Econ 202 Final

Which of the following is the best example of a perfectly competitive firm? A) A corn farmer in Illinois B) The Ford Motor Company C) United Parcel Service D) A Taco Bell restaurant

A) A corn farmer in Illinois

Marginal revenue is equal to: A) The change in P x Q due to a one unit change in output B) Price, but only if the firm is a price searcher C) The change in quantity divided by the change in price D) The change in price divided by the change in output

A) The change in P x Q due to a one unit change in output

Which is the best example of a firm's implicit costs? A) The opportunity cost of owner-provided labor B) Rent C) Wages D) Taxes

A) The opportunity cost of owner-provided labor

Which of the following is the best example of a short-run adjustment? A) Your local Walmart hires two more associates B) Smith University completed negotiations to acquire a large piece of land to build its new library C) Toyota builds a new assemble plant in Texas D) A local bakery purchases another commercial oven as part of its capacity expansion

A) Your local Walmart hires two more associates

Which of the following is not true for a firm in perfect competition? A) Profit equals total revenue minus total cost B) Average revenue is greater than marginal revenue C) Price equals average revenue D) Marginal revenue equals the change in total revenue from selling one more unit

B) Average revenue is greater than marginal revenue

Marginal cost is calculated for a particular increase in output by A) Multiplying the change in total cost by the change in output B) Dividing the change in total cost by the change in output C) Dividing the total cost by the change in output D) Multiplying the total cost by the change in output

B) Dividing the change in total cost by the change in output

Which of the following statements is false? A) Economic costs include both accounting costs and implicit costs B) Economists consider all costs to be implicit costs C) An implicit cost is a non-monetary opportunity cost D) An explicit cost is a cost that involves spending money

B) Economists consider all costs to be implicit costs

Which of the following best descrives the economic short run? A) It is a period during which fixed inputs become variable inputs because of depreciation B) It is a period during which at least one of the firm's inputs is fixed C) It is a period during which firms are free to vary all of their inputs D) It is a period of one year or less

B) It is a period during which at least one of the firm's inputs is fixed

The processes a firm uses to turn inputs into outputs of goods and services is called A) Marginal analysis B) Technology C) Technological change D) Positive economic analysis

B) Technology

Economists generally define the short run as being A) That period of time in which all inputs are variable B) That period in time in which at least one of the firm's inputs, usually plant size, is fixed C) Any period of time less than one year D) Any period of time less than six months

B) That period in time in which at least one of the firm's inputs, usually plant size, is fixed

Which of the following statements regarding the relationship between average and marginal costs is incorrect? A) When marginal costs are less than average costs, the latter must fall B) There is no way for average variable costs to fall when marginal costs are falling C) When marginal costs are greater than average costs, the latter must rise D) There is always a definite relationship between average and marginal cost

B) There is no way for average variable costs to fall when marginal costs are falling

Marginal cost is defined as the change in ____ cost when output changes by one unit/ In the short run, marginal cost can also be measured by the change in ___ cost when output changes by one unit A) Fixed;variable B) Total;variable C) Total;fixed D) Variable;fixed

B) Total;variable

Marginal cost is the A) Change in average cost when an additional unit of output is produced B) Additional output when total cost is increased by one dollar C) Additional cost of producing an additional unit of output D) Change in the price of inputs if a firm buys more inputs to produce an additional unit of output

C) Additional cost of producing an additional unit of output

Assume goods X and Y are complements and are produced in perfectly competitive markets. All else constant, an increase in demand for good X would cause: A) A decrease in the number of firms that produce good X B) A decrease in the number of firms that produce good Y C) An increase in the number of firms that produce good Y D) No effect on the number of firms that produce either good

C) An increase in the number of firms that produce good Y

The demand curve faced by the individual perfectly competitive firm is A) Vertical B) Downward sloping C) Horizontal D) Upward sloping

C) Horizontal

If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should A) Lower the price B) Keep output constant and enjoy the above normal profit C) Increase its output D) Reduce its output

C) Increase its output

Which of the following is an example of an "implicit cost" A) The payment of rent by the firm for the building in which it is housed B) The payment of wages by the firm C) Interest that could have been earned on retained earnings used by the firm to finance expansion D) The interest payment made by the firm for funds borrowed from a bank

C) Interest that could have been earned on retained earnings used by the firm to finance expansion

Suppose a family owned donut shop has $80,000 in total revenues, $36,000 in rent, and $20,000 in additional operating costs. The husband and wife work in the shop and pay no wages to themselves or others. The economic profits from the donut shop are A) $24,000 B) $80,000 C) Less than $24,000 D) More than $24,000

C) Less than $24,000

If total costs are $50,000 when 1000 units are produced, and total costs are $50, $100, when 1001 units are produced, we can conclude that A) Average fixed costs are $100 B) Average total costs are $100 C) Marginal costs are $100 D) Average variable costs are $100

C) Marginal costs are $100

In the long run, A) The firm's fixed costs are greater than its fixed costs in the short run B) The firm is more profitable than it is in the short run C) All of the firm's costs are variable costs D) All of the firm's costs are explicit costs; there are no implicit costs of production

C) all of the firm's costs are variable costs

Which of the following statements is true? A) When marginal cost is greater than average fixed cost, average fixed cost increases B) The marginal cost curve intersects the average fixed cost curve at its minimum point C) Average fixed cost does not change as output increases D) As output increases, average fixed cost becomes smaller and smaller

D) As output increases, average fixed cost becomes smaller and smaller

The change in total variable cost which accompanies one extra unit of output is A) The average variable cost B) The average total cost C) The average fixed cost D) Marginal cost

D) Marginal cost

Which of the following statements is false? A) Marginal cost will equal average total cost when average total cost is at its lowest point B) When marginal cost is greater than average total cost, average total cost will rise C) When marginal cost is less than average total cost, average total cost will fall D) Marginal cost will equal average total cost when marginal cost is at its lowest point

D) Marginal cost will equal average total cost when marginal cost is at its lowest point

In the case of the perfectly competitive firm: A) Marginal revenue is less than the market price B) Marginal revenue is greater than the market place C) Marginal revenue is equal to, less than, or greater than market price depending on the level of output D) Marginal revenue equals the market price

D) Marginal revenue equals the market price

McDonald's is a fast-food restaurant chain. Which of the following would be a long-run decision for McDonald's? A) Supply more hamburgers in one restaurant B) Replace the manager of a restaurant C) Hire one more worker in a restaurant location D) Open a new restaurant in a city

D) Open a new restaurant in a city

The demand curve for a perfectly competitive firm is A) Unitary elastic B) Elastic at relatively high prices and inelastic at relatively low prices C) Perfectly inelastic D) Perfectly elastic

D) Perfectly elastic

Which of the following statements is NOT true for a perfectly competitive firm? A) A firm's demand curve is horizontal B) The firm's demand curve is perfectly elastic C) The market demand and supply curves determine the market price D) The firm can influence its demand curve by advertising its product

D) The firm can influence its demand curve by advertising its product

An implicit cost is defined as: A) The difference between an input's explicit cost and its actual cost B) The amount by which economic profit exceeds accounting profit C) The opportunity cost of using a resource that is not explicitly paid out by the firm D) The amount by which the money spent on an input to production exceeds its opportunity cost

D) The opportunity cost of using a resource that is not explicitly paid out by the firm

For a firm in a perfectly competetive industry, the demand curve for its own product is A) Vertical B) Always above the marginal revenue curve C) Downward sloping D) The same as the marginal revenue curve

D) The same as the marginal revenue curve

T/F If marginal cost is above the average variable cost, then average variable cost is decreasing

False