Econ Exam 3
The short run is a period of time in which A. the quantities of some resources the firm uses are fixed. B.prices and wages are fixed. C.nothing the firm does can be altered. D.the amount of output is fixed.
A) the quantities of some resources the firm uses are fixed
n example of a variable resource in the short run is A.an employee. B.a building. C.capital equipment. D.land.
A. an employee
The short run is a time period during which A.at least one factor of production is fixed. B.all factors of production are variable. C.a firm can earn a normal profit. D.all factors of production are fixed.
A. at least one factor of production is fixed
Total fixed cost A.does not change as output changes. B.initially decreases and then increases as output increases. C.decreases as output increases. D.increases as output increases.
A. does not change as output changes
A firm has fixed costs A.in the short run but not in the long run. B.in the short run and in the long run. C.neither in the long run nor in the short run. D.in the long run but not in the short run.
A. in the short run but not in the long run
Marginal revenue is defined as A.the change in total revenue that results from a one−unit increase in the quantity sold. B.the value of a firm's sales. C.the total revenue from the total amount the firm sells. D.total revenue divided by the total quantity sold.
A.the change in total revenue that results from a one−unit increase in the quantity sold.
Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. What is Ernie's average total cost? A.$8 B.$10 C.$2 D.$12
B. $10
Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. What is Ernie's total variable cost? A.$2,400 B.$1,600 C.$2,000 D.$800
B. $1600
Economists define the short run as a period of time so short that A.only one factor of production can be varied. B.at least one factor of production cannot be varied. C.the amount of output cannot be changed at all. D.the amount of output cannot be changed except under diminishing marginal returns.
B. at least one factor of production cannot be varied
The marginal product of labor is the A.maximum output attainable with fixed factors when labor is the only variable factor. B.change in output resulting from a one−unit increase in labor. C.output level above which the slope of the total product curve falls. D.output level above which the rate of total product per unit of labor falls.
B. change in output resulting from a one-unit increase in labor
A firm's total fixed cost (TFC) is defined as a cost A.it is certain ("fixed") that the firm must pay. B.that does not change as output changes. C.that is dependent on marginal cost. D.that is paid in only the long run.
B. that does not change as output changes
A firm's total cost (TC) equals the sum of its fixed cost plus its A.marginal cost. B.variable cost. C.variable cost plus its marginal cost. D.sunk cost plus its variable cost plus its marginal cost.
B. variable cost
The marginal product of labor is equal to the A.slope of the marginal product of labor curve. B.increase in the total product that results from hiring one more worker. C.total product divided by the total number of workers hired. D.None of the above answers are correct.
B.increase in the total product that results from hiring one more worker.
Which of the following is correct? A.A firm's long−run total cost is the difference between its long−run fixed cost and long−run variable cost. B. A firm's short−run average cost curve is derived from a series of long−run average cost curves. C.A firm's long−run average cost curve is derived from a series of short−run average cost curves. D.Both answers A and C are correct.
C. A firm's long-run average cost curve is derived from series of short-run average cost curves.
The long run is a period of time in which A.all factors of production are fixed. B.some but not all factors of production are fixed. C.all factors of production are variable. D.some but not all factors of production are variable.
C. all factors of production are variable
Total cost is equal to the A.product of the marginal cost multiplied by the average total cost. B.difference between the average variable cost and the average fixed cost. C.sum of the total fixed cost and the total variable cost. D.sum of the average fixed cost and the average variable cost.
C. sum of the total fixed cost and the variable cost
Marginal cost is equal to A.quantity divided by total cost. B.the change in total cost divided by the change in total revenue. C.the change in total cost divided by the change in quantity. D.total cost divided by quantity.
C. the change in total cost divided by the change in quantity
Economies to scale refer to A.a feature of short−run production functions but not long−run production functions. B.the point at which marginal cost equals average cost. C.the range of output over which the long−run average cost falls as output increases. D.the fact that in the long run, fixed costs remain constant as output increases.
C. the range of output over which the long-run average cost falls as output increases
The LRAC curve generally is A.upward sloping. B.downward sloping. C.U−shaped. D.shaped as an upside−down U.
