Chapter 7-9 Practice Quiz : Economics
Econ Corp produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the 7,000 can openers was
$2.43
In order to produce 100 oatmeal cookies, GoodieCookieCo incurs an average total cost of $0.25 per cookie. The company's marginal cost is constant at $0.10 for all oatmeal cookies produced. The total cost to produce 50 oatmeal cookies is
$20
Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4? QPTCTRMRMCProfit0$5$9 1$5$10 2$5$12 3$5$15 4$5$19 5$5$24 6$5$30 7$5$45
$5.00
In economics, a firm that faces no competitors is referred to as _________________.
a monopoly
A firm that holds a monopoly position in the market place is
a price maker
The _____________________ curve will always lie below the curve for average cost because average cost includes _____________ in the numerator of the calculation.
average variable cost; fixed costs
Which of the following falls outside of the classification of business expenditures that fall into the category of variable costs?
costs of research and development
It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00, ____________________.
could likely result in a notable loss of sales to competitors
In the ________, the perfectly competitive firm will react to profits by __________________________ .
long run; increasing its production
In the ________, the perfectly competitive firm will react to losses by __________________________ .
long run; reducing production or shutting down
According to the definition of profit, if a profit-maximizing firm will always attempt to produce its desired level of output at the lowest possible cost, then it will
do so regardless of what type of competition exists in a market.
The slope of the demand curve for a monopoly firm is
downward sloping
Copyright protection legislation provides protection for original works
during the author's life plus 70 years
The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.
economies of scale
In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity.
either total cost or variable cost
When J.K. Rowling exerts copyright ownership of her literary works, she creates a monopoly by restricting
entry into the market
If the North American newsprint paper market has barriers to entry, then
entry will be blocked even if firms are earning high profits.
Why are some producers forced to sell their products at the prevailing market price?
high degree of similarity to competitor's products
In microeconomics, the term _____________________ is synonymous with economies of scale.
increasing returns to scale
Refer to the diagram below. In this instance, the range of production possibilities at point d,
is a steeper slope reflecting a return to losses due to diminishing returns.
Zero economic profit :-
is considered to be normal profit
I'maSolarPanelCo. manufactures and distributes solar panels in the US market. Two years ago, it had 5 US competitors, but government stimulus in the industry has encouraged 7 new US competitors to enter the market. In these circumstances, I'maSolarPanelCo.'s price for its output
is dictated by the forces of demand and supply.
The form of legal protection intended to prevent reproduction of original works is referred to as ______________ law.
copyright
Intellectual property law is a body of law that includes
copyright legislation, as well as all of the above
Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it?
physical space for the gallery
The use of sharp, temporary price cuts as a form of _________________ would enable traditional US automakers to discourage new competition from smaller electric car manufacturers.
predatory pricing
When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is
preparing to exit operations.
If a perfectly competitive firm is a price taker, then
pressure from competing firms will force acceptance of the prevailing market price
The largest cattle rancher in a given region will be unable to have a __________ when sufficient numbers of smaller cattle ranchers provide sources of competition.
monopoly
A __________________ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve.
natural monopoly
Deregulation occurs when a government eliminates or scales back rules relating to all but one of the following. Which one is it?
natural monopoly
Refer to the graph shown below. Based on the information illustrated in the graph, which of the following is correct?
producing a marginal unit is increasing average costs overall
Refer to the diagram below. In this instance, at the range of output represented at point c,
profits will be maximized.
When a firm makes plans for investments in physical capital, it compares the _______________ on these investments with ______________________ .
projected rates of return; the cost of financial capital to the firm
Refer to the table below. If this information were used to create a total cost graph, the curve should QuantityCost (in dollars)Fixed Costs (in dollars)Total Costs (in dollars)Average Total Costs (in dollars per unit)Average Variable Costs (in dollars per unit)Marginal Costs (in dollars per unit)004040- -- -- -114055155515235407517.537.520360401002033.3254904013022.532.53051254015525313561604020026.633.340
reflect all of the above.
Refer to the diagram below. In this instance, the marginal revenue curve
reflects each of the above
If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ .
shutdown point
In Sam's greenhouse operation, labor is the only short term variable input. After completing a cost analysis, if the marginal product of labor is the same for each unit of labor, this will imply that
the average product of labor is always equal to the marginal product of labor.
Which of the following denotes the typical shape of the monopolist's total cost curve?
total costs rise and grow steeper as output rises
Whatever the firm's quantity of production, _____________ must exceed total costs if it is to earn a profit.
total revenue
In the business world, a _________________ is recognized as a legally acceptable way for any business to keep knowledge of its particular methods of production from being known by competing firms.
trade secret
If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero?
variable costs
In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice?
what quantity to produce
A natural monopoly occurs when the quantity demanded is ________ the minimum quantity it takes to be at the bottom of the long-run average cost curve.
less than
Which of the following is most likely to be a monopoly?
local electricity distributor
The term _____________ is used to describe the additional cost of producing one more unit.
marginal cost
If it was possible for one company to gain ownership control all of the uranium processing plants in the US, then
that firm could set up barriers to entry to discourage competition.
