micro test 2 chap 8

Which of the following is a difference between constant-cost industries and increasing-cost industries? a. For firms in constant-cost industries, an increase in output leads to an increase in the price of some resources; whereas for firms in increasing-cost industries, an increase in output leads to no change in the price of resources. b. Firms in a constant-cost industry encounter a lower average cost with an increase in output; whereas firms in an increasing-cost industry encounter a higher average cost with an increase in output. c. For constant-cost industries, the long-run industry supply curve is horizontal; whereas for increasing-cost industries, the long-run industry supply curve slopes upward. d. In increasing-cost industries, each firm's costs depend only on the scale of its plant and its rate of output; whereas for constant-cost industries, each firm's costs depend not only on the plant size but also on the number of firms in the market.

For constant-cost industries, the long-run industry supply curve is horizontal; whereas for increasing-cost industries, the long-run industry supply curve slopes upward.

________ refers to the amount by which total revenue from production exceeds variable cost. a. Consumer surplus b. Economic surplus c. Producer surplus d. Labor surplus

Producer surplus refers to the amount by which total revenue from production exceeds variable cost.

The golden rule of profit maximization states that to maximize profit or minimize loss, a firm should produce the quantity at which: a. marginal revenue is less than marginal cost. b. marginal revenue equals marginal cost. c. marginal revenue is more than marginal cost. d. marginal revenue equals total cost.

The golden rule of profit maximization states that to maximize profit or minimize loss, a firm should produce the quantity at which marginal revenue equals marginal cost.

The long-run supply curve in an increasing cost industry is: a. vertical. b. horizontal. c. negatively sloped. d. positively sloped.

The long-run supply curve in an increasing cost industry slopes upward.

________ refers to a firm's change in total revenue from selling an additional unit of output. a. Micro-revenue b. Average revenue c. Marginal revenue d. Interest revenue

a. Micro-revenue

Suppose a competitive market is in long run equilibrium. Which of the following is likely to happen if the market demand decreases? a. The market price and quantity supplied decrease in the short run. b. The market price and quantity supplied increase in the short run. c. The market supply increases and the producers earn economic profit in the short run. d. The market price increases but the quantity supplied decreases in the short run.

a. The market price and quantity supplied decrease in the short run.

Suppose a competitive market is in long-run equilibrium. Which of the following is likely to happen if the market demand increases? a. The market price and the quantity supplied increases in the short run. b. The market supply decreases and the producers incur economic loss in the short run. c. The market price decreases but the quantity supplied increases in the short run. d. The market price and the quantity supplied decreases in the short run.

a. The market price and the quantity supplied increases in the short run.

The long-run supply curve in a constant cost industry is: a. horizontal. b. positively sloped. c. negatively sloped. d. vertical.

a. horizontal.

In the short run, a competitive firm will shut down if: a. the average variable cost exceeds the price at all rates of output. b. total revenue exceeds the variable cost of production. c. the price at all rates of output exceeds the total cost of production. d. the price is equal to the average cost of production.

a. the average variable cost exceeds the price at all rates of output.

Which of the following is one of the features of a perfectly competitive market structure? a. Interdependence of firms b. One seller and a large number of buyers c. No close substitutes of the product sold in the market d. No barriers to entry or exit in the long run

All other are characteristics of monopoly and oligopoly market structure.

________ occurs when firms produce the output that consumers value most. a. Productive efficiency b. Positive externality c. Negative externality d. Allocative efficiency

Allocative efficiency occurs when firms produce the output that consumers value most.

If a firm earns total revenue of $225 when it produces 6 units of a good, what is the average revenue of the firm? a. $42.50 b. $35 c. $37.50 d. $36.50

Average revenue is equal to total revenue divided by quantity, or AR = TR/q. Therefore, AR is equal to $225 / 6 or $37.50.

Suppose a competitive market is in long run equilibrium. Which of the following is likely to happen if the market demand decreases? a. The market supply increases and the producers earn economic profit in the short run. b. The market price increases but the quantity supplied decreases in the short run. c. The market price and quantity supplied decrease in the short run. d. The market price and quantity supplied increase in the short run.

A decrease in market demand leads to a fall in the market price. Each firm reacts to a fall in price by reducing output along its short-run supply or marginal cost curve. This leads to a fall in the quantity supplied by each firm in the short-run.

In the short run, if a competitive firm's average variable cost equals the price of its product: a. shuts down. b. the firm continues to operate in the market. c. earns zero economic profit. d. earns positive economic profit.

If a firm's average variable cost equals the price of its product, the firm incurs losses but it continues to operate in the market.

In the long run, firms in a perfectly competitive industry earn ________ profit. a. marginal b. economic c. super-normal d. normal

In the long run, firms in a competitive market earn normal profit or means zero economic profit.

The long-run supply curve in a constant cost industry is: a. horizontal. b. vertical. c. negatively sloped. d. positively sloped.

horizontal

________ refers to a firm's change in total revenue from selling an additional unit of output. a. Marginal revenue b. Average revenue c. Micro-revenue d. Interest revenue

Marginal revenue refers to a firm's change in total revenue from selling an additional unit of output.

Under perfect competition, which of the following indicates the total quantity supplied of a good in the market at each price in the short run? a. Short-run total cost curve b. Short-run industry supply curve c. Long-run firm supply curve d. Short-run firm supply curve

Under perfect competition, it is the short-run industry supply curve that indicates the quantity supplied of a good by all the firms in the market at each price in the short run.

A market is said to be allocatively efficient if: a. the marginal benefit that consumers derive from a good is less than the marginal cost of producing that good. b. the producers use the least-cost combination of inputs to produce the required output. c. the marginal benefit that consumers derive from a good is more than the marginal cost of producing that good. d. the marginal benefit that consumers derive from a good equals the marginal cost of producing that good.

A market is said to be allocatively efficient if the marginal benefit that consumers derive from a good equals the marginal cost of producing that good.

A market is said to be allocatively efficient if: a. the marginal benefit that consumers derive from a good is more than the marginal cost of producing that good. b. the marginal benefit that consumers derive from a good equals the marginal cost of producing that good. c. the marginal benefit that consumers derive from a good is less than the marginal cost of producing that good. d. the producers use the least-cost combination of inputs to produce the required output.

A market is said to be allocatively efficient if the marginal benefit that consumers derive from a good equals the marginal cost of producing that good.

________ describes the important features of a market, such as the number of firms, product uniformity across firms, firm's ease of entry and exit, and forms of competition. a. Market research b. Market structure c. Market capitalization d. Market segmentation

Market structure describes the important features of a market, such as the number of firms, product uniformity across firms, firm's ease of entry and exit, and forms of competition.