Economics

Refer to Figure 13-2. Which of the curves is most likely to represent marginal cost? a. Curve B b. Curve A c. Curve C d. Curve D

a. Curve B

Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is a. above $6.5. b. less than $6.5 but more than $3. c. less than $3. d. exactly $6.5.

a. above $6.5.

Taylor sells 400 candy bars at $0.50 each. Her total costs are $125. Her profits are a. $75.00. b. $124.50. c. $125.00. d. $200.00.

a. $75.00.

Competitive markets are characterized by? a. a small number of buyers and sellers. b. unique products. c. the interdependence of firms. d. free entry and exit by firms.

D. free entry and exit by firms.

Which of the following is not a characteristic of a competitive market? a. Buyers and sellers are price takers. b. Entry is limited. c. Each firm sells a virtually identical product. d. Each firm chooses an output level that maximizes profits.

Entry is limited.

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the a. production of the 100th unit of output increases the firm's profit by $1. b. production of the 100th unit of output increases the firm's average total cost by $1. c. firm's profit-maximizing level of output is less than 100 units. d. production of the 101st unit of output must increase the firm's profit by more than $1.

a. production of the 100th unit of output increases the firm's profit by $1.

When buyers in a competitive market take the selling price as given, they are said to be a. price takers. b. market entrants. c. monopolists. d. free riders.

price takers.

When profit-maximizing firms in competitive markets are earning profits, a. market demand must exceed market supply at the market equilibrium price. b. market supply must exceed market demand at the market equilibrium price. c. new firms will enter the market. d. the most inefficient firms will be encouraged to leave the market.

new firms will enter the market.

Scenario 14-1 At Q = 1,000, the firm's profits equal a. −$200. b. $1,000. c. $3,000. d. $4,000.

b. $1,000.

Figure 14-4. When 100 identical firms participate in this market, at what price will 15,000 units be supplied to this market? a. $1.00 b. $1.50 c. $2.00 d. The price cannot be determined from the information provided.

b. $1.50

(14-3) For this firm, the average revenue when 18 units are produced and sold is a. $3. b. $11. c. $1. d. $0.

b. $11.

Refer to Table 13-7. What is the value of A? a. $25 b. $50 c. $100 d. $200

b. $50

Refer to Table 13-7. What is the value of D? a. $25 b. $50 c. $100 d. $200

b. $50

Refer to Table 13-2. At which number of workers does diminishing marginal product begin? a. 1 b. 2 c. 3 d. 4

b. 2

Refer to Table 13-7. What is the value of B? a. $25 b. $50 c. $100 d. $200

c. $100

Refer to Table 13-7. What is the value of C? a. $25 b. $50 c. $100 d. $200

c. $100

(14-3.) For this firm, the marginal revenue of the 15th unit is a. $1. b. $3. c. $11. d. The marginal revenue cannot be determined without knowing the total revenue when 15 units are sold

c. $11.

(14-2) For this firm, the average revenue from selling 4 units is a. $0. b. $1. c. $15. d. $4.

c. $15.

(14-2) or this firm, the marginal revenue from selling the next unit is a. $12. b. $1. c. $15. d. $0.

c. $15.

Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business? a. $30 b. $140 c. $170 d. $300

c. $170

Refer to Scenario 13-1. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory? a. $3,000 b. $6,000 c. $15,000 d. $18,000

d. $18,000

Suppose a firm in a competitive market earned $3,000 in total revenue and had a marginal revenue of $30 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? a. $5 and 50 units b. $5 and 100 units c. $100 and 30 units d. $30 and 100 units

d. $30 and 100 units

Figure 14-4. If at a market price of $1.75, 52,500 units of output are supplied to this market, how many identical firms are participating in this market? a. 75 b. 100 c. 250 d. 300

d. 300

Refer to Figure 13-2. Curve C represents which type of cost curve? a. Marginal cost b. Average total cost c. Average variable cost d. Average fixed cost

d. Average fixed cost

Figure 14-3. When market price is P7, a profit-maximizing firm's short-run profits can be represented by the area A. P7 × Q5. B. P7 × Q3. C. (P7 − P5) × Q3. D. We are unable to determine the firm's profits because the quantity that the firm would produce is not labeled on the graph.