The following figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist. After maximizing profits, what does the firm's revenue equal?
the area of rectangle ADEH
The following figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist. After maximizing profits, what do the firm's profit's equal?
the area of rectangle BDEG
________________________ arises where many firms are competing in a market to sell similar but differentiated products
Monopolistic competition
___________ include all spending on labor, machinery, tools, and supplies purchased from other firms.
Total costs
_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.
Total revenue
Which of the following is an example of of an implicit cost?
Value of the owner 's labor devoted to the business
In microeconomics, the term ___________________ is synonymous with decreasing returns of scale.
diseconomies of scale
In economics, the term "shutdown point" refers to the point where the
marginal cost curve crosses the average variable cost curve.
If marginal cost is rising in a competitive firm's short-run production process and its average variable cost is falling as output is increased, then
marginal cost is below average variable cost.
Government ______________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for ______________ .
patent; a limited time
Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products.
perfect competition
If a firm holds a pure monopoly in the market and is able to sell 4 units of output at $2.00 per unit and 5 units of output at $1.75 per unit, it will produce and sell the fifth unit if its marginal cost is
$0.75 or less
I'MaGadgetCo. produces and sells widgets. Last year, it produced 9,000 widgets and sold each one for $8. To produce the 9,000 widgets, the company incurred Fixed costs of $27,000 and a total cost of $36,000. I'MaGadgetCo's variable fixed cost to produce 9,000 widgets was
$1.00
Given the data provided in the table below, the total revenue (TR) for production at quantity (Q) level 4 equals QPTCTRMRMCProfit0$5$9 1$5$10 2$5$12 3$5$15 4$5$19 5$5$24 6$5$30 7$5$45
$20.00
Given the data provided in the table below, what will the marginal cost equal for production at quantity (Q) level 4? QPTCTRMRMCProfit0$5$9 1$5$10 2$5$12 3$5$15 4$5$19 5$5$24 6$5$30 7$5$45
$4.00
Given the data provided in the table below, what will the fixed costs equal for production at quantity (Q) level 4? QPTCTRMRMCProfit0$5$9 1$5$10 2$5$12 3$5$15 4$5$19 5$5$24 6$5$30 7$5$45
$9.00
In the United States, a pharmaceutical company's exclusive patent rights last for
20 years.
Neil's Bakery is famous for its giant cinnamon buns. The bakery has fixed costs of $100. Neil must pay each worker a wage of $10.00 per hour and each works an 8 hour shift. He earns $2 for each cinnamon bun that is sold. The following table shows how many cinnamon buns he can sell, depending on the number of workers he hires. Refer to the table below. To maximize his profits in this competitive market, how many workers should he hire? LaborQuantity1752140320042105215
3 workers
The following table shows a monopolist's demand curve and cost information for the production of its good. What quantity will it produce?
30
Mindy's company manufactures rubber balls used by elementary schools for playground activities. The table below sets out her firm's production cost information. Some values are missing. Which of the following statements is correct? QuantityVariable CostFixed CostTotal CostAverage Variable Cost ($ per unit)Marginal Cost ($ per unit)0040400-15 B5E215 CDF3A 6020G
A = 20; E = 5
The table below sets out cost information for the production of volley balls. Some values are missing. Which of the following statements is correct? QuantityVariable CostFixed CostTotal CostAverage Variable Cost ($ per unit)Marginal Cost ($ per unit)0030300-112 B12E225 CDF3A 7214G
A = 42, E = 12
_____________________ help to explain why every economy, as it develops, has an increasing proportion of its population living in urban areas
Agglomeration factors
__________________ law implies ownership over an idea or concept or image
Intellectual property
Refer to the graph below. Based on the information illustrated in the graph, which of the following is correct?
The transition point between where MC is pulling down and pulling up AC always occurs at the minimum point of the AC curve
Which one of the following is the most accurate description of a monopolist?
a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry
If monopolists are able to produce fewer goods and sell them at a higher price than they could under perfect competition, the result will be
abnormally high sustained profits.
An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________________ .
accounting profit; excluding opportunity cost
If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its
allocative efficiency
The marginal revenue curve for a monopolist ____________________ the market demand curve.
always lies beneath
If the price that a firm charges is higher than its ________________ cost of production for that quantity produced, then the firm will earn profits.
average
If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses.
average cost
A situation known as _____________________ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production.
constant returns to scale
The graph below illustrates the total cost function for GoodieCookie Co. The changing slope of the total cost curve reflects this company's
decreasing marginal costs.
If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises.
decreasing returns to scale
In economics, labor demand is synonymous with
derived demand.
If a solar panel manufacturer wants to look at its total costs of production in the short run, which of the following would provide a useful starting point?
divide total costs into two categories: fixed costs that can't be changed in the short run and variable costs that can be
A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production.
fixed costs; do not change,
A perfectly competitive industry is a ____________________
hypothetical extreme.
Economic profit can be derived from calculating total revenues minus all of the firm's costs,
including its opportunity costs.
