ECON FINAL (Units 5 & 6)

If the 15th unit of output has a marginal cost of $29.50 and the average cost of producing 14 units of output is $30.23, what will happen to the average cost of production if the 15th unit is produced? Average cost increases as more is produced. Average cost could increase or decrease depending on what happens to variable cost. Average cost will fall. Average cost could increase or decrease depending on what happens to fixed cost.

Average cost will fall.

Consider the following characteristics: a. low transactions costs b. small levels of pollution c. high levels of pollution d. clear assignment of property rights a, b, and d a, c, and d a and d a only

a and d

Why do most firms in monopolistic competition typically make zero profit in the long run? because the lack of entry barriers would compete away profits because firms do not produce at their minimum efficient scale because the total market is not large enough to accommodate so many firms because firms produce differentiated products

because the lack of entry barriers would compete away profits

When a firm's long-run average cost curve is horizontal for a range of output, then that range of production displays increasing returns to scale. constant returns to scale. decreasing returns to scale. constant average fixed costs.

constant returns to scale.

All of the following characteristics are common to both monopolistic competition and perfect competition except entry barriers into the industries are low. firms act to maximize profit. the market demand curves are downward-sloping. firms take market prices as given.

firms take market prices as given

If a significant number of consumers switch from consuming traditional baked goods to consuming vegan baked goods, a vegan bakery will likely find its demand curve shifting to the ________ and its marginal revenue curve shifting to the ________ as more competitors enter the market. left; left right; right left; right right; left

left; left

Which of the following equations is incorrect? AFC = ATC - AVC ATC - AFC = AVC ATC = AVC - AFC AVC + AFC = ATC

ATC= AVC-AFC

In a diagram showing the average total cost and average variable cost curves, the minimum point of the average total cost is At the same level of output as the maximum of the total product curve. At the same level of output as the minimum point of the average variable cost. At a larger level of output than the minimum point of the average variable cost. At a lower level of output than the minimum point of the average variable cost.

At a larger level of output than the minimum point of the average variable cost.

If a typical monopolistically competitive firm is making short-run losses, then as some firms leave, the remaining firms will experience an increase in the demand for their products. other more competitive firms will enter the market. the industry will eventually cease to exist. as some firms leave, the demand for the products of the remaining firms will become more elastic.

as some firms leave, the remaining firms will experience an increase in the demand for their products.

Which of the following is not an example of a monopolistically competitive market? supermarkets gas stations automobile producers makers of women's clothing

automobile producers

If the marginal cost curve is below the average variable cost curve, then average variable cost could either be increasing or decreasing. average variable cost is increasing. average variable cost is decreasing. marginal cost must be decreasing.

average variable cost is decreasing

Which of the following characterizes the market that Chipotle competes in? "Fast-casual" restaurants sell identical products. All "fast-casual" restaurants face horizontal demand curves. There are a small number of firms. Barriers to entry are low.

barriers to entry are low

In cities with rent controls, the actual rents paid can be higher than the legal maximum. One explanation for this is landlords are allowed to charge more than the legal maximum on some apartments so long as they charge less on others. rent control laws are so complicated that landlords and tenants may not be aware of what the legal price is. because there is a shortage of apartments, tenants often are willing to pay rents higher than the law allows. the legal penalty landlords face for charging more than the legal maximum rent is less than the revenue earned by charging their tenants more than the maximum rent.

because there is a shortage of apartments, tenants often are willing to pay rents higher than the law allows.

Economists agree that a monopolistically competitive market structure can eliminate any excess capacity if all firms in the industry devote more funds to differentiating their products. benefits consumers because firms produce products that appeal to a wide range of consumer tastes. is detrimental to society because it leads to a waste of scarce resources. lowers consumer utility because consumers pay a price higher than the marginal cost of production.

benefits consumers because firms produce products that appeal to a wide range of consumer tastes.

The marginal revenue of a monopolistically competitive firm can be negative if the firm charges a low price. will equal average revenue. can be negative if the firm charges a high price. cannot be negative because the price the firm charges will always be greater than zero.

can be negative if the firm charges a low price

If, when a firm doubles all its inputs, its average cost of production increases, then production displays declining fixed costs. economies of scale. diseconomies of scale. diminishing returns.

diseconomies of scale.

