eco final

If a firm's marginal product of labor is less than its average product of labor, then an increase in the quantity of labor it employs definitely will 13) A) decrease its average product of labor. B) decrease its total product. C) increase its marginal product of labor. D) not change its average product of labor.

A

Which of the following is ALWAYS true for a profit-maximizing single-price monopolist? 6) A) MR = MC B) MC = ATC C) P = MR D) P = MC

A

Which of the following is not necessarily true for a profit-maximizing single-price monopolist? 7) A) P > ATC B) P > MC C) MR = MC D) P > MR

A

2. Which of the following is NOT an assumption of perfect competition? A) Firms compete by making their product different from products produced by other firms. B) There are no restrictions on entry into the market. C) Established firms have no advantage over new firms. D) Sellers and buyers are well informed about prices.

A) Firms compete by making their product different from

7. A firm is producing the profit-maximizing amount of output when it is producing where its ________ curve intersects its ________ curve. A) MC; MR B) MC; AVC C) MC; ATC D) MC; TR

A) MC; MR

19. For a perfectly competitive firm, in the long-run equilibrium, A) P = MC = ATC = MR. B) MR = MC = AFC. C) MR = P = ATC = AFC. D) P = MC > ATC.

A) P=MC=ATC=MR

3. The existence of economies of scale can create ________. A) a natural monopoly B) an ownership monopoly C) a legal monopoly D) a market in which many firms make identical products

A) a natural monopoly

4. An example of a perfectly competitive firm is A) an oat farmer in the United States. B) the local cable TV company. C) a U.S. automobile producer. D) a big city newspaper.

A) an oat farmer in the United States.

If the market price in a perfectly competitive market is less than a firm's minimum average variable cost, then the firm's total revenue will always ________. 59) A) be less than its total variable cost B) equal its total cost C) exceed its total fixed cost D) be less than its total economic loss

A) be less than its total variable cost

Marginal cost is the increase in total ________ that results from a one-unit increase in ________. 15) A) cost; output B) variable cost; the variable input C) fixed cost; output D) fixed cost; the fixed input

A) cost;output

Most total product curves have 2) A) first increasing and then decreasing marginal returns to labor. B) output increasing at an increasing rate as labor is added. C) first decreasing and then increasing marginal returns to labor. D) output first increasing and then decreasing as labor is added.

A) first increasing and then decreasing marginal returns to labor.

As output increases, marginal cost will eventually 17) A) increase because of the law of diminishing returns. B) increase because of the law of increasing returns. C) decrease because of the law of diminishing returns. D) decrease because of the law of increasing returns.

A) increase because of the law of diminishing returns.

Consider the perfectly competitive firm in the above figure. At the profit maximizing level of output, the firm is 61) A) incurring an economic loss equal to $119.00. B) incurring an economic loss equal to $187.00. C) incurring an economic loss equal to $123.50. D) making zero economic profit.

A) incurring an economic loss equal to $119.00.

A monopoly 2) A) is able to raise the price it can charge for its product by decreasing the quantity sold. B) faces a perfectly elastic demand curve. C) is able to raise the price it can charge for its product by increasing the quantity sold. D) does not need to take account of demand because it's the only seller.

A) is able to raise the price it can charge for its product by decreasing the quantity sold.

If average variable cost is decreasing as output increases, then marginal cost is definitely 33) A) less than average variable cost. B) greater than average variable cost. C) increasing as output increases. D) decreasing as output increases.

A) less than average variable cost

The marginal revenue curve for a single-price monopoly 1) A) lies below the market demand curve. B) lies above the market demand curve. C) is upward sloping. D) is horizontal.

A) lies below the market demand curve

In perfect competition, at all levels of output the market price is the same as the firm's ________. 47) A) marginal revenue B) fixed cost C) normal profit D) average variable cost

A) marginal revenue

A perfectly competitive firm that is producing a positive quantity of a good maximizes its economic profit if it produces so that 49) A) marginal revenue = marginal cost. B) total revenue = total cost. C) average total cost = average variable cost. D) average revenue = average total cost.

A) marginal revenue = marginal cost.

1. A monopoly is best defined as a firm that A) produces a good or service for which no close substitute exists and which is protected by a barrier that prevents other firms from selling that good or service. B) purchases its resources from only one supplier because of a barrier preventing it from buying from other suppliers. C) produces a good or service for which no close substitute exists and that sells all its output to one buyer because there is barrier preventing other buyers from purchasing the good or service. D) cannot control the price it sets for its good or service because there is barrier that prevents the firm from changing the price.

A) produces a good or service for which no close substitute exists and which is protected by a barrier that prevents other firms from selling that good or service.

In the short run a perfectly competitive firm will 56) A) shut down if P > AFC. B) shut down if P < ATC. C) shut down if P < AVC. D) never shut down.

A) shut if P > AFC

1. Perfect competition exists in a market if A) there are many firms producing an identical product. B) there are many firms producing a similar product, each of which may have unique features. C) the firm is protected by a barrier to entry. D) the firm is always at the break-even point where it is earning only a normal profit.

A) there are many firms producing an identical product.

If a perfectly competitive firm decides to shut down in the short run, its loss will equal its 57) A) total fixed cost, TFC. B) minimum average variable cost, AVC. C) total variable cost, TVC. D) average total cost, ATC.

