Microeconomics week 6

If Mitch's Surf Shop has $30,000 in revenue each month and if the total cost of operating the shop is $26,000 each month, then the monthly profit for Mitch's Surf Shop is dollars (enter a numeric value).

4,000

If Wahoo's Fish Tacos has $75,000 in revenue each month, and if their total cost is $68,000 each month, then the monthly profit for Wahoo's Fish Tacos is dollars (enter a numeric value only).

7000

A firm's fixed cost is the sum of all payments made

A firm's fixed cost is the sum of all payments made

Which of the following capture the conditions under which firms will shutdown?

If price is less than average variable cost even when the firm produces at the level of output that minimizes average variable cost. If the firm's revenue is less than the firm's variable cost at all levels of output.

Suppose the automobile manufacturers in an economy use a similar set of inputs to produce cars and SUVs. If the market price of SUVs increases, which of the following is likely to happen to the supply of cars?

It will decrease. Reason: Automobile manufacturers will shift their resources away from producing cars and towards producing SUVs, so the supply of cars will decrease.

If output can be varied continuously, then firms in a perfectly competitive market maximize their profits by choosing the level of output such that _____.

P=MC

A price-taking, profit-maximizing firm will always produce a level of output where ______

Price = MC

Which of the following is correct as it applies to pollution mitigation and recycling programs?

Reaching zero pollution increases MC above MB in most cases.

The sum of all payments made to the firm's variable factors of production is the firm's _____.

Varible cost

input used in the production of a good or service is called ______.

a factor of production

The demand curve facing a firm in a perfectly competitive market is

a horizontal line at the equilibrium price.

Technological innovations that decrease a firm's marginal cost lead to

an increase in supp

A factor of production is ______.

an input used in the production of a good or service

A fixed factor of production is ______.

an input whose quantity cannot be changed in the short run

Suppose a recent announcement by the United States Department of Agriculture leads Mr. Zuckerman, who grows sugar cane, to believe that the price of sugar cane will increase sharply next year. Mr. Zuckerman's current supply of sugar cane is likely to _______.

decrease Reason: Expectations of future price increases lead current supply to decrease because suppliers prefer to sell their product when prices are high.

As input prices increase, the cost of producing each additional unit of output increases, leading to

decrease ofs upply

For a firm that produces jeans, which of the following is likely to be a factor of production?

denim workers machines

Marginal cost eventually increases because of _____.

diminishing returns

Marginal cost eventually increases because of _____.

diminishing returns Reason: Diminishing returns implies that it takes more of the variable input to produce each additional unit of output, which, in turn, implies that marginal cost is increasing.

Suppose an artist has a year-long lease on the studio where she works. When deciding how many paintings to make in a given month, the rent the artist pays for her studio is considered a _____.

fixed cost

Suppose the owners of a local brewery carry property insurance that is paid for on an annual basis. In deciding how much beer to produce on any given day, the annual cost of the property insurance is considered a ____.

fixed cost

The sum of all payments made to the firm's fixed factors of production is the firm's _____.

fixed cost

An input whose quantity cannot be altered in the short run is ______.

fixed factor

The law of diminishing returns explains why marginal costs eventually _____.

increase

If the marginal cost of producing an additional unit of a good is less than price of that good, then the firm should

increase production

Suppose Elsa owns an ice cream shop. If she expects the price of ice cream to fall next month, then this should ______.

lead her current supply of ice cream to increase

The period of time of sufficient length that all of the firm's factors of production are variable is known as the _____.

long run

At each point along a market supply curve, price measures each seller's _____.

marginal ocst of production

If a firm in a perfectly competitive market chooses the level of output such that price equals marginal cost, then the firm is ______.

maximiing revune

a firm in a perfectly competitive market chooses the level of output such that price equals marginal cost, then the firm is ______.

maximizing its prfits

If the marginal cost of producing the 500th unit of a good is greater than price of that good, then the firm should

not produce the 500th unit.

For a firm that produces bread, which of the following is likely to be a factor of production?

ovens flour worker

Firms in perfectly competitive markets face demand curves that are _____.

perfeclty elastic

Firms in perfectly competitive markets face demand curves that are _____.

perfectly elastic

The difference between the total revenue of a firm and all costs (explicit and implicit) incurred by the firm is called _____.

pofit

t each point along a market supply curve, Blank 1Blank 1 measures each seller's marginal cost of production.

price

Producer surplus is the amount by which:

price exceeds the seller's reservation price

he amount by which price exceeds the seller's reservation price is _____.

producer surplus

If a firm's total revenue is greater than its total cost, then the firm _____.

profitable

As the number of suppliers in the market increases, the market supply curve will shift to the _____.

right

if input prices decrease, supply will shift _____.

rightward

Supply will increase as the number of _____.

sellers in the market increases

The period of time sufficiently short that at least some of the firm's factors of production are fixed is known as the _____.

short run

In the short run, a profit-maximizing firm will not produce anything if

the firm's revenue is less than its variable cost at all levels of production

he sum of all the payments made to the firm's fixed and variable factors of production is the firm's cost.

total

A firm is profitable if its total revenue exceeds its _____.

total cost

profit equals

total revenue minus total cost

A firm's total variable, blank cost is the sum of all payments the firm makes to inputs whose quantities can be altered in the short run.

total variable

If recycling programs pay individuals and a reasonable amount for the collection of recycled raw materials, like aluminum, why do we have any litter at all?

Total economic surplus is greatest when we recycle up to the point where MB = MC. Each additional unit of recyclable materials incurs an additional cost. At some point this money could be spent elsewhere. Some recyclable materials are often discarded in remote areas that make the cost of retrieval very high.