chapter 6
When determining which firms enter the market first, we look at____________.
average total cost.
A production function establishes the relationship between:
the quantity of inputs used and the quantity of output produced
Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases:
the opportunity cost of buying sweaters increases.
A firm sells 20 units of a good at a price of $5 per unit. If the average cost of production of the good equals $3 per unit, the firm's revenue is:
$100
A firm sells 30 units of its product at a price of $5 per unit. It incurs a fixed cost of $100 and a variable cost of $20. The firm's profit is:
$30
A firm with a fixed cost of $300 every month and variable cost of $200 every month decides to shut down. In such a situation it would lose:
$300 every month.
A firm has an average total cost of $50. If it sells 20 units of its product at $80 each, what is its profit?
$600
A firm producing 10 units of output incurs a total cost of $800. When it produces 11 units, the total cost increases to $890. What is the marginal cost of producing the eleventh unit?
$90
The total cost of a firm is $50, the average variable cost is $2, and the average fixed cost is $3. How may units of the output does the firm produce?
10 units
A firm produced 376 units with 10 workers. When the eleventh worker was hired, the output increased to 398 units. The marginal product of the eleventh worker is:
22 units
A firm produces 200 units of a good when it employs 7 workers. The marginal product of the eighth worker is 46 units. If the eighth worker is hired, the firm's total product will increase to:
246 workers
A firm earns $600 of total revenue from selling its product at $200 per unit. If the per-unit cost of producing the good is $150, the firm sells _______ units(s) of the good
3
You thought there was no hope of reselling the ticket, though your roommate just offered to buy it for $10.
The ability to resell the ticket means it is no longer a sunk cost and skipping the show brings you an additional $10 in benefit, making you more likely to skip the show.
Which of the following refers to diminishing marginal returns?
The additional output produced in a firm decreased as more workers were hired
What is the difference between accounting profit and economicprofit
Economic profit subtracts both explicit and implicit costs from total revenue, while accounting profit only subtracts explicit costs.
Which of the following is an example of specialization?
Instead of a worker making an entire shoe, the total productivity increased when different workers were allotted different jobs in the production process
Which of the following examples best describes the concept of free entry?
Jack has an old cell phone that he wants to sell. He opens an account on eBay and auctions it off
Assume that the market for chocolates is perfectly competitive. Which of the following statements would be true in this case? Correct!
Jill starts to produce chocolates today, but the addition of her supply into the market does not decrease the market price.
Which of the following statements is true of the short run?
Only some of a firm's input can be varied in the short run.
Consider a market where there are many firms with different cost structures. If demand shifts to the left (decreases), the last firm that entered__________
earns negative economic profits and so exits the market.
In a perfectly competitive market, because an individual seller tends to sell only a fraction of the total amount of the good produced:
his individual choices do not affect market outcomes
The long-run average cost curve connects the lower part of the short-run cost curves because:
in the long run, firms have more flexibility to change input combinations
The long-run average cost curve connects the lower part of the short-run cost curves because:
in the long run, firms have more flexibility to change input combinations.
. If the marginal cost of a perfectly competitive firm producing a good is $50 and the market price of the good is $100, the firm should:
increase its output
If the percentage change in the quantity supplied of a good is less than the percentage change in price of the good, the good is said to have a(n):
inelastic supply
Which of the following inputs can be changed in the short run?
labor employed
If with a small decrease in the price of a good, the quantity supplied falls to zero, the supply of the good is said to be:
perfectly elastic.
In a perfectly competitive market, a seller cannot choose to raise the price of its good since all sellers in the market produce identical goods, so raising the price would result in losing all its customers. All firms in a perfectly competitive market are said to be__________.
price takers
A firm is said to be a price taker if it:
sells as much of any good as it wants at the prevailing market price
Increases in the marginal product of labor can be attributed to:
specialization of workers
When the marginal cost curve lies below the average cost curve,
the average cost curve slopes downward
In a perfectly competitive market:
the long-run market price is equal to the minimum average cost of the industry because of free entry and exit of firms
Consider a market where there are many firms with different cost structures. The last firm to enter earns ________
zero economic profits.
When the price of a good increases by 300%, the quantity supplied of the good increases from 200 units to 900 units. The price elasticity of supply of the good is:
1.17
If the government gives each firm a large sum of money with no strings attached, will ventilator production increase?
No, a no strings attached payment does not impact marginal revenue or marginal cost so production will remain unchanged.
Which of the following situations depicts diseconomies of scale?
The average total cost of a firm increases from $50 to $55 when it increases its production from 10 units to 20 units
Firm A and Firm B produce the same goods but with different inputs. If the inputs used by firm A are more easily available than the inputs used by firm B, then which of the following statements is true?
The elasticity of supply of firm A will be higher than the elasticity of supply of firm B.
A firm uses workers, land, and machinery for its production process. Which of the following statements is then true?
The firm can change its output level in the long run by changing any or all of its three inputs.
Which of the following is NOT an element of a seller's decision-making process in a perfectly competitive market?
The number of buyers
Which of the following statements is true of the long run?
There are no fixed inputs in the long run
Earlier in the day you found a $10 bill on the ground, which makes you feel less guilty about wasting $30.
This does not impact your decision since it is still a sunk cost that will not impact your decision.
You notice a mistake on your credit card statement! You paid $20for the ticket, not $30.
This does not impact your decision since it is still a sunk cost that will not impact your decision.
You learn there will be free pizza at the concert; thus, you will no longer have to spend $10 on dinner.
This lowers the cost of attending the concert and will make you more likely to attend the show.
Via tax subsidies, the government reduces the cost of labor and parts. Does this increase ventilator production?
Yes, the subsidy will lower cost and encourage entry into the market causing production to increase.
Is it possible for accounting profit to be positive and economic profit to be negative?
Yes, this could occur if explicit costs were modest and implicit costs were high.
In the long run:
all factors of production can be changed.
