ECON Ch 8
The graph shows the marginal cost, average total cost, and marginal revenue curves for Dave's Donuts. How many donuts does Dave's produce? What is the size of its economic profit or loss?Dave's produces _____ donuts an hour and (makes an economic profit/incurs an economic loss) _____ of $ _____ an hour.
20 incurs an economic loss 20
Demonstrating that the Price=MR in perfectly competitive settingsThe market for vases is perfectly competitive.The price of a vase is $30. When the firm increases the number of vases it produces from 4 to 5, its marginal revenue is $______.
30
The graph shows the marginal cost, average total cost, and marginal revenue curves for Lou's Lattes. How many lattes does Lou's produce? What is Lou's economic profit or economic loss? (a.) Lou's produces _____ lattes an hour
30
The table shows the cost structure of a firm selling granola bars in a perfectly competitive market. What is the quantity at the firm's shutdown point?The firm's shutdown point occurs at a quantity of __________ boxes of granola bars a week.
300
The table shows the firm's total product schedule.Sue's Surfboards hires each worker at $500 a week.Its total fixed cost is $1000 a week. (b.) When output is 160 surfboards a week, average fixed cost is $ _____ a surfboard and average variable cost is $ _____ a surfboard.Answer to 2 decimal places.
6.25 12.5
The table shows sales of the firms in the tattoo industry. Calculate the four-firm concentration ratio.(a.) The four-firm concentration ratio is __________ percent.Answer to 2 decimal places.
64.84
Given the following data, what should the firm do?Current production = 1,000Current price = $10Marginal cost = $10Total costs = $15,000Fixed cost = $6,000
Continue to produce in the short run, but exit in the long run.
The table shows various methods for producing blue jeans.Which method is technologically inefficient?Method __________ is technologically inefficient.
D
Distinguish between the short run and the long run. In the short run, __________. In the long run, __________.
a firm's plant is fixed; a firm can change its plant
Total variable cost is the cost of the __________. Specifically, the cost of __________.
a firm's variable factor of production; labor
What is the lowest price at which a firm produces an output? Explain why.The lowest price at which a firm will produce is the price at minimum __________ because at this price its loss equals __________.
average variable cost; total fixed cost
Explain the relationship between marginal product and average product.When marginal product exceeds average product, __________ product is increasing.When average product exceeds marginal product, __________ product is decreasing.
average; average
Choose the correct statement. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a When average product exceeds marginal product, marginal product is rising. b When marginal product exceeds average product, average product is rising. c When marginal product is falling, average product is falling. d When average product is rising, marginal product is rising.
b
Which of the following illustrates diminishing marginal returns? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Total cost decreases as the quantity of labor hired increases. b Debra produces 30 hats per hour. c Hiring more workers eventually decreases the productivity of each additional worker. d A company makes greater investments as it earns higher profits.
c
Why does a firm in perfect competition produce the quantity at which marginal cost equals price? A firm produces the quantity at which marginal cost equals price because when marginal cost is greater than price, the firm __________.
can increase economic profit by producing 1 less unit of output
Explain the key distinction between technological efficiency and economic efficiency.The key distinction between technological efficiency and economic efficiency is that technological efficiency __________ and economic efficiency __________.
concerns the quantity of inputs used in production for a given level of output; concerns the value of the inputs used
As the firm grows in scale from 3,000 to 4,000 units, it is experiencing _____.
constant returns to scale
Given the following facts, what should the firm do in the short run? In the long run?Fixed costs are $50,000. Total costs are $90,000. Total revenues are $45,000.
continue to produce in the short run; leave the industry in the long run
Why do accountants and economists calculate a firm's costs and profit in different ways?An accountant calculates a firm's cost and profit to __________. An economist calculates a firm's cost and profit to __________.
ensure that the firm pays the correct amount of income tax and to show its investors how their funds are being used; enable them to understand and predict the firm's decisions
The graph shows the costs of Quick Copy, one of the many copy shops near campus.The short run market price of copying one page is 10 cents.In response to the 10 cents price, firms will __________ the market in the long run.As a result, in the long run, the market price will be __________ cents a page and the equilibrium quantity will be __________ pages an hour.
enter; 6; 60
The smartphone market is in long-run equilibrium. Then the demand for smartphones increases. Describe what happens in the market for smartphones. (b.) Some firms will __________ the market, and the market supply curve will shift __________.
enter; rightward
Ricky is in a consumer equilibrium.Given the prices of goods, Ricky has allocated all his income such that his marginal utility per dollar is ______________ for ______________ goods.