The economies-of-scale curve is a long-run average cost curve, because
it allows all factors of production to change.
Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should
keep the business open in the short-run, but plan to go out of business in the long-run.
When a natural monopoly exists in a given industry, the per-unit costs of production will be
lowest when a single firm generates the entire output of the industry
Roughly speaking, patent law covers __________ and __________ law protects an author's original books.
original inventive creations; copyright
Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?
output will be too small and its price too high.
In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely
raise prices, cut production, and realize positive economic profits.
Idaho farmers can sell as large a quantity of their potato crop as they wish,
provided each is willing to accept the prevailing market price.
If a graph is used to compare total revenue and total cost of a perfectly competitive firm, then the horizontal axis of the graph will represent the _______________ and the vertical axis will represent ______________________ .
quantity produced; both total revenue and total costs, measured in dollars.
Which of the following should typically be ignored because spending has already been made and cannot be changed?
sunk costs
Fixed costs are important because, at least in the ___________, the firm _______________.
short run; cannot alter them
In the _________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _____________________ .
short run; losses are smallest
In the _________, the perfectly competitive firm will seek out ________________________ .
short run; the quantity of output where profits are highest
The total revenue curve for a monopolist will
start low, rise, and then decline
What qualities would ideally suit a monopolistic firm with regard to barriers to entry?
sufficient strength to prevent or discourage potential competitors from entering the market
Which of the following will present the least amount of concern to a firm that has a monopoly over a particular industry?
the competitive actions of other business firms
When the demand for a good or service limits the quantity that can be sold to an output at which the firm experiences economies of scale,
the firm is a natural monopoly.
For a pure monopoly to exist,
there is a single seller in a particular industry
When a firm pursues a predatory pricing strategy, it does so
to maximize profits in the long run.
Why would a profit-seeking firm need to tailor its decisions about the quantity of labor inputs that it purchases?
to produce the profit-maximizing quantity of output at the lowest possible average cost
Refer to the diagram below. In this instance, at the range of output represented at point b,
total costs exceed total revenues.
The marginal cost curve is generally ______________, because diminishing marginal returns implies that additional units are ________________________.
upward-sloping; more costly to produce
In order to determine ____________, the firm's total costs must be divided by the quantity of its output.
average cost
If the average product for six workers is fifteen and the marginalproduct of the seventh worker is eighteen, then
average product is rising
____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.
Diminishing marginal returns
The term "constant returns to scale" describes a situation where
expanding all inputs does not change the average cost of production.
In order to produce 100 pairs of oven gloves, Marcia incurs an average total cost of $2.50 per pair. Marcia's marginal cost is constant at $10.00 for every pair of oven gloves produced. The total cost to produce 50 pairs of oven gloves is
$200.00
If a firm holds a pure monopoly in the market and is able to sell 5 units of output at $4.00 per unit and 6 units of output at $3,90 per unit, it will produce and sell the sixth unit if its marginal cost is
$3.40 or less
I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom, sausage and spinach pizzas and sold each one for $8. To produce these 8,000 specialty pizzas, the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo's average total cost to produce 8,000 specialty pizzas was
$5.00
Given the data provided in the table below, what will the amount of profit be for production at quantity (Q) level 7? QPTCTRMRMCProfit0$5$9 1$5$10 2$5$12 3$5$15 4$5$19 5$5$24 6$5$30 7$5$45
-$10.00
If accounting profits for a firm are 20% of output, and the opportunity cost of financial capital is 8% of output, then what do the firm's economic profits equal?
12% of output
If nine workers can produce 780 units of output and 10 workers can produce 820 units of output, the marginal physical product of the 10th worker is:-
40 units
In a perfectly competitive market setting, which of the following would be a true statement?
Wage rates trend toward marginal revenue product levels.
The future of cities in the United States and in other countries will be determined by their ability to benefit from the _________________ and to minimize or counterbalance the ______________________.
economies of agglomeration; corresponding diseconomies
When __________________ exist, doubling of all inputs will result in more than doubling output, which means __________________________________________.
economies of scale; a larger factory can produce at a lower average cost than a smaller company.
Refer to the table below. If the firm produces 5 units that it sells at a price of $30.00 each, what will its profits or losses equal? QuantityCost (in dollars)Fixed Costs (in dollars)Total Costs (in dollars)Average Total Costs (in dollars per unit)Average Variable Costs (in dollars per unit)Marginal Costs (in dollars per unit)004040- -- -- -114055155515235407517.537.520360401002033.3254904013022.532.53051254015525313561604020026.633.340
losses equal $5
In economic terms, a practical approach to maximizing profits requires an examination of how changes in production affect ________________ and ________________ .
marginal revenue; marginal cost
I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company
must accept market price for its physical capital inputs.
What happens in a perfectly competitive industry when economic profit isgreater than zero?
new firms may enter the industry and all of the above
The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product
price taker
Why would labor be treated as a variable cost?
producing larger quantities of a good or service generally requires more workers
A monopolist is able to maximize its profits by
producing output where MR = MC and charging a price along the demand curve