MICRO MIDTERM 2

Total revenue minus both explicit and implicit costs defines a firm's: A.) gross earnings. B.) profit. C.) marginal earnings. D.) net worth.

B.) profit.

Efficiency is an important goal because when markets are efficient: A.) there is less income inequality. B.) the poor benefit more than the wealthy. C.) there are more resources available to achieve other goals. D.) there is no need for government intervention in the economy.

C.) there are more resources available to achieve other goals.

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: Hours Per Day Cleaning Windows Total Number of Windows Cleaned 0 0 1 7 2 11 3 14 4 16 5 17 A second hour cleaning windows will yield additional earnings of ______. A.)$2 B.)$14 C.)$8 D.)$7

$8

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $64 per day. Employee-Hours Per Day Output Per Day 0 0 1 40 4 80 9 120 15 160 23 200 This firm's fixed cost each day is: A.) $64 B.) $66 C.) $14 D.) $50

A) $64

3. John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: Hours Per Day Cleaning Windows VS Total Number of Windows Cleaned 0 0 1 7 2 11 3 14 4 16 5 17 John's benefit from his first hour cleaning windows is: A. $14 B. $7 C. $18 D. $2

A. $14

26. Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Pat's accounting profit is _______, and Pat's economic profit is _______. A. $34,000; -$1,000 B. $50,000; $15,000 C. $15,000; -$1,000 D. $34,000; $15,000

A. $34,000; -$1,000

13. Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee hours it uses each day. The table below describes the relationship between the number of employee hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $64 per day. Employee Hours Output Per Day Per Day 0 0 1 40 4 80 9 120 15 160 23 200 The firm's fixed cost each day is: A. $64 B. $66 C. $14 D. $50

A. $64

20. If a five percent increase in the price of oranges leads to a one percent increase in the quantity supplied, the price elasticity of supply for oranges is ______. A. 1/5 B. 5 C. 1/2 D. 2

A. 1/5

28. Refer to the table below. At what output level or levels are this firm's owners doing as well as or better than they could do with the next best use of their resources? Quantity/ Total Rev./ Exp. Costs/ Imp. Costs/ 10 50 36 5 15 75 63 6 20 100 93 7 25 125 125 8 30 150 161 9 A. 10, 15, and 20 units B. 10 units C. 10, 15, 20, and 25 units D. 10 and 15 units

A. 10, 15, and 20 units

18. Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the table below. Number of Mugs Per Day VS Total Cost Per Day 0 $10 1 $14 2 $19 3 $25 4 $32 5 $40 6 $49 If the market for mugs is perfectly competitive, and mugs sell for $8.50 each, then Chris should make ______ mugs per day. A. 5 B. 0 C. 6 D. 4

A. 5

9. The long run is best defined as: A. A period of time sufficiently long that all factors of production are variable B. The period of time between annual accounting reports C. A period of time sufficiently long that at least one factor of production is fixed D. One year or more

A. A period of time sufficiently long that all factors of production are variable

21. Accounting profit minus implicit costs equals: A. Economic profit B. Explicit costs C. Total revenues D. Fixed costs

A. Economic profit

16. The Cost-Benefit Principle tells us that a firm should continue to expand production as long as: A. Price of the good is greater than its marginal cost B. The supply curve is upward sloping C. The firm's profit is positive D. It can sell another unit of the good

A. Price of the good is greater than its marginal cost

15. Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee hours it uses each day. The table below describes the relationship between the number of employee hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $64 per day. Employee Hours Per Day VS Output Per Day 0 0 1 40 4 80 9 120 15 160 23 200 When the firm uses 15 employee hours, it earns a daily ______ of ______. A. Profit; $46 B. Profit; $60 C. Profit; $110 D. Profit; $320

A. Profit; $46

34. Economic rent is: A. The difference between the payment made to the owner of a factor of production and the owner's reservation price B. The amount people pay for an apartment in a perfectly competitive market C. The payment made to the owner of a factor of production, which is usually equal to the owner's reservation price D. Sometimes higher and sometimes lower than the owner's reservation price

