ECON 202 OLE MISSSSS

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its profit is

$1,600

Refer to Table 15-3. For this firm, the average revenue when 14 units are produced and sold is

$11

Refer to Table 15-3. For this firm, the marginal revenue of the 13th unit is

$11

Refer to Table 15-4. What is the average revenue when 4 units are sold?

$120

Refer to Table 15-4. What is the marginal revenue from selling the 3rd unit?

$120

Refer to Table 15-4. What is the total revenue from selling 4 units?

$480

Refer to Table 15-5. If the firm is currently producing 14 units, what would you advise the owners?

Continue to operate at 14 units

Refer to Figure 15-1. If the market price is $13, the firm will earn

If the market price is $13, the firm will earn

Refer to Figure 14-6. The firm experiences economies of scale at which output levels?

Output levels less than M

Refer to Figure 15-2. If the market price is $6, what is the firm's short-run economic profit? a. $0 b. $12 c. $15 d. $18

a. $0

Hakeem gives piano lessons for $15 per hour. He also grows flowers, which he arranges and sells at the local farmer's market. One day he spends 4 hours planting $50 worth of seeds in his garden. Once the seeds have grown into flowers, he can sell them for $150 at the farmer's market. Hakeem's accounting profits are a. $100, and his economic profits are $40. b. $100, and his economic profits are $15. c. $40, and his economic profits are $100. d. $15, and his economic profits are $140.

a. $100, and his economic profits are $40

3. Trinity sells 300 candy bars at $0.50 each. Her total costs are $125. Her profits are a. $25.00. b. $124.50. c. $125.00. d. $150.00.

a. $25.00.

Refer to Table 14-8. What is the average fixed cost of producing 5 units of output? a. $4 b. $5 c. $40 d. $44

a. $4

Which of the following statements best reflects a price-taking firm? a. If the firm were to charge more than the going price, it would sell none of its goods. b. The firm has an incentive to charge less than the market price to earn higher revenue. c. The firm can sell only a limited amount of output at the market price before the market price will fall. d. Price-taking firms maximize profits by charging a price above marginal cost.

a. If the firm were to charge more than the going price, it would sell none of its goods.

Refer to Figure 15-1. The firm will earn a positive economic profit in the short run if the market price is a. above $26. b. less than $26 but more than $12. c. less than $12. d. exactly $26.

a. above $26.

The average fixed cost curve a. always declines with increased levels of output. b. always rises with increased levels of output. c. declines as long as it is above marginal cost. d. declines as long as it is below marginal cost.

a. always declines with increased levels of output.

A firm produces 400 units of output at a total cost of $1,200. If total variable costs are $1,000, a. average fixed cost is 50 cents. b. average variable cost is $2. c. average total cost is $2.50. d. average total cost is 50 cents.

a. average fixed cost is 50 cents.

For an individual firm operating in a competitive market, marginal revenue equals a. average revenue and the price for all levels of output. b. average revenue, which is greater than the price for all levels of output. c. average revenue, the price, and marginal cost for all levels of output. d. marginal cost, which is greater than average revenue for all levels of output.

a. average revenue and the price for all levels of output.

Suppose that a firm's long-run average total costs of producing microwaves decreases as it produces between 10,000 and 20,000 microwaves. For this range of output, the firm is experiencing a. economies of scale. b. constant returns to scale. c. diseconomies of scale. d. coordination problems.

a. economies of scale.

Refer to Figure 14-2. Curve B is increasing because a. of diminishing marginal product. b. of increasing marginal product. c. marginal product first increases, then decreases. d. marginal product first decreases, then increases.

a. of diminishing marginal product.

Refer to Figure 15-1. If the market price rises above $26, the firm will earn a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits and shut down. d. zero economic profits in the short run.

a. positive economic profits in the short run.

1. Total revenue equals a. price × quantity. b. price/quantity. c. (price × quantity) − total cost. d. output − input.

a. price × quantity.

46. For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the a. production of the 100th unit of output increases the firm's profit by $1. b. production of the 100th unit of output increases the firm's average total cost by $1. c. firm's profit-maximizing level of output is less than 100 units. d. production of the 101st unit of output must increase the firm's profit by more than $1.

a. production of the 100th unit of output increases the firm's profit by $1.

If a firm uses labor to produce output, the firm's production function depicts the relationship between a. the number of workers and the quantity of output. b. marginal product and marginal cost. c. the maximum quantity that the firm can produce as it adds more capital to a fixed quantity of labor. d. fixed inputs and variable inputs in the short run.

a. the number of workers and the quantity of output.