A monopolistically competitive industry that earns economic profits in the short run will continue to earn economic profits in the long run. experience the exit of existing firms out of the industry in the long run. experience the entry of new rival firms into the industry in the long run. experience a rise in demand in the long run.

experience the entry of new rival firms into the industry in the long run

In the long run, a firm in a perfectly competitive industry will supply output only if its total revenue covers its explicit costs. explicit costs plus its implicit costs. implicit costs. fixed costs.

explicit costs plus its implicit costs.

The rules of accounting generally require that ________ costs be used for purposes of keeping a company's financial records and for paying taxes. These costs are sometimes called ________ costs. explicit; accounting economic; legal real; explicit total; economic

explicit; accounting

Every firm that has the ability to affect the price of the good or service it sells will have a marginal revenue curve that lies below its demand curve. earn a short-run profit but break even in the long run. have a perfectly elastic demand curve. shut down in the short run.

have a marginal revenue curve that lies below its demand curve.

Some colleges now offer massive open online courses (MOOCs), where students do not need to be in the same classroom as their instructors. The fixed cost of an online course is relatively ________, but after the courses are placed online, the marginal cost of providing instruction to an additional student is ________. low; low low; high high; low high; high

high; low

A perfectly competitive firm faces a demand curve that is horizontal. perfectly inelastic. vertical. perpendicular to the quantity axis.

horizontal.

In theory, in the long run, monopolistically competitive firms earns zero profits. However, in reality there are some ways by which a firm can avoid losing profits. Which of the following is one such way? identify new markets and develop products precisely for those markets gradually increase the mark-up on the goods produced lower the price of its products to expand its market share find a market niche and keep it as narrow as possible so as to prevent other producers from entering this market segment

identify new markets and develop products precisely for those markets

Diseconomies of scale occur when long-run labor costs rise as a firm increases its output. long-run average costs fall as a firm expands its plant size. short-run average costs rise as a firm expands its plant size. long-run average costs rise as a firm increases its output.

long-run average costs rise as a firm increases its output.

Which of the following is not a source of technological advancement for a producer? better trained workers higher skill level of managers more efficient physical capital outsourcing some aspect of production

outsourcing some aspect of production

To improve package delivery, one change UPS made involved taking better account of weather forecasts to avoid delays in flying packages. This is an example of diseconomies of scale. a reduction in fixed costs. positive technological change. increasing marginal returns.

positive technological change.

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then average total cost is at a minimum. marginal revenue is less than price. total revenue equals total cost. price exceeds average total cost.

price exceeds average total cost.

Suppose the demand curve for a product is horizontal and the supply curve is upward sloping. If a per-unit tax is imposed in the market for this product sellers bear the entire burden of the tax. the tax burden will be shared among the government, buyers, and sellers. buyers bear the entire burden of the tax. the tax burden will be shared by buyers and sellers.

sellers bear the entire burden of the tax.

The minimum efficient scale is... the smallest output level where the firm finally reaches productive efficiency. the level of output where diminishing returns have not set in yet. the plant size that yields the most profit. the level of operation where long-run average costs are lowest.

the level of operation where long-run average costs are lowest.

Which of the following statements is true about marginal revenue? If marginal revenue is positive, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. If marginal revenue is negative, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. If marginal revenue is zero, it means that quantity demanded falls to zero when a firm changes its price. Marginal revenue increases as price falls and quantity sold increases.

If marginal revenue is negative, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price.

Excess capacity is a characteristic of monopolistically competitive firms. What does excess capacity mean? It means that firms produce with inefficient combinations of resources. It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves. It means that firms hire more than the minimum number of workers needed to produce the profit-maximizing level of output. It means that firms build plants that are not large enough to achieve minimum efficient scale.

It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves.

Which of the following statements is false? When marginal cost is greater than average total cost, average total cost will rise. Marginal cost will equal average total cost when average total cost is at its lowest point. Marginal cost will equal average total cost when marginal cost is at its lowest point. When marginal cost is less than average total cost, average total cost will fall.

