ECO 232 Exam 3

Which of the following is a short-run adjustment?

A local bakery hires two additional bakers

A purely competitive seller is:

a "price taker"

Which of the following industries most likely approximates pure competition?

agriculture

In the long run:

all costs are variable costs

Fixed cost is:

any cost which does not change when the firm changes its output

The short run is characterized by:

at least one fixed resource

If you operated a small bakery, which of the following would be a variable cost in the short run?

baking supplies (flour, salt, etc.)

Under pure competition in the long run:

both allocative efficiency and productive efficiency are achieved

A perfectly elastic demand curve implies that the firm:

can sell as much output as it chooses at the existing price

Marginal cost is the:

change in total cost that results from producing one more unit of output

Average fixed cost:

declines continually as output increases

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

depreciation charges on company-owned equipment

Economic profits are calculated by subtracting:

explicit and implicit costs from total revenue.

Which of the following is most likely to be a variable cost?

fuel and power payments

To economists the main difference between the short run and the long run is that:

in the long run all resources are variable, while in the short run at least one resource is fixed

Marginal revenue for a purely competitive firm:

is equal to price

In the short run a purely competitive seller will shut down if product price:

is less than AVC

If a purely competitive firm shuts down in the short run:

it will realize a loss equal to its total fixed costs

If a firm decides to produce no output in the short run, its cost will be:

its fixed costs

A purely competitive firm;s short-run supply curve is:

its marginal cost curve above average variable cost

Implicit costs are:

nonexpenditure costs

The demand schedule or curve confronted by the individual purely competitive firm is:

perfectly elastic

Diseconomies of scale:

pertain to the long run

Which of the following is most likely to be a fixed cost?

property insurance premiums

A constant-cost industry is one in which:

resource prices remain unchanged as output in increased

The long run is characterized by:

the ability of the firm to change its plant size

The basic characteristic of the short run is that:

the firm does not have sufficient time to change the size of its plant.

Implicit and explicit costs are different in that:

the former refer to nonexpenditure costs and the latter to out-of-pocket costs.

If a variable input is added to some fixed input, beyond some point the resulting extra output will decline. This statement describes:

the law of diminishing returns

Fixed costs are associated with:

the short run only

Economists use the term imperfect competition to describe:

those markets which are not purely competitive

Total cost minus total variable cost equals:

total fixed costs

Firms seek to maximize:

total profit