Micro Test II Ch 6-9

The rate at which one input can be reduced as units of the other input are added while holding output constant, is measured by the a. marginal rate of substitution b. marginal rate of technical substitution c. slope of the isocost curve d. average product of the input

b marginal rate of technical substitution

Which of the following is least likely to occur as a result of a price support program? a. a reduction in consumer surplus b. a reduction in producer surplus c. an increase in quantity produced d. an economic cost to government

b. a reduction in producer surplus

In a constant-cost industry, expansion of output a. causes input prices to rise as demand for them grows b. leaves input prices constant as input demand grows c. occurs under conditions of increasing returns to scale d. occurs due to the law of diminishing returns

b. leaves input prices constant as input demand grows

Although rice is a staple of the Japanese diet, the Japanese government has long restricted the importation of rice into Japan. The result of this import quota is a. to decrease the price of rice to the Japanese people b. to decrease the consumer surplus of J rice consumers c. to decrease the producer surplus of J rice producers d. a welfare gain for the J people e. to increase the consumption of rice by the J people

b. to decrease the consumer surplus of Japanese rice consumers

If input prices are constant, a firm with increasing returns to scale can expect a. costs to double as output doubles b. costs to more than double as output doubles c. costs to go up less than double as output doubles d. none of the above

c. costs to go up less than double as output doubles

An isocost line reveals the a. costs of inputs needed to produce along an isoquant b. costs of inputs needed to produce along an expansion path. c. input combinations that can be purchased with a given outlay of funds d. output combination that can be produced with a given outlay of funds

c. input combination that can be purchased with a given outlay of funds

When the average product is decreasing, marginal product a. equals average product b. exceeds average product c. is less than average product d. All of the above are possible

c. is less than average product

The supply curve for a competitive firm is a. its entire MC curve b. the upward-sloping portion of its MC curve c. its MC curve above the minimum point of the AVC curve d. its MC curve above the minimum point of the ATC curve e. its MR curve

c. its MC curve above the minimum point of the AVC curve

Deadweight loss refers to a. losses associated with stock market bubbles b. situations where market prices fail to capture all of the costs and benefits of a policy c. net losses in total producer and consumer surplus d. losses due to bankruptcies

c. net losses in total producer ad consumer surplus

Which of the following is not a necessary condition for the long-run equilibrium under perfect competition? a. no firm has an incentive to enter the market b. no firm has an incentive to exit the market c. prices are relatively low d. each firm earns zero economic profit e. each firm is maximizing profit

c. prices are relatively low

The difference between the economic and accounting costs of a firm are a. the accountant fees b. the corporate taxes on profits c. the opportunity costs d. the sunk costs incurred by the firm e. the explicit costs of the firm

c. the opportunity costs

A given production function assumes a given: a. technology b. set of input prices c. ratio of input prices d. amount of capital and labor e. amount of output

A. Technology

In a short-run production process, the marginal cost is rising and the average variable cost is falling as output is increased. Thus, a. average fixed cost is constant. b. the marginal cost is above average variable cost. c. marginal cost is below average fixed cost. d. marginal cost is below average variable cost.

D. marginal cost is below average variable cost

two firms can achieve a greater output than one firm producing both goods with the same inputs. We can conclude that the production process involves a. diseconomies of scope b. diseconomies of scale c. decreasing returns to scale d. increasing returns to scale

a. diseconomies of scope

The curve which shows combination of inputs that all yield the same output is a(n) a. isoquant curve b. isocost curve c. production function d. production possibilities frontier

a. isoquant curve

revenue is equal to a. price times quantity b. price times quantity minus total cost c. price times quantity minus average cost d. price times quantity minus marginal cost

a. price times quantity

The marginal rate of technical substitution is equal to a. the absolute value of the slope of an isoquant b. the absolute value of the slope of the indifference curve c. the ration of the marginal utilities of the two goods being produced d. all of the above

a. the absolute value of the slope of an isoquant

The law of diminishing returns applies to a. the short run only b. the long run only c. both the short and the long run d. neither the short nor the long run

a. the short run only

Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as a. P = MR b. P = AVC c. AR = MR d. P = MC

d. P = MC

An effective price ceiling causes which of the following: a. a loss of producer surplus b. a portion of consumer surplus becomes DWL c. an increase in DWL d. all of the above

d. all of the above

At the optimum combination of two inputs, a. the slopes of the isoquant and isocost curves are equal b. costs are minimized for the production of a given output c. the marginal rate of technical substitution equals the ratio of input prices d. all of the above

d. all of the above

Which of the following costs always declines as output increases? a. average cost b. marginal cost c. fixed cost d. average fixed cost e. average variable cost

d. average fixed cost

What is the difference between a price support and a price floor? a. a price support is below EQ; a price floor is above it b. a price support is above EQ; a price floor is below it c. government buys the excess supply to maintain a price floor, but not a price support d. government buys the excess supply to maintain a price support, but not for a price floor

d. government buys the excess supply to maintain a price support, but not for a price floor

every firm maximizes profit where a. average revenue equals average cost b. average revenue equals average variable cost c. total costs are minimized d. marginal revenue equals marginal cost. e. marginal revenue exceeds marginal soft by the greatest amount

d. marginal revenue equals marginal cost

The demand facing a perfectly competitive firm is a. the same as market demand curve b. downward-sloping and steeper than the market demand curve c. downward-sloping but less steep than the market demand curve d. perfectly horizontal e. perfectly vertical

d. perfectly horizontal

A firm's short run average cost curve is U-shaped. Which of these conclusions can be reached regarding the firm's returns to scale? a. the firm experiences increasing returns to scale b. increasing, constant, and decreasing returns in that order c. decreasing, then increasing returns to scale d. the short run average cost curve reveals nothing regarding returns to scale

d. the short run average cost curve reveals nothing regarding returns to scale

In the long run, which of the following is considered a variable cost? a. expenditures for wages b. expenditures for research and development c. expenditures for raw materials d. expenditures for capital machinery and equipment e. all of the above

e. all of the above

Which of the following conditions must hold in an equilibrium of a competitive market where the government puts a specific tax on consumers? a. the Q sold and the Price paid by the buyer must lie on the demand curve b. the Q sold and the seller's price must lie on the supply curve c. the Q demanded must = the quantity supplied d. the difference b/n the price the buyer pays and the price the seller receives must equal the specific tax e. all of the above

e. all of the above

import tariffs generally result in a. higher domestic prices b. less consumer surplus c. more producer surplus for domestic producers d. a deadweight loss e. all of these

e. all of these

In a supply-and-emand graph, producer surplus can be pictures as the a. vertical intercept of the supply curve b. area between the demand curve and the supply curve to the left of equilibrium output c. area under the supply curve to the left of the equilibrium output d. area under the demand curve to the left of equilibrium output e. area between the equilibrium price line and the supply curve to the left of the equilibrium output

e. area between the equilibrium price line and the supply curve to the left of the equilibrium output