Micro homework 7 & 8

Refer to Table above. If the market price of each camera case is $8, what is the profit-maximizing quantity?

400 units

Marginal cost is equal to the

change in total cost divided by the change in output

When a firm's long-run average cost curve is horizontal for a range of output, then that range of production displays

constant returns to scale

If, when a firm doubles all its inputs, its average cost of production decreases, then production displays

economies of scale

Average fixed costs of production

fall as long as output is increased

If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold, what should the farm do to maximize its profit?

increase output

Assume that price is greater than average variable cost. If a perfectly competitive seller is producing at an output where price is $11 and the marginal cost is $14.54, then to maximize profits the firm should

produce a smaller level of output

Which of the following is an implicit cost of production

rent that could have been earned on a building owned and used by the firm

If a typical firm in a perfectly competitive industry is incurring losses, then

some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profits for the remaining firms.

The processes a firm uses to turn inputs into outputs of goods and services is called

technology

The law of diminishing marginal returns states

that at some point, adding more of a variable input to a given amount of a fixed input will cause the marginal product of the variable input to decline.

When plasma television sets were first introduced prices were high and few firms were in the market. Later, economic profits attracted new firms and the price of plasma televisions fell. This example illustrates

that consumers receive this new technology "free of charge" in the sense that they only have to pay a price for plasma televisions equal to the lowest production cost.

An individual seller in perfect competition will not sell at a price lower than the market price because

the seller can sell any quantity she wants at the prevailing market price

In the long run which of the following is true?

there are no fixed costs

If another worker adds 9 units of output to a group of workers who had an average product of 7 units, then the average product of labor

will increase

In economics, technology only refers to the development of new products.

FALSE

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

MR > AVC

Refer to Figure above. Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run. Which of the diagrams in the figure depicts what happens to in the industry as it transitions to along run equilibrium

Panel B

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?

$15

Refer to Figure above. When output level is 100, what is the total cost of production?

$2000

Vipsana's Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's variable cost per day when she produces 50 gyros using two workers

$220

Figure shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. Refer to Figure. If the market price is $20, what is the firm's profit-maximizing output

1350 units

Refer to Figure above. The marginal product of the 3rd worker is

15

If four workers can produce 18 chairs a day and five can produce 20 chairs a day, the marginal product of the fifth worker is

2 chairs

Which of the following is not true for a firm in perfect competition

Average revenue is greater than marginal revenue

In a decreasing-cost industry, the entry of new firms lowers average cost at each level of output

TRUE

The short-run supply curve for a perfectly competitive firm is that part of the firm's marginal cost curve that lies above the minimum point of its average variable cost curve

TRUE

if a firm is experiencing diseconomies of scale, its long-run average cost curve is increasing

TRUE

What is always true at the quantity where a firm's average total cost equals average revenue?

The firm breaks even

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000. The prevailing market price is $48. Assuming that this firm continues to produce in the long run, what happens to output level in the long run

The firms output increases

Which of the following is not a characteristic of a perfectly competitive market structure?

There are restrictions on exit of firms

A perfectly competitive firm earns a profit when price is

above minimum average total cost

Refer to Figure above. Diminishing returns to labor set in

after L1

The characteristic of the long run is

all inputs can be varied

A perfectly competitive firm has to charge the same price as every other firm in the market. Therefore, the firm

is a price taker

A firm has successfully adopted a positive technological change when

it can produce more output using the same inputs

What is allocative efficiency?

it refers to a situation in which resources are allocated such that the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it

The price of a seller's product in perfect competition is determined by

market demand and market supply

When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell

nothing at all; the firm shuts dow

which of the following is a fixed cost

payment to hire a security worker to guard the gate to the factory around the clock