ECON 201 Final based off practice questions

Brady Industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firm's total fixed costs equal a. $2. b. $4. c. $1,000. d. $2,000.

c

For a monopoly market, total surplus can be defined as the value of the good to a. producers minus the cost incurred by consumers. b. producers plus the cost incurred by consumers. c. consumers minus the costs of producing the good. d. consumers plus the cost of producing the good.

c

Average revenue for a monopoly is the total revenue divided by the quantity produced. a. True b. False

a

A restaurant that has market power can a. minimize costs more efficiently than its competitors. Practice b. influence the market price for the meals it sells. c. reduce its marketing budget more than its competitors. d. ignore profit maximizing strategies when setting the price for its meals.

b

An increase in a product's price will shift the labor demand curve for workers who produce that product to the left. a. True b. False

b

If a firm experiences diminishing marginal productivity of labor, the marginal product a. increases as total product increases. b. decreases as total product increases. c. increases as total product decreases. d. decreases as total product decreases.

b

First grade teachers who work in Lynn, Massachusetts's (a large, low income city north of Boston) public schools earn more than first grade teachers who work in private schools in more affluent communities north of Boston. Lynn teachers belong to a teachers' union. Which statement best explains the scenario described above? a. Lynn school teachers receive a compensating differential because they work in a more difficult environment, and they receive higher than market equilibrium wages because they are members of a teachers' union. b. Lynn school teachers receive a compensating differential because they work in a more difficult environment, but they do not receive higher than market equilibrium wages because they are members of a teachers' union. c. Lynn school teachers do not receive a compensating differential because they work in a more difficult environment, but they do receive higher than market equilibrium wages because they are members of a teachers' union. d. Lynn school teachers do not receive a compensating differential because they work in a more difficult environment, and they do not receive higher than market equilibrium wages because they are members of a teachers' union.

a

If an employer's behavior is supportive of the theory of efficiency wages, the employer would a. raise wages in an effort to increase worker effort. b. raise wages in an effort to increase worker turnover. c. decrease wages in an effort to increase worker effort. d. decrease wages in an effort to increase worker turnover.

a

If the average total cost of producing five units is $10, and the marginal cost of producing the fifth unit is $10, then the average total cost curve is at its minimum at five units. a. True b. False

a

Laborsaving technological advances decrease the marginal productivity of labor. a. True b. False

a

Suppose that a large tornado destroys the fleet of fire trucks for the city of Omaha, Nebraska. What happens to the earnings of firefighters in Omaha? a. The reduction in the supply of fire trucks reduces the marginal productivities of Omaha firefighters, which causes the equilibrium wage to fall. b. The reduction in the supply of fire trucks increases the marginal productivities of Omaha firefighters, which causes the equilibrium wage to fall. c. The reduction in the supply of fire trucks reduces the marginal productivities of Omaha firefighters, which causes the equilibrium wage to rise. d. The reduction in the supply of fire trucks increases the marginal productivities of Omaha firefighters, which causes the equilibrium wage to rise.

a

The labor supply curve reflects how workers' decisions about the labor leisure tradeoff respond to changes in the opportunity cost of leisure. a. True b. False

a

The long run supply curve in a competitive market is more elastic than the short run supply curve. a. True b. False

a

The shape of the marginal cost curve tells a producer something about the marginal product of her workers. a. True b. False

a

When a firm is making a profit maximizing production decision, which of the following principles of economics is likely to be most important to the firm's decision? a. The cost of something is what you give up to get it. b. A country's standard of living depends on its ability to produce goods and services. c. Prices rise when the government prints too much money. d. Governments can sometimes improve market outcomes.

a

Which of the following statements best reflects a pricetaking firm? a. If the firm were to charge more than the going price, it would sell none of its goods. b. The firm has an incentive to charge less than the market price to earn higher revenue. c. The firm can sell only a limited amount of output at the market price before the market price will fall. d. Pricetaking firms maximize profits by charging a price above marginal cost.

a

Mrs. Smith is operating a firm in a competitive market. The market price is $6.50. At her profitmaximizing level of output, her average total cost of production is $7.00, and her average variable cost of production is $6.00. Which of the following statements about Mrs. Smith's firm is correct? a. Mrs. Smith is earning a loss and should shut down in the short run. b. Mrs. Smith is earning a loss but should continue to operate in the short run. c. Mrs. Smith is earning a profit since the price is above the average variable cost. d. Without knowing Mrs. Smith's marginal cost, we cannot determine whether she should stay in business or shut down

b

Other things the same, we'd expect that a job with less pleasant working conditions pays a. more; this is known as an efficiency wage. b. more; this is known as a compensating differential. c. less; this is known as an efficiency wage. d. less; this is known as a compensating differential.

b

Sunshine's Organic Market sells organic produce. Assume that labor is the only input that varies for the firm. The store manager has determined that if she hires 9 workers, the store can sell 200 pounds of produce per day. If she hires 10 workers, the store can sell 230 pounds of produce per day. The store earns $4 for each pound of produce that it sells, and the manager pays each worker $60 per day. Which of the following is correct? a. For the 10th worker, the marginal product is 20 pounds of produce per day. b. For the 10th worker, the marginal revenue product is $120 per day. c. The marginal profit from the 10th worker is $120. d. All of the above are correct.

