Ag Econ exam 2

AVC+AFC=

ATC

ATC-AFC=

AVC

If the price elasticity of supply is 1.2 and a price increase led to a 5% increase in quantity supplied, then the price increase is about

4.2%

Patents, Copyrights, and Trademarks

All of the above are correct

The average fixed cost curve

Always declines with increased levels of output

True

Average variable cost is equal to a firms total variable cost divided by its total output

Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. you evaluate the data and determine that the price elasticity of demand for ice cram at your shop is 1.8. you should

Decrease the price of ice cream

If an increase in price causes total revenue to fall, what can be concluded?

Demand is elastic

When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor, the firm is experiencing

Diminishing marginal product

Give one example of variable cost

Fuel, seed, labor

In general, elasticity is a measure of

How much buyers and sellers respond to changes in market conditions

True

The price of a product and its marginal revenue are equal under conditions of perfect competition

Assume milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and population of beef cattle by 50 percent. The equilibrium price will

Increase in both the milk and beef markets

A competitive firm

Is a price taker, whereas a monopolist is a price taker

A firm that shuts down temporarily has to pay

Its fixed costs but not its variable costs

Economies of scale occur when a firm's

Long run average total costs are decreasing as output increases

At what point is profit maximized

MR=MC

The Monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

MR=MC

In which of the following market structures can a firm make positive economic profits and negative economic profits in both the short run and long run

Monopoly

Which of the following is most likely to be a fixed cost

Monthly rental payments on equipment

When profit maximizing firms in competitve markets are earning profits

New firms will enter the market

Total Revenue is equal to

Price*Quantity

In a perfectly competitive market, the market price is $23. At the current level of output, a firm has a marginal cost of $28. What should the firm do in the short run?

Produce less output to earn more profit

Economists assume that the goal of the firm is to maximize total

Profits

Give one example of fixed cost

Rent on land

Marginal costs are defined as

The change in total costs due to a one-unit change in production

What are four conditions for perfect competition

The product sold by businesses are homogeneous Any business can enter or exit the sector without encountering serious barriers for entry There must be a large number of buyers and sellers of the product Perfect information must exist for all participants regarding price, quantities, qualities, sources of supple, etc No market power

True

The total cost of production would include the opportunity cost of management

Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is

Unit elastic

As a business owner, you should increase the price of the good/service you produce if

You are in the inelastic portion of the demand curve

A firm that has little ability to influence market prices operates in a

competitive market

In a competitive market, no single producer can influence the market price because

many other sellers are offering a product that is essentially identical