equal; all
The market for portable CD players is in long-run equilibrium.Then the demand for portable CD players decreases.Describe what happens in the market for portable CD players. As a result, firms will __________ the market, and the market supply curve will shift __________.
exit; leftward
The short-run market supply curve is __________.
horizontal at the shutdown price
As Ben approaches his new consumer equilibrium, his marginal utility per dollar for video games
increases
What decisions must a firm make to maximize profit? To maximize profit, a firm in perfect competition must decide __________.
how to produce at minimum cost, what quantity to produce, and whether to enter or exit a market
Explain how the marginal product and average product of labor change initially as the labor employed increases and, then, how they change eventually.As the labor employed increases, marginal product of labor initially __________.As the labor employed increases, the average product of labor initially __________.
increases and eventually decreases; increases and eventually decreases
If marginal cost exceeds average total cost and output increases, average total cost __________ and average variable cost __________.
increases; increases
Complete the sentence.When a firm is producing a given output at the least possible cost, __________.
it is operating on its long-run average cost curve
Why is a firm in perfect competition a price taker? A firm in perfect competition is a price taker because __________.
it produces a tiny proportion of the total output of a particular good, and buyers are well informed about the prices and products of other firms
Long-run average cost curve is a curve that shows the __________ average total cost at which it is __________ to produce each output when the firm has had sufficient time to change both its plant size and labor employed.
lowest; possible
The smartphone market is in long-run equilibrium. Then the demand for smartphones increases. Describe what happens in the market for smartphones. (a.) In the short run, firms will __________.
make an economic profit
The graph shows the marginal cost, average total cost, and marginal revenue curves for Lou's Lattes. How many lattes does Lou's produce? What is Lou's economic profit or economic loss? Indicate a negative economic profit as an economic loss. (b.) If Lou produces the quantity specified in part a, then Lou (makes an economic profit/incurs an economic loss) _____ of $ _____ an hour
makes an economic profit 30
The top table shows the market demand schedule for paper in a perfectly competitive market.Each firm has the costs shown in the bottom table. (a.) In long run equilibrium, each firm __________.
makes zero economic profit
What triggers entry in a competitive market?(a.) Entry is triggered in a competitive market when existing firms are __________.
making an economic profit
The market for pizza is perfectly competitive and has 1,000 firms. Each firm is identical. Describe each firm in long-run equilibrium.In long-run equilibrium, each firm is __________.
making zero economic profit
Lin's makes fortune cookies. Anyone can make and sell fortune cookies, so there are many producers. All fortune cookies are the same and everyone knows this fact. In what type of market does Lin's operate?What determines the price of fortune cookies? What determines Lin's marginal revenue? (a.) Lin's fortune cookies operates in a __________ market.
perfectly competitive
In perfect competition, a firm maximizes its economic profit if it produces the output at which __________.
price equals marginal cost
Total product is the total __________ of a good produced in a given period.Marginal product is the change in __________ product that results from a one-unit increase in the __________.Average product is the total product divided by the __________.
quantity; total; quantity of labor employed; quantity of a factor of production
Sue's Surfboards rents a factory. If the rent rises by $200 a week and other things remain the same, how do Sue's Surfboards' short-run average cost curves and marginal cost curve change? (a.) If other things remain the same, the average fixed cost curve __________ and the average variable cost curve __________.
shifts upward; does not change
Sue's Surfboards rents a factory. If the rent rises by $200 a week and other things remain the same, how do Sue's Surfboards' short-run average cost curves and marginal cost curve change? (b.) If other things remain the same, the average total cost curve __________, and the marginal cost curve __________.
shifts upward; does not change
If total fixed cost increases, then the average total cost curve __________ and the marginal cost curve __________.
shifts upward; does not shift
A firm producing where price equals marginal cost that has variable costs equaling $60 million; fixed costs equaling $40 million; and revenues equaling $50 million should:
shut down now and leave the industry in the long run
The graph shows the total product curve for a firm that produces handbags. Marginal returns start to diminish when the firm hires the __________ worker.
sixth
What are the two measures of concentration? Explain how each measure is calculated. (b.) The Herfindahl-Hirschman Index is the __________ of the percentage market share of each firm summed across the largest __________ firms (or summed across all the firms if there are fewer than __________) in a market.
square; 50; 50
The shape of the ATC curve arises because of __________.
the influence of two opposing forces—spreading total fixed cost over a larger output and eventually diminishing returns
Andy drinks hot chocolate every week throughout the winter. The curve illustrates Andy's total utility from hot chocolate.Total utility depends on ______________.
the level of consumption
What is a major disadvantage of a proprietorship?A major disadvantage of a proprietorship is that __________.
