ECON Quizzes (9,10,11)

If current output is less than the profit-maximizing output, which must be true?

Marginal revenue is greater than marginal cost.

At the profit-maximizing level of output, marginal profit

is zero.

Table 8.1 Q P TR MR TC MC 0 $30 $0 --- $15 --- 1 $30 $30 $30 $25 $10 2 $30 $60 $30 $40 $15 3. $30 $90 $30 $60 $20 4. $30 $120 $30 $85 $25 5. $30 $150 $30 $115 $30 6. $30 $180 $30 $150 $35 The total revenue graph consistent with Table 8.1 is:

linear and upward-sloping.

In a short-run production process, the marginal cost is rising and the average variable cost is falling as output is increased. Thus,

marginal cost is below average variable cost.

A firm never operates:

on the downward-sloping portion of its AVC curve.

The total cost (TC) of producing computer software diskettes (Q) is given as: . What is the variable cost?

the firm is earning negative profit, but will continue to produce where MR = MC in the short run.

Table 8.1 Q P TR MR TC MC. 0 $30 $0 --- $15 --- 1 $30 $30 $30 $25 $10 2 $30 $60 $30 $40 $15 3 $30 $90 $30 $60 $20 4. $30 $120 $30 $85 $25 5 $30 $150 $30 $115 $30 6 $30 $180 $30 $150 $35 Refer to Table 8.1. The maximum profit available to the firm is:

$35

The total cost (TC) of producing computer software diskettes (Q) is given as: . What is the variable cost?

5Q

If a competitive firm's marginal cost curve is U-shaped, then:

Its short-run supply curve is the upward-sloping portion of the marginal cost curve that lies above the short-run average variable cost curve

From Example 7.2, most pizza restaurants have large fixed costs and relatively low variable costs. What does this tell us about the average variable cost (AVC) of producing pizza?

AVC is relatively low.

Use the following two statements to answer this question: I. The average total cost of a given level of output is the slope of the line from the origin to the total cost curve at that level of output. II The marginal cost of a given level of output is the slope of the line that is tangent to the total cost curve at that level of output.

Both I and II are true.

Use the following two statements to answer this question: I. The average total cost of a given level of output is the slope of the line from the origin to the total cost curve at that level of output. II. The marginal cost of a given level of output is the slope of the line that is tangent to the variable cost curve at that level of output.

Both I and II are true.

Consider the following statements when answering this question. I. Increases in the rate of income tax decrease the opportunity cost of attending college. II. The introduction of distance learning, which enables students to watch lectures at home, decreases the opportunity cost of attending college.

I and II are both true.

For any given level of output: a. marginal cost must be greater than average cost. b. average variable cost must be greater than average fixed cost. c. average fixed cost must be greater than average variable cost. d. fixed cost must be greater than variable cost. e. None of these

None of these

Which of the following relationships is NOT valid?

Rising marginal cost implies that average total cost is also rising.

At the profit-maximizing level of output, what is relationship between the total revenue (TR) and total cost (TC) curves?

They must have the same slope.

In 1985, Alice paid $20,000 for an option to purchase ten acres of land. By paying the $20,000, she bought the right to buy the land for $100,000 in 1992. When she acquired the option in 1985, the land was worth $120,000. In 1992, it is worth $110,000. Should Alice exercise the option and pay $100,000 for the land?

Yes

In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive, but can be resold, and are therefore an example of:

a fixed cost.

Which of following is an example of a homogeneous product?

both Gasoline and Copper

Suppose your firm has a U-shaped average variable cost curve and operates in a perfectly competitive market. If you produce where the product price (marginal revenue) equals average variable cost (on the upward sloping portion of the AVC curve), then your output will:

exceed the profit-maximizing level of output.

The perfectly competitive firm's marginal revenue curve is:

horizontal.

Table 8.1 Q P TR MR TC MC 0 $30 $0 --- $15 --- 1 $30 $30 $30 $25 $10 2 $30 $60 $30 $40 $15 3 $30 $90 $30 $60 $20 4 $30 $120 $30 $85 $25 5 $30 $150 $30 $115 $30 6 $30 $180 $30 $150 $35 Average cost for the firm in Table 8.1:

is U-shaped.

If the market price for a competitive firm's output doubles, then:

the marginal revenue doubles.

The demand curve facing a perfectly competitive firm is:

the same as its average revenue curve and its marginal revenue curve.

Marginal revenue, graphically, is:

the slope of the total revenue curve at a given point.

When the TR and TC curves have the same slope,

they are the furthest from each other.