A. The difference between the payment made to the owner of a factor of production and the owner's reservation price

12. In general, when the price of a fixed factor of production increases: A. The profit-maximizing level of output does not change B. Marginal cost increases C. The profit-maximizing price falls D. The profit-maximizing level of output increases

A. The profit-maximizing level of output does not change

23. Suppose you own a small business, Last month, your total revenue was $6,000. In addition, you paid: $1,000 in monthly rent for office space $200 in monthly rent for equipment $3,000 to your workers in wages for the month $1,000 for the supplies you used that month If you correctly determine that your economic profit last month was positive $600, then it must be true that: A. Your implicit costs are $200 per month B. Your implicit costs are $1,000 per month C. The rent you pay on your equipment is an implicit cost D. You do not have any implicit costs

A. Your implicit costs are $200 per month

If a five percent increase in the price of oranges leads to a one percent increase in the quantity supplied, the price elasticity of supply for oranges is ______. A.) 1/5 B.) 5 C.) 1/2 D.) 2

A.) 1/5

Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the table below. Number of Mugs Per Day Total Cost Per Day 0 $10 1 $14 2 $19 3 $25 4 $32 5 $40 6 $49 If the market for mugs is perfectly competitive, and mugs sell for $8.50 each, then Chris should make ______ mugs per day. A.) 5 B.) 0 C.) 6 D.) 4

A.) 5

The role that prices play in directing resources away from overcrowded markets and towards markets that are underserved is known as the ______ function of price. A.) allocative B.) market C.) rationing D.) transitive

A.) allocative

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $64 per day. Employee-Hours Per Day Output Per Day 0 0 1 40 4 80 9 120 15 160 23 200 When the firm uses 15 employee-hours, it earns a daily ______ of ______. A.) profit; $46 B.) profit; $60 C.) profit; $110 D.) profit; $320

A.) profit; $46

Suppose you own a small business. Last month, your total revenue was $6,000. In addition, you paid: $1,000 in monthly rent for office space. $200 in monthly rent for equipment. $3,000 to your workers in wages for the month. $1,000 for the supplies you used that month. If you correctly determine that your economic profit last month was negative $600, then it must be true that: A.) your implicit costs are $200 per month. B.) your implicit costs are $1,000 per month. C.) the rent you pay on your equipment is an implicit cost. D.) you do not have any implicit costs

A.) your implicit costs are $200 per month.

5. John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: Hours Per Day Cleaning Windows VS Total Number of Windows Cleaned 0 0 1 7 2 11 3 14 4 16 5 17 How many hours a day should John spend cleaning windows? A. 1 B. 2 C. 3 D. 4

B. 2

35. The supplier of a factor of production has a reservation price of $100. There are numerous potential buyers for this factor of production. The buyer with the highest reservation price is willing to pay at most $200 for this factor of production. If this factor of production is unique, then: A. A transaction will occur, and the price paid for the factor of production will be $100 B. A transaction will occur, and the price paid for the factor of production will be $200 C. There will be no transaction since $200 is greater than $100 D. A transaction will occur, and the price paid for the factor of production will be $150

B. A transaction will occur, and the price paid for the factor of production will be $200

31. The allocative function of price is to: A. Provide subsidies to low-income families so they can purchase essential goods and services B. Direct resources away from markets that are overcrowded and toward markers that are underserved C. Ensure that firms in perfectly competitive markets earn an economic profit D. Distribute scarce goods and services to those consumers who value them the most highly

B. Direct resources away from markets that are overcrowded and toward markers that are underserved

2. One implication of the shape of the demand curve facing a perfectly competitive firm is that: A. If the firm increases its price above the market price, it will earn higher revenue B. If the firm increases its price above the market price, it will earn zero revenue C. If the firm decreases its price below the market price, it will earn higher revenue D. The market would be unable to reach a new equilibrium if demand changed

