Econ Exam 2

D) in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.

A basic distinction between the long run and the short run is that A) if a firm produces no output in the long run, it still incurs a cost. B) the opportunity costs of production are lower in the short run than in the long run. C) in the long run, some inputs are fixed, while in the short run, all inputs are variable. D) in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.

D) economies of scale.

A decrease in the long-run average costs resulting from increasing output is referred to as A) diseconomies of scale. B) constant return to scale. C) a scale invariant process. D) economies of scale.

A) demand is elastic.

A firm could lower prices and still increase revenue if A) demand is elastic. B) elasticity of demand is equal to unity. C) demand is inelastic. D) elasticity of demand is equal to zero.

B) shut down.

A firm is currently producing at the rate of output at which total revenues just cover its total variable costs. If demand falls, the firm should A) lower both price and its rate of output. B) shut down. C) increase its rate of output to make up for the lower price. D) not change its rate of output because it is still covering its variable costs.

D) P = MR = MC = ATC.

A firm's long-run position under perfect competition is often said to be efficient because A) P = AR > MC = AVC. B) P = AR > MR = MC. C) P = MR = AVC = AFC. D) P = MR = MC = ATC.

A) constant returns to scale.

A horizontal long-run average cost curve indicates A) constant returns to scale. B) diseconomies of scale. C) constant marginal physical product. D) economies of scale.

A) A cost associated with an economic activity is borne by a third party.

A negative externality is a situation in which A) a cost associated with an economic activity is borne by a third party. B) there is a spillover of benefits C) a firm is paying in excess of the total costs of producing a good D) none of the above

C) long-run average total cost is lowest at that rate of output.

A single-plant firm trying to select the rate of output consistent with an overall plant size that yields the minimum efficient scale will choose a rate of output for which A) the short-run marginal cost curve crosses the short-run average total cost curve at that rate of output. B) the long-run marginal cost curve crosses the long-run average fixed cost curve at that rate of output. C) long-run average total cost is lowest at that rate of output. D) total fixed cots are minimized at that rate of output.

D) An externality.

A situation in which a benefit or a cost associated with an economic activity spills over to third parties is called A) the free-rider problem B) a merit good C) a public good D) an externality.

A) Q1.

According to the above figure, if steel mills ignore the cost of pollution, the equilibrium quantity of steel will most likely be A) Q1. B) Q2 C) Q2-Q1 D) none of the above

B) remain at S1

According to the above figure, then the supply curve will A) shift from S1 to S2 B) remain at S1 C) shift from S2 to S1 D) shift is either to the left or the right, but it is impossible to say without more information

C) produce identical products.

All firms in a perfect competition industry A) are price makers. B) produce differentiated products. C) produce identical products. D) lose money.

A) the availability of many substitutes.

An elastic response in the quantity of a good demanded would be caused by A) the availability of many substitutes. B) a lack of substitutes. C) a lack of sensitivity to the good's price. D) the good representing a small portion of a person's budget.

C) Subsidizing consumption of the good.

Assume the production of a good gives rise to external benefits. The government may increase efficiency by A) taxing production of the good B) imposing taxes on the good C) subsidizing consumption of the good. D) requiring all producers of the good to be licensed

A) TC/Q.

Average total cost at a particular level of output equals A) TC/Q. B) TVC/Q. C) TFC/Q. D) change in total cost/change in output.

B) TVC/Q.

Average variable cost at a particular level of output equals A) TC/Q. B) TVC/Q. C) TFC/Q. D) change in total cost/change in output.

B) a firm cannot influence the market price.

Being a price taker essentially means A) a firm can influence the market price. B) a firm cannot influence the market price. C) the firm cannot legally set its price above the market price. D) the firm cannot legally set its price below the market price.

C) an increasing-cost industry.

Consider an industry that is in long-run equilibrium. An increase in demand leads to an increase in the price of the good. We know that this is A) a decreasing-cost industry. B) a constant cost industry. C) an increasing-cost industry. D) not a competitive industry.

A) marginal revenues equal marginal costs.

Economic profits are maximized at the point at which A) marginal revenues equal marginal costs. B) accounting profit exceeds economic profit. C) total revenues are greater than total costs. D) accounting profits are equal to zero.