Marginal cost will equal average total cost when marginal cost is at its lowest point.

Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of $4,000. Max's explicit cost amounts to $3,000 per month more than his revenue. Should Max continue operating his business? Max's explicit cost exceeds his total revenue. He should shut down his tattoo parlor. Max should continue to run the tattoo parlor until his lease runs out. If Max's marginal revenue is greater than or equal to his marginal cost, then he should stay in business. This cannot be determined without information on his revenue.

Max should continue to run the tattoo parlor until his lease runs out.

Identity the area that represents the loss P3caP0 P2 deP1 P3cbP1 0P1 bQ1

P3cbP1

For the monopolistically competitive firm P > MR = AR. Price (P) = Marginal Revenue (MR) = Average Revenue (AR). P = AR > MR. P = MR > AR.

P= AR > MR

Only one of the following statements is correct. The statements compare perfectly competitive (PC) markets and monopolistically competitive (MC) markets. Which statement is correct? Productive efficiency is achieved in both PC and MC markets. Allocative efficiency is achieved only in MC markets. Allocative efficiency is achieved only in PC markets. Productive efficiency is achieved only in MC markets. Allocative efficiency is achieved in both PC and MC markets. Productive efficiency is achieved only in PC markets. Productive efficiency and allocative efficiency are both achieved in PC markets. Neither is achieved in MC markets.

Productive efficiency and allocative efficiency are both achieved in PC markets. Neither is achieved in MC markets.

Jill Johnson owns a pizzeria. She currently produces 10,000 pizzas per month at a total cost of $500. If she produced one more pizza her total cost rises to $500.11. What does this tell us about Jill's marginal cost of producing pizzas? The marginal cost of producing pizzas is constant. The marginal cost of producing pizzas is falling. The marginal cost of producing pizzas is rising. The marginal cost of producing pizzas cannot be determined without more information.

The marginal cost of producing pizzas is rising.

A tax that imposes a small excess burden relative to the tax revenue that it raises is an efficient tax. a sin tax. a FICA tax. a payroll tax.

an efficient tax.

In monopolistic competition there is/are many sellers who each face a perfectly elastic demand curve. a few sellers who each face a downward-sloping demand curve. only one seller who faces a downward-sloping demand curve. many sellers who each face a downward-sloping demand curve.

many sellers who each face a downward-sloping demand curve

The firm's short-run supply curve is its marginal cost curve from b and above. marginal cost curve. marginal cost curve from d and above. marginal cost curve from c and above.

marginal cost curve from b and above.

In the short run, if marginal product is at its maximum, then: marginal cost is at its minimum. average variable cost is at its minimum. average cost is at its minimum. total cost is at its maximum.

marginal cost is at its minimum.

In the United States, the average person mostly patronizes firms that operate in perfectly competitive markets. monopolistically competitive markets. monopoly markets. oligopoly markets.

monopolistically competitive markets

If a producer is not able to expand its plant capacity immediately, it is operating in the long run. losing money. bankrupt. operating in the short run.

operating in the short run.

Economists argue that the level of pollution should be reduced to the point where the marginal benefit of pollution reduction is equal to the marginal cost of pollution reduction to society. reduced completely to zero because by definition, it has a negative external effect. ignored because it has always been present since the beginning of history. best determined by elected officials who can speak on behalf of the public.

reduced to the point where the marginal benefit of pollution reduction is equal to the marginal cost of pollution reduction to society.

When new firms are encouraged to enter a monopolistically competitive market the marginal cost curve facing an existing firm shifts downwards. the demand curve facing an existing firm shifts to the right. they do so because there is insufficient product differentiation. some existing firms must be earning economic profits.

some existing firms must be earning economic profits.

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are nonmonetary opportunity costs. implicit costs. sunk costs. capital costs.

sunk costs.

The actual division of the burden of a tax between buyers and sellers in a market is called tax liability. tax parity. tax incidence. tax bearer.

tax incidence.

