Unit 3-Spring '22

(Figure 56-1: Long-Run Average Cost) Output per period in the region A to B indicates that a firm is experiencing:

a. constant returns to scale.

(Figure 54-1: Total Product) Between points A and B the marginal product of labor is:

a. rise; rise

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, we expect that the market price will _____________ and the output of a typical firm will ________________.

a. rise; rise

(Table 54-1: Labor and Output) Referring to the table, the marginal product of the fifth worker is:

b. 4.

In the figure, if the market price is $18, this firm will:

b. earn a positive economic profit.

Marginal revenue:

b. equals the market price in perfect competition.

If firms are making positive economic profits in the short run, then in the long run:

b. firms will enter the industry.

Suppose that some firms in a perfectly competitive industry are incurring negative economic profits. In the long run, the:

b. industry supply curve will shift to the left

The total product curve:

b. will become less steep as output increases, if there are diminishing returns to the variable input.

(Figure 59-4: A perfectly Competitive Firm in the Short Run) The firm's total cost of producing its most profitable level of output is:

c. 0FKD

(Figure 59-7: Perfectly Competitive Firm II) If this firm's MR curve is MR1, the firm will profit-maximize by producing ________________ units of output and its economic profit will be _____________.

c. Q3; positive

The ________________ curve continually declines as more output is produced in the short run.

c. average fixed cost

If Marie's Marionettes is operating under conditions of diminishing marginal product, the marginal costs will be:

c. increasing.

(Table 55-2: Output and Costs) Using the information in the table, when quantity equals three, average total cost equals:

d. 17.

The table describes Bart's perfectly competitive skateboard-producing firm. If the market price is $67.50, how many skateboards will the firm produce?

d. four

A perfectly competitive firm's short-run supply curve is its:

d. marginal cost curve above the average variable cost curve

Rebecca knows that Becca Furniture's marginal cost curve is above the average total cost curve. This means Becca Furniture's average total cost curve:

A. Must be rising.

At 76 units of labor, a firm finds that average product of labor equals 39.6 and marginal product of labor equals 42.9. We can conclude that the average product curve at 76 units of labor is:

A. Upward sloping.

(Figure 60-1: Perfectly Competitive Firm) The figure shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit. In the long-run equilibrium, this firm will produce ______________ units of output and sell its output at a price of ______________.

B. 250; $1.90

In a perfectly competitive long-run equilibrium:

B. All firms produce at the minimum point of their average total cost curves.

The long-run average cost curve will be upward sloping when the firm is experiencing:

B. Diseconomies of scale.

Lilly is the price-taking owner of an apple orchard. Currently the price of apples is high enough that Lilly is earning positive economic profits. In the long-run, Lilly should expect:

B. Higher apple prices due to exit or existing firms.

(Figure 55-2: Short Run Costs) Point E corresponds to the

B. Minimum of average total cost.

(Figure 59-1: Prices, Cost Curves, and Profits) In the figure, if the price is P2, then the firm earns:

C. A profit equal to (de) x Q2.

You own a small manufacturing company that produces gadgets. The table shows the quantity of gadgets that you could produce, the total cost you incur at each level of production, and total cost you incur at each level of production, and the total revenue you earn at each level of production. At what level of output does marginal revenue equal marginal cost?

e. 4

Zoe's Bakery determines that P < ATC and P > AVC. Zoe should:

e. continue to operate because economic profit is equal to zero.