Ap Econ Unit 3 retake

If the marginal cost of producing the first unit of some good is $50 and the marginal cost of producing the second unit is $60, the average variable cost of producing 2 units is...

$55

At 100 units of output, a firm's total cost is $10,000. If the firm's total fixed cost is $4,000, what are its average variable cost, average fixed cost, and average total cost at this level of production?

$60, $40, and $100

Assume a company faces $200,000 in fixed costs and $180,000 in variable costs while producing 4,500 units of a good, and the same company faces fixed costs of $200,000, variable costs of $180,085 while producing 4,501 units of a good. Determine this companies four per-unit costs.

AFC ($44); AVC ($40); ATC ($84); MC ($85)

Which of the following MUST be true of the long-run.

All factors of production are variable.

All of the following are essential characteristics of a perfectly competitive industry EXCEPT:

All firms in the industry are price makers

Which of the following statements about a constant-cost perfectly competitive industry in long-run equilibrium must be true?

An increase in demand will cause no change in the long-run equilibrium price

Assume that, for a perfectly competitive firm, marginal cost equals average variable cost at $10, marginal cost equals average total cost at $15, and marginal revenue equals marginal cost at $12. On the basis of this information, the firm should...

operate in the short run, even though it will sustain a loss.

The most profitable level of output for any firm operating in the short run is the level of output at which...

price equals marginal cost

Assume that olive oil is produced in a constant-cost, perfectly competitive industry, which is currently in long-run equilibrium. If the current price of olive oil is $5 per quart, and the demand for olive oil increases, then the price of olive oil will change in which of the following ways in the short run and long run?

short run: be more than $5 long run: be equal to $5

A farmer grows wheat using two inputs: labor and land whose prices are constant. If she triples her inputs, she finds that the quantity of wheat produced doubles. Therefore, it must be true that in this output range her long-run average total cost curve is

upward sloping

In the short run, which of the following costs must continuously decrease as output produced increases?

Average fixed cost

In order to minimize short-run losses, a profit maximizing firm will necessarily shut down production under which of the following conditions?

Average revenue is less than average variable cost.

Short-run marginal costs eventually increase because of the effects of...

diminishing marginal product

As the firm in the above diagram expands from plant size #1 to plant size #3, it experiences:

economies of scale because of specialization, division of labor, and mechanization.

When total (physical) product is at its maximum, marginal (physical) product must be...

equal to zero

A constant-cost, perfectly competitive gadget industry is in long-run equilibrium. A decrease in the number of consumers of gadgets will most likely result in...

a lower short-run price for gadgets, followed by a decrease in the quantity produced

If a perfectly competitive firm is producing where marginal cost is rising and less than marginal revenue, to maximize profits it should...

increase the level of production

The short-run supply curve for a firm in a perfectly competitive industry is...

its marginal cost curve equal to and above the minimum AVC

Other things equal, if the prices of a firm's variable inputs were to fall

marginal cost, average variable cost, and average total cost would all fall.

As a firm increases its output, the difference between the firm's average total cost and its average variable cost gets smaller because the firm's...

average fixed cost is decreasing

Productive efficiency occurs when a firm produces output at a level at which

average total cost is at a minimum

Which of the following indicates that a perfectly competitive firm is in long-run equilibrium?

Price equals marginal cost equals minimum average total cost equals marginal revenue

If the average variable cost of producing 5 units of a good is $100 and the average variable cost of producing 6 units is $150, then the marginal cost of increasing output from 5 to 6 units is...

$400

If a firm desired to produce at a level equal to 'x' in the diagram above, which plant size should they be operating at if they want to minimize their average total costs?

#2, because that is where ATC would be minimized, given the level of output

Instead of being employed at a printing company at a salary of $25,000 per year, Sally starts her own printing firm. Rather than renting a building that she owns to someone else for $10,000 per year, she uses it as the location for her company. Her costs for workers, materials, advertising, and energy during her first year are $125,000. If the total revenue from her printing company is $155,000, her total economic profit is...

-$5,000

Diminishing marginal returns for the first four units of a variable input is exhibited by the total product sequence:

150, 190, 220, 240.

Which of the following is a result of increasing returns to scale?

Downward-sloping long-run average total cost curve

At a firm's current rate of output, the marginal cost is $70, the average variable cost is $40, the average fixed cost is $30, and the product price is $70. Which of the following statements is true for the firm?

Economic profits are zero because price equals average total cost

An entrepreneur has earned enough total revenue to cover her accounting costs, but economic losses are being incurred. What must be true?

Her accounting profits are less than her implicit costs.

The graph above shows the short-run cost curves of a firm in a perfectly competitive market. Which of the following are true at the firm's profit maximizing output level? I. Price exceeds average total cost. II. Economic profits are positive. III. Marginal cost equals average total cost. IV. New firms are likely to enter the market in the long run.

I, II, and IV onlyThis answer is correct.

If a company decides to increase production by increasing its use of the factors of production by 150%, which of the following statements would NOT be true?

If the company's production increases by 160%, then they are operating with diseconomies of scale.

Which of the following MUST be true to move the firm into long-run equilibrium?

If the price is above P3 new firms will enter the industry

Which of the following is true of the marginal cost curve?

It intersects the average variable cost curve and the average total cost curve at each curve's minimum point.

Assume a company faces $200,000 in fixed costs and $180,000 in variable costs while producing 4,500 units of a good. Which of the following statements would be true?

It should sell its product at a price of $85 in order to make an accounting profit.

If a firm's production process exhibits diseconomies of scale, which of the following will occur when the firm's output increases?

Its long-run average total costs will rise

The graph above shows the marginal product (MP) and the average product (AP) of labor for a firm that uses labor as the only variable input and hires its labor in a perfectly competitive market. At which quantity of labor does marginal cost change from decreasing to increasing?

L2

Which of the following must be true if a firm is experiencing constant returns to scale?

Long run average total cost remains constant as the firm's output increases

If a firm is experiencing economies of scale, which of the following will decrease as output increases?

Long-run average total cost

If labor is the only variable input in the production process, the short-run marginal cost curve is upward sloping because which of the following occurs as more and more labor is added?

Output increases at a decreasing rate, and thus the cost of producing each additional unit of output increases.

Which of the following segments of the marginal cost curve lies entirely on the firm's short-run supply curve?

TUV

Which of the following is NOT true for a perfectly competitive firm?

The firm faces a downward-sloping demand curve.

Assume that a profit-maximizing, perfectly competitive firm has economic losses in the short run. If the firm continues to produce and sell its goods, then which of the following must be true?

The firm is covering all of its variable costs but not all of its fixed costs of production

Assume a firm faces $200,000 in fixed costs and $180,000 in variable costs while producing 4,500 units of a good, and the same firm faces fixed costs of $200,000, variable costs of $180,085 while producing 4,501 units of a good. Using the information given, determine which of the following statements is true.

The firm should reduce production in order to minimize per-unit costs.

The table below shows a production function for a firm. All of the following can be concluded from the information in the table EXCEPT which one?

The profit maximizing level of production is 76 units

Refer to the graph below for a representative firm in a perfectly competitive, constant-cost industry, which shows the firm's marginal cost (MC), average total cost (ATC), and average variable cost (AVC).

between P2 and P3