Micro Test 3
In the short run, a firm incurs fixed costs
whether it produces output or not
economists assume that the typical person starts her own business does so with the intention of
maximizing profits
The efficient scale of the firm is the quantity of output that
minimizes average total cost
when existing firms in a competitive market are profitable an incentive exists for
new firms to enter the market even without giv. subsidies
in a competitive market
no single buyer or seller can influence the price of the product
The U.S. military defends Jacob from foreign attackers. The fact that Jacob enjoys this protection does not detract from other Americans' enjoyment of it. For this reason we say that national defense is
not rival in consumption
total revenue equals
p*q
Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $34700 and incrred explicit costs of $163,000. Jane's economic profit from her first year in her own practice was
-$39,000
The Carolina Christmas Tree Cormporation grows and sells 500 Christmas trees. THe average cost of production per tree is $50. Each tree sells for a price of $65. The CCTC's total revenues are
32,500
Mike Miller is the town manager of Medfield, a town with 50,000 residents. at a recent town meeting, several citizens proposed building a large public swimming pool in the center of town for all of the residents to enjoy. A survey of all 50,000 residents revealed that the pool would be worth $50 to each of them. The cost to build the swimming pool is $1,000,000. Which of the following is the most efficient option? The pool should be built and paid for by the wealthiest 10% of the residents. The pool should not be built because the social value does not exceed the cost. The pool should be built and paid for with donations collected from residents, as these donations should more than cover the cost of the pool. The pool should be built and paid for by the town government and paid for with a tax on the residents because all residents would benefit from it but some residents would not donate if they were asked.
The pool should be built and paid for by the town government and paid for with a tax on the residents because all residents would benefit from it but some residents would not donate if they were asked.
if a competitive firm is currently priducting a level of output at which marginal revenue exceeds marginal cost then
a one-unit increase in output will increase the firm's profit
Marginal costs is equal to the average total cost whenn
average total cost is at its minimum
Not a characteristic of aa competitive market?
entry is limited
One economically efficient way to eliminate the Tragedy of the Commons is to: reduce the marginal social benefit of the resource prevent anyone from using the resource tax the owners of the resource establish private ownership of the resource
establish private ownership of the resource
Private goods are both: excludable and rival in consumption excludable and nonrival in consumption nonexcludable and nonrival consumption nonexcludable and rival in consumption
excludable and rival in consumption
A free rider problem exists for any good that is not: free a private good excludeable rival in consumption
excludeable
in the short run a firm that produces and sells house paint can adjust
how many workers to hire
Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's
implicit costs
in the long run
inputs that were fixed in the short run become variable
when a firm experiences constant return to scale
long run average total cost is unchanged even when output increases
Diseconomics of scale occur when a firm's
long-run average costs are increasing as output increases
Economics of scale occur when a firm's
long-run average total costs are decreasing as output increases
The provision of a public good generates a
positive externality and the use of a common resource generates a negative externality
a key characteristic of a competitive market is that
producers sell nearly identical products
Diminishing marginal product suggests that the marginal
product of an extra worker is less than the previous worker's marginal product
the phenomenon of free riding is most closely associated with which type of good?
public goods
The analysis of competitive firms sheds light on the decisions that lie behind the
supply curve
one assumption that distinguishes short run cost analysis from long run cost analysis for profit maximizing firm is that in the short run
the size of the factory is fixed
without government intervention, public goods tend to be
underproduced and common resources tend to be overconsumed.
at the profit-maximizing level of output
marginal revenue equals marginal cost
If a competitive firm is currently producing a level of output at which a marginal cost exceeds marginal revenue then
decreasing output would increase the firm's profit
In the long run, when marginal costs is above the averagle total cost, the average total cost curve exhibits
diseconomics of scale
when new firms have an incentive to enter a competitive market their entry will
drive down the profitts of existing firms in the market
Explicit costs
enter into the accountants measurement of a firms profit and the economist's measurement of a firm's profit
entry into a market by new firms will increase the
supply of the good
the greatest difficulty with cost-benefit analysis of a public project is determining
the value or benefit of the project
simply asking people how much they value a highway is not a reliable way of measuring the benefits and costs because
those who stand to lose have an incentive to exaggerate their true costs
