Assignment #8

If the market for butter is perfectly competitive, then the demand curve facing a firm that produces butter will be:

perfectly elastic

A firm's profit equals:

(P − ATC) × Q [(price minus average total cost) times the quantity sold]

Which of the following would be considered a factor of production in the provision of bus service?

Bus drivers

Last year, Casey grew fresh vegetables, which she sold at her local farmers market, but this year, Casey did not plant any vegetables and went to work at a bank instead. Which of the following best explains Casey's career change?

Casey's opportunity costs of gardening exceeded Casey's opportunity costs of working at the bank.

Which of the following is NOT true of a perfectly competitive firm?

It seeks to maximize revenue

The price equals marginal cost rule for profit maximization is a specific example of which core principle?

The Cost-Benefit Principle

Which of the following is the most likely to be a variable factor of production at a university?

The number of librarians

Suppose a profit-maximizing firm in a perfectly competitive market is collecting $1,999 in total revenues. If the total cost of its fixed factors of production falls from $500 to $400, the firm will:

earn greater profits or smaller losses.

The most important challenge facing a firm in a perfectly competitive market is deciding:

how much to produce

A variable factor of production:

is variable in both the short run and the long run

According to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively:

larger and larger quantities of the variable factors of production.

When plotting marginal and average cost curves, the ______ cost curve always crosses the ______ cost curve at its ______.

marginal; average total; minimum

The absolute price of a good in terms is the good's

nominal price

Assume that each day a firm uses 13 employee-hours per day and an office to produce 100 units of output. The price of each unit output is $5, the hourly wage rate is $10, and rent on the office is $200 per day. Each day the firm earns a ______ of ______.

profit; $170

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:

should not shut down if its total variable cost is less than $750.

Suppose that when a perfectly competitive firm produces 1,000 units of output, its total variable cost is $1,900. If the marginal cost of producing the 1,000th unit is $1.70, and if the market price of each unit of output is $1.70, then the firm should:

shut down

If we plot John's opportunity cost per window on the vertical axis and the number of windows cleaned each day on the horizontal axis, we will have John's ______ curve for window-cleaning services.

supply

Marginal cost is calculated as:

the change in total cost divided by the change in output.

Consumer surplus measures

the difference between the most a buyer would be willing to pay for a product and the price actually paid.