(P7 − P5) × Q3.

Which of the following statements regarding a competitive firm is correct? A.) Because each firm faces a downward sloping demand if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output. B.)If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units. C.)By lowering its price below the market price, the firm will benefit from selling more units at a lower price than it could have sold by charging the market price. D.)For all firms, average revenue equals the price of the good.

For all firms, average revenue equals the price of the good.

Figure 14-5. The figure above is for a firm operating in a competitive industry. If there were four identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve? a. A only b. A and C only c. B only d. B and D only

a. A only

Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 245 of the units it produced. The average cost of production for each unit of output produced was $100. The price for each of the 245 units sold was $90. Total profit for Billy's Bean Bag Emporium would be a. -$2,450. b. $22,050. c. $27,000. d. $30,000.

a. -$2,450.

Refer to Table 13-2. What is the marginal product of the first worker? a. 300 units b. 200 units c. 100 units d. 50 units

a. 300 units

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing a. economies of scale. b. diseconomies of scale. c. coordination problems arising from the large size of the firm. d. fixed costs greatly exceeding variable costs.

a. economies of scale.

Refer to Figure 13-6. At levels of output less than K, the firm experiences a. economies of scale. b. diseconomies of scale. c. constant returns to scale. d. both diminishing marginal productivity and coordination problems.

a. economies of scale.

Refer to Figure 13-2. Curve D is increasing because a. of diminishing marginal product. b. of increasing marginal product. c. marginal product first increases, then decreases. d. marginal product first decreases, then increases.

a. of diminishing marginal product.

Figure 14-1. If the market price rises above $6.5, the firm will earn a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits and shut down. d. zero economic profits in the short run.

a. positive economic profits in the short run.

Figure 14-3. In the short run, if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn a. positive profits .b. zero profits. c. losses but will remain in business. d. losses and will shut down.

a. positive profits.

Total revenue equals a. price × quantity. b. price/quantity. c. (price × quantity) − total cost. d. output − input.

a. price × quantity.

Nathan makes candles. If he charges $20 for each candle, his total revenue will be a. $1,000 if he sells 100 candles. b. $500 if he sells 25 candles. c. $20 regardless of how many candles he sells. d. $2,000 if he sells 5 candles.

b. $500 if he sells 25 candles.

Refer to Table 13-5. Assume the Wooden Chair Factory currently employs 5 workers. What is the marginal product of labor when the factory adds a 6th worker? a. 5 chairs per hour b. 15 chairs per hour c. 25 chairs per hour d. 70 chairs per hour

b. 15 chairs per hour

Figure 14-4. If there are 100 identical firms in this market, what is the value of Q2? a. 10,000 b. 20,000 c. 40,000 d. 80,000

b. 20,000

(14-6) The firm should not produce an output level beyond a. 4 units. b. 5 units. c. 6 units. d. 7 units.

b. 5 units.

. Refer to Figure 13-3. Which of the following can be inferred from the figure above? a. Marginal cost is increasing at all levels of output, and marginal product is increasing at low levels of output. b. Marginal product is increasing at low level of output and decreasing at high level of output. c. Marginal cost is increasing at all levels of output, and marginal product is decreasing at high level of output. d. Marginal product is increasing at all levels of output.

b. Marginal product is increasing at low level of output and decreasing at high level of output.

Suppose that for a particular business there are no implicit costs. Then a. accounting profit will be greater than economic profit. b. accounting profit will be the same as economic profit. c. accounting profit will be less than economic profit. d. the relationship between accounting profit and economic profit cannot be determined without more information

b. accounting profit will be the same as economic profit.

A firm produces 100 units of output at a total cost of $1,200. If fixed costs are $100, a. average fixed cost is $12. b. average variable cost is $11. c. average total cost is $13. d. average total cost is $14.

b. average variable cost is $11.