the owner's entire wealth is at risk
In perfect competition, firms will be able to earn economic profits in:
the short run, only
A consumer equilibrium is a situation in which a consumer has allocated all of her income in a way that maximizes her ______________. Or, equivalently, has allocated all her income in a way that equalizes the ______________.
total utility; marginal utility per dollar
What relationships do a firm's short-run cost curves show? Indicate whether the following statement is true or false. (I.) The marginal cost curve intersects the average variable cost curve at its minimum.(II.) When marginal cost is greater than average variable cost, average variable cost is increasing.
true; true
Ricky and Lucy want to open a fitness club and operate it as a partnership. What is a partnership?A partnership is a firm with __________ who have __________ liability.
two or more owners; unlimited
Technological efficiency occurs when the firm produces a given output by __________.
using the least amount of inputs
The AFC curve has this shape because __________.
when output increases, the firm spreads its total fixed cost over a larger output
What is an indifference curve and how does a preference map show preferences?An indifference curve shows ______________. A preference map shows that a person prefers combinations ______________.
combinations of goods among which a consumer is indifferent; on higher indifference curves to combinations on lower indifference curves
A firm's opportunity cost of production includes ______.
the cost of using resources bought in the market, owned by the firm, and supplied by the firm's owner
What do we call the magnitude of the slope of an indifference curve?The magnitude of the slope of the indifference curve is ______________.
the marginal rate of substitution
Tina employs 4 people in her pizza store, where she produces 12 pizzas an hour. Her total fixed cost, total variable cost, and total costs of pizza production per hour are $15, $19.40, and $34.40 respectively. Calculate Tina's average fixed cost, average variable cost and average total cost.
$1.25; $1.62; $2.87
The top table shows the market demand schedule for paper in a perfectly competitive market.Each firm has the costs shown in the bottom table.(b.) In the long run, the equilibrium price is __________ a box and market output is __________ boxes a week.
$10.00; 200,000
The image below shows the cost curves of a firm in a perfectly competitive market, facing an initial market price of $12. If the market price suddenly increase from $12 to $16, what is the new quantity this firm will produce? What is the total revenue this firm will make if market price increases to $16? What is the profit this firm will make if market price increases to $16? (b.) If the market price increases to $16, then the firm's total revenue will be
$2,400
The table gives the cost of producing shirts. When 5 shirts are produced, the average fixed cost is __________ and the average variable cost is __________
$2.00; $6.40
The table gives the cost of producing T-shirts. The total fixed cost is __________ and the marginal cost of increasing production from 10 to 12 T-shirts is __________.
$20; $8
The image below shows the cost curves of a firm in a perfectly competitive market, facing an initial market price of $12. If the market price suddenly increase from $12 to $16, what is the new quantity this firm will produce? What is the total revenue this firm will make if market price increases to $16? What is the profit this firm will make if market price increases to $16? (c.) If the market price increases to $16, then the firm's profit will be
$300
When Sam increases smoothie production from 4 gallons to 5 gallons, his total cost of production increases from $32.50 to $36.85. Calculate Sam's marginal cost of producing smoothies.
$4.35
The image below shows the cost curves of a firm in a perfectly competitive market, facing an initial market price of $12. If the market price suddenly decrease from $12 to $8, what is the new quantity this firm will produce? What is the total revenue, total costs, and total economic loss associated with this level of production? (b.) Given your answer in part a, the firm's total revenue will be _______, their total costs will be _______, and their economic loss will be _______.
$960; $1560; $600
Sue's Surfboards can operate with one plant or two plants.The graph shows the average total cost curve, ATC for one plant and the average total cost curve, ATC for two plants.To produce 180 surfboards a week, is it is efficient to operate withone or two plants?To produce 160 surfboards a week, is it is efficient to operate withone or two plants? To produce 180 surfboards a week, it is efficient to operate with __________.To produce 160 surfboards a week, it is efficient to operate with __________.
1 plant; 1 plant
The table shows the total product schedule for a firm that produces jeans.When the firm produces 80 pairs of jeans, what is the average product of labor? When the firm produces 80 pairs of jeans, the average product of labor is _______ pairs of jeans per worker.
10
The table shows a firm's total cost schedule. (a.) The firm's total cost if it shuts down in the short run is $ __________.
1000
The table shows a firm's total cost schedule. The table implies that the firm's fixed costs of production are equal to $ __________.