b

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist? a. The monopolist is currently maximizing profits, and its total profits are $200. b. The monopolist is currently maximizing profits, and its total profits are $250. c. The monopolist is not currently maximizing its profits; it should produce more units and charge a lower price to maximize profit. d. The monopolist is not currently maximizing its profits; it should produce fewer units and charger a higher price to maximize profit.

b

Workers who work the night shift are often paid more than those who do identical work on the day shift. This is referred to as a a. discriminatory wage practice. b. compensating differential. c. wage inequity. d. a market inefficiency.

b

A monopolist faces a a. horizontal demand curve. b. vertical demand curve. c. downward sloping demand curve. d. U-shaped demand curve.

c

Marginal cost tells us the a. value of all resources used in a production process. b. marginal increment to profitability when price is constant. c. amount by which total cost rises when output is increased by one unit. d. amount by which output rises when labor is increased by one unit.

c

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are a. less of a concern for a monopoly than competitive market. b. offset by the higher profits earned by a monopolist. c. a function of the reduction in the quantity produced by a monopolist in comparison to a competitive market. d. All of the above are correct.

c

When a firm operates under conditions of monopoly, its price is a. not constrained. b. constrained by marginal cost. c. constrained by demand. d. constrained only by its social agenda.

c

Which of the following is a characteristic of a competitive market? a. There are many buyers but few sellers. b. Many firms have market power because they own patents. c. Buyers and sellers are price takers. d. Firms sell differentiated products.

c

Which of the following statements is correct? Monopolies are socially inefficient because they (i) charge a price above marginal cost. (ii) produce too little output. (iii) earn profits at the expense of consumers. (iv) maximize the market's total surplus. a. (iii) only b. (iii) and (iv) only c. (i) and (ii) only d. (i), (ii), (iii), and (iv)

c

Which of the following statements is not correct? a. Fixed costs are constant. b. Variable costs change as output changes. c. Average fixed costs are constant. d. Average total costs are typically U-shaped.

c

Which of the following statements is true of wages, educational attainment, and gender? a. Male workers are compensated for attending college, while female workers generally are not. b. Female workers are compensated for attending college, while male workers generally are not. c. Both genders receive a higher wage for attending college. d. Neither gender receives a higher wage for attending college.

c

A firm in a competitive market currently produces and sells 500 doorknobs for a price of $10 per doorknob. Which of the following events would decrease the firm's average revenue? a. The firm increases its output above 500 doorknobs. b. The firm decreases its output below 500 doorknobs. c. The market price of doorknobs rises above $10. d. The market price of doorknobs falls below $10

d

An increase in the supply of labor a. increases the equilibrium wage and increases the value of the marginal product of labor. b. increases the equilibrium wage and decreases the value of the marginal product of labor. c. decreases the equilibrium wage and increases the value of the marginal product of labor. d. decreases the equilibrium wage and decreases the value of the marginal product of labor.

d

Consider the labor market for shortorder cooks. An increase in immigration will cause a. both equilibrium wages and equilibrium employment to increase. b. both equilibrium wages and equilibrium employment to decrease. c. equilibrium wages to increase and equilibrium employment to decrease. d. equilibrium wages to decrease and equilibrium employment to increase.

d

If a monopoly lowers its price, its a. total revenue must increase. b. total revenue must decrease. c. marginal revenue must increase. d. marginal revenue must decrease.

d

If a monopoly market were to be transformed into a competitive market, the result would be that a. market output would increase. b. the market would be efficient, once the market reached the competitive output. c. the deadweight loss from the monopoly would be eliminated. d. All of the above would be true.

d

If a production function shows declining marginal product of an input as the quantity of the input increases, then the production function exhibits a. diminishing profitability. b. increasing returns to scale. c. increasing marginal product. d. diminishing marginal product.

d

If marginal cost is greater than average total cost, then a. profits are increasing. b. economies of scale are becoming greater. c. average total cost remains constant. d. average total cost is increasing.

d

In a long-run equilibrium, the marginal firm has a. price equal to average total cost. b. total revenue equal to total cost. c. economic profit equal to zero. d. All of the above are correct.

d

The fundamental cause of monopoly is a. incompetent management in competitive firms. b. the zero profit feature of long run equilibrium in competitive markets. c. advertising. d. barriers to entry.

d

Total revenue minus only implicit costs is called a. accounting profit. b. economic profit. c. opportunity cost. d. None of the above is correct.

d

When firms in a competitive market have different costs, it is likely that a. free entry and exit in the market will be violated. b. the market will no longer be considered competitive. c. longrun market supply will be downward sloping. d. some firms will earn positive economic profits in the long run.

d

Which of the following is an example of an implicit cost? a. salaries paid to owners who work for the firm b. interest on money borrowed to finance equipment purchases c. cash payments for raw materials d. foregone rent on office space owned and used by the firm

d