C) variable costs.

Factors that cause the short-run supply curve to change are factors that affect A) demand. B) fixed costs. C) variable costs. D) the market but not the individual firm.

B) costs that a firm incurs even when output is zero.

Fixed costs are A) costs that never change. B) costs that a firm incurs even when output is zero. C) not actually costs since they do not affect the decisions of a firm. D) costs that increase at a constant rate when output increases.

C) short-run economic profits may be positive, but long-run economic profits must be zero.

For a firm in a perfectly competitive industry A) short-run economic profits must be zero. B) short-run and long-run economic profits must be zero. C) short-run economic profits may be positive, but long-run economic profits must be zero. D) both short-run and long-run economic profits may be negative.

B) marginal revenue and product price are equal at every level of output.

For a firm in a perfectly competitive industry A) the demand curve is unitary elastic throughout. B) marginal revenue and product price are equal at every level of output. C) the price elasticity of demand is zero. D) more output can be sold only if the firm unilaterally lowers its product price.

A) at least one input cannot be changed.

For a firm, we define the short run as a period of time during which A) at least one input cannot be changed. B) all inputs can be changed. C) only the plant size can be changed. D) all inputs cannot be changed.

D) the market price.

For a perfect competitor, marginal revenue equals A) the slope of the demand curve. B) average revenue divided by price. C) price divided by average revenue. D) the market price.

B) inelastic.

Generally, expenses on toothpaste are a small part of a consumer's budget, so the demand for toothpaste is more likely to be A) elastic. B) inelastic. C) unit elastic. D) perfectly elastic.

B) Increasing taxes or regulation.

Government can correct for negative externalities by A) allowing the market system to correct the program B) increasing taxes or regulation. C) decreasing the costs to those responsible for the externality D) decreasing taxes

A) diseconomies of scale.

If a firm gets so large that management of employees and other resources becomes a costly problem, it will be experiencing A) diseconomies of scale. B) diminishing marginal product. C) constant returns to scale. D) economies of scale.

A) 20 percent.

If the absolute value of the price elasticity of demand for a product is -2, and the price of a product increased 10 percent, then the quantity demanded will decline by A) 20 percent. B) 10 percent. C) 5 percent. D) 2 percent

C) constant-cost industry.

If the costs of production do NOT change as output increases in the long run in a perfectly competitive industry, then this is a A) constant-return-to-scale industry. B) constant-competitive industry. C) constant-cost industry. D) constant-price industry.

D) KR.

If the firm in the above figure produces output level D, it incurs an average fixed cost of production equal to the distance A) DK. B) RN. C) JL. D) KR.

D) the entire tax will be paid by the producer.

If the government places a $0.50 tax on an item for which demand is perfectly elastic A) the entire tax will be paid by the consumer. B) the tax will be split equally between the consumer and producer, with each paying exactly $0.25. C) most of the tax will be paid by the consumer. D) the entire tax will be paid by the producer.

B) decreases.

If the price elasticity of demand of a good is -1.8, then the total revenues will increase if its market price A) increases. B) decreases. C) stays the same. D) changes, but we can't tell without more information if the price increases or decreases.

B) the firm should shut down in the short run.

If there is no output for which product price is sufficient to cover variable costs A) the firm should stay open in the short-run. B) the firm should shut down in the short run. C) the firm earns economic profits by staying open. D) the firm should increase production.

C) cross-price elasticity of demand will be negative.

If two goods are complements, A) the demands for both goods will be elastic. B) cross-price elasticity of demand will be 0. C) cross-price elasticity of demand will be negative. D) cross-price elasticity of demand will be positive.

D) inferior good.

If your income rises and, as a result, you buy fewer packages of Ramen Noodles, then Ramen Noodles are a(n) A) substitute. B) normal good. C) complement. D) inferior good.

B) normal good.

If your income rises by one percent and, as a result, you buy more steak, then steak is a(n) A) substitute. B) normal good. C) complement. D) inferior good.

C) at the minimum of the long-run average cost curve.

