AP econ CRAM

When a competitive firm maximizes short-run economic profits, it produces at the output level where

MR=MC

In the short run, assume diminishing marginal product of labor sets in with the hiring of the second worker. Which of the following will remain constant as a firm produces more output. a. average product of labor b. total cost c. total fixed cost d. total variable cost e. marginal cost

c

The graph above illustrates.....

produce quantity Q1, where price is equal to marginal cost

Ryan quit a job with a daily salary and opened a business. On a daily basis, the total revenue of the business is $200, and the explicit costs of the business are $120. If Ryan has zero economic profits, what must be the value of Ryan's implicit costs? a. ) b. 80 c. 120 d. 200 e. 280

80

Assume a competitive market is producing where price (P) and marginal revenue (MR) are greater than marginal cost (MC) and average variable cost (AVC). Which of the following is true regarding the firm's short-run output level A. The firm is producing too little and should increase its output level unit P=MR=MC B. The firm is producing too much and should reduce its output level unit P=MR=AVC C. The firm is not maximizing profits and should raise it sprice but not change its output level D. The firm should increase its marginal revenue to equal price and reduce its output level unit MR=MC

A

Which of the following statemtns regarding accounting proftis, opportunity costs, and economic profits is true A. If accounting profits are less than opportunity costs, there will be economic losses B. With positive oppotyunity cost, a firm can never earn economic profts C. Economic profits must always be greater than accounting profits D. When economic profits are positive, account profits may be positive or negative E. Accounting profits are equal to economic profits minus opportunity costs

A

Based on the short-run production function graph above showing the relationship between the quantity of labor and total product, which of the following statements is true? A. At 10, the marginal product of labor exceeds the average product of labor B. Total product is maximized when marginal product is zero C. At Lo the marginal product of labor is at its maximum D. The marginal product of labor is always increasing E. The marginal product of labor is always positive

B

Assume Nadia voluntarily leaves a job with a salary of $100 per day to open and run a restaurant instead. After deducting all explicit costs from the restaurant revenues, Nadia has a gain of $120. Assuming there are no additional implicit costs, which of the following statements is true? a. Nadia has an accounting profit of $20 b. Nadia has an account progfit of $100 c. Nadia has an economic profit of $20 d. Nadia has an economic profit of $120 e. Nadia has an economic profit of -$20

C

Assume the marginal product of labor first rises, reaches a maximum, and then falls. If the average product of labor is falling, which of the following is true?A) The marginal product of labor is greater than the average product of labor. B) The level of output produced must be at its maximum. C) The marginal product of labor must be falling. D) The marginal product of labor must be negative. E) The average product of labor has not yet reached its maximum.

C

Which of the following explains the difference between short-run and long-run costs A. All of the costs are variable in the short run but not in the long run B. All costs are fixed in the long run but not the short run C. All costs are variable in the long run but not in the short run D. All costs are fixed in the short run but not in the long run E. All of the costs are variable in the short run and fixed in the long run

C

As its current level of output, a firm's total revenue is greater than its total variable cost but less than its total cost. If the firm is producing at the point where MR=MC, what should the firm do to maximize profit in the short run A. Increase price to increase revenue B. Decrease price to increase quantity C. Exit the market to minimize losses D. Continue to produce at its currrent level of output to minimize losses

D

Assume a firm doubles its usage of each input, resulting in a doubling of the firm's output. Which of the following describes this result? A. increasing its totaling cost B. Diminishing marginal returns C. Decreasing returns to scale D. Constant returns to scale E. Increasing returns to scale

D

Assume that the short-run marginal cost curve initially falls, and it then rises as quantity of output increases. Which of the following must be true? A) The marginal product of labor is always falling. B) At every output level, the short-run marginal cost curve is always above the average variable cost curve. C) As output increases, the unit price of labor (the wage rate) is first falling and then rising. D) Initially the marginal product of labor increases but eventually marginal product of labor decreases. E) The average variable cost curve must always be rising

D

In absence of barriers to entry, a typical firm is currently in long-run equilibrium. Assume there is an increase in the market demand for the good that the firm is producing. Which of the following will happen in the long run?a) New firms will enter the market. b) The market supply will decrease, but the quantity supplies will increase. c) The firm will earn positive economic profit. d) The firm's price will be greater than its average revenue. e) The firm will continue to produce the same quantity of output.

D

In the short run, which of the following must be true for a perfectly competitive firm that is maximizing profits A. The firm will shut down if it has any economic losses b. the firm will produce at the minimum of average total cost c. The firm will produce where MR=MC, but price from the demand curve is greater than MC d. The firm will produce where MR=MC as long as P is greater than average variable cost

D

Which of the following statements about short-run costs is true A. AFC plus variable cost equals total cost B. AFC plus average fixed cost equals average variable cost C. TFC increases in constant increments as output produced increases D. Total fixed cost plus total variable cost equals total cost E. At low output levels, as output increases, total fixed cost and total variable cost decrease, reducing average total cost

D

which of the following provides an example of the law of diminishing returns? A) A farm doubles all its inputs and observes that output less than doubles. B) A textile producer's output increases by 5 units when adding a fourth worker and by 7 units when adding a fifth worker. C) If a fixed input increases, fewer additional units of a variable input will be needed to increase output by one unit. D) As more of a variable input—for example, labor is used with a fixed number of machines— output increases but at a diminishing rate. E) More cooks in a single kitchen will increase the number of meals produced by increasing amounts.

D

The graph above shows a firm's long-run average total cost curve (LRATC). Which of the following statements is true as the firm increases its scale of production?

For output levels above Q1, the firm experiences diseconomies of scale.