B. If the firm increases its price above the market price, it will earn zero revenue

38. Suppose the production of cotton causes substantial environmental damage because the pesticides used by cotton farmers often make their way into nearby rivers and streams, and are very harmful to fish and other wildlife. If cotton farmers do not have to pay for the environmental damage caused by the pesticides used to grow cotton, then the market equilibrium price will be ________ and the market equilibrium quantity will be ______. A. Inefficiently high; inefficiently low B. Inefficiently low; inefficiently high C. Inefficiently high; inefficiently high D. Inefficiently low; inefficiently low

B. Inefficiently low; inefficiently high

29. Refer to the table below. Suppose all firms in this industry have identical costs to this firm and are producing 15 units of output. One can predict that Quantity/ Total Rev./ Exp. Costs/ Imp. Costs/ 10 50 36 5 15 75 63 6 20 100 93 7 25 125 125 8 30 150 161 9 A. Firms will attempt to lower their implicit costs B. New firms will enter the industry C. Old firms will exit the industry D. Price must rise

B. New firms will enter the industry

4. John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: Hours Per Day Cleaning Windows VS Total Number of Windows Cleaned 0 0 1 7 2 11 3 14 4 16 5 17 Should John spend a third hour cleaning windows? A. Yes, because he would earn $28 B. No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7 C. Yes, because the additional amount he would earn is $6, which is better than earning nothing D. Yes, because the additional amount he would earn is $14, which is greater than his opportunity cost of $7

B. No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7

8. A profit-maximizing perfectly competitive firm must decide: A. Only which industry to join, taking price and output as fixed B. Only how much to produce, taking price as fixed C. Both what price to charge and how much to produce D. Only what price to charge, taking output as fixed

B. Only how much to produce, taking price as fixed

30. The role that prices play in distributing scarce goods and services to those consumers who value them the most highly is known as the _______ function of price. A. Multiplicative B. Rationing C. Equilibrium D. Allocative

B. Rationing

25. If a firm is earning zero economic profit, then: A. The firm's revenues are sufficient to pay its explicit costs, but not its implicit costs B. The firm's accounting profit is equal to the firm's implicit costs C. The owner will not be able to pay himself or herself a salary D. The firm will shut down in the long run, but will continue to operate in the short run

B. The firm's accounting profit is equal to the firm's implicit costs

Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Pat's accounting profit is _______, and Pat's economic profit is _______. A.) $50,000; $15,000 B.) $34,000; -$1,000 C.) $34,000; $15,000 D.) $15,000; -$1,000

B.) $34,000; -$1,000

Refer to the table below. The law of diminishing marginal returns becomes evident after ______ units of output are produced. Output Per Day Number of Employee Hours Per Day 0 0 33 1 66 2 99 4 132 7 165 11 A.) 33 B.) 66 C.) 99 D.) 132

B.) 66

Which of the following is NOT necessarily true in a market equilibrium? A.) Price represents the value of an extra unit of consumption. B.) Both rich and poor have adequate access to the good. C.) Price represents the cost of an extra unit of production. D.) All mutually beneficial trades have been made.

B.) Both rich and poor have adequate access to the good

Curly told Larry about his new business venture: Curly pays Acme International $1,000 per month for supplies, works out of his apartment on his own computer and earns a monthly revenue of $1,500. Should Larry quit his job and do what Curly is doing? A.) Yes, as long as Larry has at least $1,000 in savings to get started. B.) Not if Larry is earning more than $500 per month at his current job. C.) Not unless Larry can borrow the $1,000 monthly payment at no interest. D.) Yes, as long as Larry can work out if his apartment and owns a computer.

B.) Not if Larry is earning more than $500 per month at his current job.

Which of the following statements about implicit costs is true? A.) They are always fixed. B.) They measure the forgone opportunities of the firm's owners. C.) They exceed explicit costs. D.) They do not enter into the calculation of economic profit.

