Module 4-5 Lecture Quizzes

Once it's patent application has been accepted, a firm is able to earn _____________ on its product, which ___________.

monopoly profits; offers an incentive for research and development to take place

When a firm produces 50,000 units, its total cost is $6.5 million. When it produces 70,000 units, its total cost increases to $9.4 million. Within this range, the marginal cost is

$145

On average, it can cost and take to discover a new drug, perform the necessary safety tests, and bring the drug to market.

$800 million; more than a decade

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

Which of the following statements about command-and-control policies is NOT true?

Command-and-control approaches provide incentives to polluters to reduce the amount of their pollutants beyond a required level.

The optimal level of pollution reduction is zero.

False

Which of the following is an example of a negative externality in consumption?

Smokine cigarettes

Which of the following describes how a negative externality affects a competitive market?

The externality causes a difference between the private cost of production and the social cost

In which case the Coase Theorem can be applied?

The property rights are easy to establish.

Perfectly competitive markets are likely to be efficient

True

The government can solve the problem with negative externalities like pollution by imposing a tax equal to the difference between the private marginal cost and the social marginal cost.

True

Which of the following is a factor of production that generally is fixed in the short run?

a factory building

Which of the following would legally qualify you to be registered as a shareholder of the Microsoft Corporation?

buying Microsoft stock in the New York Stock Exchange

Diminishing marginal product of labor occurs when adding another unit of labor

changes output by an amount smaller than the output added by the previous unit of labor

Which of the following would be classified as a positive externality.

converting a derelict empty lot to a public vegetable garden

If a firm's long-run average total curve shows that it can produce 5,000 DVDs at the average cost of $2.00 and 15,000 DVDs at an average cost of $1.50 this is evidence of

economies of scale

As a form of buisness, a partnership

has limited options to raise money

The demand curve for a perfectly competitive firm is ___________________

horizontal

The existence of the principal-agent problem

increases the risk of buying stock in a corporation

If for a perfectly competitive firm in the short run P<ATC, the firm is

incurring a loss

If Southwest Airlines borrows $20 millions from a bank to finance the renovation of their corporate offices, this is an example of

indirect finance

Bill owns a store selling CDs of blues musicians. Bill took out a loan from a bank to pay for bis store and initial inventory. Bull pays the bank $900 per week. This payment

is an explicit cost

In the short run, is marginal coast is at its minimum, then

marginal coast is at ists minimum

Cathy can a lightly used new toll road that is rarely congested to get to work. The toll road is

nonrivalrous and exludable

The shape of the average total cost curve is determined by the shape of

the marginal cost curve

A positive externality causes

the marginal social benefit to exceed the marginal private cost of the last unit produced.

Perfectly competitive firms have ________________ economic profits in the long run.

zero