econ test 3

What do you recommend to the firm in case #4? A) increase output .B) decrease output, but not shut down. C) maintain its current rate of output D) shut down

A) increase output

What do you recommend to the firm in case #3? A) increase output. B) decrease output, but not shut down. C) maintain its current rate of output D) shut down.

A) increase output.

At the profit-maximizing output for a perfectly competitive firm: A) Average revenue = average total cost. B) Marginal cost = price. C) Total revenue = price. D) Total cost = total revenue.

B) Marginal cost = price.

Based on the figure, at the profit-maximizing (loss-minimizing) output, this firm will realize A) a profit of $36. B) a profit of $32 C) a profit of $12 D) a loss of $60 E) a normal profit

B) a profit of $32

What do you recommend to the firm in case #2? A) increase output. B) decrease output, but not shut down. C) maintain its current rate of output D) shut down.

B) decrease output, but not shut down.

The existence of short-run economic profits induces perfectly competitive firms to: A) exit the industry, which shifts the market supply curve to the left and increases market price B) enter the industry, which shifts the market supply curve to the right and decreases market price. C) enter the industry, which shifts the market supply curve to the left and decreases market price. D) exit the industry, which shifts the market supply curve to the right and decreases market price

B) enter the industry, which shifts the market supply curve to the right and decreases market price.

If, at the present output level, price exceeds marginal cost, the purely competitive firm A) is maximizing its profit or minimizing its loss. B) should increase output to maximize its profit or minimize its loss. C) should reduce output to maximize its profit or minimize its loss. D) should increase its price to maximize its profit or minimize its loss. E) is clearly incurring a loss and should leave the industry

B) should increase output to maximize its profit or minimize its loss

In the short run, a perfectly competitive firm should stay in business as long as: A) the total revenue it earns is equal to the total cost. B) the total revenue it earns is greater than the total variable cost. C) the total revenue it earns is greater than the total fixed cost. D) the total revenue it earns is equal to the total fixed cost

B) the total revenue it earns is greater than the total variable cost

What do you recommend to the firm in case #5? A) increase output. B) decrease output, but not shut down. C) maintain its current rate of output D) shut down

C) maintain its current rate of output

What do you recommend to the firm in case #1? A) increase output. B) decrease output, but not shut down. C) maintain its current rate of output D) shut down.

D) shut down.

Which of the following is not characteristic of a purely competitive industry? A) a large number of sellers B) relatively small firms C) ease of entry into the industry D) substantial differences in the products of sellers E) a selling price determined by market forces

D) substantial differences in the products of sellers

Based on the figure, to maximize its profit or minimize its loss, this firm will produce A) 6 units of output at a price of $8. B) 8 units of output at a price of $10. C) 10 units of output at a price of $14. D) 6 units of output at a price of $10. E) 8 units of output at a price of $14.

E) 8 units of output at a price of $14.

When long-run perfectly competitive equilibrium exists, then which of the following is true? A) Price equals minimum AVC B) Positive economic profit C) Price equals marginal cost D) Price exceeds marginal cost E) both A and C.

E) both A and C.

At 2 units of output in above Table, the average variable cost is: a. $13 b. $6 c. $12 d. $21

a. $13

1. Accounting costs and economic costs differ because: a. Economic costs include implicit costs and accounting costs do not. b. Accounting costs include implicit costs and economic costs do not. c. Economic costs include explicit costs and accounting costs do not. d. Accounting costs include explicit costs and economic costs do not

a. Economic costs include implicit costs and accounting costs do not.

Increasing returns to scale are said to exist when: a. inputs are increased by some percentage and output increase by a greater percentage, causing average cost to fall b. inputs are increased by some percentage and output increase by a smaller percentage, causing average cost to rise c. inputs are increased by some percentage and output increase by a greater percentage, causing average cost to rise d. inputs are increased by some percentage and output increase by a smaller percentage, causing average cost to fall

a. inputs are increased by some percentage and output increase by a greater percentage, causing average cost to fall

In the above table, the total cost of producing zero pizzas is shown to be equal to: a. zero. b. $100. c.$5. d. $105. e. $95

b. $100.

In the short run, if average variable cost equals $50, average total cost equals $75, and out put equals 100, the total fixed cost must be a. $25. b. $2,500. c. $5,000. d. $7,500

b. $2,500.

By filling in the blanks in the above Table, the variable cost of producing 4 pizzas is shown to be equal to: a. $100. b. $40. c. $60. d. $85. e. $185.

b. $40.

Which of the following will become smaller and smaller as the firm expands output? a. average total cost. b. average fixed cost . c. marginal cost. d. total fixed cost

b. average fixed cost .

.Hideki is the owner/operator of Hideki's Flower Shop. Last year he earned $100,000 in totalrevenue. His explicit costs were $60,000 paid to his employees and suppliers (assume that thisamount represents the total opportunity cost of these resources). During the course of the year hereceived three offers to work for other flower shops with the highest offer being $60,000 per year.Calculate Hideki's accounting and economic profit. a. Accounting profit = $40,000; economic profit = $0 b. Accounting profit = $60,000; economic profit = $40,000. c. Accounting profit = $40,000; economic profit = negative $20,000. d. Accounting profit = $0; economic profit = negative $40,000

c. Accounting profit = $40,000; economic profit = negative $20,000.

If a firm's long-run average cost curve is rising, it is experiencing: a. a constant returns to scale. b. economies of scale. c. diseconomies of scale. d. none of the above

c. diseconomies of scale.

Refer to the above Figure for a perfectly competitive firm. To maximize total profits, this firm should produce at a rate of: a. A b. B c. C d. D

d. D

3. Indicate if the following statement is True or False: ATC is TFC + TVC

false

Indicate if the following statement is True or False: The firm in case #2 is making a loss of $1000

false

Use the above diagram and indicate if the following statement is True or False: The total fixed cost is $80

false

indicate if the following statement is True or False: A perfectly competitive firm faces a demand curve that is perfectly inelastic

false

In the short run, a perfectly competitive firm's supply curve is: A) its average variable cost curve. B) its average total cost curve. C) the segment of the marginal cost curve which is rising and above the minimum average variable cost. D) the segment of the marginal cost curve which is rising above the minimum average total cost.

the segment of the marginal cost curve which is rising and above the minimum average variable cost

Indicate if the following statement is True or False :Based on the figure, at the profit-maximizing (loss-minimizing) output, the firm's marginal cost is $14.

true

Indicate if the following statement is True or False: If the marginal cost curve intersects the average variable cost curve, the average variable cost must be at its minimum.

true