Ag Econ exam 2
AVC+AFC=
ATC
ATC-AFC=
AVC
If the price elasticity of supply is 1.2 and a price increase led to a 5% increase in quantity supplied, then the price increase is about
4.2%
Patents, Copyrights, and Trademarks
All of the above are correct
The average fixed cost curve
Always declines with increased levels of output
True
Average variable cost is equal to a firms total variable cost divided by its total output
Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. you evaluate the data and determine that the price elasticity of demand for ice cram at your shop is 1.8. you should
Decrease the price of ice cream
If an increase in price causes total revenue to fall, what can be concluded?
Demand is elastic
When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor, the firm is experiencing
Diminishing marginal product
Give one example of variable cost
Fuel, seed, labor
In general, elasticity is a measure of
How much buyers and sellers respond to changes in market conditions
True
The price of a product and its marginal revenue are equal under conditions of perfect competition
Assume milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and population of beef cattle by 50 percent. The equilibrium price will
Increase in both the milk and beef markets
A competitive firm
Is a price taker, whereas a monopolist is a price taker
A firm that shuts down temporarily has to pay
Its fixed costs but not its variable costs
Economies of scale occur when a firm's
Long run average total costs are decreasing as output increases
At what point is profit maximized
MR=MC
The Monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?
MR=MC
In which of the following market structures can a firm make positive economic profits and negative economic profits in both the short run and long run
Monopoly
Which of the following is most likely to be a fixed cost
Monthly rental payments on equipment
When profit maximizing firms in competitve markets are earning profits
New firms will enter the market
Total Revenue is equal to
Price*Quantity
In a perfectly competitive market, the market price is $23. At the current level of output, a firm has a marginal cost of $28. What should the firm do in the short run?
Produce less output to earn more profit
Economists assume that the goal of the firm is to maximize total
Profits
Give one example of fixed cost
Rent on land
Marginal costs are defined as
The change in total costs due to a one-unit change in production
What are four conditions for perfect competition
The product sold by businesses are homogeneous Any business can enter or exit the sector without encountering serious barriers for entry There must be a large number of buyers and sellers of the product Perfect information must exist for all participants regarding price, quantities, qualities, sources of supple, etc No market power
True
The total cost of production would include the opportunity cost of management
Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is
Unit elastic
As a business owner, you should increase the price of the good/service you produce if
You are in the inelastic portion of the demand curve
A firm that has little ability to influence market prices operates in a
competitive market
In a competitive market, no single producer can influence the market price because
many other sellers are offering a product that is essentially identical
