ECON 203 - 4

When Acme Dynamite produces 225 units of output, its variable cost is $2,500, and its fixed cost is $600. It sells each unit of output for $25. When Acme Dynamite produces 225 units of output, its profit is. *(225 x 25) - 2,500 - 600*

$2,525.

If a firm spends $400 to produce 20 units of output and spends $880 to produce 40 units, then between 20 and 40 units of output, the marginal cost of production is: (change in cost) / (change in u)nits)

$24.

If a firm spends $125 to produce 25 units of output and spends $250 to produce 40 units, then between 25 and 40 units of output, the marginal cost of production is:

$8.33.

Suppose the current market price for wheat is $10 per bushel and there are 200,000 bushels sold each day. If the supply curve is a straight line that intersects the price axis at $2 per bushel, what is the total amount of producer surplus in this market?

$800,000

Which of the following is a defining characteristic of all perfectly competitive markets?

All firms sell the same standardized product.

Last year, Amada grew fresh vegetables, which she sold at her local farmers market, but this year, Amada did not plant any vegetables and went to work at a bank instead. Which of the following best explains Amada's career change?

Amada's opportunity costs of gardening exceeded Amada's opportunity costs of working at the bank.

Suppose a firm produces the level of output at which the marginal cost of the last unit produced equals the price of the good. Which of the following statements is always true?

The firm should shut down if its total revenue is less than its variable cost.

Which of the following best explains why you are more likely to see a poor person than a wealthy person picking up aluminum cans to sell?

The opportunity cost of picking up cans is higher for wealthy people than for poor people.

If crude oil is a variable factor of production for a firm, then an increase in the price of crude oil will lead to

a decrease in the firm's supply.

If the market for apples is perfectly competitive, then the demand curve facing an individual apple producer is

a horizontal line at the equilibrium price.

If a firm shuts down in the short run, then its

economic loss will equal its fixed costs.

The law of diminishing returns implies that when some of a firm's factors of production are fixed, increased production eventually requires

ever-smaller increases in the level of output.

An increase in the price a firm receives for its output will lead the firm to

expand output.

If a perfectly competitive firm can sell each unit of output for $9, and the marginal cost of the last unit produced is $8.50, then the

extra benefit of the last unit produced is greater than the extra cost.

In a perfectly competitive market

firms are price takers.

If a firm is a price taker, then it

has no influence over the price at which it sells its product.

A price-taker faces a demand curve that is

horizontal at the market price.

Suppose a perfectly competitive firm is producing 37 units output, and the marginal cost of the 37th unit is $3. If the firm can sell each unit of output for $5 and the firm's revenue is sufficient to cover its variable cost, the firm should

increase production.

Suppose the market for apples is perfectly competitive, and the equilibrium price of apples is $2 per pound. If Apple Valley Farms charges $4 per pound for apples, then

it will not be able to sell any apples.

A profit-maximizing firm will only produce a positive amount of output if

its total revenue is greater than or equal to its variable cost.

Suppose the Direct-to-You Delivery Company only has two factors of production: delivery trucks and workers. The number of delivery trucks available to the firm is not easily altered, so the firm's only variable factor of production is labor. Currently, the firm employs 5 workers a day and makes 100 deliveries a day. If the firm is experiencing diminishing returns, then if it hires 5 additional workers each day (so that there are 10 workers in total), it will be able to make _____ deliveries a day.

less than 200

Suppose 30 employees can produce 50 units of output per day. Assuming the presence of diminishing marginal returns, producing 100 units of output per day would require

more than 30 additional employees.

If the market for widgets is perfectly competitive, then we would expect

new firms to be able to easily enter the market for widgets.

Suppose the market for strawberries is perfectly competitive, and strawberries sell for $3 per pint. If an individual strawberry producer tries to sell strawberries for $4 per pint, then that producer will

not be able to sell any strawberries.

If a firm doubles the price of its product and its sales fall by only 10 percent, then this suggests that the firm is

not part of a perfectly competitive market.

A seller's supply curve shows the seller's

opportunity cost of producing an additional unit of output at each quantity.

If the market for butter is perfectly competitive, then the demand curve facing a firm that produces butter will be:

perfectly elastic.

Assume that each day a firm uses 13 employee-hours per day and an office to produce 100 units of output. The price of each unit output is $5, the hourly wage rate is $10, and rent on the office is $200 per day. Each day the firm earns a ______ of ______.

profit; $170

Suppose that when a firm produces the level of output at which price equals marginal cost, the firm's total revenue is less than its variable cost. In this case, the firm should

shut down.

Marginal cost is calculated as

the change in total cost divided by the change in output.

A profit-maximizing firm chooses the level of output that maximizes:

the difference between its total revenue and its total cost.

If three firms produce 92 percent of all ketchup bought and sold in the market, then this suggests that

the market for ketchup is not perfectly competitive.

Last year, Amada grew fresh vegetables, which she sold at her local farmers market, but this year, Amada did not plant any vegetables and went to work at a bank instead. If Amada's decision to change careers did not affect the price of vegetables at the farmers market, then this suggests that

the market for vegetables is perfectly competitive.

If a firm is a price taker, then

the most the firm can charge for its product is the equilibrium price.

A firm's total profit equals

(P − ATC) × Q.

Why are brown eggs more expensive than white ones?

Because hens that lay brown eggs require more food per egg than those that lay white ones.

Why are many more white eggs sold than brown eggs?

Because white eggs are cheaper and most customers don't care about egg color.

Which of the following would be considered a factor of production in the provision of bus service?

Bus drivers

Which of the following is NOT a characteristic of a perfectly competitive market?

Each firm in the market sells a somewhat different variant of the good.

Which of the following is NOT a characteristic of perfectly competitive markets?

Each supplier produces a unique variety of the good.

Suppose a firm currently employs 99 workers. If labor is the only variable factor of production, and the firm is experiencing diminishing returns, then the

additional output the firm gets from hiring the 99th worker is greater than the additional output the firm would get from hiring a 100th worker.

Suppose a profit-maximizing firm in a perfectly competitive market is earning an economic profit of $1,345. If the firm's fixed cost increases from $200 to $300, the firm will

earn a smaller profit.

Your neighbors have offered to pay you to look after their dog while they are on vacation. It will take you one hour per day to feed, walk, and care for the dog, which you can do either before or after you go to work. Your regular job pays $10 per hour, and you can work up to eight hours per day. The smallest amount of money you would accept to look after your neighbor's dog each day is equal to

the value you place on one hour of leisure.