Econ 110

Suppose a pizza parlor has the following production costs: $4.00 in labor per pizza, $3.00 in ingredients per pizza, $0.40 in electricity per pizza, $2,000 in restaurant rent per month, and $450 in insurance per month. Assume the pizza parlor produces 1,000 pizzas in a month. What is the total variable cost to produce the 1,000 pizzas?

$7,400 (cost of what it takes to make pizza only)

Which of the following is not a characteristic of a monopolistically competitive market?

Firms sell identical products

A price taker is

A firm that is unable to affect the market price

A market demand curve is derived by

Adding horizontally the individual demand curves

The law of (eventually) diminishing returns states that

Adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline

How are implicit costs different from explicit costs?

An explicit cost is not an opportunity cost, while an implicit cost is an opportunity cost

The law of diminishing marginal utility suggests that

Consumers experience less total satisfaction as they consume more of a good or service

Which of the following is an example of a good sold in an oligopolistic market?

Diamonds

Economic costs differ from accounting costs in that

Economic costs add the opportunity costs of a firm, such as foregone interest on investments, while accounting costs do not.

What's the difference between the short run and the long run?

In the short run, at least one of the firm's inputs is fixed, while in the long run, a firm is able to vary all its inputs and adopt new technology

As the level of output increases, the difference between the average total cost and average variable cost

Increases because average variable cost increases with output but average fixed cost decreases with output.

Which of the following is most likely to be a fixed cost for a farmer?

Insurance premiums paid on property

Why are firms willing to accept losses in the short run but not in the long run?

It may be profitable to incur losses in the short run for profits in the long run

For a market to be perfectly competitive, there must be

Many buyers and a few sellers, with all firms selling identical products, and no barriers to new firms entering the market

All profit-maximizing firms produce where

Marginal revenue equals marginal cost.

The price of a seller's product in perfect competition is determined by

Market demand and market supply

Which of the following is an implicit cost of production?

Rent that could have been earned on a building owned and used by the firm

The marginal product of labor is

The additional output that results when one more worker is hired, holding all other resources constant.

Utility is

The enjoyment or satisfaction people receive from consuming goods and services

The marginal cost curve intersects the average variable cost curve at the level of output where average variable cost is at a minimum because

The firm begins experiencing diminishing returns at this quantity

Suppose the equilibrium price in a perfectly competitive industry is $17 and a firm in the industry charges $18. Which of the following will happen?

The firm will not sell any output.

Which of the following will not change as output changes?

Total fixed costs.

Any cost that changes as output changes represents a firms

Variable cost

Why do single firms in perfectly competitive markets face horizontal demand curves?

With many firms selling an identical product, single firms have no effect on market price