Test 2

variable cost

A firm's total cost (TC) equals the sum of its fixed cost plus its

consumer surplus.

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

supply

A ________ curve shows the marginal cost of producing one more unit of a good or service.

the willingness of consumers to buy a product at different prices.

A demand curve shows

the sum of consumer surplus and producer surplus is at a maximum.

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which

$50,000

Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. Refer to Figure 4-5. What is the value of producer surplus after the imposition of the ceiling?

$100,000

Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. Refer to Figure 4-5. What is the value of the portion of producer surplus transferred to consumers as a result of the rent ceiling?

$20

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. Refer to Figure 4-8. For each unit sold, the price sellers receive after the tax (net of tax) is

$5

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. Refer to Figure 4-8. How much of the tax is paid by buyers?

$27

Figure 4-8 shows the market for beer. The government plans to impose a per-unit tax in this market. Refer to Figure 4-8. The price buyers pay after the tax is

the output is greater than the equilibrium quantity.

If, in a competitive market, marginal benefit is less than marginal cost,

the marginal benefit equals the marginal cost of the last unit sold.

In a competitive market equilibrium,

all of the firm's costs are variable costs.

In the long run,

the increase in total cost divided by the increase in output.

Marginal cost is calculated as

change in total cost divided by the change in output.

Marginal cost is equal to the

the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently low.

The figure above represents the market for pecans. Assume that this is a competitive market. At a quantity of 4,000 pounds,

decreases as output increases

The vertical distance between a firm's average total cost curve, ATC, and its average variable cost curve, AVC,

costs associated with the production of goods

Total variable cost is the sum of all

$340

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 total cost per day when she produces 50 gyros using two workers?

the firm is able to produce more output using the same inputs, or the same output using fewer inputs.

When a firm experiences a positive technological change

average total cost increases as output increases

When marginal cost is greater than average total cost, the

affects the market equilibrium for that good or service.

When the government taxes a good or service, it

opportunity costs of capital owned and used by the firm

Which of the following are implicit costs for a typical firm?

decrease the size of its physical plant

Which of the following can a firm do in the long run but not in the short run?

A firm's long-run average cost curve is derived from a series of short-run average cost curves.

Which of the following is a correct statement?

"I was all ready to pay $300 for a new leather jacket that I had seen in Macy's but I ended up paying only $180 for the same jacket."

Which of the following statements best describes the concept of consumer surplus?

there is no deadweight loss.

If equilibrium is achieved in a competitive market, then

additional cost of producing an additional unit of output.

Marginal cost is the

$240

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. Refer to Figure 4-3. What is the value of producer surplus at a price of $18?

increase because of the law of diminishing returns

As output increases, marginal cost will eventually

fall as long as output is increased.

Average fixed costs of production

total costs divided by total output

Average total costs are

average product is at a maximum

Average variable cost is at a minimum at the same amount of output at which

the area under the demand curve

Consumer surplus in a market for a product would be equal to ________ if the market price was zero.

the firm will experience diseconomies of scale.

Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc. Refer to Figure 11-11. For output rates greater than 20,000 picture frames per month,

$8

Figure 11-7 shows the cost structure for a firm. Refer to Figure 11-7. When the output level is 100 units, average fixed cost is

Yes, because $15 is the price where the marginal benefit is equal to the marginal cost.

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. Refer to Figure 4-3. At the equilibrium price of $15 consumers are willing to buy 80 pounds of tiger shrimp. Is this an economically efficient quantity?

$160

Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. Refer to Figure 4-3. What is the value of producer surplus at the equilibrium price of $15?

$250,000

Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. Refer to Figure 4-5. What is the value of consumer surplus after the imposition of the ceiling?

The marginal product of the sixth worker must be negative.

Red Stone Creamery currently hires 5 workers. When it added a 6th worker, its output actually fell. Which of the following statements is true?

E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed cost curve.

Refer to Figure 11-5. Identify the curves in the diagram.

the marginal cost of pecans is greater than the marginal benefit; therefore, output is inefficiently high.

Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. At a quantity of 12,000 pounds,

the quantity supplied is less than the economically efficient quantity.

Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $3,

a price ceiling

Rent control is an example of

the price received is at least equal to the additional cost of producing the product.

Suppliers will be willing to supply a product only if

Deadweight loss will increase.

Suppose a binding price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia. What will be the likely effect on the market for sparkling wine in Vinyardia?

buyers bear the entire burden of the tax.

Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a per-unit tax is imposed in the market for this product,

5 pounds

Table 11-1 shows the technology of production at the Matsuko's Mushroom Farm for the month of May. Refer to Table 11-1. What is the marginal product of the 4th worker?

54 bushels

Table 11-2 summarizes production at the Crunchy Apple Orchard for the month of April. Refer to Table 11-2. What is the average product of labor when the orchard employs 5 workers?

$14

Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. Refer to Table 11-7. What is the average total cost of production when the firm produces 120 lanterns?

610,000

Table 4-4 shows the demand and supply schedules for the labor market in the city of Pixley. Refer to Table 4-4. If a minimum wage of $11.50 an hour is mandated, what is the quantity of labor supplied?

550,000

Table 4-4 shows the demand and supply schedules for the labor market in the city of Pixley. Refer to Table 4-4. If a minimum wage of $12.50 an hour is mandated, what is the quantity of labor demanded?

W = $9.50; Q = 610,000

Table 4-4 shows the demand and supply schedules for the labor market in the city of Pixley. Refer to Table 4-4. Suppose that the quantity of labor supplied increases by 40,000 at each wage level. What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

tax incidence.

The actual division of the burden of a tax between buyers and sellers in a market is called

equals total cost of production divided by the level of output.

The average total cost of production

marginal cost of production.

The change in a firm's total cost from producing one more unit of a good or service is the firm's

lowest price a firm would have been willing to accept; price it actually receives

The difference between the ________ and the ________ from the sale of a product is called producer surplus.

demand curve for imported champagne is vertical.

The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the

a variable input, with a given quantity of fixed inputs, the marginal product of the variable input eventually decreases

The law of diminishing returns states hat as a firm uses more of

the lowest average cost of producing every level of output in the long run.

The long-run average cost curve shows

ΔQ/ΔL

The marginal product of labor is calculated using the formula

the increase in the total product that results from hiring one more worker.

The marginal product of labor is equal to

the area above the market supply curve and below the market price.

The total amount of producer surplus in a market is equal to

The average product of labor is at its maximum when the average product of labor equals the marginal product of labor.

Which of the following statements is true?

fixed cost

Which type of cost is independent of the quantity produced?