AP Economics- Micro- Unit 3 Review

According to the cost schedule in the table above, the firm's total fixed cost is

$100

Given the information above, the average variable cost of 25 units of output is

$2

The average fixed cost of producing four units of output is equal to

$30

The graph above shows the cost curves for May's Fruit Farm, where MC is marginal cost, ATC is average total cost, and AVC is average variable cost. May's short-run supply curve includes which of the following points?

STV

Assume a perfectly competitive firm is currently producing 100 units of output. Its marginal cost is $6 and rising at that output quantity. Its average variable cost is $7 and its average fixed cost is $3. If the product's price is $6, which of the following will the firm do in the short run to maximize its profit?

Shut down

The table below is partially filled in with the different types of costs for a firm. Based on the information in the table, what is the marginal cost of producing the second unit?

$50

Bruce is a talented writer and graphic artist who enjoys both types of work equally. Instead of earning $45,000 as a writer, Bruce now earns $25,000 in accounting profits as a graphic artist using the same computer equipment he would have used as a writer. What is Bruce's economic profit from choosing to work as a graphic artist?

-$20,000

Given the production schedule above, what is the maximum number of workers the firm can hire before the effects of diminishing marginal returns set in?

2

The following two questions refer to the data in the table below. A perfectly competitive firm operates with a fixed amount of capital that costs $1,000 per day. Labor is the only variable input. The firm hires labor in a perfectly competitive labor market at $100 per day per worker. The table below shows the firm's production function. What is the marginal product of the third worker?

24

If there is only one variable input, diminishing marginal returns first occur with the production of which unit of output?

5th

Which of the following must be true if at the tenth unit of output, marginal cost (MCMC) is $130$130 and average total cost (ATCATC) is $150$150 ?

ATC of producing the ninth unit is higher than $150.

If a firm's production function exhibits diminishing marginal product of the variable input in the short run, which of the following about the firm's short-run marginal cost (MC) curve must be true?

As output increases, the MC curve slopes upward.

The table below shows a competitive firm's total variable cost (TVC) and total fixed cost (TFC) at various units of output. When output is 3 units, which of the following is correct?

Average Variable Cost- 5 Marginal Cost- 7

Which of the following is true for a firm that uses labor as a variable input and capital as a fixed input in the short run?

If the average product of labor is falling, the marginal product of labor must be less than the average product of labor

At a perfectly competitive firm's current output level, average total cost is $15, average variable cost is $10, and marginal cost is $8 and increasing. If the product price is $15, what should this firm do to maximize profits?

Increase the quantity of output produced.

A profit-maximizing, perfectly competitive firm is currently in long-run equilibrium. It is earning $15,000 of total revenue from a sale of 1,000 units. Its total fixed cost of production is $2,500. Which of the following can correctly be inferred from the information provided?

Its marginal cost is $15.00, and its average variable cost is $12.50.

If individual firms in a perfectly competitive market are earning positive economic profits, the number of firms and the price of the product in the market will most likely change in which of the following ways in the long run?

Number of Firms- Increasing Price- Decreasing

Assume that a perfectly competitive firm is in long-run equilibrium. If industry demand for the product increases, how will this firm's price, output, and profit change in the short run?

Price- Increasing Output- Increasing Profit- Increasing

How many units of output should a firm with the cost and demand curves shown above produce to maximize profit?

Q3

Question is based on the following graph, which shows a firm's marginal cost (MC), average total cost (ATC), and average variable cost (AVC). The firm's short-run supply curve is which of the following?

The MC curve above P2

Which of the following best explains why a firm's short-run marginal cost curve shifts down when it purchases new, more efficient equipment and experiences an increase in its total cost?

The equipment purchase is a fixed cost, and the new equipment will cause a reduction in the cost of producing each additional unit.

At the current quantity that a firm is selling, the firm has marginal revenue of $750 and marginal cost of $800. Which of the following is true?

The firm's profits would increase if the firm decreased the quantity sold.

Currently, XYZXYZ Corporation can produce 50 units of output using 20 workers and 8 units of capital. Which of the following changes in the number of workers, units of capital, and quantity of output are consistent with constant returns to scale?

Workers- 10 Capital- 4 Output- 25

Economies of scale can be illustrated by

a decreasing long-run average total cost curve as a firm produces more output

A perfectly competitive firm's short-run supply curve is the portion of the marginal cost curve that is

above the average variable cost curve

When the marginal cost curve lies below the average total cost curve, it is true that as output increases

average total cost is decreasing

The table below shows the long-run total cost function of a firm. The firm's cost function exhibits

constant returns to scale

Question is based on the following graph, which shows a firm's marginal cost (MC), average total cost (ATC), and average variable cost (AVC). In the short run, the firm will

continue to produce as long as the price is greater than P2

The characteristic that causes firms in a perfectly competitive industry to earn zero economic profits in the long run is

there are no barriers to entry or exit

The following two questions refer to the cost and revenue conditions of a monopolistically competitive firm shown in the graph below. MC = marginal cost, ATC = average total cost, AVC =average variable cost, and MR = marginal revenue. The firm's profit-maximizing output in the short run is

zero, because P<AVC

Jamal quits a job that was paying him $30,000$30,000 per year and decides to start his own business. He runs his business out of his house in a room he had been renting to his colleague for $12,000$12,000 a year. Jamal withdraws the $20,000$20,000 in his savings account that had been earning him a 1010 percent annual interest to purchase computers and related accessories and equipment for the business. During the first year of operation, Jamal's business incurred $30,000$30,000 in explicit costs and generated $60,000$60,000 in total sales. Jamal's economic profit is

−$14,000