1000
The table shows the firm's total product schedule.Sue's Surfboards hires each worker at $500 a week.Its total fixed cost is $1000 a week. (a.) When the Sue's output is 120 surfboards a week, the firm's total fixed cost is $ _____ , total variable cost is $ _____ , and total cost is $ _____
1000 1500 2500
The image below shows the cost curves of a firm in a perfectly competitive market, facing an initial market price of $12. If the market price suddenly decrease from $12 to $8, what is the new quantity this firm will produce? What is the total revenue, total costs, and total economic loss associated with this level of production? (a.) If the market price decreases to $8, then the firm will produce _______.
120 units
The image below shows the cost curves of a firm in a perfectly competitive market, facing an initial market price of $12. If the market price suddenly increase from $12 to $16, what is the new quantity this firm will produce? What is the total revenue this firm will make if market price increases to $16? What is the profit this firm will make if market price increases to $16? (a.) If the market price increases to $16, then the firm will produce _______.
150 units
In the graph, Sue's AFC curve is _____. The AVC curve is _____. The ATC curve is _____. The MC curve is ______
4 3 2 1
The table shows the total product schedule of a firm that uses 1 sewing machine.The firm rents the sewing machine for $15 a day and pays its workers $30 a day.When the firm increases production from 11 to 17 pairs of jeans a day, what is marginal cost? The marginal cost when the firm increases production from 11 to 17 pairs of jeans a day is $ __________.
5
The table shows the firm's total product schedule.Sue's Surfboards hires each worker at $500 a week.Its total fixed cost is $1000 a week. (c.) When output is 30 surfboards a week, average total cost is $ _____ a surfboard and when output increases from 0 to 30 surfboards a week marginal cost is $ _____ a surfboard.Answer to 2 decimal places.
50 16.67
The top table shows the market demand schedule for DVDs and the bottom table shows the cost structure of each firm. The market for DVDs is perfectly competitive.In long-run equilibrium, the number of firms in the market is __________ and the market price of a DVD is __________.
50; $10.00
Walmart, Grocery, Target Top Personal Care Market ShareA Personal Care Study conducted by TABS Analytics shows that Walmart has a 19.4 percent share of the $40 billion personal care market, while grocery stores Kroger and Public each have a 16.6 percent share, and Target, 12.8 percent.Source: drugstorenews.com, March 23, 2017 The four-firm concentration ratio is __________ percent. Answer to 1 decimal place.
65.4
The table shows the total utility he gets from each activity. Max has $35 a day to spend on windsurfing and snorkeling and he can spend as much time as he likes doing them. The price of renting equipment for windsurfing is $10 an hour and for snorkeling is $5 an hour. (a.) Calculate Max's marginal utility per dollar from snorkeling for the following 'hours per day' for the 1st, 2nd, and 3rd hours
8 6 2.4
The table shows alternative ways of laundering 100 shirts.If the wage rate is $50 and the rental rate of capital is $5, method __________ is economically efficient.
A
What is one of the constraints that a firm faces? __________ constraint limits a firm's maximum profit because __________.
A market; what a firm can sell and the price it can obtain are constrained by its customers' willingness to pay and by the prices and marketing efforts of other firms
Which of the following illustrates economies of scale, diseconomies of scale, and constant returns to scale? Liza's average total cost changes from $4.50 to $2.20 when she increases production from 7 to 9 units.Sam's average total cost changes from $1.30 to $2.80 when he increases production from 5 to 8 units.Tina's average total cost remains at $3 when she increases production from 12 to 13 units.
Liza faces economies of scale; Sam faces diseconomies of scale; Tina faces constant returns to scale.
What triggers entry in a competitive market?(b.) Describe the process that ends further entry.
New firms enter, supply increases, and the price falls until in the long run all firms are making normal profit. Market output increases and the output of each individual firm decreases.
What triggers exit in a competitive market?(b.) Describe the process that ends further exit.
Some firms exit, supply decreases, and the price rises until in the long run all firms are making normal profit. Market output decreases and the output of each remaining firm increases.
The graph illustrates Acme, Inc.'s short-run total cost curves.Choose the statement that is correct. a Total variable cost and total cost both increase as output increases. b The vertical gap between curves B and C is equal to total variable cost. c As total variable cost increases, total fixed cost increases but at a slower rate. d The total fixed cost curve is curve B.
a
Total cost is the cost of __________ by a firm.
all the factors of production used
Diminishing marginal utility is the general tendency for marginal utility to ______________ as the quantity of a good consumed ______________.
decrease; increases
As the firm grows in scale from 2,000 to 3,000 units, it is experiencing _____.
economies of scale
What relationships do a firm's short-run cost curves show? Indicate whether the following statement is true or false. (I.) The marginal cost curve intersects the average fixed cost curve at its minimum.(II.) When marginal cost is less than average total cost, average total cost is decreasing.