B.) They measure the forgone opportunities of the firm's owners.

The allocative function of price cannot operate unless there is: A.) a significant barrier to entry. B.) both free entry and free exit. C.) either free entry or free exit. D.) neither free entry no free exit.

B.) both free entry and free exit.

The most important challenge facing a firm in a perfectly competitive market is deciding: A.) whether to maximize its profits. B.) how much to produce. C.) what price to charge. D.) whether to advertise.

B.) how much to produce.

If it is possible to make a change that will help some people without harming others, then the situation is: A.) efficient. B.) inefficient. C.) fair. D.) unfair.

B.) inefficient.

Unlike economic profit, economic rent: A.) can be less than zero. B.) may not be driven to zero by competition. C.) doesn't involve opportunity costs. D.) only applies to land.

B.) may not be driven to zero by competition.

The Cost-Benefit Principle tells us that a firm should continue to expand production as long as: A.) the firm's profit is positive. B.) price of the good is greater than its marginal cost. C.) it can sell another unit of the good. D.) the supply curve is upward sloping.

B.) price of the good is greater than its marginal cost.

If the market supply curve does not capture all of the costs to society of producing an additional unit of good, then: A.) the market equilibrium will be socially optimal. B.) the market equilibrium will not be efficient. C.) the allocation of resources will be efficient. D.) the market will not be in equilibrium.

B.) the market equilibrium will not be efficient.

If there is excess demand in a market, then this suggests that: A.) there is no way to help some people without harming others. B.) there is an opportunity for mutually beneficial trades. C.) the market price is above the equilibrium price. D.) the market is in equilibrium.

B.) there is an opportunity for mutually beneficial trades.

14. Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee hours it uses each day. The table below describes the relationship between the number of employee hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $64 per day. Employee Hours Output Per Day Per Day 0 0 1 40 4 80 9 120 15 160 23 200 When the firm uses 4 employee hours, its total labor cost each day is: A. $84 B. $126 C. $56 D. $30

C. $56

33. In perfectly competitive markets, an implication of entry and exit in response to economic profit and loss is that: A. Market demand is completely elastic B. All firms will exit the market in the long run C. Firms will earn zero economic profit in the long run D. Firms must earn positive economic profit in the long run

C. Firms will earn zero economic profit in the long run

7. Which of the following is NOT true of a perfectly competitive firm? A. It is unable to influence the price of the good it sells B. It faces a perfectly elastic demand curve C. It seeks to maximize revenue D. It sells only a small fraction of the total quantity exchanged in the market

C. It seeks to maximize revenue

10. According to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively: A. Larger and larger quantities of the fixed factor of production B. Smaller and smaller quantities of the variable factors of production C. Larger and larger quantities of the variable factors of production D. Constant quantities of the variable factors of production

C. Larger and larger quantities of the variable factors of production

11. If a production process exhibits diminishing returns, then as output rises: A. Average total cost will eventually decrease B. Total revenue will eventually decrease C. Marginal cost will eventually increase D. Total fixed cost will eventually increase

C. Marginal cost will eventually increase

22. Adam smith coined the term "invisible hand" to describe the process by which the actions of independent, self-interested buyers and sellers will: A. Often lead to increasing inequality B. Always lead to the most efficient allocation of resources C. Often lead to the most efficient allocation of resources D. Always lead to an economy ruin

C. Often lead to the most efficient allocation of resources

19. The percentage change in quantity supplied that results from a 1 percent change in price is known as the: A. Slope of the supply curve B. Cross-price elasticity of supply C. Price elasticity of supply D. Cross-price elasticity of demand

C. Price elasticity of supply

32. Suppose all firms in a perfectly competitive industry are earning an economic profit. One would expect that, over time, the number of firms in the industry will _____ and the market price will _______. A. Rise; stay the same B. Fall; rise C. Rise; fall D. Rise; rise

