Unit 3 Worksheet
Which of the following provides an example of the law of diminishing returns?
As more of variable input-for example, labor is used with a fixed number of machines-output increases but at a diminishing rate
When a competitive firm maximizes short-run economic profits, it produces at the output level where
Marginal revenue equals marginal cost
Assume a firm doubles its usage of each input, resulting in a doubling of the firm's output. Which of the following describes this result?
Constant returns to scale
At its current level of output, a firm's total revenue is greater than its total variable cost but less than its total cost. If the firm is producing...
Continue to produce at its current level of output to minimize losses
Assume the marginal product of labor first rises, reaches a maximum, and then falls. If the average product of labor is falling, which of the following is true?
The marginal product of labor must be falling.
In the short run, assume diminishing marginal product of labor sets in with the hiring of the second worker. Which of the following will remain constant as a firm produces more output?
Total fixed cost
Which of the following explains the difference between short-run and long-run costs?
All costs are variable in the long run but not in the short run.
in the absence of barrier to entry, a typical firm is currently in long-run equilibrium. assume there is an increase in the market demand for the good that the firm is producing. which of the following will happen in the long run?
new firms will enter the market
Ryan quit a job with a daily salary and opened a business. On a daily basis, the total revenue of the business is $200, and the explicit costs of the business are $120. If Ryan has zero economic profits, what must be the value of Ryan's implicit costs?
$80
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?
C) Total product is maximized when marginal product is zero.
Which of the following statements about short-run costs is true?
D) Total fixed cost plus total variable cost equals total cost.
The graph above shows a firm's long-run average total cost curve (LRATC). Which of the following statements is true as the firm increases its scale of production?
For output levels above Q1Q1, the firm experiences diseconomies of scale.
Which of the following statements regarding accounting profits, opportunity costs, and economic profits is true?
If accounting profits are less than opportunity costs, there will be economic losses.
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?
Initially the marginal product of labor increases but eventually marginal product of labor decreases.
Assume Nadia voluntarily leaves a job with a salary of $100 per day to open and run a restaurant instead. After deducting all explicit costs from the restaurant revenues, Nadia has a gain of $120. Assuming there are no additional implicit costs, which of the following statements is true?
Nadia has an economic profit of $20.
The graph above shows the short-run cost and revenue curves for a perfectly competitive firm. Assume that the market price is P0 and the firm is producing at quantity Q2. To maximize profit, the firm should
Produce quantity at Q1 where price is equal to marginal cost
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
The firm is producing too little and should increase its output level until P =MR=MCP =MR=MC.
In the short run, which of the following must be true for a perfectly competitive firm that is maximizing profits?
The firm will produce where MR=MC as long as P is greater than AVC