false; true
Total fixed cost is the cost of the __________. Specifically, the cost of __________, __________, and __________.
firm's fixed factors of production; land, capital, entrepreneurship
Complete the sentence.The U shape of the average total cost curve arises because of spreading total __________ cost over a larger output and eventually __________ returns.
fixed; diminishing
The shape of the AVC curve arises because of __________.
increasing returns initially and eventually diminishing returns
What triggers exit in a competitive market?(a.) Exit is triggered in a competitive market when existing firms are __________.
incurring an economic loss
Complete the sentence.In perfect competition, each firm __________.
is a price taker
Making a product slightly different from the product of a competing firm __________.
is called product differentiation
Lin's makes fortune cookies. Anyone can make and sell fortune cookies, so there are many producers. All fortune cookies are the same and everyone knows this fact.In what type of market does Lin's operate?What determines the price of fortune cookies?What determines Lin's marginal revenue? (b.) The price of a fortune cookie is determined by __________. Lin's marginal revenue from a fortune cookie equals __________.
market demand and market supply; price
Tina's marginal utility from a notebook is 42 units. At a price of $8 per notebook, what is the marginal utility per dollar from a notebook?
$5.25
The figure shows Simon's budget line when he has $4 a day to spend on chewing gum and bottled water.Which consumption bundle may potentially maximizes Simon's utility?
(2 water, 4 gum)
Using the information above...(b.) The slope of Sara's budget line is ______________
-0.8
One year ago, Jack and Jill set up a vinegar-bottling firm (called JJVB).Use the question facts to calculate JJVB's opportunity cost of production during its first year of operation.JJVB's opportunity cost of production during its first year of operation is $ __________. (do not include any commas in your answer) Question Facts1. Jack and Jill put $60,000 of their own money from their savings account into the firm.2. There is a 6% interest rate for all money in their savings account.3. They bought equipment for $50,000.4. The market value of the equipment at the end of the year was $45,000.5. They hired one employee at an annual wage of $25,000.6. They bought $5,000 of services from other firms.7. Jack gave up his previous job at which he earned $50,000.8. Jill kept her old job which paid $25 an hour, but gave up 10 hours of leisure each week for 50 weeks to work for JJVB.
101100
The table shows the total utility he gets from each activity. Max has $35 a day to spend on windsurfing and snorkeling and he can spend as much time as he likes doing them. The price of renting equipment for windsurfing is $10 an hour and for snorkeling is $5 an hour. (a.) Calculate Max's marginal utility per dollar from windsurfing for the following 'hours per day' for the 1st, 2nd, and 3rd hours
12 10 8
The table shows the Gabrielle's total utility from manicures.What is Gabrielle's total utility when she buys 4 manicures?(a.) When Gabrielle buys 4 manicures, the total utility that she receives is _____ utils.
150
The table shows the utility that Jason receives from DVDs and spy novels.If the price of a DVD is $20 and the price of a spy novel is $10, and Jason has $60 to spend on these two goods, how many of each does he buy if he is maximizing utility?(b.) Jason buys _____ DVDs and _____ spy novels.
2 2
There are five firms in a market and the market shares of the firms are 30 percent, 25 percent, 20 percent, 15 percent, and 10 percent. What is the Herfindahl-Hirschman Index for this market?The Herfindahl-Hirschman Index for this market is __________.
2250
Max has $35 a day to spend on windsurfing and snorkeling. The price of windsurfing is $10 an hour and for snorkeling is $5 an hour.To maximize his total utility, Max spends __________ windsurfing, and he spends __________ snorkeling.
3 hours; 1 hour
The table shows Jennifer's marginal utility from tea and shortbread. Jennifer has $10.00 to spend each day on tea and shortbread. The price of tea is $2.00 a cup and the price of shortbread is $1.00 apiece.When Jennifer maximizes her total utility, how many pieces of shortbread does she buy each day, and what is her marginal utility per dollar from shortbread? Jennifer's marginal utility per dollar from this optimal amount of shortbread is
38
The table shows Lily's marginal utilities from chicken and fish.Lily has $27 to spend each week on chicken and fish. Chicken costs $3 a serving and fish costs $9 a serving. To maximize utility, Lily will consume __________servings of chicken and __________ servings of fish each week.
3; 2
Pam has $10 a day to spend on bottled water and ice cream.The price of a bottle of water is $2.00 and the price of an ice cream cone is $1.00. Assume Pam spends all of her budget. If Pam decides to buy 2 ice cream cones, then how many bottles of water must she buy? She buys __________ bottles of water.
