Microeconomics Test 2

Which is a dimension or assumption of the marginal-utility theory of consumer behavior?

B.Goods and services carry a price tag

Creative destruction is most often associated with:

B.Technological advance

A purely competitive firm's short-run curve is:

B: upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.

In the short run a purely competitive firm that seeks to maximize profit will produce:

B: where total revenue exceeds total cost by the maximum amount

When diseconomies of scale occur:

C. the long-run average total cost curve rises

In the short run the individual competitive firm's supply curve is that segment of the:

B. marginal cost curve lying above the average variable cost curve.

in the short run the individual competitive firm's supply curve is that segment of the:

B. marginal cost curve lying above the average variable cost curve.

A consumer's demand curve for a product is downsloping because:

B. marginal utility diminishes as more of a product is consumed

If i know that when a firm produces 10 units of output, total costs are $1030 and average fixed costs are $10, then total fixed costs are:

B.100

Implicit costs are:

A. "payments" for self-employed resources

Refer to the above graph for a profit-maximizing monopolist. The firm will set its price at:

A. 0J

Productive efficiency refers to:

A. Costs= minimization, where P= minimum ATC

The long-run supply curve under pure competition will be:

A. Downward-sloping in a decreasing-cost industry and upward-sloping in an increasing-cost industry

When a firm doubles its inputs and finds that its output has more than doubled, this is known as:

A. Economies of scale

Assume that the market for soybeans is purely competitive. Currently, firms growing soybeans are expecting economic profits. In the long run, we can expect:

A. New firms to enter, and the industry's supply to increase

Refer to the above table. Marginal product is largest for the:

A. Second unit of variable input

What happens in a decreasing-cost industry when some firms leave and the industry's output contracts?

A. The average cost will increase

At the level of output where marginal cost equals average variable cost:

A. average total cost is decreasing

Suppose that Steve heads to the local hamburger shop with $3, expecting to spend $2 for his favorite burger and $1 for French Fries. When he gets there he discovers that his favorite burger is on sale for $1, so he buys two burgers and one order of French fries. Steve's consumption behavior is best explained by:

A. the income effect

If the maker of a patented drug sells the drug at a price above the equilibrium price, then there:

B. Are efficiency or deadweight losses

A firm encountering economies of scale over some range of output will have a:

B. Falling long-run average cost curve

If a short-run average variable cost of production for a firm is decreasing, the it follows that:

B. Marginal cost must be below average variable cost

In a purely competitive industry, an optimal allocation of scarce resources occurs when:

B. P = MC

When a purely competitive industry is in long-run equilibrium, which statement is true?

B. Price and average total cost are equal.

If a purely competitive firm is currently facing a situation where the price of its product is lower than the average variable cost then:

B. The firm will shut down in the short run, and leave the industry in the long run

At an output of 20,000 units per year, a firm's variable costs are $80,000 and its average fixed costs are $3. The total costs per year for the firm are:

C. $140,000

The wage rate Increases in a purely competitive industry. This change will result in a(n):

C. Increase in the marginal cost curve for a firm in the industry

Suppose that TC= $550, TVC= $500, and MC-$100. If the firm produces 10 units of output, then:

C. MC> AVC

A consumer with a fixed income will maximize utility when each good is purchased in amounts such that the:

C. Marginal utility per dollar spent is the same for all goods.

If a purely competitive firm is facing a situation where the price of its product is lower than the total cost, then all of the following applies, except:

C. Other firms will want to enter the industry because of the positive economic profits.

A product has utility if it:

C. Satisfies consumer wants

The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is:

C. The consumer surplus

Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. Refer to the above information. The total revenues of Harvey's firm in the first year were

D. $825,000

In a typical graph for a purely competitive firm, the intersection of the total cost and total revenue curves would be:

D. A break-even point

All of the following are long-run changes, except:

D. A purely competitive firm produces more output by acquiring more raw materials for its existing factory

Resource costs increase in a purely competitive industry. This change will result in a(n):

D. Decrease in the short-run supply curve for a firm in the industry.

The main difference between the short run and the long run is that:

D. In the short run, one or more inputs is fixed

Any activity designed to transfer income or wealth to a particular individual or firm at society's expense is called:

D. Rent-seeking

For a purely competitive seller, price equals:

D. all of these

For a purely competitive firm total revenue:

D. has all of these characteristics

A firm reaches a break-even point (normal profit position) where:

D. total revenue and total cost are equal

In the standard model of pure competition, a profit-maximizing entrepreneur will shut down in the short run if:

D. total revenue is less than total variable costs

The total utility of a product is calculated by:

Summing the marginal utilities for each successive unit of the product that is consumed

marginal utility is the:

change in total utility obtained by consuming one more unit of a good