Econ Exam #4 Review

Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product? Firms produce a homogeneous product. The quantity of the product demanded is very large. The market demand curve cannot be increased. Firms do not make long-run profits.

Firms produce a homogeneous product.

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if price is below marginal cost. average cost. average fixed cost. average variable cost.

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if price is below

When total product is increasing at an increasing rate, marginal product is positive and increasing. positive and decreasing. constant. negative.

positive and increasing.

The fact that a purely competitive firm's total revenue curve is linear and upsloping to the right implies that product price increases as output increases. product price decreases as output increases. product price is constant at all levels of output. marginal revenue declines as more output is produced.

product price is constant at all levels of output.

Firms seek to maximize per unit profit. total revenue. total profit. market share.

total profit.

A firm reaches a break-even point (normal profit position) where marginal revenue cuts the horizontal axis. marginal cost intersects the average variable cost curve. total revenue equals total variable cost. total revenue and total cost are equal.

total revenue and total cost are equal.

At what point does marginal product equal average product? where average product is equal to its minimum value where average product is equal to its maximum value where marginal product is equal to its minimum value where marginal product is equal to its maximum value

where average product is equal to its maximum value

The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Creamy Crisp's explicit costs are $286,000. $150,000. $94,000. $156,000.

$150,000.

Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and has average variable costs of $150. The firm's total costs are. $20,000. $15,000. $50. $5,000.

$20,000.

The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Creamy Crisp's total economic costs are $286,000. $150,000. $94,000. $156,000.

$286,000.

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be $3. $36. 12 lbs. $12.

$3.

The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Creamy Crisp's economic profit is $286,000. $150,000. $230,000. $94,000.

$94,000.

Which of the following best expresses the law of diminishing returns? Because large-scale production allows the realization of economies of scale, the real costs of production vary directly with the level of output. Population growth automatically adjusts to that level at which the average product per worker will be at a maximum. As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra or marginal output will decline. Proportionate increases in the inputs of all resources will result in a less-than-proportionate increase in total output.

As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra or marginal output will decline.

Which of the following is characteristic of a purely competitive seller's demand curve? Price and marginal revenue are equal at all levels of output. Average revenue is less than price. Its elasticity coefficient is 1 at all levels of output. It is the same as the market demand curve.

Price and marginal revenue are equal at all levels of output.

Which of the following is a feature of a purely competitive market? Price differences exist between firms producing the same product. There are significant barriers to entry into the industry. The industry's demand curve is perfectly elastic. Products are standardized or homogeneous.

Products are standardized or homogeneous.

Which of the following statements is correct? The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping. The demand curve for a purely competitive firm is downsloping, but the demand curve for a purely competitive industry is perfectly elastic. The demand curves are downsloping for both a purely competitive firm and a purely competitive industry. The demand curves are perfectly elastic for both a purely competitive firm and a purely competitive industry.

The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping.

A purely competitive seller is both a "price maker" and a "price taker." neither a "price maker" nor a "price taker." a "price taker." a "price maker."

a "price taker."

An explicit cost is Multiple Choice omitted when accounting profits are calculated. a money payment made for resources not owned by the firm itself. an implicit cost to the resource owner who receives that payment. always in excess of a resource's opportunity cost.

a money payment made for resources not owned by the firm itself.

If the demand curve faced by an individual firm is downward-sloping, the firm cannot be a monopoly firm. a purely competitive firm. an oligopolistic firm. a monopolistically competitive firm.

a purely competitive firm.

For a purely competitive seller, price equals average revenue. marginal revenue. total revenue divided by output. all of these.

all of these

Marginal Cost equals both average variable cost and average total cost at their respective minimums. is the difference between total cost and total variable cost. rises for a time but then begins to decline when diminishing returns set in. declines continuously as output increases.

equals both average variable cost and average total cost at their respective minimums.

Cash expenditures a firm incurs to pay for resources are called implicit costs. explicit costs. normal profit. opportunity costs.

explicit costs.

For a purely competitive firm, total revenue is price times quantity sold. increases by a constant absolute amount as output expands. graphs as a straight upsloping line from the origin. has all of these characteristics.

has all of these characteristics.

To economists, the main difference between the short run and the long run is that the law of diminishing returns applies in the long run, but not in the short run. in the long run all resources are variable, while in the short run at least one resource is fixed. fixed costs are more important to decision making in the long run than they are in the short run. in the short run all resources are fixed, while in the long run all resources are variable.

in the long run all resources are variable, while in the short run at least one resource is fixed.

The marginal revenue curve of a purely competitive firm lies below the firm's demand curve. is downsloping because price must be reduced to sell more output. is horizontal at the market price. has all of these characteristics.

is horizontal at the market price.

In the short run, the individual competitive firm's supply curve is that segment of the average variable cost curve lying below the marginal cost curve. marginal cost curve lying above the average variable cost curve. marginal revenue curve lying below the demand curve. marginal cost curve lying between the average total cost and average variable cost curves.

marginal cost curve lying above the average variable cost curve.

If in the short run a firm's total product is increasing, then its marginal product must also be increasing. marginal product must be decreasing. marginal product could be either increasing or decreasing. average product must also be increasing.

marginal product could be either increasing or decreasing.

When the total product curve is falling, the marginal product of labor is zero. marginal product of labor is negative. average product of labor is increasing. average product of labor must be negative.

marginal product of labor is negative.

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating price and average total cost. price and average fixed cost. marginal revenue and marginal cost. price and marginal revenue.

marginal revenue and marginal cost.

If a firm has at least some control over the price of its product, then the firm cannot be in which market model? oligopoly pure monopoly pure competition monopolistic competition

pure competition

Marginal product is the change in total output attributable to the employment of one more worker. the change in total revenue attributable to the employment of one more worker. the change in total cost attributable to the employment of one more worker. total product divided by the number of workers employed.

the change in total output attributable to the employment of one more worker.

Economic Cost can best be defined as any contractual obligation that results in a flow of money from an enterprise to resource suppliers those payments for resources that involve an obvious cash transaction the income the firm must provide to resource suppliers to attract resources from alternative uses the opportunity cost of using a resource already owned by the firm

the income the firm must provide to resource suppliers to attract resources from alternative uses.

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue may be either greater or less than $5. will also be $5. will be less than $5. will be greater than $5.

will also be $5.