Econ test 3

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

new firms will enter the market.

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

upward sloping.

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

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

Which of the following can be inferred from the figure above?

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

If the market price is $6, what is the firm's short-run economic profit?

0

When 100 identical firms participate in this market, at what price will 15,000 units be supplied to this market?

1.5

If the market price is $10, what is the firm's short-run economic profit?

15

Sue earns income of $80,000 per year. Her average tax rate is 50 percent. Sue paid $5,000 in taxes on the first $30,000 she earned. What was the marginal tax rate on the first $30,000 she earned, and what was the marginal tax rate on the remaining $50,000?

16.67 percent and 70.00 percent, respectively

Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?"

2 acres

The Three Amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $50. Each dog bed can be sold for a price of $65. The Three Amigo's total costs are

25,000

If at a market price of $1.75, 52,500 units of output are supplied to this market, how many identical firms are participating in this market?

300

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

6

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.

Which of the following is not a characteristic of a public good?

Because it is a free good, there is no opportunity cost.

The Pennsylvania Turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the Turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the Turnpike causing traffic to slow during peak times. What type of good would the Turnpike be classified as in this case?

Private good

Raiman's Shoe Repair produces custom-made shoes. When Mr. Raiman produces 12 pairs per week, the marginal cost of the 12th pair is $84, and the marginal revenue of the 12th pair is $70. What would you advise Mr. Raiman to do?

Produce fewer custom-made shoes

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat 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 5,600 bushels of wheat when he hires 4 workers.

Assume that the market starts in equilibrium at point W in graph (b). An increase in demand from D0 to D1 will result in

an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z.

When marginal cost is less than average total cost,

average total cost is falling.

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

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

When a firm experiences diseconomies of scale

long-run average total cost increases as output increases

If your income is $50,000, your income tax liability is $10,000, and you paid $0.25 in taxes on the last dollar you earned, your

marginal tax rate is 25 percent.

. If the market price is $10, the firm will earn

negative economic profits in the short run but remain in business.

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

profit is maximized

The accountants hired by Forever Fitness have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000. Because of this information, in the short run, Forever Fitness should

shut down because staying open would be more expensive.