ECON 2301 TEST 3
Refer to Figure 8.8 (Cost/Bushels of Soybeans). This farmer's profit-maximizing level of output is _____ units of output.
1,000.
Refer to Figure 9.1 (Price/Bushels of Wheat). For this farmer to maximize profits he should produce ___ bushels of wheat.
12.
Refer to Figure 7.4 (Total Product/Num. of Employees). The average product with three workers is?
14
Refer to Figure 7.4 (Total Product/Num. of Employees). The marginal product of the second worker is?
20
Economic Costs
Include both a normal rate of return on investment and the opportunity cost of each factor of production
Total variable cost _________ as output increases, and total fixed cost ______ as output increases.
Increases; does not change.
When total product is maximized, marginal product
Is zero, but average product is positive.
If the marginal product of labor is less than the average product of labor, then the
Average product must be decreasing, AND Marginal product must be decreasing.
In the long run,
There are no fixed factors of production.
Refer to Table 7.1 (Alternative Technologies). Which technology is the most labor intensive?
Capital Units: 4, Employee: 18.
For constant returns to scale, a(n) _______ in a firm's scale of production leads to ______ average total cost.
Decrease; no change in.
In the short run average costs eventually increase because of _________ , and in the long run average cost eventually increase because of ______.
Diminishing returns; diseconomies of scale.
On the upward sloping portion of a firm's long-run average curve, it is experiencing
Diseconomies of scale.
If economic profit is zero, a firm
Earn exactly a normal rate of return.
Refer to Figure 9.1 (Price/Bushels of Wheat). If this farmer is maximizing profits, his total costs will be
$132.
Firms that are "breaking even" are
Earning zero economic profits.
Refer to Figure 8.8 (Cost/Bushels of Soybeans). At the market price of $8 per bushel, if this farmer produces the profit-maximizing level of soybeans, the profit would be
$0.
Refer to Figure 9.1 (Price/Bushels of Wheat). This farmer would be breaking even if price was
$10.
Refer to Figure 9.1 (Price/Bushels of Wheat). If this farmer is maximizing his profits, his TVC is
$108.
Refer to Figure 9.1 (Price/Bushels of Wheat). This farmer's fixed costs are
$24.
Refer to Figure 9.1 (Price/Bushels of Wheat). This farmer's shutdown point is at a price of
$7.
Marginal cost is ______ average variable cost when ______.
Equal to; average variable cost in minimized.
An industry is in _____ if firms have no incentive to enter of exit on the _______ run.
Equilibrium; long.
The cost-minimizing equilibrium condition can be written as
MPL/PL=(MPK)(PK).
If marginal product is greater than average product, then
Marginal product could either be increasing or decreasing.
The marginal cost curve intersects the average variable cost curve at the ______ value of the average variable cost curve.
Minimum.
If P = MC and MC > ATC, then a perfectly competitive firm will earn ______ profits.
Positive.
Refer to Figure 8.1 (Produce). Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, what production technique should this firm use to produce 2 units of output?
Production technique B.
Refer to Table 8.7 (# of Fruit Baskets). Assume that fruit baskets are sold in a perfectly competitive market. The market price of a fruit basked is $22. To maximize profits, Exotic Fruit should sell _____ fruit baskets and their profit is _____.
Six; $14.
Refer to Figure 9.2 (Price Per/Bushels of Wheat). In which of the following price ranges will the firm continue to operate, but at a loss?
$6 - $7.
Refer to Table 7.1 (Alternative Technologies). If the hourly wage rate is $7 and the hourly price of capital is $10, which production technology should be selected?
Capital Units: 8, Employees: 8.
Every point on an a U-Shaped long-run average cost curve represents
The minimum cost at which the associated output level can be produced when the scale of plant can be changed.
Firms cannot enter an industry in which positive profits are being earned in
The short run.
