ECO2023 TCC QUIZ 6-10

If workers are paid $10, what is the labor cost per unit of output in Table 21.1 when output is increased from 15 to 35 units of output? Units of Labor Units of Output 0 0 1 15 2 35 3 45 4 52

$0.50 per unit.

In Figure 24.2, the profit-maximizing monopolist will earn a profit per unit of

$1.50. Profit per unit is the difference between price ($5.50) and ATC ($4.00) at the profit-maximizing output level (four), which is $1.50.

Refer to Figure 22.3 for a perfectly competitive firm. This firm should shut down at any price below

$10. A firm should shut down only if the losses from continuing production exceed fixed costs. This happens when total revenue is less than total variable cost or price is less than average variable cost.

What is the total cost of 120 units in Figure 21.2?

$34,560.

High profits in a particular industry indicate that

Consumers want more of that industry's goods.

Which of the following characterizes a competitive market?

A downward-sloping demand curve for the market.

In a competitive market where firms are earning economic profits, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus?

A lower price and more firms.

Which of the following is a barrier to entry in a monopoly market?

A patent on a new product.

In Figure 24.1, total revenue is represented by the area

ABFE. Total revenue is equal to price times quantity, which will be area ABFE.

The marginal cost curve intersects the minimum of the curve representing

ATC

The shutdown point occurs where price is below the minimum of

AVC

If the products of two firms are homogeneous, then they

Are perfect substitutes.

Any firm that has economies of scale will

Be able to produce at a lower unit cost as it increases production.

Carter has budgeted $40 per month for candy bars. No matter how the price of candy bars changes, he spends exactly $40 per month. Carter's price elasticity of demand for candy bars must

Be unitary.

In the short run, the law of diminishing returns

Can be observed in every production process.

Consumers may not experience the benefits of economies of scale because a natural monopoly

Charges prices higher than competitive levels

Assume a given amount of output can be produced by several small plants or one large plant with identical minimum per-unit costs. This long-run situation reflects the existence of

Constant returns to scale.

A firm that makes zero economic profits

Covers all its costs, including a provision for normal profit.

Megan used to work at the local pizzeria for $15,000 per year but quit in order to start her own deli. To buy the necessary equipment, she withdrew $20,000 from her inheritance (which paid 8 percent interest). Last year she paid $25,000 for ingredients and $500 per month rent but had revenue of $50,000. She asked her dad the accountant and her mom the economist to calculate her costs for her.

Dad says her cost is $31,000 and Mom says her cost is $47,600.

In a competitive market, if the market price is equal to the minimum point of the firm's ATC curve, the firm may seek to earn economic profits by

Decreasing production costs through technological improvements.

A price decrease will cause total revenue to fall if

Demand is inelastic.

Higher prices will increase total revenue if

Demand is inelastic.

In long-run perfectly competitive equilibrium, marginal cost

Equals the minimum of the ATC.

If price is below the long-run competitive equilibrium level, there will be

Exit of firms from the market.

If the cross-price elasticity of demand for SUVs with respect to the price of gasoline is -0.10, and gasoline prices rise by 18 percent, then SUV sales should, ceteris paribus,

Fall by 1.8 percent.

Which of the following costs do not change when output changes in the short run?

Fixed Cost

Greater labor productivity means

Higher output per worker.

The demand is more price-elastic

In the long run.

If a good is normal, its

Income elasticity of demand is positive.

Refer to the data in Figure 22.1. The price of this good

Is $1 per unit. The total revenue curve of a perfectly competitive firm is an upward-sloping straight line, with a slope equal to price. From the graph, you can see that the price is $1.00.

The price signal the consumer gets in a competitive market

Is an accurate reflection of opportunity cost.

Which of the following is true for a monopolist?

It must lower its price on all of its units in order to sell any additional units.

Which of the following is an accurate argument in support of market power?

It provides greater ability to fund research and development.

Which of the following would definitely not be used by any unregulated monopolist?

Marginal cost pricing.

Which of the following is consistent with long-run equilibrium for a perfectly competitive market?

Maximum technical efficiency is achieved.

In making an investment decision, an entrepreneur

Must consider only variable costs.

A perfectly competitive firm should expand output when

P > MC.

Considering the In the News article " Judge Rules Microsoft Violated Antitrust Laws," antitrust laws attempt to

Prevent the abuse of market power.

The entry of firms into a market, ceteris paribus,

Reduces the economic profit of each firm already in the market.

When the prices of postage stamps rise, the demand for Internet service increases, ceteris paribus. Postage stamps and Internet service are therefore

Substitutes.

Maximum total revenue occurs when

The absolute value of the price elasticity of demand is 1.0.

Which of the following markets best illustrates the practice of price discrimination?

The airline market.

An investment decision involves choosing

The amount of plants and equipment and is a long-run decision.

If demand is price-elastic, then

The elasticity number E is greater than 1.

A perfectly competitive firm is a price taker because

The price of the product is determined by many buyers and sellers.

Supply is very elastic when

The quantity supplied has a large increase in response to an increase in price.

The In The News article "Ford Pumps $400 Million into Kansas City Plant" says that

This investment by Ford is a long-run production decision, and the company plans to enjoy economies of scale.

When payroll taxes are raised, the firm's marginal cost curve shifts

Upward, and supply decreases.

Changes in short-run total costs result from changes in

Variable costs.

Which of the following industries is perfectly competitive?

Wholesale fresh flowers.