Refer to Figure 15-4. When 100 identical firms participate in this market, at what price will 15,000 units be supplied to this market? a. $1.00 b. $1.50 c. $2.00 d. The price cannot be determined from the information provided.

b. $1.50

Refer to Figure 15-2. If the market price is $10, what is the firm's short-run economic profit? a. $9 b. $15 c. $30 d. $50

b. $15

Refer to Figure 15-2. The firm will earn zero economic profit if the market price is

b. $6

Kerem makes candles. If he charges $25 for each candle, his total revenue will be a. $1,250 if he sells 100 candles. b. $625 if he sells 25 candles. c. $25 regardless of how many candles he sells. d. $2,500 if he sells 5 candles.

b. $625 if he sells 25 candles

Refer to Table 14-5. Assume the Wooden Chair Factory currently employs 5 workers. What is the marginal product of labor when the factory adds a 6th worker? a. 5 chairs per hour b. 15 chairs per hour c. 25 chairs per hour d. 70 chairs per hour

b. 15 chairs per hour

Refer to Figure 15-4. If there are 100 identical firms in this market, what is the value of Q2? a. 10,000 b. 20,000 c. 40,000 d. 80,000

b. 20,000

Average total cost is very high when a small amount of output is produced because a. average variable cost is high. b. average fixed cost is high. c. marginal cost is high. d. marginal product is high.

b. average fixed cost is high.

In the long run, a. inputs that were fixed in the short run remain fixed. b. inputs that were fixed in the short run become variable. c. inputs that were variable in the short run become fixed. d. variable inputs are rarely used.

b. inputs that were fixed in the short run become variable.

A firm that shuts down temporarily has to pay a. its variable costs but not its fixed costs. b. its fixed costs but not its variable costs. c. both its variable costs and its fixed costs. d. neither its variable costs nor its fixed costs.

b. its fixed costs but not its variable costs.

Economies of scale occur when a. long-run average total costs rise as output increases. b. long-run average total costs fall as output increases. c. average fixed costs are falling. d. average fixed costs are constant.

b. long-run average total costs fall as output increases.

The minimum points of the average variable cost and average total cost curves occur where the a. marginal cost curve lies below the average variable cost and average total cost curves. b. marginal cost curve intersects those curves. c. average variable cost and average total cost curves intersect. d. slope of total cost is the smallest

b. marginal cost curve intersects those curves.

Refer to Figure 15-1. If the market price is $24, the firm will earn a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits and shut down. d. zero economic profits in the short run.

b. negative economic profits in the short run but remain in business.

A key characteristic of a competitive market is that a. government antitrust laws regulate competition. b. producers sell nearly identical products. c. firms minimize total costs. d. firms have price setting power.

b. producers sell nearly identical products.

Refer to Table 14-8. What is the shape of the marginal cost curve for this firm? a. constant b. upward-sloping c. downward-sloping d. U-shaped

b. upward-sloping

Refer to Figure 14-2. Curve C is always declining because a. of diminishing marginal product. b. we are dividing fixed costs by higher and higher levels of output. c. marginal product first increases, then decreases. d. marginal product first decreases, then increases.

b. we are dividing fixed costs by higher and higher levels of output.

Refer to Figure 15-1. The firm's short-run supply curve is its marginal cost curve above a. $4. b. $8. c. $12. d. $26.

c. $12.

5. Kelly has decided to start his own business giving sailing lessons. To purchase equipment for the business, Kelly withdrew $1,000 from his savings account, which was earning 3% interest, and borrowed an additional $2,000 from the bank at an interest rate of 7%. What is Kelly's annual opportunity cost of the financial capital that has been invested in the business? a. $30 b. $140 c. $170 d. $300

c. $170

Refer to Figure 15-2. If the market price is $10, what is the firm's total cost? a. $15 b. $30 c. $35 d. $50

c. $35

Refer to Table 14-8. What is the average variable cost of producing 5 units of output? a. $4 b. $5 c. $40 d. $44

c. $40

Refer to Table 14-5. Each worker at the Wooden Chair Factory costs $12 per hour. The cost of each machine is $20 per day regardless of the number of chairs produced. What is the total daily cost of producing at a rate of 55 chairs per hour if the factory operates 8 hours per day? a. $480 b. $576 c. $520 d. $616

c. $520

Refer to Figure 15-4. If there are 300 identical firms in this market, what level of output will be supplied to the market when price is $1.00? a. 300 b. 6,000 c. 30,000 d. 60,000

c. 30,000

Refer to Figure 14-2. Curve A intersects curve B a. where the firm maximizes production. b. at the minimum of average fixed cost. c. at the efficient scale. d. where fixed costs equal variable costs.

c. at the efficient scale.

When marginal cost is less than average total cost, a. marginal cost must be falling. b. average variable cost must be falling. c. average total cost is falling. d. average total cost is rising.

c. average total cost is falling.

4. A firm's opportunity costs of production are equal to its a. explicit costs only. b. implicit costs only c. explicit costs + implicit costs. d. explicit costs + implicit costs + total revenue.

c. explicit costs + implicit costs.