C. u-shaped
Which of the following is always true for a perfectly competitive firm? A.MR = ATC B.P = AVC C.P = ATC D.P = MR
D. P = MR
A firm's long−run average cost curve A. tells the firm which plant size to use and which quantity of labor to use to minimize the cost of producing any level of output. B. is U−shaped. C. shows the lowest attainable average total cost of producing any level of output when capital and labor are variable. D. all of the above
D. all of the above
In the long run, a firm can vary A.its labor but not its capital. B.its capital but not its labor. C.neither its labor nor its capital. D. both its labor and its capital.
D. both its labor and its captial
Total fixed cost is the sum of all A.explicit costs. B.costs associated with the production of goods. C.costs that rise as output increases. D.costs of the firm's fixed inputs.
D. costs of the firm's fixed inputs
When a firm experiences economies of scale, its ________ cost curve slopes ________. A.long−run average; upward B.short−run average total; downward C.short−run marginal cost; downward D. long−run average; downward
D. long-run average; downward
"Diminishing marginal returns" refer to a situation in which the A.average cost of the last worker hired is less than the average cost of the previous worker hired. B.marginal cost of the last worker hired is less than the marginal cost of the previous worker hired. C.average product of the last worker hired is less than the average product of the previous worker hired. D.marginal product of the last worker hired is less than the marginal product of the previous worker hired.
D. marginal product of the last worker hired is less than the marginal product of the previous worker hired
In the long run, a firm has A.fixed factors of production but no variable resources. B.no factors of production that are variable. C.no factors of production that are either fixed or variable. D.no factors of production that are fixed.
D. no factors of production that are fixed
The marginal product of labor is the increase in total product from a A.one unit increase in the quantity of labor, while also increasing the quantity of capital by one unit. B.one dollar increase in the wage rate, while holding the price of capital constant. C.one percent increase in the wage rate, while also increasing the price of capital by one percent. D.one unit increase in the quantity of labor, while holding the quantity of capital constant.
D. one unit increase in the quantity of labor, while holding the quantity of capital constant
The short run is a period of time in which A.the quantities used of all resource are fixed. B.output prices are fixed. C.resource prices are fixed. D.the quantity used of at least one resource is fixed.
D. the quantity used of at least one resource is fixed
The law of diminishing returns states that as A.a firm uses more of a variable input, given the quantity of fixed inputs, the firm's average total cost will decrease eventually. B.the size of a plant increases, the firm's fixed cost increases. C.the size of a plant increases, the firm's fixed cost decreases. D.a firm uses more of a variable input, given the quantity of fixed inputs, the marginal product of the variable input eventually diminishes.
D.a firm uses more of a variable input, given the quantity of fixed inputs, the marginal product of the variable input eventually diminishes.
If the price of its product falls below the minimum point on the AVC curve, the best a perfectly competitive firm can do is to A.shut down and incur an economic loss equal to its total variable cost. B.keep producing and incur an economic loss equal to its total variable cost. C.keep producing and incur an economic loss equal to its total fixed cost. D.shut down and incur an economic loss equal to its total fixed cost.
D.shut down and incur an economic loss equal to its total fixed cost.
In perfect competition, an individual firm A.determines the quantity it sells in the marketplace but has no influence over its price. B.sets the price but does not determine the quantity it sells in the marketplace. C.sets the price and determines the quantity it sells in the marketplace. D.can not affect its price nor determine the quantity it sells in the marketplace.
a. determines the quantity it sells in the marketplace but has no influence over its price
A perfectly competitive industry is characterized by A.easy entry into the industry. B.firms that are price setters. C.firms facing a downward sloping demand curve. D.high barriers to entry.
a. easy entry into the industry
A firm experiences ________ when its ________ downward at larger outputs. A.economies of scale; long−run average cost curve slopes B.diminishing marginal returns; long−run average cost curve slopes C.diminishing marginal returns; average total cost curve shifts D.diseconomies of scale; average total cost curve slopes
a. economies of scale; long-run average cost curve slopes
A common source of diseconomies of scale is the A.growing complexity of management and organizational structure. B.diminishing marginal returns to labor. C.diminishing marginal returns to land. D.diminishing marginal returns to capital.
a. growing complexity of management and organizational structure
In perfect competition, the market demand for the good ________ perfectly elastic and the demand for the output of one firm ________ perfectly elastic. A.is not; is B.is; is not C.is; is D.is not; is not
a. is not; is
In perfect competition, the firm's marginal revenue curve A. is the same as its demand curve. B. cuts its demand curve from below, going from left to right. C. cuts its demand curve from above, going from left to right. D. always lies below its demand curve.