In a perfectly competitive market, a firm in long-run equilibrium will be operating A) to the right of the minimum of the long-run average cost curve. B) to the left of the minimum of the long-run average cost curve. C) at the minimum of the long-run average cost curve. D) at the minimum of the marginal cost curve.

D) whatever time it takes a firm to vary all inputs

In economics, how long is the long run? A) more than one year B) 24 months or longer C) 5 years or more D) whatever time it takes a firm to vary all inputs

B) elastic.

In the above figure, over the price range P1P2, demand is A) unit elastic. B) elastic. C) inelastic. D) perfectly elastic.

C) firms exit the industry, the market supply curve shifts leftward, and the market price rises.

In the long run when a perfectly competitive firm experiences negative economic profits A) firms exit the industry, the market supply curve shifts rightward, and the market price falls. B) firms enter the industry, the market supply curve shifts rightward, and the market price falls. C) firms exit the industry, the market supply curve shifts leftward, and the market price rises. D) firms enter the industry, the market supply curve shifts rightward, and the market price rises.

B) earns only a normal profit.

In the long run, the perfectly competitive firm A) does not have a shut down price. B) earns only a normal profit. C) may produce even if it suffers a loss. D) earns an economic profit.

A) is more elastic than it is in the short run.

In the long run, the supply curve A) is more elastic than it is in the short run. B) is less elastic than it is in the short run. C) exhibits no systematic sequence of changes in elasticity. D) exhibits no change in elasticity at all.

A) P < AVC for all levels of output.

In the short run, in a perfectly competitive market, a firm will shut down if A) P < AVC for all levels of output. B) P < ATC for all levels of output. C) ATC > P > AVC for all levels of output. D) P > AFC for all levels of output.

D) the responsiveness of demand to changes in income.

Income elasticity of demand reflects A) the change in total quantity demanded divided by the total change in income. B) the responsiveness of the quantity demanded to changes in income, adjusting its relative price so real income does not change. C) the responsiveness of income of producers to a change in quantity sold of the good. D) the responsiveness of demand to changes in income.

B) the AVC and ATC curves are at their respective minimums.

MC = AVC and MC = ATC at points at which A) the AVC and ATC curves are at their respective maximums. B) the AVC and ATC curves are at their respective minimums. C) the distance between the ATC and AVC curves is at its minimum. D) the distance between the ATC and AVC curves is at its maximum.

A) the change in total costs due to a one-unit change in production.

Marginal costs are defined as A) the change in total costs due to a one-unit change in production. B) costs that are viewed as marginal; of little or small importance. C) costs that represent a change, but one that cannot be measured correctly. D) the change in the decisions that are made by households and firms.

A) the change in total output from using an additional unit of one variable input, holding other inputs constant.

Marginal product is A) the change in total output from using an additional unit of one variable input, holding other inputs constant. B) the change in total output from using an additional unit of all variable inputs. C) the total output divided by the number of units of the variable input. D) the change in total output divided by the number of units of the variable input, holding constant all other inputs.

B) an unrestrained market economy leads to too few or too many resources going to a specific economic activity

Market failure occurs when A) the stock market experiences a very large loss B) an unrestrained market economy leads to too few or too many resources going to a specific economic activity C) one good is superior to another and drives it out of the market D) a good is too expensive for the market to provide

C) prevent the price system from attaining economic efficiency

Market failures A) strengthen economic efficiency by forcing unprofitable firms to close B) weaken the argument for government intervention in the economy C) prevent the price system from attaining economic efficiency D) result in quantities and prices that are socially desirable

B) There are positive externalities.

Markets tend to under-allocate resources to the production of a good when A) there are public goods produced B) there are positive externalities. C) there are negative externalities D) equilibrium occurs

B) is the lowest rate of output per unit of time at which long-run average costs reach a minimum for a particular firm.

Minimum efficient scale A) is the point at which economies of scale begin for a particular firm. B) is the lowest rate of output per unit of time at which long-run average costs reach a minimum for a particular firm. C) applies only to firms with U-shaped long-run average cost curves. D) is the point at which diseconomies of scale begin for a particular firm.

B) the price elasticity of demand goes from being inelastic to being elastic.