A firm produces 100 units of output at a total cost of $1,200. If fixed costs are $100, a. average fixed cost is $12. b. average variable cost is $11. c. average total cost is $13. d. average total cost is $14.

b. average variable cost is $11.

Economies of scale occur when a. long-run average total costs rise as output increases. b. long-run average total costs fall as output increases. ' c. average fixed costs are falling. d. average fixed costs are constant.

b. long-run average total costs fall as output increases. '

Figure 14-1. If the market price is $6, the firm will earn a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits and shut down. d. zero economic profits in the short run.

b. negative economic profits in the short run but remain in business.

Suppose a firm in a competitive market increases its output by 20 percent. As a result, the price of its output is likely to a. decline by 20 percent. b. remain unchanged. c. increase by less than 20 percent. d. decline by more than 20 percent.

b. remain unchanged.

Refer to Figure 13-2. Curve C is always declining because a. of diminishing marginal product. b. we are dividing fixed costs by higher and higher levels of output. c. marginal product first increases, then decreases. d. marginal product first decreases, then increases.

b. we are dividing fixed costs by higher and higher levels of output.

Figure 14-3. In the short run, if the market price is P4, individual firms in a competitive industry will earn a. positive profits. b. zero profits. c. losses but will remain in business. d. losses and will shut down.

b. zero profits.

Figure 14-1. The firm's short-run supply curve is its marginal cost curve above a. $1. b. $2. c. $3. d. $6.5.

c. $3.

Refer to Table 13-5. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. What is the total daily cost of producing at a rate of 55 chairs per hour if the factory operates 8 hours per day? a. $480 b. $576 c. $520 d. $616

c. $520

Suppose a certain firm is able to produce 125 units of output per day when 19 workers are hired. The firm is able to produce 137 units of output per day when 20 workers are hired, holding other inputs fixed. The marginal product of the 20th worker is a. 6 units of output. b. 7 units of output. c. 12 units of output. d. 137 units of output.

c. 12 units of output.

Figure 14-4. If there are 300 identical firms in this market, what level of output will be supplied to the market when price is $1.00? a. 300 b. 6,000 c. 30,000 d. 60,000

c. 30,000

(14-5) If the firm is currently producing 14 units, what would you advise the owners? a. Decrease quantity to 13 units b. Increase quantity to 15 units c. Continue to operate at 14 units d. Increase quantity to 16 units

c. Continue to operate at 14 units

Refer to Figure 13-2. Curve B intersects curve D a. where the firm maximizes production. b. at the minimum of average fixed cost. c. at the efficient scale. d. where fixed costs equal variable costs.

c. at the efficient scale.

(14-1) The price and quantity relationship in the table is most likely a demand curve faced by a firm in a a. concentrated market. b. monopoly. c. competitive market. d. strategic market.

c. competitive market.

Scenario 14-1. To maximize its profit, the firm should a. increase its output. b. continue to produce 1,000 units. c. decrease its output but continue to produce. d. shut down.

c. decrease its output but continue to produce.

A difference between explicit and implicit costs is that a. explicit costs must be greater than implicit costs. b. explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. c. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do. d. implicit costs must be greater than explicit costs.

c. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

(14-6) The firm will produce a quantity greater than three because at 3 units of output, marginal cost a. is greater than marginal revenue. b. equals marginal revenue. c. is less than marginal revenue. d. is minimized.

c. is less than marginal revenue.

If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then a. its total cost is more than $9,000. b. its marginal revenue is less than $10. c. its average total cost is less than $10. d. the firm cannot be a competitive firm because competitive firms cannot earn positive profits.

c. its average total cost is less than $10.

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers a. both labor and capital to be fixed. b. both labor and capital to be variable. c. labor to be variable and capital to be fixed. d. capital to be variable and labor to be fixed.

c. labor to be variable and capital to be fixed.

Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is a. above $6.5 but less than $9. b. anywhere above $6.5. c. less than $6.5 but more than $3. d. less than $3.

c. less than $6.5 but more than $3.

