Intermediate Micro Test 2
A firm produces 4,000 units of output using 500 workers. Marginal cost is $10, the wage rate is $160, and total fixed cost is $100,000. What is average variable cost?
$20
the capital stock is fixed at 50 units, the price of capital is $30 per unit and the price of labor is $25 per unit, if the firm produces 40 units, what is TVC?
$2400
Sport Tee Corporation manufactures T-shirts bearing the logos of professional football teams. The wholesale market for sport T-shirts is perfectly competitive. The manager forecasts the wholesale price of T-shirts next year to be $7.00. The firm's estimated marginal cost is
$35,000
The following graph shows the marginal and average product curves for labor, the firms only variable input. The monthly wage for labor is $2,800. fixed cost is $160,000. What is When the firm uses 40 units of labor, what is AVC at this level of output?
$70
What is average total cost when 200 units of output are produce?
4.80
Which of the following would be classified as a short-run decision?
A firm's decision to decrease the amount of electricity used (in day-to-day operations by encouraging employees to adopt conservation strategies, e.g., shut off lights when leaving a room.)
when marginal costs are greater than total average costs, then
AVC is rising
If marginal costs are increasing, then...
AVC may be increasing or decreasing
Economies of scope in the production of goods G and W exist if
All three choices are correct
suppose that a firms only variable input is labor. When 50 workers are used, the average product of labor is 50 and the marginal product of labor is 75. The wage rate is $80 and the total cost of the fixed input is $500. What is the marginal cost?
None of the above
which of the following is true of the typical relationship between marginal product and average product
The MP curve intersects the AP curve at maximum AP
Economies of scale are illustrated by
a downward sloping long-run average cost curve
A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the ___________
average variable cost curve
which of the following would be classified as a short run decision?
decreasing electricity usage
if a firms long run average cost curve is rising, it is experiencing
diseconomies of scale
the positively-sloped part of the long-run average total cost curve is due to which of the following?
diseconomies of scale
Which of the following is NOT a condition of a perfect competition:
each seller sets own price
You overhear a businessman say: "We want to be big because there are economies associated with bigness." What he means is that
economies of scale can occur
which of the following statements is false?
in the short run, all inputs are fixed
The graph below shows demand and marginal cost for a perfectly competitive firm. If the firm is producing 100 units of output, increasing output by 1 unit would ___________ the firms profit by $________-
increase, $1
if a firm is experiencing decreasing marginal returns to labor, the firms production function is _____________ at a _________ rate
increasing; decreasing
if a firm shuts down in the short run, it will
incur losses equal to its fixed costs.
Diminishing returns refers to the decrease in ____________________
marginal product (output of production process)
if average product is increasing, then marginal product
must be greater than average product
Does the proprietor of a grocery store who owns the building in which his business is located have lower costs than a grocery store proprietor who must pay rent for the building in which his store is located?
no, because the owner/proprietor loses rent money
In the short run, a firm should shut down its operation if:
price is less than average variable cost
A necessary condition for "perfect competition" is
price takers
In a competitive industry the market-determined price is $12. A firm is currently producing 50 units of output; average total cost is $10, marginal cost is $15, and average variable cost is $7. In order to maximize profit, the firm should:
reduce production until MC=$12
Diseconomies of scale exist over the range of output for which the long-run average cost curve is _________
rising
which of the following is FALSE about the short run/long run distinction?
short run firms can change all inputs, long run can only change fixed costs
given the table below, diminishing returns begin with ________
the 11th worker
If a professor gives up her job to open a shoe store, which of the following costs would an accountant tend to ignore?
the 3600 foregone by not teaching
In a constant cost industry
the long run avg cost curve is horizontal
The "minimum efficient scale" of operation in an industry is defined as
the lowest level of output needed to reach the minimum value of the long-run average cost
Marginal product equals 0 when:
total product reaches its maximum value
marginal product equals 0 when
total product reaches its maximum value
the average product of a variable input is calculated as:
total product/total Q of variable output