At the minimum efficient scale The firm has achieved the lowest possible average cost of production. Any increases in the scale of operation will encounter further economies of scale. Marginal cost is at its minimum. All possible economies of scale have not been exhausted.

the firm has achieved the lowest possible average cost of production

If production displays economies of scale, the long-run average cost curve is above the short-run average total cost curve. below the long-run marginal cost curve. downward sloping. upward sloping.

downward sloping

How does the long-run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry? A firm in monopolistic competition will earn economic profits but a firm in perfect competition earns zero profit. A firm in monopolistic competition produces an allocatively efficient output level while a firm in perfect competition produces a productively efficient output level. A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible. A firm in monopolistic competition will charge a price higher than the average cost of production but a firm in perfect competition charges a price equal to the average cost of production.

A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible.

The delivery of first-class mail by the U.S. Postal Service is an example of Perfect competition because consumers have access to other methods of written communication; for example, email and text messaging. Monopolistic competition, because mail delivery is a differentiated product provided by many firms. A monopoly. An oligopoly because a few other firms provide delivery of letters and packages.

A monopoly.

The president of Toyota's Georgetown plant was quoted as saying, "Demand for high volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out the expertise and knowledge we painstakingly built up over the years." This quote suggests that Toyota was experiencing an excess demand for its automobiles which it had difficulty keeping up with. As Toyota expanded its capacity, it experienced diseconomies of scale. Toyota was focused on "churning" out cars for which it did not invest sufficiently in training its workers. High demand for Toyota's cars prevented the company from focusing on its strength: auto design.

As Toyota expanded its capacity, it experienced diseconomies of scale.

Which of the following arguments could be made as evidence that the market for cage-free eggs is perfectly competitive? Sales of cage-free eggs have increased at a rate of 20 percent per year. As more farmers began selling cage-free eggs, the increase in supply has driven down prices to the point where they just cover the cost of production. The profits earned by farmers who sell cage-free eggs have continued to grow, despite the increasing number of farmers entering this market. The U.S. Department of Agriculture has established standards for the labeling of cage-free eggs.

As more farmers began selling cage-free eggs, the increase in supply has driven down prices to the point where they just cover the cost of production.

Which of the following statements is true? The marginal cost curve intersects the average fixed cost curve at its minimum point. As output increases, average fixed cost becomes smaller and smaller. Average fixed cost does not change as output increases. When marginal cost is greater than average fixed cost, average fixed cost increases.

As output increases, average fixed cost becomes smaller and smaller.

Compare two situations. (A) A firm is not legally responsible for damages that result from air pollution caused by its production of steel. (B) A firm is legally responsible for damages that result from its production of steel. Ronald Coase argued that if the property rights are assigned and transactions costs are low, Bargaining between the firm and the victims of the air pollution caused by the firm would lead to a smaller reduction in pollution in situation (A) than situation (B). Bargaining between the firm and the victims of the air pollution caused by the firm would lead to an equal reduction in pollution in situation (A) and situation (B). Bargaining between the firm and the victims of the air pollution caused by the firm would lead to a greater reduction in pollution in situation (A) than situation (B). Bargaining between the firm and the victims of the air pollution caused by the firm will result in little reduction of pollution in either situation (A) or (B) because the firm has greater economic and political power than the victims.

Bargaining between the firm and the victims of the air pollution caused by the firm would lead to an equal reduction in pollution in situation (A) and situation (B).

In the mid-1990s, cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost. What is the likely explanation for this? The ranchers were hoping to receive government subsidies. Cattle is an important source of protein and its production is essential for the United States. Continuing to operate resulted in smaller losses than would have been incurred by shutting down. The exit costs were too high.

Continuing to operate resulted in smaller losses than would have been incurred by shutting down.

Economic costs of production differ from accounting costs in that Accounting costs include expenditures for hired resources while economic costs do not. Accounting costs are always larger than economic cost. economic costs include expenditures for hired resources while Accounting costs do not. Economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.

Economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.

Which of the following statements is true? An explicit cost is more important, dollar for dollar, than an implicit cost. Economic costs include both explicit costs and implicit costs. An explicit cost is an actual cost; an implicit cost is a theoretical cost. Explicit costs are accounting costs, not economic costs; implicit costs are economic costs, not accounting costs.

