GAP Week 4 Economics

Refer to Table 4-3. If the law of supply applies to this good, then Q1 could be

150.

Because there are many buyers and sellers in a perfectly competitive market, no one seller can influence the market price.

True

Which of the following demonstrates the law of supply?

When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup.

Refer to Table 14-8. What is the shape of the marginal cost curve for this firm?

upward-sloping

Which of the following changes would not shift the supply curve for a good or service?

A change in the price of the good or service

Table 14-7The following table shows the production costs for The Flying Elvis Copter Rides. ​ Refer to Table 14-7.What is the value of A?

$50

Carol Anne makes candles. If she charges $20 for each candle, her total revenue will be

$500 if she sells 25 candles.

Refer to Figure 15-7. Suppose a firm in a competitive market, like the one depicted in graph (a), observes market price rising from P1 to P2. Which of the following could explain this observation?

An increase in market demand from D0 to D1.

Refer to Table 15-5. If the firm is currently producing 14 units, what would you advise the owners?

Continue to operate at 14 units

Suppose that in a competitive market the equilibrium price is $2.50. What is the marginal revenue for the last unit sold by the typical firm in this market?

Exactly $2.50

Total revenue equals

price × quantity.

When marginal cost is less than average total cost,

average total cost is falling.

Refer to Figure 14-2. Which of the curves is most likely to represent average fixed cost?

A

Which of the following is not held constant in a supply schedule?

The price of the good

The line that relates the price of a good and the quantity supplied of that good is called the supply

curve, and it usually slopes upward.

Robin owns a horse stable and riding academy and gives riding lessons for children at "pony camp." His business operates in a competitive industry. Robin gives riding lessons to 20 children per month. His monthly total revenue is $4,000. The marginal cost of pony camp is $250 per child. In order to maximize profits, Robin should

give riding lessons to fewer than 20 children per month.

A supply schedule is a table that shows the relationship between

price and quantity supplied.

A firm in a competitive market has the following cost structure: Refer to Table 15-7.If the market price is $16, this firm will

produce 5 units of output in the short run and face competition from new market entrants in the long run.

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

profit is maximized.

If something happens to alter the quantity supplied at any given price, then

the supply curve shifts.

Profit-maximizing firms enter a competitive market when existing firms in that market have

total revenues that exceed fixed costs.

Billy's Bean Bag Emporium produced 300 bean bag chairs but sold only 275 of the units it produced. The average cost of production for each unit of output produced was $100. The price for each of the 275 units sold was $95. Total profit for Billy's Bean Bag Emporium would be

−$3,875.

If a firm uses labor to produce output, the firm's production function depicts the relationship between

the number of workers and the quantity of output.

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

True

Refer to Figure 4-4. The movement from point A to point B on the graph is caused by

an increase in the price of the good.

Refer to Figure 4-4. The movement from point A to point B on the graph is called

an increase in the quantity supplied.

The minimum points of the average variable cost and average total cost curves occur where the

marginal cost curve intersects those curves.

Refer to Figure 15-5. 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

When it produces and sells 90 units of output, a competitive firm's average total cost is $42 and its profit is $360. What is the firm's marginal revenue if it sells 100 units of output?

$46

Brady Industries has average variable costs of $1 and average total costs of $3 when it produces 500 units of output. The firm's total fixed costs equal

$1,000.

Refer to Table 14-8. What is the average fixed cost of producing 5 units of output?

$4

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that when four units of output are produced, the total cost is $175, and the average variable cost is $33.75. What would the average fixed cost be if ten units were produced?

$4

Refer to Table 14-8. What is the average variable cost of producing 5 units of output?

$40

The Three Amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $15. Each dog bed can be sold for a price of $65. The Three Amigo's total costs are

$7,500.

Refer to Table 14-8. What is the marginal cost of producing the fifth unit of output?

$70

Refer to Figure 14-2. Curve A represents which type of cost curve?

Average fixed cost

A competitive firm currently produces and sells 500 units of output. Its total revenue is $6,000; the marginal cost of producing the 500th unit of output is $14.50; and the average total cost of producing the 500th unit of output is $9.50. Is the firm maximizing its profit, or should it increase or decrease output in order to increase its profit?

Firms should decrease output to increase profits!

What is the relationship between price and marginal revenue for a competitive firm?

Price equals marginal revenue

On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?

The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers.

Which of the following events would cause a movement upward and to the right along the supply curve for mangos?

The price of mangos rises.

Refer to Figure 15-7. Assume that the market starts in equilibrium at point W in graph (b). An increase in demand from D0 to D1 will result in

an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z.

A firm produces 400 units of output at a total cost of $1,200. If total variable costs are $1,000,

average fixed cost is 50 cents.

Average total cost is very high when a small amount of output is produced because

average fixed cost is high.

For an individual firm operating in a competitive market, marginal revenue equals

average revenue and the price for all levels of output.

Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's

implicit costs.

If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then

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

labor to be variable and capital to be fixed.

Suppose there are six bait and tackle shops that sell worms in a lakeside resort town in Minnesota. If we add the respective quantities that each shop would produce and sell at each of the six bait and tackle shops when the price of worms is $2 per bucket, $2.50 per bucket, and $3 per bucket, and so forth, we have found the

market supply curve.

The law of supply states that, other things equal, when the price of a good

rises, the quantity supplied of the good rises.