Moving upward along a downward sloping straight-line demand curve, as the price of the product goes up A) the price elasticity of demand does not change. B) the price elasticity of demand goes from being inelastic to being elastic. C) the price elasticity of demand goes from being elastic to being inelastic. D) the price elasticity of demand goes from negative to positive.

A) An over-allocation of resources in production.

Pollution is caused by a market failure, in an industry in which there is A) an over-allocation of resources in production. B)excessive cost borne by the firm C) unemployment D) excess demand

A) Panel 1 and S1

Prior to the shift of the curves, which panel and which curve involve the existence of negative externality? A) Panel 1 and S1 B) Panel 1 and S2 C) Panel 2 and D1 D) Panel 2 and D2

B) 2.

Refer to the above figure. Average total costs are represented by curve A) 1. B) 2. C) 3. D) 4.

C) average fixed cost curve.

Refer to the above figure. Curve (4) is the A) total fixed cost curve. B) marginal product curve. C) average fixed cost curve. D) average variable cost curve.

A) Economic profits are positive and equal to ABCG.

Refer to the above figure. If the market price is equal to A, which statement can be made about economic profits? A) Economic profits are positive and equal to ABCG. B) Economic profits are positive and equal to ABEF. C) Economic profits are negative and equal to GCEF. D) Economic profits are negative and equal to ABQ 0.

A) 1.

Refer to the above figure. Marginal costs are represented by curve A) 1. B) 2. C) 3. D) 4.

B) Panel 2.

Refer to the above figures. Which of the panels would be consistent with the situation in which external benefits exist? A) Panel 1 B) Panel 2. C) Panel b1 and 2 D) neither panel

B) it does not matter what units are used to measure prices or quantities.

Relative percentage changes are used in measuring price elasticity of demand, so that A) it does not matter whether price increases or decreases when calculating the elasticity. B) it does not matter what units are used to measure prices or quantities. C) we always obtain a positive number. D) larger numbers indicate greater responsiveness.

A) Resources are over-allocated to the firm.

Suppose that one firm produces a product that results in negative external costs to society. This information suggests that A) resources are over-allocated to the firm. B) the equilibrium market price of the product includes the external costs to society C) at the market price, quantity demanded is less than quantity supplied D) resources are under-allocated to the firm

D) Goods Y and Z are substitutes because the cross price elasticity is positive.

Suppose that the cross-price elasticity of demand between goods Y and Z equals 1.5. Which of the following is TRUE? A) Goods Y and Z are complements because the cross price elasticity is greater than one. B) Goods Y and Z are complements because the cross price elasticity is positive. C) Goods Y and Z are substitutes because the cross price elasticity is greater than one. D) Goods Y and Z are substitutes because the cross price elasticity is positive.

A) diminishing marginal product.

Suppose the manager of a restaurant notices that when she has too many waiters on the floor for a shift that the waiters get in each other's way and fewer dinners are served. This is an example of A) diminishing marginal product. B) diminishing marginal utility. C) diminishing marginal workforce. D) diminishing marginal inputs.

B) perfectly inelastic.

Suppose the price change of a good causes no change in quantity demanded, we would say that the item is A) perfectly elastic. B) perfectly inelastic. C) infinitely elastic. D) unitary elastic.

D) varies by industry.

The amount of calendar time associated with the long run A) is less than five years. B) is greater than one year. C) is between one and five years. D) varies by industry.

C) marginal product of labor.

The change in output caused by a one-unit change in labor is referred to as the A) compounded physical product of labor. B) average product of labor. C) marginal product of labor. D) total product of labor.

D) marginal cost.

The change in total variable cost which accompanies one extra unit of output is A) the average total cost. B) the average variable cost. C) the average fixed cost. D) marginal cost.

C) the percentage change in the demand for one good (a shift in the demand curve) divided by the percentage change in price of a related good.

The cross-price elasticity of demand is defined as A) the percentage change in the supply for one good (a shift in the supply curve) divided by the percentage change in price of a related good. B) the percentage change in demand for two different commodities. C) the percentage change in the demand for one good (a shift in the demand curve) divided by the percentage change in price of a related good. D) the percentage change in price for two different commodities.