Economic costs include both explicit costs and implicit costs.

Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive. Which of the following offers the best reason why some economists believe that monopolistically competitive markets are less efficient than perfectly competitive markets? In contrast to perfectly competitive markets, firms in monopolistically competitive markets can charge a price greater than average total cost in the short run. In contrast to perfectly competitive markets, firms in monopolistically competitive markets do not produce where price equals average total cost in long-run equilibrium. Correct In contrast to perfectly competitive markets, neither allocative efficiency nor productive efficiency are achieved in monopolistically competitive markets. In contrast to perfectly competitive markets, firms in monopolistically competitive markets earn economic profits in long-run equilibrium.

In contrast to perfectly competitive markets, neither allocative efficiency nor productive efficiency are achieved in monopolistically competitive markets.

A perfectly competitive market is in long-run equilibrium. At present there are 100 identical firms each producing 5,000 units of output. The prevailing market price is $20. Assume that each firm faces increasing marginal cost. Now suppose there is a sudden increase in demand for the industry's product which causes the price of the good to rise to $24. Which of the following describes the effect of this increase in demand on a typical firm in the industry? In the short run, the typical firm increases its output and makes an above normal profit. In the short run, the typical firm's output remains the same but because of the higher price, its profit increases. In the short run, the typical firm increases its output but its total cost also rises, resulting in no change in profit. In the short run, the typical firm increases its output but its total cost also rises. Hence, the effect on the firm's profit cannot be determined without more information.

In the short run, the typical firm increases its output and makes an above normal profit.

Which of the following would result in a positive externality? Medical research results in a cure for malaria. A local government establishes a price ceiling on rental apartments. McDonald's adds new fat-free items to its menu. An electric utility burns coal that causes acid rain.

Medical research results in a cure for malaria.

Is a monopolistically competitive firm productively efficient? No, because it does not produce at minimum average total cost. No, because price is greater than marginal cost. Yes, because price equals average total cost. Yes, because it produces where marginal cost equals marginal revenue.

No, because it does not produce at minimum average total cost.

Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open. Which of the following is true? The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost. The fixed cost of running the studio is $22,000. The variable cost of running the studio is $22,000. The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost.

The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost.

In the long run, what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits? The demand curve will shift to the left and became less elastic. The demand curve will shift to the right and became more elastic. The demand curve will shift to the right and became less elastic. The demand curve will shift to the left and became more elastic.

The demand curve will shift to the left and became more elastic.

Assume the market for cage-free eggs is perfectly competitive. All else equal, as more farmers choose to produce and sell cage-free eggs, what is likely to happen to the equilibrium price of the eggs and profits of these farmers in the long run? The equilibrium price is likely to increase and profits are likely to increase. The equilibrium price is likely to increase and profits are likely to remain unchanged. The equilibrium price is likely to decrease and profits are likely to decrease. The equilibrium price is likely to remain unchanged and profits are likely to increase.

The equilibrium price is likely to decrease and profits are likely to decrease.

Assume that the medical screening industry is perfectly competitive. Consider a typical firm that is making short-run losses. Suppose the medical screening industry runs an effective advertising campaign which convinces a large number of people that yearly CT scans are critical for good health. How will this affect a typical firm that remains in the industry? The firm's marginal revenue curve and average cost curve shift upwards in response to the increase in market price and advertising expenditure. The firm increases output until it starts breaking even. The firm's supply curve shifts right and its marginal revenue curve shifts upwards as the market price rises and ultimately the firm starts making profits. The marginal revenue curve shifts upwards, the firm's output increases along its marginal cost curve, it expands production until it breaks even. The marginal revenue curve shifts upwards, the firm's output increases along its marginal cost curve, it expands production and eventually starts making profits.

The marginal revenue curve shifts upwards, the firm's output increases along its marginal cost curve, it expands production until it breaks even.

Which of the following is an example of market "production," as used by economists? Garvey takes out a low-cost government loan to start his pet-sitting business. Heidi makes a pizza for her family's dinner. Katrina works as a cashier at the local produce stand. The theatre and film studies department in Fine Art's College stages a play at the local theatre.

