Seidler Semester 1 Final

Which of the following provides an example of the law of diminishing returns

As more of variable input- for example labor is used with a fixed number of machines- output increase but at a diminishing rate

When a competitive firm maximizes short run economic profits, it produces at the output level where

Marginal revenue equals marginal cost

Assume a firm doubles its usage of each input, resulting in a doubling of the firm's output. Which of the following describes this result?

Constant returns to scale

At its current level of output, a firms total revenue is greater that its total variable cost but less than its total cost. If the firm is producing at the point where marginal revenue is equal to marginal cost, what should the firm do to maximize profit in the short run?

Continue to produce at its current level of output to minimize losses

The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is______

Downward sloping, perfectly elastic

In the short run, assume diminishing marginal product of labor sets in with the hiring of the second worker. Which of the following will remain constant as a firm produces more output?

Total fixed cost

Which of the following statements about short run costs is true?

Total fixed costs plus total variable cost equals total cost

Based on the short-run production function graph above showing the relationship between the quantity of labor and total product, which of the following statements is true?

Total product is maximized when marginal product is zero

Refer to Figure B. The marginal cost of producing the 4th output is: a. $1.50 b. $6 c. $13.50 d. $54 e. $216

b. $6

Refer to Figure B. The average total cost of producing 3 units of output is: a. $7 b. $12 c. $16 d. $24 e. $144

c. $16

Marginal revenue is

change in total revenue associated with the sale of one more unit of output

Refer to Graph 1. At the profit maximizing output, the firm will realize:

economic profit of HJEF

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

its marginal cost curve above the minimum point of its average variable cost curve

Refer to figure B. The total variable cost of producing 5 units is

$ 37

Ryan quit a job with a daily salary and opened a business. On a daily basis, the total revenue of the business is $200, and the explicit costs of the business are $120. If Ryan has zero economic profits, what must be the value of Ryan's implicit costs?

$ 80

If a firm's average total cost decreases as the firm increases its output , the firm's marginal cost must be

less than the average total cost

Assume that tulip producers compete in a constant cost, perfectly competitive industry that is currently in long run equilibrium. Which of the following statements must be true?

An increase in demand for tulips may lead to short run economic profits but will cause no change in the long run equilibrium price

Marginal Product

may initially increase, then diminish, and ultimately become negative.

Refer to Graph 1 . To maximize profit or minimize losses this firm will produce

C units at price H

Fixed costs are

any cost which does not change when the firm changes its output

Which of the following explains the difference between short run and long run costs

All costs are variable in the long run but not in the short run

If the average variable cost of producing 4 burritos is $ 20 and the average variable cost of producing 5 burritos is $ 25, then the marginal cost of increasing output from 4 to 5 burritos is

$45

Figure A shows the number of workers and quantity of burgers produced in one hour The marginal product of the sixth worker is:

15 units of outpt

Refer to figure C. At the point of price 0 A economic profits are

ABKH

Lil Cliffords diaper service is a profit maximizing firm currently experiencing short-run economic losses. Under which of the following conditions should Lil Cliffords diaper service shut down production?

Average Revenue is less that average variable cost

Refer to Figure A. With which worker does the Law of Diminishing Marginal Returns first set in? a. 1st b. 2nd c. 3rd d. 4th e. 5th

C. 3rd

Refer to figure C. In the short run, the firm will stop production when the price falls below

D

At a firms current rate of output, the marginal cost is $15, the average variable cost is $10, the average fixed cost is $5m and the product price is $15. Which of the following statements is true for the firm

Economic Profits are zero because price equals average total cost

If a perfectly competitive industry is in long- run equilibrium, which of the following statements is most likely to be true?

Firms are earning a return on investment that is equal to their opportunity costs

Which of the following statements regarding accounting profits, opportunity costs and economic profits is true

If accounting profits are less than opportunity costs there will be economic losses

Assume that the short-run marginal cost curve initially falls, and it then rises as quantity of output increases. Which of the following must be true?

Initially the marginal product of labor increases but eventually marginal product of labor decreases

In the absense of barriers to entry a typical firm is currently in long run equilibrium. Assume there is an increase in the market demand for the good that the firm is producing. Which of the following will happen in the long run?

New firms will enter the market

The graph above shows the short run cost and revenue curves for a perfectly competitive firm. Assume that the market pruce is P0 and the firm is producing at quantity Q2. To maximize profit, the firm should

Produce quantity Q1, where price is equal to marginal cost

Oneil Motor Corp, Inc. is a multinational producer of automoblies that is currently experiencing constant returns to scale. Which of the following describes what happens as the firms increases its output?

Proportionate increases in inputs result in proportionate increases in output

Assume a competitive firm is producing where price and marginal revenue are great than marginal costs and average variable costs. Which of the following is true regarding the firms short run output level

The firm is producing too little and should increase its output level until P=MR=MC

The table in Figure D gives the short-run total cost function for a typical firm in a perfectly competitive industry. If the price the firm receives for its product is $20, which of the following statements is true in the short-run?

The firm will produce 3 units and make a profit of $7

In the short run, which of the following must be true for a perfectly competitive firm that is maximizing profits?

The firm will produce where MR=MC as long as P is greater than average variable cost

Assume the marginal product of labor first rises, reaches a maximum then falls. If the average product of labor is falling, which of the following is true?

The marginal product of labor must be falling

A constant-cost, perfectly competitive gadget industry is in long-run equilibrium. An increase in the number of consumers of gadgets will most likely result in...

short run losses for widget producers, followed by the exit of some firms

The vertical distance between ATC and AVC reflects

the average fixed cost at each level of output

Marginal Product is

the increase in total output attributable to the employment of one more worker

Economists use the term imperfect competition to describe :

those markets which are not purely competitive