C. Rise; fall

40. If all firms in a perfectly competitive industry are earning a normal profit, then: A. Existing firms will exit the industry B. The market supply curve will shift to the left C. There is no incentive for firms to enter or exit the industry D. New firms will enter the industry

C. There is no incentive for firms to enter or exit the industry

27. Refer to the table below. An output level of 25 units, this firm's accounting profit is _______, and its economic profit is ______. Quantity/ Total Rev./ Exp. Costs/ Imp. Costs/ 10 50 36 5 15 75 63 6 20 100 93 7 25 125 125 8 30 150 161 9 A. $125; $113 B. $125; zero C. zero; -$8 D. zero; $8

C. zero; -$8

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $64 per day. Employee-Hours Per Day Output Per Day 0 0 1 40 4 80 9 120 15 160 23 200 When the firm uses 4 employee-hours, its total cost each day is: A.) $84 B.) $126 C.) $56 D.) $30

C.) $56

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: What is John's opportunity cost of cleaning windows for an hour? Hours Per Day Cleaning Windows Total Number of Windows Cleaned 0 0 1 7 2 11 3 14 4 16 5 17 A.) $14 B.)$8 C.)$7 D.)$2

C.) $7

Which of the following is a defining characteristic of all perfectly competitive markets? A.) Each firm in the market faces a perfectly inelastic demand curve. B.) The market demand curve is perfectly elastic. C.) All firms sell the same standardized product. D.) Consumers display strong brand loyalty.

C.) All firms sell the same standardized product.

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: Hours Per Total Number of Window Cleaned Day Cleaning Windows 0 0 1 7 2 11 3 14 4 16 5 17 Should John spend a third hour cleaning windows? A.) Yes, because he would earn $28. B.) Yes, because the additional amount he would earn is $14, which is greater than his opportunity cost of $7. C.) No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7. D.) Yes, because the additional amount he would earn is $6, which is better than earning nothing.

C.) No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7.

Duke is a highly skilled negotiator who could work for many law firms. The law firm that hires Duke is able to collect twice as much revenue per hour of Duke's time than it can for any other negotiator in town. The increased revenue will: A.) be evenly split between Duke and the law firm to maximize surplus. B.) all go to the law firm because the firm bears the risk of running the business. C.) all go to Duke because, if it didn't, another firm could hire Duke away. D.) be split between Duke and the law firm, but how it will be split cannot be determined without more information.

C.) all go to Duke because, if it didn't, another firm could hire Duke away.

A market equilibrium is only efficient if: A.) the consumer surplus and the producer surplus associated with a given transaction are equal. B.) consumer surplus and producer surplus are both zero. C.) all relevant costs and benefits are reflected in the market supply and demand curves. D.) output is distributed equitably among consumers.

C.) all relevant costs and benefits are reflected in the market supply and demand curves.

In perfectly competitive markets, an implication of entry and exit in response to economic profit and loss is that: A.) firms must earn positive economic profit in the long run. B.) all firms will exit the market in the long run. C.) firms will earn zero economic profit in the long run. D.) market demand is completely elastic.

C.) firms will earn zero economic profit in the long run.

Suppose the production of cotton causes substantial environmental damage because the pesticides used by cotton farmers often make their way into nearby rivers and streams, and are very harmful to fish and other wildlife. If cotton farmers do not have to pay for the environmental damage caused by the pesticides used to grow cotton, then the market equilibrium price will be ______ and the market equilibrium quantity will be ______. A.) inefficiently high; inefficiently low B.) inefficiently high; inefficiently high C.) inefficiently low; inefficiently high D.) inefficiently low; inefficiently low

C.) inefficiently low; inefficiently high

According to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively: A.) smaller and smaller quantities of the variable factors of production. B.) constant quantities of the variable factors of production. C.) larger and larger quantities of the variable factors of production. D.) larger and larger quantities of the fixed factor of production.