4
The total utility obtained from three packs of potato chips is 36 utils, and the total utility obtained from two packs is 32 utils. The marginal utility from the third pack is ______________ unit(s).
4
The table shows the Gabrielle's total utility from manicures.(c.) The marginal utility from her second manicure is ______ utils, and the marginal utility from her fourth manicure is _____ utils.
40 28
The table gives the total product schedule for Flora's Flower Shoppe. If Flora's increases the number of workers hired from 0 to 1, the marginal product of labor is ______bouquets.If Flora's increases the number of workers hired from 2 to 3, the marginal product of labor is ______bouquets.If Flora's increases the number of workers hired from 3 to 4, the marginal product of labor is ______ bouquets.
50; 70; 40
Nancy bought a laptop for $1,260 on Thanksgiving 2012 and she plans to sell it for $750 on Thanksgiving 2013. Her economic depreciation for the laptop is $ __________.
510
The table shows Jennifer's marginal utility from tea and shortbread.Jennifer has $10.00 to spend each day on tea and shortbread.The price of tea is $2.00 a cup and the price of shortbread is $1.00 a piece.When Jennifer maximizes her total utility, how many pieces of shortbread does she buy each day and what is her marginal utility per dollar from shortbread? When Jennifer maximizes her total utility, she buys _____ pieces of shortbread each day.
6
Jake has a budget of $10 per week to spend on song downloads and cookies. The table shows his marginal utility from each good.If the price of a song is $1 and the price of a cookie is $2, how does Jake allocate his $10 between songs and cookies? Jake buys _____ songs and ______ cookies to maximize his utility.
6 2
The table shows four methods of producing 10 computer desks a day. If the cost of a worker is $100 a day and the cost of capital is $100 a day, which of the following methods are economically efficient? If the cost of a worker is $100 a day and the cost of capital is $100 a day, economical efficiency occurs with method __________.
A
Sara's income is $20 a week. The price of popcorn is $5 a bag, and the price of a smoothie is $4. (a.) Calculate the equation for Sara's budget line. Qs is the quantity of smoothies and Qp is the quantity of popcorn.
Qp = 4 - 0.8Qs
The image below depict's Lisa's budget line. If Lisa has $150 a month to spend on these two goods, given the budget line depicted below what must the price of the hockey game be? The price of a concert ticket?
The price of hockey game must be $50, while the price of a concert ticket must be $75
Choose the statement that is correct. a) A technologically inefficient method is never economically efficient. b) A firm that uses more labor and less capital than another firm cannot be technologically efficient. c) The technologically efficient method is the one that uses a smaller amount of the more expensive resource and a larger amount of the less expensive resource. d) A firm that is not economically efficient still maximizes profit if the price at which it sells its good or service is high enough.
a
Which of the following is an example of product differentiation? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a) I prefer Nike shoes while my friend prefers Puma shoes. b) Cindy loves chocolate flavored icecream. c) Adidas sells jackets while DeBeers sells diamonds. d) Columbia sells expensive winter jackets.
a
The law of diminishing returns says that as the firm uses more of __________, with a given quantity of __________, marginal product of the variable factor eventually diminishes.
a variable factor of production; the fixed factor of production
The table shows alternative ways of laundering 100 shirts.Which methods are technologically efficient?
all methods
The table shows the utility that Jason receives from DVDs and spy novels.What two conditions are met when a consumer is maximizing utility? (a.) When Jason is maximizing his total utility he spends ______________.
all of his available income and equalizes his marginal utility per dollar for all goods
(b.) Given your answer above, the market structure of the tattoo industry is __________.
an oligopoly
Economic efficiency occurs when the firm produces a given output __________.
at the least cost
Henry buys only chips and candy and spends all of his income on the two items. Suppose the price of chips rises. Henry adjusts his optimal consumption bundle such that he now buys less chips and less candy at his new consumer equilibrium. Which of the following statements must be true? Select an answer and submit. a) the income effect must have been bigger than the substitution effect since we observe Henry buying less chips. b) the income effect must have been bigger than the substitution effect since we observe Henry buying less candy. c) the substitution effect must have been bigger than the income effect since we observe Henry buying less candy. d) the substitution effect must have been bigger than the income effect since we observe Henry buying less chips.
b
In a day in the life of Jack, the following four things occur. Which is an example of resources being allocated by the command system? a) He gets a ticket for a parking offense. b) His manager at McDonalds puts him on the drive-through window. c) He waits in line for a table at Red Lobster. d) He buys tomatoes at Safeway for $3 per pound.
