Chapter 8 Study
If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role influencing the decisions of purchasers?
Price of competing products
If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its
allocative efficiency
If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses.
average cost
It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.99,
could likely result in a notable loss of sales to competitors
In economics, labor demand is synonymous with
derived demand
Which of the following can be thought of as an adjustment for the risks involved with respect to the cost of a firm acquiring financial capital?
imposition of hurdle rates of interest
In the _______, the perfectly competitive firm will react to profits by ___________.
long run; increasing its production
In economics, the term "shutdown point" refers to the point where the
marginal cost curve crosses the average variable cost curve
If a marginal cost is rising in a competitive firm's short-run production process and its average variable cost is falling as output is increased, then
marginal cost is below average variable cost.
Idaho farmers can sell as large a quantity of their potato crop as they wish,
provided each is willing to accept the prevailing market price.
When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is
preparing to exit operations
If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ .
shutdown point
In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice>
what quantity to produce
When a firm makes plans for investments in physical capital, it compares the ___________ on these investments with ___________.
projected rates of return; the cost of financial capital to the firm
Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4?
$5.00
Neil's Bakery is famous for its giant cinnamon buns. The bakery has fixed costs of $100. Neil must pay each worker a wage of $10,00 per hour and each works an 8 hour shift. He earns $2 for each cinnamon bun that is sold. The following table shows how many cinnamon buns he can sell, depending on the number of workers he hires. Refer to the table below. To maximize his profits in this competitive market, how many workers should he hire?
3 workers
Temperatures have persisted below freezing levels in Florida throughout the months of December and January. As a result, demand for electricity sharply increased and the price of electricity rose sharply. The price of coal also rose. In these circumstances, any resulting shifts in the supply curves for coal miners and electricity producers
can also be interpreted as shifts of their respective marginal cost curves
A perfectly competitive industry is a
hypothetical assumption
I'maSolarPanelCo. manufactures and distributes solar panels in the US market. Two years ago, it had 5 US competitors, but government stimulus in the industry has encouraged 7 new US competitors to enter the market. In these circumstances, I'maSolarPanelCo.'s price for its output
is dictated by the forces of demand and supply
What happens in a perfectly competitive industry when economic profit is greater than zero?
new firms may enter the industry and all of the above
Why are some producers forced to sell their products at the prevailing market price?
they are very small players in the overall market