B) its production decisions cannot influence the market price.

The demand curve for a perfectly competitive firm is horizontal because A) consumers are willing to pay any price to obtain its product. B) its production decisions cannot influence the market price. C) the firm profits from setting its price higher than the market price. D) its product is easy for consumers to differentiate from those of other firms.

A) variable inputs.

The focus of firm decisions in the short run is primarily on A) variable inputs. B) capital investment. C) plant size. D) economies of scale.

B) maximize total profits.

The goal of the perfectly competitive firm is to A) maximize total revenue. B) maximize total profits. C) minimize AFC. D) minimize ATC.

B) the demand for gasoline was inelastic in the short run, but elastic in the long run.

The government raises gasoline taxes as part of the price of gasoline and receives more tax revenues. However, after five years, the government discovers that revenues from the gasoline tax have declined. This situation would be most likely to occur if A) the long-run elasticity of supply was much greater than the long-run elasticity of demand. B) the demand for gasoline was inelastic in the short run, but elastic in the long run. C) the long-run elasticity of demand was greater than the long-run elasticity of supply. D) the demand for gasoline was perfectly inelastic in both the short run and the long run.

C) Lower equilibrium quantity and raise equilibrium price in the market.

The imposition of a unit excise tax on beer will A) raise equilibrium quantity and lower equilibrium price in the market B) increase equilibrium quantity and price in the market C) lower equilibrium quantity and raise equilibrium price in the market. D) lower equilibrium price and quantity in the market

A) negatively sloped.

The long-run industry supply curve in a decreasing-cost, perfectly competitive industry is A) negatively sloped. B) perfectly elastic. C) positively sloped. D) perfectly inelastic.

D) more quantity demanded will change.

The longer any price change lasts over time, the A) more difficult it is to alter quantity demanded. B) the more quickly quantity demanded will return to its original level. C) the longer the short-run equilibrium will continue to be the short-run equilibrium. D) more quantity demanded will change.

C) limits to the efficient functioning of management.

The main source of diseconomies of scale is A) dimensional factors associated with many physical relationships. B) specialization of labor. C) limits to the efficient functioning of management. D) improvements in production technology.

A) workers are able to specialize.

The marginal product of labor may increase rapidly initially as more A) workers are able to specialize. B) total product is decreasing. C) the amount of other inputs is held constant. D) workers will get crowded in a fixed factory.

D) is also the demand curve faced by the firm.

The marginal revenue curve of a perfectly competitive firm A) has a vertical intercept equal to exactly one-half of the vertical intercept for the demand curve. B) lies below the demand curve and above the average revenue curve. C) intersects the average revenue curve from above at the maximum point of the average revenue curve. D) is also the demand curve faced by the firm.

A) point A is the minimum efficient scale (MES) for the firm.

The minimum efficient scale in the figure below shows that A) point A is the minimum efficient scale (MES) for the firm. B) point B is the minimum efficient scale (MES) for the firm. C) the long-run average cost curve (LAC) reaches a minimum point at B. D) the minimum efficient scale (MES) illustrates maximum average costs.

B) the time period firms have to adjust to the new price.

The most important determinant of price elasticity of supply is A) the number of close substitutes there are for the good. B) the time period firms have to adjust to the new price. C) the price of the good. D) the importance of the good in the budgets of consumers.

A) law of diminishing marginal product.

The observation that after some point, successive equal size increases in a variable factor of production, such as labor, added to fixed factors of production, will result in smaller increases in output is the A) law of diminishing marginal product. B) streamlining production function. C) consumer equilibrium. D) theory of increasing marginal utility.

B) its production is too small to affect the market.

The perfectly competitive firm cannot influence the market price because A) it has market power. B) its production is too small to affect the market. C) a few buyers have control over the market price. D) its costs are too high.

A) the consumers' sensitivity to a price change.

The price elasticity of demand measures A) the consumers' sensitivity to a price change. B) the producers' sensitivity to a price change. C) how much the market supply changes in response to a change in demand. D) how much the demand changes in response to a change in income.

B) the proportionate amount by which the quantity demanded changes in response to a proportionate change in price.