a. is the same as its demand curve
A perfectly competitive firm shuts down if the price of its product is A.less than its minimum average variable cost. B.greater than its maximum variable cost. C.greater than its minimum average variable cost. D.less than its minimum total cost.
a. less that its minimum average variable cost
A perfectly competitive firm maximizes its economic profit if it produces so that A.marginal revenue = marginal cost. B.total revenue = total cost. C.average revenue = average total cost. D.average total cost = average variable cost.
a. marginal revenue = marginal cost
When the demand for electricity peaks during the hottest days of summer, Florida Power and Light Company can generate more electricity by using more fuel and increasing the working hours of many of its employees. The company cannot, however, increase electric power production by building additional generating capacity. This means that the company is in the A.short run. B.long run. C.market run. D.intermediate run.
a. short run
Economies of scale refer to the range of output over which A.the long−run average cost falls as output increases. B.marginal cost exceeds average cost. C.the long−run average cost is lower than the short−run average total cost. D.the marginal product of labor diminishes.
a. the long-run average cost falls as output increases
A perfectly competitive firm will operate and incur an economic loss in the short run if A. the loss is smaller than its total fixed costs. B. shareholders do not know about the loss. C. it knows it can recoup the loss in the long run. D. the loss can offset future profits.
a. the loss is smaller than its total fixed costs
Average total costs are total costs divided by A.total output. B.total variable costs. C.total fixed costs. D.the total number of workers employed.
a. total output
A perfectly competitive firm's shortminus−run supply curve is the same as its A. ATC curve. B. MC curve above the minimum of the AVC curve. Your answer is correct. C. MR curve. D. AVC curve.
b.
Kansas Power and Light, the only supplier of electricity in Kansas, is an example of a firm in what type of market? A.a monopolistically competitive market B.a monopoly market C.an oligopolistic market D.a perfectly competitive market
b. a monopoly market
A market with the characteristics of many firms selling an identical product, many buyers, and no restrictions on entry or exit to the market is A.a monopoly market. B.a perfectly competitive market. C.a monopolistically competitive market. D.an oligopolistic market.
b. a perfectly competitive market
The market for wheat is an example of A.a monopolistically competitive market. B.a perfectly competitive market. C.a monopoly market. D.an oligopolistic market.
b. a perfectly competitive market
As output increases, average fixed cost A.increases, then decreases. B.always decreases. C.decreases, then increases. D.remains constant.
b. always decreases
When long−run average cost increases as output increases there are A.economies of scale. B.diseconomies of scale. C.constant returns to scale. D.none of the above
b. diseconomies of scale
When long−run average costs decrease as output increases, there are A.diseconomies of scale. B.economies of scale. C.constant returns to scale. D.constant marginal costs.
b. economies of scale
A company could produce 99 units of a good for $316 or produce 100 units of the same good for $320. The marginal cost of the 100th unit A.is $320. B.is $4.00 C.is $3.20. D.cannot be calculated with this information.
b. is $4.00
In perfect competition, each firm ________. A.faces a perfectly inelastic demand for its product B.is a price taker C.produces as much as it can D.can influence the price that it charges
b. is a price taker
A market structure in which many firms compete by making similar but slightly different products is called A.oligopoly. B.monopolistic competition. C.perfect competition. D.monopoly.
b. monopolistic competition
In a given market, a large number of firms sell a similar product. Consumers think that each firm's product is somewhat different from that of its competitors. This market is A.equivalent to a monopoly because consumers think the products are different. B.monopolistically competitive. C.perfectly competitive. D.equivalent to an oligopoly because consumers think the products are different.
b. monopolistically competitive
In the short run A.all firms experience increasing returns to scale. B.no firm experiences economies of scale. C.all inputs are variable. D.some firms experience economies of scale.
b. no firms experiences economies of scale
A market structure in which many firms are selling an identical product is called A.monopolistic competition. B.perfect competition. C.monopoly. D.oligopoly.
b. perfect competition
When long−run average cost remains constant as output increases there are constant A.diseconomies of scale. B.returns to scale. C.marginal returns. D.economies of scale.
b. returns to scale
In perfect competition, the price of the product is determined where the market A.fixed cost is zero. B.supply curve and market demand curve intersect. C.average variable cost equals the market average total cost. D.elasticity of supply equals the market elasticity of demand.