In the short run, a firm that produces and sells house paint can adjust a. where to produce along its long-run average-total-cost curve. b. the size of its factories. c. how many workers to hire. d. the location of its factory.

c. how many workers to hire.

A difference between explicit and implicit costs is that a. explicit costs must be greater than implicit costs. b. explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. c. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do. d. implicit costs must be greater than explicit costs.

c. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's a. total revenue. b. explicit costs. c. implicit costs. d. marginal costs.

c. implicit costs.

If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then a. its total cost is more than $9,000. b. its marginal revenue is less than $10. c. its average total cost is less than $10. d. the firm cannot be a competitive firm because competitive firms cannot earn positive profits.

c. its average total cost is less than $10.

Refer to Figure 15-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is a. above $26 but less than $36. b. anywhere above $26. c. less than $26 but more than $12. d. less than $12.

c. less than $26 but more than $12.

If marginal cost is rising, a. average variable cost must be falling. b. average fixed cost must be rising. c. marginal product must be falling. d. marginal product must be rising.

c. marginal product must be falling.

Refer to Figure 15-1. If the market price is $10, the firm will earn a. positive economic profits in the short run b. negative economic profits in the short run but remain in business. c. negative economic profits and shut down. d. zero economic profits in the short run.

c. negative economic profits and shut down.

Refer to Figure 15-1. If the market price falls below $12, the firm will earn a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits in the short run and shut down. d. zero economic profits in the short run.

c. negative economic profits in the short run and shut down.

When profit-maximizing firms in competitive markets are earning profits, a. market demand must exceed market supply at the market equilibrium price. b. market supply must exceed market demand at the market equilibrium price. c. new firms will enter the market. d. the most inefficient firms will be encouraged to leave the market.

c. new firms will enter the market.

If a firm in a competitive market doubles its number of units sold, total revenue for the firm a. will more than double. b. will increase but by less than double. c. will double. d. may increase or decrease depending on the price elasticity of demand.

c. will double.

Refer to Figure 14-6. At levels of output between M and N, the firm experiences

constant returns to scale.

Suppose a firm in a competitive market earned $3,000 in total revenue and had a marginal revenue of $30 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? a. $5 and 50 units b. $5 and 100 units c. $100 and 30 units d. $30 and 100 units

d. $30 and 100 units

Refer to Figure 15-2. If the market price is $10, what is the firm's total revenue? a. $15 b. $30 c. $35 d. $50

d. $50

Refer to Table 14-8. What is the marginal cost of producing the fifth unit of output? a. $4 b. $40 c. $50 d. $70

d. $70

Tao's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $65 for 10,000 tents. At that level of output, the firm's average total costs equal a. $65 b. $75 c. $85 d. $95

d. $95

Iyana is a florist. Iyana can arrange 26 bouquets per day. She is considering hiring her husband James to work for her. Together Iyana and James can arrange 39 bouquets per day. What is James's marginal product? a. 65 bouquets b. 39 bouquets c. 28 bouquets d. 13 bouquets

d. 13 bouquets

Refer to Figure 14-2. Curve C represents which type of cost curve? a. Marginal cost b. Average total cost c. Average variable cost d. Average fixed cost

d. Average fixed cost

Which of the following costs of publishing a book is a fixed cost? a. Author royalties of 5 percent per book b. The costs of paper and binding c. Shipping and postage expenses d. Composition, typesetting, and jacket design for the book

d. Composition, typesetting, and jacket design for the book

Refer to Table 14-5. The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker? a. The third worker b. The fourth worker c. The fifth worker d. The sixth worker

d. The sixth worker

If a firm produces nothing, which of the following costs will be zero? a. Total cost b. Fixed cost c. Opportunity cost d. Variable cost

d. Variable cost

Marginal cost is equal to average total cost when a. average variable cost is falling. b. average fixed cost is rising .c. marginal cost is at its minimum. d. average total cost is at its minimum

d. average total cost is at its minimum

Refer to Figure 15-1. The firm should shut down if the market price is a. above $26. b. above $12 but less than $26. c. above $26 but less than $40. d. less than $12

d. less than $12

Average total cost is increasing whenever a. total cost is increasing. b. marginal cost is increasing. c. marginal cost is less than average total cost. d. marginal cost is greater than average total cost.

d. marginal cost is greater than average total cost.

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which a. total revenue is equal to variable cost. b. total revenue is equal to fixed cost. c. total revenue is equal to total cost. d. profit is maximized.

d. profit is maximized.

Refer to Figure 15-1. If the market price is exactly $26, the firm will earn a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits and shut down. d. zero economic profits in the short run.

d. zero economic profits in the short run.

If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will

exactly triple.

Refer to Figure 15-1. If the market price rises above $13, the firm will earn

positive economic profits in the short run

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

sunk costs.