The price elasticity of demand shows A) the relationship between market price and household income. B) the proportionate amount by which the quantity demanded changes in response to a proportionate change in price. C) the quantity demanded at a given price. D) the proportionate amount by which the price changes in response to a proportionate change in quantity demanded.

B) a 10 percent increase in price would increase quantity supplied by 60 percent.

The price elasticity of supply is 6. This means that A) a $10 increase in price would increase quantity supplied by 60. B) a 10 percent increase in price would increase quantity supplied by 60 percent. C) a 10 percent increase in quantity will occur when price increases by 0.6 percent. D) a 10 percent increase in quantity will occur when price increases by 6 percent.

A) the number of producers in the market increases over time.

The price elasticity of supply is higher when A) the number of producers in the market increases over time. B) the product in question is a complementary good. C) the number of buyers in the market increases. D) producers have less time to adjust to price changes.

B) the responsiveness of quantity supplied to a change in price.

The price elasticity of supply measures A) the responsiveness of quantity demanded to a change in price. B) the responsiveness of quantity supplied to a change in price. C) the change in supply due to a change in input prices. D) the change in price due to a change in quantity supplied.

A) The production of a good effects parties other than its buyers and sellers.

The price system allocates resources efficiently except when A) the production of a good effects parties other than its buyers and sellers. B) voluntary exchange exists C) consumers decide they want more of a good D) resources are utilized to produce the highest-valued goods and services

A) inputs.

The production function illustrates the amount of total product that can be produced with a given set of A) inputs. B) outputs. C) marginal product. D) marginal input.

C) a production function.

The relationship between inputs and outputs is known as A) business. B) manufacturing. C) a production function. D) marginal product.

D) MC curve above its AVC curve.

The short-run supply curve for a perfectly competitive firm is the portion of its A) ATC curve above the MC curve. B) MC curve above the ATC curve. C) ATC curve below the MC curve. D) MC curve above its AVC curve.

A) lower will be the price elasticity of supply.

The shorter the time period that suppliers have to adjust to price changes, the A) lower will be the price elasticity of supply. B) higher will be the price elasticity of supply. C) higher will be the price elasticity of demand. D) lower will be the price elasticity of demand.

A) smaller is the responsiveness of quantity demanded to the price change.

The smaller is the closer to zero (0) price elasticity of demand, the A) smaller is the responsiveness of quantity demanded to the price change. B) larger is the responsiveness to a price change. C) larger is the income of the buyer. D) higher is the change in demand to an income change.

D) law of diminishing marginal product.

The typical cost curves are U-shaped due to the A) law of diminishing marginal utility. B) law of supply. C) law of demand. D) law of diminishing marginal product.

C) relatively small changes in price lead to relatively large changes in quantity demanded.

To say that demand is elastic means that A) people do not like the good very much. B) quantity demanded not very responsive to price changes. C) relatively small changes in price lead to relatively large changes in quantity demanded. D) relatively small changes in quantity demanded lead to relatively small changes in price.

B) the cost that does not change as output changes.

Total fixed cost is A) the cost of buying and installing new machinery. B) the cost that does not change as output changes. C) the expenditure on imported raw materials. D) the wages paid to consultants.

A) price × quantity.

Total revenue is A) price × quantity. B) change in price × change in quantity. C) change in price × quantity. D) price × change in quantity.

C) lose all of its customers.

Under perfect competition, a firm that sets its price slightly above the market price would A) make lower profits than the other firms, but the amount would depend on the elasticity of demand. B) make a normal rate of return, but on reduced revenues. C) lose all of its customers. D) earn higher profits as long as the other firms continued to charge the market price.

B) Largely paid by consumers because they are not very responsive to price changes.

Unit excise taxes imposed on gasoline, alcohol, and cigarettes are A) paid by the wholesalers of these products B) largely paid by consumers because they are not very responsive to price changes. C) largely paid by the producers because they want to maintain their level of sales D) shared equally between the producer and the consumer

A) DE.

Use the above figure. At an output equal to "Q" the average fixed cost for the firm will be the line segment A) DE. B) AB. C) BE. D) CD.

A) OQDC.