b. supply curve and market demand curve intersect
Tammy sells woolen hats in a perfectly competitive market. The marginal cost of producing 1 hat is $24. The marginal cost of producing a second hat is $26 and the marginal cost of producing a third hat is $28. The market price of a hat is $26. To maximize profit, Tammy produces ________ a day. A.as many hats as possible B.1 hat C.2 hats D.3 hats
c. 2 hats
In perfect competition, each individual firm faces ________ demand curve. A.a downward sloping B.an inelastic C.a perfectly elastic D.an upward sloping
c. a perfectly elastic
In perfect competition, A.there are few buyers. B.there are significant restrictions on entry. C.all firms in the market sell their product at the same price. D.each firm can influence the price of the good.
c. all firms in the market sell their product at the same price
The air travel market, which is dominated by a few large firms, is an example of A.a monopolistically competitive market. B.a perfectly competitive market. C.an oligopolistic market. D.a monopoly market.
c. an oligopolistic market
An example of a short−run fixed factor of production is A.electricity. B.postage for mailing. C.capital equipment. D.labor.
c. capital equipment
The largest share of the U.S. private economy is A.oligopolistic. B.monopolistic. C.competitive or monopolistically competitive. D.in manufacturing.
c. competitive or monopolistically competitive
Farmer Seth has a perfectly flat long−run average total cost curve over the range of output from 10,000 bushels of wheat to 100,000 bushels of wheat. Hence, over this range of output, Farmer Seth definitely experiences A.constant economies of scale. B.constant marginal returns. C.constant returns to scale. D.none of the above
c. constant returns to scale
If the price exceeds the average variable cost, by producing the level of output such that marginal revenue equals marginal cost, the firm ensures that it will A.earn an economic profit. B.not suffer any losses. C.earn the largest profit possible. D.survive in the long run.
c. earn the largest profit possible
In perfect competition, the marginal revenue of an individual firm A.is zero. B.is positive but less than the price of the product. C.equals the price of the product. D.exceeds the price of the product.
c. equals the price of the product
Firms in perfectly competitive industries have a ________ individual demand curve when the price is on the vertical axis and the quantity is on the horizontal axis. The shape of the curve is result of the firm being a ________. A.vertical; price taker B.downward sloping; price maker C.horizontal; price taker D.downward sloping; price taker
c. horizontal; price taker
One reason for diseconomies of scale is that, at very large scales, management systems can become A.more numerous than the workers they manage. B.more efficient because they can effectively manage more workers. C.increasingly complex and inefficient. D.none of the above
c. increasingly complex and inefficient
A period of time in which the quantity of all factors of production used by a firm can be varied is called the A.market period. B.variable run. C.long run. D.short run.
c. long run
Diseconomies of scale definitely means that as the firm increases its output, its A.short−run average total cost decreases. B.long−run average total cost decreases. C.long−run average total cost increases. D.short−run average total cost increases.
c. long-run average total cost increases
At that amount of output where diminishing marginal returns first sets in, A.total product will begin to decline. B.average product will begin to decline. C.marginal product will begin to decline. D.all of the above
c. marginal product will begin to decline
In perfect competition, at al levels of output the market price is the same as the firm's ________. A.average variable cost B.fixed cost C.marginal revenue D.normal profit
c. marginal revenue
Under ________, there are many firms selling slightly different products. A.perfect competition B.monopoly C.monopolistic competition D.oligopoly
c. monopolistic competition
A market structure in which a small number of firms compete is called A.monopoly. B.perfect competition. C.oligopoly. D.monopolistic competition.
c. oligopoly
A perfectly competitive firm will shut down rather than produce if its A.price is less than total variable cost. B.price is less than marginal cost. C.price is less than average variable cost. D.total revenue is less than total cost.
c. price is less than average variable cost
When a firm is experiencing economies of scale, A.diminishing returns to labor have been suspended. B.the MC curve slopes downward. C.the LRAC curve slopes downward. D.the MP curve slopes upward.
c. the LRAC curve slopes downward
"Diseconomies of scale" occur in A.both the short run and the long run. B.neither the short run nor the long run. C.the long run, but not the short run. D.the short run, but not the long run.
