6-supply

Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it's clear that this firm: A: is not maximizing its profit. B: should shut down. C: should not shut down if its total variable cost is less than $750. D: should produce more than 500 units a day.

C: should not shut down if its total variable cost is less than $750. Explanation: A firm will only shut down if its total revenue is less than its total variable cost. If this firm produces 500 units of output and the price of each unit is $1.50, then we know this firm's total revenue is $750. Thus, this firm should not shut down if its total variable cost is less than $750.

Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. If the lemonade market is perfectly competitive, and Jenny is charging the equilibrium price, then Jenny can increase her revenue if she: A. decreases the price of her lemonade and doesn't change her output. B. increases the price of her lemonade and decreases her output. C. increases the price of her lemonade and doesn't change her output. D. keeps the price of her lemonade the same and increases the output.

D

If a production process exhibits diminishing returns, then as output rises: A)total fixed cost will eventually increase. B)marginal cost will eventually increase. C)total revenue will eventually decrease. D)average total cost will eventually decrease. A

a

Which of the following is the most likely to be a fixed factor of production at a farm? a. The land on which the farm is located b. The number of workers hired to harvest the crops c.The amount of fertilizer used each week d. The amount of water used each day

a

As the market price of a service increases, more potential sellers will decide to perform that service because: Multiple Choice a. higher prices result in higher revenue. b. more potential sellers will find that the market price exceeds their reservation price. c. it's more prestigious to produce high-priced services. d. higher prices lead to lower opportunity costs.

b

The long run is best defined as: a. one year or more. b. a period of time sufficiently long that all factors of production are variable. c. the period of time between annual accounting reports. d. a period of time sufficiently long that at least one factor of production is fixed.

b

The most important challenge facing a firm in a perfectly competitive market is deciding: a, whether to maximize its profits. b. how much to produce. c. what price to charge. d. whether to advertise.

b

A profit-maximizing perfectly competitive firm must decide: a. only on what price to charge, taking output as fixed. b. both what price to charge and how much to produce. c. only on how much to produce, taking price as fixed. d. only on which industry to join, taking price and output as fixed.

c

A seller's supply curve shows the seller's: a. willingness to pay for an additional unit of output at each quantity. b. opportunity cost of producing an additional unit of output at each quantity. c. hourly wage for producing an additional unit of output at each quantity.

c

Even when a firm produces the level of output at which price equals marginal cost, it should shut down if its total revenue is less than its: a. marginal cost. b. fixed cost. c. variable cost. d. total cost.

c

If a firm shuts down in the short run, then its: Multiple Choice total revenue and total cost will fall to zero. profit will equal zero. economic loss will equal its fixed costs. economic loss will equal its variable costs.

c

A price-taker faces a demand curve that is: a. vertical at the market price. b. upward sloping. c. downward sloping. d. horizontal at the market price.

d

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output.Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day.When the firm uses 9 employee-hours, it earns a daily ________ of ________. A)loss; $64 B)profit; $114 C)loss; $114 D)profit; $64

d

In general, when the price of a fixed factor of production increases: a.

marginal cost is unchanged

Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 25 cents, then this firm should:

produce 80 donoughts