve that lies above its average variable cost.

The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker?

the sixth worker

The competitive firms long run supply curve is that portion of the marginal cost curve that lies above average

total cost

If a firm produces nothing, which of the following costs will be zero?

variable cost