The theatre and film studies department in the Fine Art's College stages a play at the local theatre.

Firms such as Taco Bell and Chipotle operate hundreds of restaurants nationwide while firms such as El Pollo Loco operates only in five states. How would you characterize these stores? Taco Bell and Chipotle are oligopolists while El Pollo Loco is a monopolistic competitor. Taco Bell and Chipotle are duopolists while El Pollo Loco is a monopolistic competitor. They are all monopolistic competitors. Taco Bell and Chipotle are duopolists while El Pollo Loco is an oligopolist.

They are all monopolisitc competitors.

The ABC Company manufactures routers that are used to provide high-speed Internet service. ABC sells an average of 1,000 routers each month, but to exhaust economies of scale in its industry ABC would have to sell 3,000 routers each month. Therefore, ABC will soon go out of business. ABC is experiencing diseconomies of scale. To reach minimum efficient scale ABC would have to sell at least 3,000 routers each month. ABC is experiencing diminishing returns.

To reach minimum efficient scale ABC would have to sell at least 3,000 routers each month.

After selling 1,000 three-ring binders Tony DiFulvio realizes that the marginal revenue from selling the last binder was less than the marginal cost. From this we can conclude that Tony's business earns a short-run economic profit. Tony should shut down his business temporarily. Tony's profit would be greater if he sold an additional three-ring binder. Tony's profit fell after selling his 1,000th three-ring binder.

Tony's profit fell after selling his 1,000th three-ring binder.

A monopolistically competitive market is described as one in which there are one large firm and many small firms producing identical products. a few firms producing differentiated products. a few firms producing an identical product. a large number of firms selling similar, but not identical, products.

a large number of firms selling similar, but not identical, products.

The economic analysis of monopolistic competition shows that market forces eliminate profits in the long run. However, it is possible for a firm to continue to earn economic profits if the firm expands its marketing budget. expands its product offerings to appeal to a wider range of consumers. reduces its price to expand its market. adopts new technologies that enable it to lower its cost of production.

adopts new technologies that enable it to lower its cost of production

Which of the following is true of a typical firm in a monopolistically competitive industry? The more successful firms have an incentive to merge in order to exert greater market power. Each firm acts independently. All firms have identical cost structures. Product differentiation allows a successful firm to emerge as a market leader in the industry.

each firm acts independently

In August 2008, Ethan Nicholas developed the iShoot application for the Apple iPhone 3G, and within five months had earned $800,000 from this program. By May 2009, Nicholas had dropped the price from $4.99 to $1.99 in an attempt to maintain sales. This example indicates that in a competitive market earning an economic profit in the long run is extremely difficult. it is impossible to earn an economic profit in either the short run or the long run. earning an economic profit in the long run is extremely easy. economic profits are only earned in the long run.

earning an economic profit in the long run is extremely difficult

If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set equal to the marginal external cost at the economically efficient level of pollution. equal to the marginal private cost of production at the economically efficient level of pollution. equal to the amount of the deadweight loss created in the absence of a pollution tax. at a level low enough so that producers can pass along a portion of the additional cost onto consumers without significantly reducing demand for the product.

equal to the marginal external cost at the economically efficient level of pollution

Assume price exceeds average variable cost over the relevant range of demand. If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19, then to maximize profits the firm should shut down. decrease output. increase output. continue to produce the same quantity.

increase output

Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of $4,000. The lease is a variable cost of operating the tattoo parlor. is a fixed cost of operating the tattoo parlor. is part of the marginal cost of operating the tattoo parlor. is an implicit cost of operating the tattoo parlor.

is a fixed cost of operating the tatoo parlor.

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm should shut down. is breaking even. is earning a profit. is incurring a loss.

is incurring a loss.

When a firm faces a downward-sloping demand curve, marginal revenue must exceed price because the output effect outweighs the price effect. must exceed price because the price effect outweighs the output effect. equals price because the firm sells a standardized product. is less than price because a firm must lower its price to sell more.

is less than price because a firm must lower its price to sell more

Which of the following is typically considered a fixed cost by academic book publishers but a variable cost by companies that print books? travel wages and salaries rent postage and supplies

wages and salaries