Micro Test Review 2

I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom, sausage and spinach pizzas and sold each one for $8. To produce these 8,000 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo's average fixed cost to produce 8,000 specialty pizzas was

$2.00

I'MABigCorp. produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the 7,000 can openers was

$2.43

Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4?

$5.00

Rick eats only french fries and burgers at his office cafeteria. His weekly lunch budget is $48. Each burger costs $6 and each order of fries costs $3. When deciding how much of each good to buy, Rick knows that 2 burgers and 4 orders of french fries will give him a utility of 8. At his utility-maximizing point, Rick's utility is:

32

The table below sets out cost information for the production of volley balls. Some values are missing. Which of the following statements is correct?

A = 42, E = 12

The race to the bottom scenario of global environmental degradation is explained roughly like this:

Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits.

Why would foreign firms export a product at less than its cost of production—which presumably means making a loss?

This may be part of a long-term strategy in which foreign firms would sell at below the cost of production in the short-term for a time, and when they have driven out the domestic U.S. competition, they would then raise prices.

Which of the following is the best example of a quota?

a limit imposed on the number of men's suits that can be imported from a foreign country

Refer to the diagram above. What is the significance of the point at the top of the backward bending of the supply curve marked L3?

as wages increase over this range, the quantity of hours worked actually decreases.

If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses.

average cost

In order to determine ____________, the firm's total costs must be divided by the quantity of its output.

average cost

It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00, ____________________.

could likely result in a notable loss of sales to competitors

A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that:

cross-price elasticity of demand for soda is -3.

The most common pattern for marginal utility is ____________________.

diminishing marginal utility

The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that:

domestic producers can attain the economies of scale to allow them to compete in world markets.

If the supply curve for a product is vertical, then the elasticity of supply is:

equal to zero.

A perfectly elastic supply curve is:

horizontal

Tariffs are taxes imposed on _________________.

imported products

Economic profit can be derived from calculating total revenues minus all of the firm's costs,

including its opportunity costs.

The longer the time period considered, the more the elasticity of supply tends to:

increase

Introducing a tariff on vitamin Z would:

increase American consumption of domestically produced vitamin Z.

An import quota does which of the following?

increases the price of the domestic goods to consumers

The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise:

increasing the price of game tickets because demand is inelastic

Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price.

inelastic

Refer to Figure 5-1. Graph B represents a demand curve that is relatively __________. Total revenue __________ as the price decreases from $10 to $5.

inelastic; decreases

When Marietta chooses to only purchase a combination of goods that lie within her budget line, she:

is maximizing utility.

Refer to the table below. In this instance, confirmation that this firm is operating in a perfectly competitive market can readily be ascertained by the fact that its

marginal revenue is constant.

The term _________________ refers to the additional utility provided by one additional unit of consumption.

marginal utility

The step-by-step process of finding the choice with highest total utility involves a comparison of the:

marginal utility gained and lost from different choices along the budget constraint.

What happens in a perfectly competitive industry when economic profit is greater than zero?

new firms may enter the industry and all of the above

If a perfectly competitive firm is a price taker, then

pressure from competing firms will force acceptance of the prevailing market price.

Why would labor be treated as a variable cost?

producing larger quantities of a good or service generally requires more workers

Idaho farmers can sell as large a quantity of their potato crop as they wish,

provided each is willing to accept the prevailing market price.

If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ .

shutdown point

For a perfectly competitive firm, the marginal cost curve is identical to the firm's ________________ .

supply curve

If cola and iced tea are good substitutes for consumers, then it is likely that:

their cross price elasticities are greater than zero.

Whatever the firm's quantity of production, _____________ must exceed total costs if it is to earn a profit.

total revenue

A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:

total revenue will decrease.

Demand is said to be __________ when the quantity demanded changes at the same proportion as the price.

unit elastic

The marginal cost curve is generally ______________, because diminishing marginal returns implies that additional units are ________________________.

upward-sloping; more costly to produce