Microeconomics Unit 3 Practice

The firm is producing too little and should increase its output level until P =MR=MCP =MR=MC.

Assume a competitive firm is producing where price (P) and marginal revenue (MR) are greater than marginal cost (MC) and average variable cost (AVC). Which of the following is true regarding the firm's short-run output level

Initially the marginal product of labor increases but eventually marginal product of labor decreases.

Assume that the short-run marginal cost curve initially falls, and it then rises as quantity of output increases. Which of the following must be true?

JC should operate, since its loss is less than its fixed cost.

JC pizzeria has a year remaining on an unbreakable lease on its building, requiring a payment of $20,000 a year. If JC operates over the next year, it estimates that its revenues will be $200,000 and that its expenses, in addition to the lease, will be $190,000. Which of the following statements is true?

5 trains

Locotek produces toy trains and pays each worker $350 per week. Five workers can produce 40 trains per week and six workers can produce 45 trains per week. The marginal product per week of the sixth worker is

change in total cost resulting from producing an additional unit of output

Marginal cost is defined as the

If accounting profits are less than opportunity costs, there will be economic losses.

Which of the following statements regarding accounting profits, opportunity costs, and economic profits is true?

The firm's price is given by the market and is equal to marginal revenue.

Which of the following statements relating to a profit-maximizing perfectly competitive firm is true?

The price will remain unchanged.

A constant-cost, perfectly competitive industry is in long-run equilibrium. If the demand for the good increases, which of the following will occur in the long run?

continue to produce only if the new price covers average variable costs

A farmer produces peppers in a perfectly competitive market. If the price falls, in the short run the farmer should

$100

A firm is producing 100 units of output at a total cost of $400. The firm's average variable cost is $3 per unit. What is the firm's total fixed cost?

price is equal to marginal cost

A firm is producing the allocatively efficient level of output if

$500

A firm produces 400 books and sells each book for $15. If the explicit cost of producing the books is $4,500 and the implicit cost is $1,000, the firm's economic profit is

Price exceeds marginal cost.

A market is clearly NOT perfectly competitive if which of the following is true in equilibrium?

The firm's output is 1,000 units, and its profit is zero.

A perfectly competitive firm is currently in long-run equilibrium. Its total revenue is $100,000, and the average total cost of production is $100. Which of the following can be concluded from this information?

above the average variable cost curve

A perfectly competitive firm's short-run supply curve is the portion of the marginal cost curve that is

The total profit from selling 101 units is $2 greater than the total profit from selling 100 units.

A perfectly competitive firm, earning economic profits, produces and sells 100 units of output at a price of $20 per unit. If its marginal cost of increasing output to a rate of 101 units is $18, which of the following statements is correct?

the sum of total consumer surplus and total producer surplus

A perfectly competitive market in equilibrium is allocatively efficient and it maximizes

Number of Firms Market Price Firm's Quantity Decrease Increase Increase

A typical firm in a perfectly competitive constant-cost industry is operating with an economic loss in the short run. When the industry returns to long-run equilibrium, what will happen to the number of firms in the industry, the market price, and the typical firm's quantity?

Firms can affect the selling price of their product.

All of the following characterize both perfectly competitive and monopolistically competitive markets EXCEPT:

Total product is maximized when marginal product is zero.

Based on the short-run production function graph above showing the relationship between the quantity of labor and total product, which of the following statements is true?

average total cost is at a minimum

Productive efficiency occurs when a firm produces output at a level at which

Market Structure Quantity Perfect Competition Q3

The graph above shows the total revenue and total cost curves for a firm in which type of market structure and what is the profit-maximizing quantity?

It is less than the marginal product of the third worker due to diminishing returns.

The table above shows the short-run production function for picking apples. Based on the production data, which of the following statements about the marginal product of the fifth worker is true?