Microeconomics- Chapter 8 and 9 quiz

Refer to Figure 22.3 for a perfectly competitive firm. This firm should shut down at any price below

$10.

Refer to the data in Figure 22.1. The total fixed costs for this firm are approximately

$50.

Suppose the entrepreneur could earn $1,000 as an employee elsewhere. This means the accounting profit is

$925.

Suppose a firm has an annual budget of $200,000 in wages and salaries, $75,000 in materials, $30,000 in new equipment, $20,000 in rented property, and $35,000 in interest costs on capital. The owner/manager does not choose to pay himself, but he could receive income of $90,000 by working elsewhere. The firm earns revenues of $360,000 per year. What is the economic profit for the firm described above?

-$90,000.

Refer to the data in Figure 22.1. The profit-maximizing output for this firm is

200 units.

In a competitive market where firms are earning economic losses, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus?

A higher price and fewer firms.

The long run is

A period long enough for all inputs to be variable.

A production decision involves choosing

A rate of output and is a short-run decision.

In a perfectly competitive market economy, business failures can benefit society by causing

A reallocation of resources to better uses.

The $600 paid in property taxes counts as

An explicit cost.

In the In the News article "Southern Farmers Hooked on New Cash Crop," production of catfish has skyrocketed in the United States from 16 million pounds in 1975 to an expected 340 million pounds in 1989. The business is growing among farmers in Alabama, Arkansas, and Louisiana. Which of the following is the motive that enticed many farmers to give up the production of row crops to produce catfish?

Catfish is relatively more profitable than row crops.

When the short-run marginal cost curve is upward-sloping,

Diminishing returns occurs with greater output.

When technology improves, the firm's marginal cost curve shifts

Downward, and supply increases.

Technological improvements cause

Existing firms to produce more output.

If price is above the long-run competitive equilibrium level,

Firms will enter the market.

One In the News feature reports that General Motors planned to essentially quit making cars and trucks in the United States for nine weeks from mid-May through July 2009 and Dell planned to close one of its Texas computer-manufacturing plants. Based on these particular news clips, what is the difference between GM's and Dell's decisions?

GM's decision to idle plants was a short-run shutdown decision. Dell, by contrast, made a long-run decision to exit a specific market.

The short run is the time period

In which some costs are fixed.

One World View article titled "Economy Threatens Catfish Industry" describes the increased competition in the catfish market. Which of the following is not true for a perfectly competitive industry in the long run?

Individual firms possess significant market power.

The decision to start or expand a business is known as the

Investment decision.

Refer to the data in Figure 22.1. The price of this good

Is $1 per unit.

Which of the following is true about a competitive market supply curve?

It is the sum of the marginal cost curves of all firms.

Investment decisions are made on the basis of the relationship of price to

Long-run average total cost.

Businesses that fail to account for implicit costs, like the strawberry farmer, Hiroshi Fujishige, who failed to consider the enormous opportunity of selling his property to Disneyland, will

Make more money when they shut down.

Short-run profits are maximized at the rate of output where

Marginal revenue is equal to marginal cost.

Refer to Figure 22.3 At quantity level B

Marginal revenue is greater than marginal cost, so the firm should expand production.

If a perfectly competitive firm is producing at its profit-maximizing output in the short run and fixed costs decline, the firm should

Not change output.

Profit per unit is equal to

P - ATC.

A perfectly competitive firm should expand output when

P > MC.

Examples of barriers to entry include

Patents.

A change in which of the following will change the optimal rate of output?

Payroll taxes.

Which of the following is not a barrier to entry?

Perfect information.

A catfish farmer will shut down production when

Price falls below AVC.

A firm experiencing economic losses will still continue to produce output in the short run as long as

Price is above average variable cost.

The fact that a perfectly competitive firm's total revenue curve is an upward-sloping straight line implies that

Product price is constant at all levels of output.

Which of the following is generally a fixed cost?

Property taxes on land used in production.

If the firm in Figure 23.4 raised the price of its product above $4, the firm would

Reduce its total revenue to zero.

The entry of firms into a market, ceteris paribus,

Reduces the economic profit of each firm already in the market.

Bib's Soccer Ball Company produces 800 soccer balls per week. If the firm used marginal cost pricing to determine soccer ball output, it would produce 600 soccer balls. Consumers do not receive the most desirable quantity of soccer balls from Bib's because

The cost of producing the additional 200 soccer balls is greater than the amount that consumers are willing to pay for the additional soccer balls.

Refer to Figure 22.3 for a perfectly competitive firm. Which of the following statements is true for this firm between the prices of $10 and $15?

The firm is experiencing economic losses but should continue to produce.

Which of the following is a determinant of market supply but not the supply curve of an individual firm?

The number of firms in the market.

Which of the following should not be included when calculating accounting profit?

The return on the next best alternative investment opportunity.

Perfect competition is a situation in which

There are many firms and no buyer or seller has market power.

In making an investment decision, an entrepreneur

Treats all costs as variable.

When payroll taxes are raised, the firm's marginal cost curve shifts

Upward, and supply decreases.

In a perfectly competitive industry, economic profit

Will approach zero in the long run as more firms enter the market.

In Figure 23.3, diagram "a" presents the cost curves that are relevant to a firm's production decision, and diagram "b" shows the market demand and supply curves for the market. Use both diagrams to answer the following question: In Figure 23.3, the price at which a firm makes zero economic profits is

p2.