b
Which of the following are examples of short run and long run decisions? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a) The profits of Dell has improved this quarter; Consumers' preferences for Dell laptops have changed over time. b) Starbucks' has hired more labor to meet the increasing demand; Starbucks' has opened another store to meet the increasing demand. c) LG has adopted a new technology to create a new cell phone; The sale of LG phones has increased. d) Olive Garden has increased its plant size; Olive Garden has opened two new restaurants in Ames.
b
A diminishing marginal rate of substitution is a general tendency for a person to ______________.
be willing to give up less of good y to get one more unit of good x, while at the same time remaining indifferent as the quantity of x increases
The figure shows Phillip's budget line when he has $40 a week to spend on protein bars and movies.Which combinations of protein bars and movies can Phillip afford?Phillip can afford all combinations ______________ the budget line.
both on and inside
A budget line is a line that describes limits to consumption possibilities and that depends on a consumer's ______________ and ______________ of goods and services.
budget; prices
The image shows Sue's Surfboards' total product curve.Choose the correct statement. a) All points that lie on the TP curve and below it are inefficient. b) Points that lie on the TP curve are unattainable. c) Points that lie below the TP curve are attainable but they are inefficient. d) All points that lie on the TP curve and above it are attainable.
c
The table shows various methods of producing blue jeans.If labor costs $10 a unit and capital costs $100 a unit, which method is economically efficient?If labor costs $10 a unit and capital costs $100 a unit, method __________ is economically efficient.
c
The graph shows Marjorie's total utility curve for apple pies.Which of the following statements is true? a) The marginal utility that Marjorie receives from the 5th pie is negative. b) Marjorie's marginal utility from pies gets larger as she consumes more pies. c) The marginal utility that Marjorie receives from the 4th pie is negative. d) Marjorie's marginal utility from pies gets smaller as she consumes more pies.
d
The table shows the total utility that Ellen and John get from apple pies.Given this information, which of the following statements is true? a) If Ellen consumes 2 pies, her total utility will be 34. b) Ellen's marginal utility is increasing. c) For Ellen, the marginal utility from the third pie consumed is 6. d) Ellen and John have identical marginal utilities.
d
What is the key assumption about marginal utility?The key assumption about marginal utility is that marginal utility ______________.
decreases as consumption increases
When the price of a good falls and the prices of other goods and a consumer's income remain the same, explain what happens to the consumption of the good whose price has fallen and to the consumption of other goods. The price of a movie falls.(b.) To adjust to the new consumer equilibrium, Ben ______________ the number of video games he plays.As Ben approaches his new consumer equilibrium, his marginal utility per dollar for movies ______________.
decreases; decreases
What is the principal-agent problem? What are three ways in which firms try to cope with it? (a.) The principal-agent problem is the problem of __________.
devising compensation rules that induce an agent to act in the best interest of a principal
Indifference curves ______________.
do not intersect
What is a characteristic of oligopoly? In an oligopoly, __________.
firms might produce almost identical products or they might produce differentiated products
An indifference curve is a line that shows combinations of ______________ among which a ______________ is indifferent.
goods; consumer
Roses and chocolates are substitutes.Russell spends all of his income on roses and chocolates and he is currently in consumer equilibrium.The price of roses falls. (a.) The marginal utility per dollar on roses is currently ______________ than the marginal utility per dollar on chocolates.
greater
The marginal rate of substitution is ______________.
greater the steeper is the indifference curve at a given point
Roses and chocolates are substitutes.Russell spends all of his income on roses and chocolates and he is in consumer equilibrium.The price of roses falls. (b.) In response to the price change, Russell ______________ roses and ______________ chocolate.
increases his quantity demanded of; decreases his demand for
Starting from a point of consumer equilibrium, a rise in income ______________.
increases total utility
The table gives the total product schedule for Flora's Flower Shoppe. If Flora's increases the number of workers hired from 2 to 3, average product of labor __________.If Flora's increases the number of workers hired from 3 to 4, average product labor __________.
increases; decreases
When the price of a good falls and the prices of other goods and a consumer's income remain the same, explain what happens to the consumption of the good whose price has fallen and to the consumption of other goods. Consider Ben, who consumes only movies and video games and is currently in consumer equilibrium. For Ben, movies and video games are substitutes.(a.) The price of a movie falls which ______________ the marginal utility per dollar from movies.To adjust to the new consumer equilibrium, Ben ______________ the number of movies he sees.
increases; increases
Initially the consumer is maximizing utility. Then the price of one good falls.The marginal utility per dollar from that good immediately ______________. The consumer responds to the fall in the price and ______________.