C.) larger and larger quantities of the variable factors of production.

The percentage change in quantity supplied that results from a 1 percent change in price is known as the: A.) cross-price elasticity of supply. B.) slope of the supply curve. C.) price elasticity of supply D.) cross-price elasticity of demand

C.) price elasticity of supply

Economic rent is: A.) the amount people pay for an apartment in a perfectly competitive market. B.) the payment made to the owner of a factor of production, which is usually equal to the owner's reservation price. C.) the difference between the payment made to the owner of a factor of production and the owner's reservation price. D.) sometimes higher and sometimes lower than the owner's reservation price.

C.) the difference between the payment made to the owner of a factor of production and the owner's reservation price.

6. John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: Hours Per Day Cleaning Windows VS Total Number of Windows Cleaned 0 0 1 7 2 11 3 14 4 16 5 17 What is the lowest price per window that John would be willing to accept to spend 4 hours per day cleaning windows? A. $2 B. $11 C. $7 D. $3.50

D. $3.50

17. Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the table below. Number of Mugs Per Day VS Total Cost Per Day 0 $10 1 $14 2 $19 3 $25 4 $32 5 $40 6 $49 The marginal cost of the 4th mug per day is ______. A. $8 B. $5 C. $32 D. $7

D. $7

36. If it is possible to make a change that will help some people without harming others, then the situation is: A. Efficient B. Fair C. Unfair D. Inefficient

D. Inefficient

1. The primary objective of most private firms is to: A. Minimize cost B. Maximize revenue C. Maximize output D. Maximize profit

D. Maximize Profit

24. Curly told Larry about his new business venture: Curly pays Acme International $1,000 per month for supplies, works out of his apartment on his own computer and earns a monthly revenue of $1,500. Should Larry quit his job and do what Curly is doing? A. Yes, as long as Larry can work out of his apartment and owns a computer B. Yes, as long as Larry has at least $1,000 in savings to get started C. Not unless Larry can borrow the $1,000 monthly payment at no interest D. Not if Larry is earning more than $500 per month at his current job

D. Not if Larry is earning more than $500 per month at his current job

39. Efficiency is an important goal because when markets are efficient: A. There is no need for government intervention in the economy B. The poor benefit more than the wealthy C. There is less income inequality D. There are more resources available to achieve other goals

D. There are more resources available to achieve other goals

37. If there is excess demand in a market, then this suggests that: A. There is no way to help some people without harming others B. The market price is above the equilibrium price C. The market is in equilibrium D. There is an opportunity for mutually beneficial trades

D. There is an opportunity for mutually beneficial trades

The short run is best defined as: A.) one year or less. B.) a period of time sufficiently short that all factors of production are variable. C.) the period of time between quarterly accounting reports. D.) a period of time sufficiently short that at least one factor of production is fixed.

D.) a period of time sufficiently short that at least one factor of production is fixed.

A price-taker faces a demand curve that is: A.) vertical at the market price. B.) upward sloping. C.) downward sloping. D.) horizontal at the market price.

D.) horizontal at the market price.

A situation is efficient if it is: A.) possible to find a transaction that will make at least one person better off, even if others are made worse off. B.) possible to find a transaction that will make everyone better off. C.) possible to find a transaction that will make at least one person better off without harming others. D.) not possible to find a transaction that will make at least one person better off without harming others.

D.) not possible to find a transaction that will make at least one person better off without harming others.

Adam Smith's theory of the invisible hand posits that the most efficient allocation of resources is often achieved by: A.) reducing economic inequality. B.) government intervention in the market. C.) collective action. D.) the actions of independent, self-interested buyers and sellers.

D.) the actions of independent, self-interested buyers and sellers.

In general, when the price of a variable factor of production increases: A.) total cost falls. B.) the profit maximizing level of output rises. C.) the profit-maximizing price falls. D.) the profit-maximizing level of output falls.

D.) the profit-maximizing level of output falls.