Use the above figure. At an output equal to "Q" the total cost for the firm will be the area A) OQDC. B) OQFA. C) OQBC. D) OQEB.

B) OQEB.

Use the above figure. At an output equal to "Q" the total variable cost for the firm will be the area A) OQAB. B) OQEB. C) OQFA. D) OQDC.

C) P3.

Using the above figure, the price facing the perfectly competitive firm in the long run will be A) P1. B) P2. C) P3. D) P4.

C) a greater than one percent change in quantity demanded.

We say that a good has elastic demand whenever the value of the price elasticity of demand is less than minus one (-1). A one percent change in price therefore causes A) exactly a one percent change in the quantity demanded. B) a change of less than one percent in the quantity demanded. C) a greater than one percent change in quantity demanded. D) a change that cannot be determined based on one percent.

A) For the first time, hiring an additional worker decreases total product.

What happens at a firm's point of saturation? A) For the first time, hiring an additional worker decreases total product. B) Workers cannot take on any additional tasks without working overtime hours. C) The market for a firm's output has been saturated and sales fall to zero. D) The firm's total costs exceed its revenues.

C) short-run

When El Torito Restaurant is deciding how many waiters to hire for a holiday weekend, it is making a ________ decision. A) plant-size B) long-run C) short-run D) fixed-input

A) the firm is earning a normal rate of return on investment.

When a firm has economic profits equal to zero A) the firm is earning a normal rate of return on investment. B) the firm is not earning a normal rate of return on investment. C) the firm should shut down. D) the firm's accounting profits are also zero.

A) elastic.

When a household spends over 70% of its monthly income on a good, demand will be A) elastic. B) unit-elastic. C) inelastic. D) elastic, unit-elastic or inelastic depending upon supply.

B) quantity demanded is not very responsive to a change in price.

When demand is inelastic A) quantity demanded is very responsive to a change in price. B) quantity demanded is not very responsive to a change in price. C) the proportional change in quantity demanded is equal to the proportional change in price. D) producers react quickly to price changes.

A) diseconomies of scale.

When long-run average costs rise as output increases, the firm is experiencing A) diseconomies of scale. B) diminishing returns. C) constant returns to scale. D) economies of scale.

C) The government can step in to correct the market failure.

When market failures occur A) the invisible hand will correct for the market failures B) people will reduce their consumption C) the government can step in to correct the market failure. D) the price system will correct the market failures

C) inelastic.

When the price elasticity of demand equals -0.9, demand is A) elastic. B) unit-elastic. C) inelastic. D) undetermined without more information.

A) elastic.

When the price of a pound of oranges is $1.00, 7500 pounds of oranges are demanded. When the price of a pound of oranges decreases to $0.80, 10,000 pounds of oranges are demanded. In this price range the demand for oranges is A) elastic. B) inelastic. C) unit elastic. D) perfectly elastic.

A) elastic.

When the price of a textbook is $100, 60 copies are demanded; and when the price of that textbook goes up to $120, 30 copies are demanded. In the price range between $100 and $120, the demand for the textbook is A) elastic. B) inelastic. C) unit elastic. D) perfectly elastic.

B) Too few or too many goods will be produced.

When the price system fails to generate an efficient allocation of resources A) business will produce more B) too few or too many goods will be produced. C) the market will always correct it D) consumers will spend less

C) External benefits.

Which of the following leads to an under-allocation of resources to a specific economic activity? A) effluent benefits B) marginal costs C) external benefits. D) external costs

A) Inoculation programs.

Which of the following often involves positive external benefits? A) inoculation programs. B) water pollution C) drunken driving D) tobacco smoking

A) Proportionally larger pipes can transport more than a proportional increase in oil.

Which of the following physical relationships might generate economies of scale? A) Proportionally larger pipes can transport more than a proportional increase in oil. B) Larger equipment tends to weigh more and use more fuel on a per-unit-of-output basis. C) Each lift truck requires one lift truck driver. D) A doubling of all inputs leads to a doubling of output.

B) B.

n the above figure, if the firm is facing demand curve d2, then to maximize profits it will produce at output level A) A. B) B. C) C. D) D.