increases; the quantity demanded of the good increases
Shawn drinks tea and hot chocolate throughout the winter. For Shawn, tea and hot chocolate are substitutes.When the price of a mug of hot chocolate falls, Shawn responds by ______________, which ______________ his marginal utility per dollar from hot chocolate.
increasing the quantity of hot chocolate he buys; decreases
Most production processes experience __________ marginal returns initially, but all production processes eventually reach a point of __________ marginal returns.
increasing; diminishing
What is economic profit? Economic profit __________.
is equal to total revenue minus both the explicit and implicit costs of production
What are the items that make economists' measure of cost differ from an accountant's measure of cost? Consider how the following, which are part of a firm's opportunity cost of production, are treated by accountants.Economic depreciation __________ in an accountant's measure of cost. Interest forgone __________ in an accountant's measure of cost.
is not included; is not included
Is a firm technologically efficient if it uses the latest technology? Why or why not? A firm that uses the latest technology __________ technologically efficient because __________.
is not necessarily; the firm might not use the least amount of inputs to produce a given output
Marginal utility ______________.
is the change in total utility that results from a one-unit increase in the quantity of a good consumed.
Total utility ______________.
is the total happiness that a person gets from the consumption of all the different goods and services.
An indifference curves slopes downward because ______________.
it shows that when a person gives up some of good x they must increase their consumption of good y to remain indifferent
Monopolistic competition is a market in which a __________ number of firms compete by making similar but slightly __________ products.
large; different
An indifference curve is bowed toward the origin because the more of good x that you consume the ______________.
less you are willing to give up of good y to get more of good x and remain indifferent
Perfect competition is a market in which there are __________ firms, each selling __________ product; many buyers; __________ to the entry of new firms into the industry; no advantage to established firms; and buyers and sellers __________ about prices.
many; identical; no barriers; are well informed
A consumer maximizes her total utility when she spends all her available income such that the ______________ utility per dollar is ______________ for all goods.
marginal; equal
What is a firm's fundamental goal and what happens if the firm doesn't pursue this goal?The fundamental goal of a firm is to __________. If a firm fails in this goal, it is __________.
maximize profit; either eliminated or bought by other firms that do seek to maximize profit
The table shows alternative ways of laundering 100 shirts.If the wage rate is $1 and the rental rate of capital is $100, __________ is economically efficient.If the wage rate is $5 and the rental rate of capital is $50, __________ economically efficient.
method d; methods c and d are
Why does a consumer spend the entire budget? A consumer spends the entire budget because ______________.
more consumption brings more utility, and thus only those choices that exhaust income can maximize utility
Explain why equalizing the marginal utility per dollar for all goods maximizes utility. (a.) If the marginal utility per dollar from hot chocolate exceeds the marginal utility per dollar from video games, buy ______________ hot chocolate and play ______________ video games to maximize total utility.
more; fewer
Explain why equalizing the marginal utility per dollar for all goods maximizes utility. (b.) If the marginal utility per dollar from video games exceeds the marginal utility per dollar from hot chocolate, play ______________ video games and buy ______________ hot chocolate to maximize total utility.
more; less
Monopoly is a market in which one firm sells a good or service that has __________ substitutes and __________ blocks the entry of new firms.
no close; a barrier
V
ownership, incentive pay, and long-term contracts
Any consumption bundle on indifference curve is ____________ to all consumption bundles on indifference curve . Any consumption bundle on indifference curve is ____________ to all consumption bundles on indifference curve .
preferred; less preferred
When your marginal grade exceeds your GPA, your GPA __________.
rises
What are the two measures of concentration? Explain how each measure is calculated. (a.) The four-firm concentration ratio is the percentage of the value of __________ accounted for by the four largest firms in an industry.
sales
Amy has $20 a week to spend on coffee and cake. The price of coffee is $4 a cup, and the price of cake is $2 a slice. Then Amy's income increases to $24 a week and the prices of coffee and cake remain unchanged. What happens to Amy's budget line when her income increases and the prices of coffee and cake remain unchanged?Amy's new budget line will ______________.
shift outward and have the same slope as the original budget line
If a consumer's income increases and if all goods are normal goods, explain how the quantity bought of each good changes.If a consumer's income increases and if all goods are normal goods, ______________.
the quantity bought of each good increases because the consumer maximizes utility by spending all available income and marginal utility per dollar, which decreases as more is consumed, must be equal for all goods
Explain why equalizing the marginal utility per dollar for all goods maximizes utility. (c.) When the last dollar spent on each good gives ______________.
the same marginal utility, then total utility cannot be increased by changing the consumption combination