Chapter 6: Practice Questions

8)For a given seller, the figure below shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output.What is this seller's reservation price for the 250th unit? A)$4 B)$14 C)$8 D)$2

A

A seller's supply curve shows the seller's: A)opportunity cost of producing an additional unit of output at each quantity. B)willingness to pay for an additional unit of output at each quantity. C)profit from producing an additional unit of output at each quantity. D)hourly wage for producing an additional unit of output at each quantity.

A

Assume that each day a firm uses 13 employee-hours and an office to produce 100units 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 ________. A)profit; $170 B)loss; $200 C)profit; $370 D)loss; $170

A

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

Suppose 30 employee-hours can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output would require: A)more than 30 additional employee-hours. B)fewer than 30 additional employee-hours. C)an additional 30 employee-hours. D)a total of 60 or fewer employee-hours.

A

The table below describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour. Given the information in the table above, what is the call center's marginal cost when it goes from making 6 to 16 calls an hour? A)$10 B)50 cents C)$2 D)$20

A

A fixed factor of production: A)is common in large firms but rare in small firms. B)is fixed in the long run but variable in the short run. C)is fixed in both the short run and the long run. D)is fixed only in the short run.

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.This firm's fixed cost each day is: A)$50 B)$64 C)$14 D)$66

A

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: Should John spend a third hour cleaning windows? A)No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7. B)Yes, because the additional amount he would earn is $6, which is better than earning nothing. C)Yes, because the additional amount he would earn is $14, which is greater than his opportunity cost of $7. D)Yes, because he would earn $28.

A

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: What is the lowest price per window that John would be willing to accept to spend 4hours per day cleaning windows? A)$7 B)$3.50 C)$2 D)$11

A

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.What is the marginal cost of production between 80 and 120 units of output each day?A)$70 B)$14 C)$1.75 D)$1.40

A

A price-taker faces a demand curve that is: A)downward sloping. B)horizontal at the market price. C)vertical at the market price. D)upward sloping.

B

One implication of the shape of the demand curve facing a perfectly competitive firm is that: A)the market would be unable to reach a new equilibrium if demand changed. B)if the firm increases its price above the market price, it will earn zero revenue. C)if the firm increases its price above the market price, it will earn higher revenue. D)if the firm decreases its price below the market price, it will earn higher revenue.

B

9)For a given seller, the below above shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. As the market price of this good increases, the quantity produced by this seller will________. A)stay the same B)stay the same until the price rises above $6 per unit, and then it will increase C)increase D)decrease

C

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: A)constant quantities of the variable factors of production. B)larger and larger quantities of the fixed factor of production. C)larger and larger quantities of the variable factors of production. D)smaller and smaller quantities of the variable factors of production.

C

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: The first hour John spends cleaning windows costs him ________ that he could have earned in the grocery store. A)$2 B)$18 C)$7 D)$14

C

One reason that variable factors of production tend to show diminishing returns in the short run is that: A)capital equipment is often idle in the short run. B)there is only so much that can be produced using additional variable inputs when some factors of production are fixed. C)the cost of employing additional resources increases as firms employ more of those resources. D)large firms cannot effectively manage their resources.

C

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

C

Individual supply curves generally slope ________ because ________. A)upward; profits increase with quantity B)downward; sellers become more efficient with practice C)downward; inputs are cheaper when purchased in high volume D)upward; of increasing opportunity costs

D

A rational seller will sell another unit of output: A)whenever the seller is earning a profit. B)if the seller can charge more than the equilibrium price. C)as long as the quantity demanded is greater than zero. D)if the cost of making another unit is less than the revenue gained from selling another unit.

D

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work ,and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: What is John's opportunity cost of cleaning windows for an hour? A)$2 B)$14 C)$8 D)$7

D

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: What is the lowest price per window that would induce John to spend at least one hour per day cleaning windows? A)$2 B)$7 C)$3 D)$1

D

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.If Casey's decision to change careers did not affect the price of vegetables at the farmers market, then this suggests that: A)the demand for vegetables increased this year. B)the market demand for vegetables is perfectly inelastic. C)the market for vegetables is perfectly competitive. D)the demand for vegetables did not change.

D

Marginal cost is calculated as: A)the change in output divided by the change in total costs. B)total revenue minus total costs. C)the percentage change in total costs divided by the percentage change in output. D)the change in total costs divided by the change in output.

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

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's total variable cost each day is: A)$84 B)$30 C)$56 D)$126

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, its total revenue each day is: A)$18. B)$160. C)$120. D)$240.

D

The primary objective of most private firms is to: A)maximize output. B)maximize revenue. C)minimize cost. D)maximize profit.

D

The short run is best defined as: A)one year or less. B)the period of time between quarterly accounting reports. C)a period of time sufficiently short that all factors of production are variable. D)a period of time sufficiently short that at least one factor of production is fixed

D

The table below describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour. What is the total cost of making 6 calls an hour? A)$30 B)$65 C)$60 D)$40

D

To increase output from 33 to 66 units requires ________ extra employee-hours; to increase output from 66 to 99 units requires ________ extra employee-hours. A)1; 1 B)2; 4 C)2; 1 D)1; 2

D

Which of the following best explains why you are more likely to see a poor person than a wealthy person picking up aluminum cans to sell? A)Wealthy people are more aware of diseases transmitted through litter than are poor people. B)Wealthy people are more concerned about their public image than are poor people. C)Wealthy people do not care about the environment. D)The opportunity cost of picking up cans is higher for wealthy people than for poor people.

D

Which of the following is NOT a characteristic of a perfectly competitive market? A)Buyers and sellers are well-informed. B)There are many sellers, each of which sells only a small fraction of the total quantity exchanged. C)Sellers can easily buy and sell the productive resources needed to enter the market. D)Each firm in the market sells a somewhat different variant of the good.

D