c. the long run, but not the short run
A company could produce 100 units of a good for $320 or produce 101 units of the same good for $324. The $4 difference in costs is A.the marginal benefit of producing the 101st unit. B.neither the marginal benefit nor the marginal cost of producing the 101st unit. C.the marginal cost of producing the 101st unit. D.both the marginal benefit and the marginal cost of producing the 101st unit.
c. the marginal cost of producing the 101st unit
An example of a perfectly competitive industry is A.a big city police department. B.the National Football League. C.the market for corn in the United States. D.the market for French impressionists' paintings.
c. the market for corn in the United States
A firm that shuts down and produces no output incurs a loss equal to its A.marginal revenue. B.total variable costs. C.total fixed costs. D.marginal costs.
c. total fixed costs
The shortminus−run supply curve for a perfectly competitive firm is its marginal cost curve A. everywhere. B. above the horizontal axis. C. below its shutdown point. D. above its shutdown point.
d.
Under oligopoly, there are ________ firms selling products that are ________. A.many; either identical or different B. a few; identical C. many; different D.a few; either identical or different
d. a few; either identical or different
Perfect competition implies that A.there are many firms in the industry. B.all firms are price takers. C.all firms are producing the same identical product. D.All of the above answers are correct.
d. all of the above answers are correct
An example of a perfectly competitive firm is A.a big city newspaper. B.the local cable TV company. C.a U.S. automobile producer. D.an oat farmer in the United States.
d. an oat farmer in the united states
The owners will shut down a perfectly competitive firm if the price of its good falls below its minimum A.wage rate. B.average total cost. C.average marginal cost. D.average variable cost.
d. average variable cost
The long run A.means a long period of time, always longer than a year. B.is a period of time in which all factors of production can be varied. C.is different for different firms. D.Both answers B and C are correct.
d. both answers B and C are correct
A perfectly competitive firm maximizes its profit by A.manipulating demand. B.cutting wages. C.setting its price so that it exceeds the marginal revenue. D.choosing to produce the quantity that sets MC equal to MR.
d. choosing to produce the quantity that sets MC equal MR
Marginal cost is the increase in total ________ that results from a oneminus−unit increase in ________. A.fixed cost; output B.fixed cost; the fixed input C.variable cost; the variable input D.cost; output
d. cost; output
When long−run average costs increase as output increases, there are A.constant returns to scale. B.economies of scale. C.constant marginal costs. D.diseconomies of scale.
d. diseconomies of scale
Electric utility companies have built larger and larger electric generating stations and, as a result, the long−run average cost of producing each kilowatt hour decreased. This is an example of A.increasing returns to cost. B.diseconomies of scale. C.constant returns to cost. D.economies of scale.
d. economies of scale
Which type of cost is does not change as the quantity of output produced changes? A.total cost B.average cost C.marginal cost D.fixed cost
d. fixed
he costs incurred even when no output is produced are called A.variable costs. B.marginal costs. C.external costs. D.fixed costs.
d. fixed costs
In perfect competition, there are _______. A.many firms selling similar but slightly different products B.a small number of firms, each selling an identical product C.many firms selling products for which no good substitutes exist D.many firms, each selling an identical product
d. many firms, each selling an identical product
A perfectly competitive firm's economic profit is maximized by producing the amount of output such that A.total revenue equals total variable cost. B.total revenue equals total cost and marginal cost. C.marginal revenue is equal to total revenue. D.marginal revenue equals marginal cost.
d. marginal revenue equals marginal cost
Which market type has characteristics as follows: large number of firms, differentiated product? A.monopoly B.oligopoly C.perfect competition D.monopolistic competition
d. monopolistic competition
Which market type has characteristics as follows: one firm, good or service produced has no close substitutes, barriers to entry prevent new firms from entering into the industry? A.perfect competition B.oligopoly C.monopolistic competition D.monopoly
d. monopoly
The long run is a time frame in which A.the quantities of all resources are fixed. B.all costs are sunk costs. C.the quantities of some resources are fixed and the quantities of other resources can be varied. D.the quantities of all resources can be varied.
d. the quantities of all resources can be varied.
In perfect competition, ________. A.there are restrictions on entry into the industry B.firms in the industry have advantages over firms that plan to enter the industry C.only firms know their competitors' prices D.there are many firms that sell identical products
d. there are many firms that sell identical products
A market structure in which one firm produces a good or service that has no close substitutes is called A.monopolistic competition. B.perfect competition. C.oligopoly. D.monopoly.
monopoly
