ECON Exam 3

Tankao makes earbuds for mobile devices. When Tankao produces 20 sets of earbuds, its average variable cost is $5 per set and its average total cost is $8 per set. Tankao's:

average fixed cost is $3 per set

If marginal cost is less than average total cost, then _____ cost is _____.

average total; decreasing

Suppose GoSports pennant monopoly is broken up and the pennant industry becomes perfectly competitive. We would expect the ________ to increase from the breakup and ________ to decrease from the breakup.

consumer surplus and total surplus; producer surplus

Zoe's Bakery determines that P < ATC and P > AVC. In the short run, Zoe should:

continue to operate even though she is taking an economic loss

if a perfectly competitive firm sells 300 units of output at $1 per unit, its marginal revenue is:

$1

A business produces 10 pairs of eyeglasses. It incurs $35 in average total cost and $5 in average fixed cost. The average variable cost of producing 10 pairs of eyeglasses is:

$30

A business produces 10 pairs of eyeglasses. It incurs $30 in average variable cost and $5 in average fixed cost. The average total cost of producing 10 pairs of eyeglasses is:

$35

In the short run, a firm will produce as long as the price is greater than its:

AVC

the lowest point on a perfectly competitive firm's short-run supply curve corresponds to the minimum point on the _______ curve

AVC

When an additional unit of a variable input adds less to total product than the previous unit, the firm has:

diminishing marginal returns

which of the following is NOT an assumption that economists make when using the model of competition?

each firm sets its price equal to its average total cost

The difference between total revenue and total cost is:

economic profit or loss

It is common in large breweries for the long-run average total cost to decline as output increases. This indicates that many breweries operate with:

economies of scale

If the marginal utility of hot dogs exceeds the marginal utility of french fries, then the consumer should always increase the consumption of hot dogs and decrease the consumption of french fries.

false

if total utility is rising as more salsa is consumed, we can definitely say that the marginal utility is:

greater than 0

A perfectly competitive firm will earn a profit in the short run when it produces the profit-maximizing quantity of output and the price is:

greater than average total cost

When a firm adds physical capital, in the short run fixed costs will:

increase

If Marie Marionettes is operating under conditions of diminishing marginal product, the marginal costs will be:

increasing

When a firm produces a small amount of output, the spreading effect:

is stronger than the diminishing returns effect

A perfectly competitive firm will not produce any output in the short run and will shut down if the price is:

less than average variable cost

Economies and diseconomies of scale are associated with the:

long-run average total cost curve and the long run.

At the long-run quantity of output, where the long-run average total cost curve is at its lowest point, it is tangent to the _____ of the corresponding short-run average total cost curve.

minimum

the law of diminishing marginal utility indicates that the slope of the marginal utility curve eventually becomes:

negative

The slope of a long-run average total cost curve exhibiting diseconomies of scale is:

positive

When a firm cannot affect the market price of the good that it sells, it is said to be a:

price taker

Bob runs a pedicure business in a perfectly competitive industry. He knows that he will break even if the price of pedicures is $15 but that he will have to shut down if the price is $11. If the market demand in the industry is P = 30 - (0.2)Q and the market supply is P = (0.2)Q, in the short run, Bob will:

produce but just break even

In the short run, if P > ATC, a perfectly competitive firm:

produces output and earns an economic profit

Wenqin is a farmer, and in the short run she produces 100 bushels of wheat. Her average total cost per bushel is $1.75, total revenue is $450, and (total) fixed costs are equal to $100. Wenqin's:

profit per bushel is $2.75

A monopolist's marginal cost curve shifts up, but the firm's demand curve remains the same and the firm does not shut down. compared to the condition before the increase in marginal costs, the monopolist will ______ its price and ______ its level of production

raise; decrease

for a perfectly competitive firm, the short-run supply curve is the :

rising part of the MC curve beginning at the shut-down point

Janet's poodle grooming salon has a total cost curve expressed by the equation TC = 100 + 3Q2, where Q is the quantity of dogs groomed. Given this expression, Janet is operating in the:

short run, and her fixed costs are $100.

As production increases and the fixed cost is divided by larger quantities of output, average fixed cost drops. This is referred to as the _____ effect.

spreading

suppose economic profits exist in perfect competition in the short run. firms will enter in the long run because of easy entry, the short run market _______ curve will shift to the right, and _______ will ________

supply; output; increase

in the short run, if a monopoly is forced to charge a price equal to marginal cost:

the deadweight loss will decrease

perfect competition is characterized by:

the inability of any one firm to influence price

Perfect competition is characterized by:

the inability of any one firm to influence price.

Which of the following best describes the amount of utility that is gained by spending an additional dollar on yogurt?

the marginal utility of one tub of yogurt divided by the price of yogurt

In economics, the short run is defined as:

the period in which some inputs are considered to be fixed in quantity.

A firm's marginal cost is:

the ratio of the change in total cost to the change in the quantity of output

The marginal product of labor is:

the slope of the total product of labor curve.

during the summer, Alex runs a mowing service, and lawn mowing is a perfectly competitive industry

the total revenues can't cover variable costs

A firm's total output times the price at which it sells that output is _____ revenue.

total

Tankao makes Bluetooth sets for mobile devices. When 50 Bluetooth sets are produced in the short run, the average variable cost is $30. Tankao's average _____ cost is _____.

total; greater than $30

Marginal cost is the change in _____ cost resulting from a one-unit change in _____.

total; output

consumer surplus in a monopoly is smaller than in perfect competition

true

Average variable cost equals all of the following EXCEPT:

variable cost times output

A fixed input is one:

whose quantity cannot be changed in the short run.

Buford Bus Manufacturing installs a new assembly line. As a result, the output per worker increases. The marginal cost of output at Buford:

will decrease (the MC curve will shift down)

In a long-run equilibrium, economic profits in a perfectly competitive industry are:

zero

Suppose Cyd knows the average total cost of producing 9 scones is $5, while the average total cost of producing 10 scones is $5.20. What is the marginal cost of the tenth scone?

$7

Tom is trying to decide how to allocate his $50 budget for music downloads and online movie streaming when the price of a music download is $1 and the price of a movie is $5. (Scenario: Tom's Budget Constraint) Read the scenario Tom's Budget Constraint. If we measure music downloads on the horizontal axis and movies on the vertical axis, the horizontal intercept of Tom's budget line is:

50

The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You have $5 to spend. You decide to purchase 6 boxes of popcorn. The maximum number of bags of peanuts that you can purchase is:

8

In some complex production processes, such as nuclear power plants, some inputs have to be treated as being fixed even in the long run.

False

Joan adds one more employee to her construction company. The additional output produced by this employee represents the average product of this employee.

False

The long-run industry supply curve is usually more elastic than the short-run industry supply curve, but if entering firms make intensive use of an input that is in limited supply, then it is possible for the long-run curve to be less elastic than the short-run curve.

False

The short-run individual supply curve for a perfectly competitive firm is given by the marginal cost curve above minimum average fixed cost.

False

A perfectly competitive firm maximizes profit in the short run by producing the quantity at which:

MR=MC

which of the following is NOT a barrier to entry?

a ban on certain kinds of advertising

If all firms in an industry are price takers:

an individual firm cannot alter the market price even if it doubles the output