Test 3- Chapter 8

The table below sets out the amount of capital needed for certain investment projects and the rate of return for each project. What is this firm's demand for physical capital if their hurdle rate is 5%

$23 million

The table below sets out the amount of capital needed for certain needed for certain investment projects and the rate of return for each project. What is this firm's demand for physical capital if their hurdle rate is 8%

$500,000

If accounting profits for a firm are 20% of output, and the opportunity cost of financial capital is 8% of output, then what do the firm's economic profits equal?

12% or output

if a firm is producing that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its

allocative efficiency

If the price that a firm charges is higher than its cost of production for that quantity produced, then the firm will earn profits

average

if the price that a firm charges is higher than its cost of production for that quantity produced, then the firm will earn profits

average

if the price that a firm charges is lower than its of production, the firm will suffer losses

average cost

in economics, labor demand is synonymous with

derived demand

Which of the following can be thought of as an adjustment for the risks involved with respect to the cost of a firm acquiring financial capital?

imposition of hurdle rates of interest

A manufacturer would likely make an ____ in a market following the long-run process of beginning and expanding production in response to ____

entry; a sustained pattern of profits

In the _______, the perfectly competitive firm will react to losses by ____

long run; reducing production or shutting down

if marginal cost is rising in a competitive firm's short-run production process and its average variable is falling as output is increased, then

marginal cost is below average variable cost

I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company

must accept market price for its physical capital inputs.

Idaho farmers can sell as large a quantity of their potato crop as they wish,

provided each is willing to accept the prevailing market price.

when a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is

preparing to exit operations

If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers?

price of competing products

in the ____, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where ____.

short run; losses are smallest

in this instance, point e shown on the graph indicates

the point where profits will increase by reducing output

Even when competitive firms are unable to calculate firms are unable to calculate marginal revenue product directly, _____ will push wage rates toward the marginal revenue product of labor

the pressures of competition in the labor market

Which of the following explains the slope of the total revenue curve illustrated in this graph?

the slope of the total revenue curve is explained by both a and b above

In this instance, at the range of output represented at point b

total costs exceed total revenues

perfectly competitive market setting, which of the following would be a true statement?

wage rates trend toward marginal revenue product levels

Based on the information illustrated in this graph, which of the following is an accurate statement?

profits will be reduced by production in the zone where MC exceeds MR

when a firm makes plans for investments in physical capital, it compares the on these investments with

projected rates of return; the cost of financial capital to the firm presents inputs of physical capital; future hurdle rates

Given the data provided in the table below, the total revenue (TR) for production at quantity (Q) level 4 equals

$20

In order to produce 100 oatmeal cookies, GoodieCookieCo incurs an average total cost of $.25 per cookie. The company's marginal cost is constant at $.10 for all oatmeal cookies produced. The total cost to produce 50 oatmeal cookies is

$20

Neil's Bakery is famous for its giant cinnamon buns. The bakery has fixed costs of $100. Neil must pay each worker a wage of $10 per hour and each works an 8 hour shift. He earns $2 for each cinnamon bun that is sold. The following table shows how many cinnamon buns he can sell, depending on the number of workers he hires. Refer to the table below. To maximize his profits in this competitive market, how many workers should he hire?

3 workers

It is said that in a perfect competitive market, raising the price of a firm's product from the prevailing market price of $179 to $199

could likely result in a notable loss of sales to competitors

in this instance, the range of production possibilities at point d

is a steeper slope reflecting a return to losses due to diminishing returns.

I'maSolarPanelCo. manufactures and distributes solar panels in the US market. Two years ago, it had 5 US competitors, but government stimulus in the industry has encouraged 7 new US competitors to enter the market. In these circumstances, I'maSolarPanelCo.'s price for its output

is dictated by the forces of demand and supply

Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should

keep the business open in the short-run, but plan to go out of business in the long-run

______ refers to the additional revenue gained from selling one more unit.

marginal revenue

Refer to the table below. In this instance, confirmation that this firm is operating in a perfectly competitive market can readily be ascertained by the fact that its

marginal revenue is constant

In this instance, at the range of output represented at point C

profits will be maximized

In this instance, the marginal revenue curve

reflects each of the above