If marginal cost is rising, a. average variable cost must be falling. b. average fixed cost must be rising. c. marginal product must be falling. d. marginal product must be rising.

c. marginal product must be falling.

. Total cost is the a. amount a firm receives for the sale of its output. b. fixed cost less variable cost. c. market value of the inputs a firm uses in production. d. quantity of output minus the quantity of inputs used to make a good.

c. market value of the inputs a firm uses in production.

Figure 14-1. If the market price is $2.5, the firm will earn a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits and shut down. d. zero economic profits in the short run.

c. negative economic profits and shut down.

Figure 14-1. If the market price falls below $3, the firm will earn a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits in the short run and shut down. d. zero economic profits in the short run.

c. negative economic profits in the short run and shut down.

The long-run market supply curve in a competitive market will a. always be horizontal. b. be the portion of the MC that lies above the minimum of AVC for the marginal firm. c. typically be more elastic than the short-run supply curve. d. be above the competitive firm's efficient scale.

c. typically be more elastic than the short-run supply curve.

Refer to Figure 14-3. When market price is P2, a profit-maximizing firm's losses can be represented by the area a. (P4 − P2) × Q2. b. (P2 − P1) × (Q2 − Q1). c. At a market price of P2, the firm earns profits, not losses. d. At a market price of P2 the firm has losses, but the reference points in the figure don't identify the losses.

d. At a market price of P2 the firm has losses, but the reference points in the figure don't identify the losses.

(14-1) Over which range of output is average revenue equal to price? a. 2 to 10 units b. 6 to 14 units c. 10 to 18 units d. Average revenue is equal to price over the entire range of output.

d. Average revenue is equal to price over the entire range of output.

Refer to Table 13-12. Which firm has economies of scale and then diseconomies of scale as output increases from 1 to 7? a. Firm 1 b. Firm 2 c. Firm 3 d. Firm 4

d. Firm 4

(14-1) Over what range of output is marginal revenue declining? a. 2 to 12 units b. 6 to 14 units c. 14 to 18 units d. Marginal revenue is constant over the entire range of output.

d. Marginal revenue is constant over the entire range of output.

Refer to Figure 14-3. Firms would be encouraged to enter this market for all prices that exceed a. P1. b. P2. c. P3. d. P4.

d. P4.

Refer to Table 13-5. The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker? a. The third worker b. The fourth worker c. The fifth worker d. The sixth worker

d. The sixth worker

(14-5) If the firm is maximizing profit, how much profit is it earning? a. $0.50 b. $7.50 c. $10 d. There is insufficient data to determine the firm's profit.

d. There is insufficient data to determine the firm's profit.

Marginal cost is equal to average total cost when a. average variable cost is falling. b. average fixed cost is rising. c. marginal cost is at its minimum. d. average total cost is at its minimum

d. average total cost is at its minimum

When a factory is operating in the short run, a. it cannot alter variable costs. b. total cost and variable cost are usually the same. c. average fixed cost rises as output increases. d. it cannot adjust the quantity of fixed inputs.

d. it cannot adjust the quantity of fixed inputs.

Figure 14-1. The firm should shut down if the market price is a. above $6.5. b. above $3 but less than $6.5. c. above $6.5 but less than $10. d. less than $3.

d. less than $3.

Figure 14-1. If the market price is exactly $6.5, the firm will earn a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits and shut down. d. zero economic profits in the short run.

d. zero economic profits in the short run.

Tom produces commemorative t-shirts in a competitive market. If Tom decides to decrease his output, this will A.) increase his revenue, since the output decrease leads to a higher market price. B.) increase his revenue, since Tom's competitors will also decrease their output, so that price rises to offset the drop in Tom's output. C.) decrease his revenue, since his output has decreased and the price remains the same. D.)decrease his revenue, since the price falls as competitors increase their output to make up for his decrease

decrease his revenue, since his output has decreased and the price remains the same.

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will A. fall in the short run. All firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. B. fall in the short run. No firms will shut down, but some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. C. fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. D. not fall in the short run because firms will exit to maintain the price.

fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.