A) total fixed cost

In the long run, a single-price monopolist will 9) A) make zero economic profit. B) be able to continue to make an economic profit as long as there is a barrier to entry. C) end up being regulated by the government because it is making short-run economic profits. D) Both answers A and C are correct.

B

Monopolies can make an economic profit in the long run because of 8) A) the elastic demand for the monopoly's product. B) barriers to enter the monopoly's market. C) rent seeking by competitors. D) the cost-savings gained by the monopoly.

B

Consider the perfectly competitive firm in the above figure. The shutdown point occurs at a price of 62) A) $16.00. B) $11.00. C) $22.00. D) $12.00.

B) $11.00

A perfectly competitive firm's short-run supply curve is the same as its 64) A) MR curve. B) MC curve above the minimum of the AVC curve. C) AVC curve. D) ATC curve.

B) MC curve above the minimum of the AVC curve.

The marginal product of labor is the 3) A) output level above which the slope of the total product curve falls. B) change in output resulting from a one-unit increase in labor with all other inputs remaining the same. C) output level above which the rate of total product per unit of labor falls. D) maximum output attainable with fixed factors of production when labor is the only variable factor of production.

B) change in output resulting from a one-unit increase in labor with all other inputs remaining the same.

16) Marginal cost ________ as the quantity produced is increased. 16) A) always decreases B) first decreases and then increases C) always increases D) first increases and then decreases

B) first decreases and then increases

Firms in perfectly competitive industries have a ________ individual demand curve when the price is on the vertical axis and the quantity is on the horizontal axis. The shape of the curve is result of the firm being a ________. 41) A) vertical; price taker B) horizontal; price taker C) downward sloping; price taker D) downward sloping; price maker

B) horizontal; price taker

5) The marginal product of labor is equal to the A) total product divided by the total number of workers hired. B) increase in the total product that results from hiring one more worker with all other inputs remaining the same. C) slope of the marginal product of labor curve. D) None of the above answers are correct.

B) increase in the total product that results from hiring one more worker with all other inputs remaining the same.

In the long run, a perfectly competitive firm can 74) A) only incur an economic loss. B) only make zero economic profit. C) only make an economic profit. D) make an economic profit, make zero economic profit, or incur an economic loss.

B) only make zero economic profit

18. Suppose some firms in a perfectly competitive market are incurring an economic loss. As a result, A) all the firms will eventually incur an economic loss. B) some firms will leave the market and the price of the good will rise. C) some firms will leave the market and the remaining firms' quantity will decrease. D) the total market economic profit must equal $0.

B) some firms will leave the market and the price of the good will rise.

11) Diminishing marginal returns to labor occur because A) after awhile it is hard to find a good worker. B) the capital resources used by the firm are fixed in the short run. C) workers become more efficient over time. D) larger companies are less efficient.

B) the capital resources used by the firm are fixed in the short run.

3) The long run is a time frame in which A) the quantities of some factors of production are fixed and the quantities of other factors of production can be varied. B) the quantities of all factors of production can be varied. C) the quantities of all factors of production are fixed. D) all costs are sunk costs.

B) the quantities of all factors production can be can be varied

8. Charlie's Chimps is a perfectly competitive firm that produces cuddly chimps for children. The market price of a chimp is $10, and Charlie's produces 100 chimps at a marginal cost of $9 a chimp. Charlie's ________. A) is maximizing its profit B) will maximize its profit if it produces more than 100 chimps C) will maximize its profit if it lowers the price to $9 a chimp D) will maximize its profit if it produces fewer than 100 chimps

B) will maximize its profit if it produces more than 100 chimps

Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. What is Ernie's total variable cost? 7) A) $800 B) $2,400 C) $1,600 D) $2,000

C) 1,600

Which of the following is ALWAYS true for a perfectly competitive firm? 48) A) P = ATC B) MR = ATC C) P = MR D) P = AVC

C) P=MR

2. Which of the following is LEAST likely to be a monopoly? A) the holder of a public franchise B) a pharmaceutical company with a patent on a drug C) a store in a large shopping mall D) an artist who owns a copyright for a painting

C) a store in a large shopping mall

12. The owners will shut down a perfectly competitive firm if the price of its good falls below its minimum A) average total cost. B) average marginal cost. C) average variable cost. D) wage rate.

C) average variable cost

5. In perfect competition, an individual firm A) faces unitary elasticity of demand. B) has a price elasticity of supply equal to one. C) faces a perfectly elastic demand. D) has perfectly elastic supply.

C) faces a perfectly elastic demand.

12) Which type of cost is does not change as the quantity of output produced changes? A) total cost B) average cost C) fixed cost D) marginal cost

C) fixed cost

4) A firm's total product curve shows A) that inefficiency is not possible. B) how the cost of the fixed resources change when output changes. C) how the amount of output changes when the quantity of labor changes. D) that in the long run the firm must adjust the quantity of all the resources it employs.

C) how the amount of output changes when the quantity of labor changes.

Total product is 1) A) the increase in output that results from a one-unit increase in the quantity of labor employed with all other inputs remaining the same. B) maximum amount of output produced by a given quantity of labor divided by the given quantity of labor employed. C) maximum output that a given quantity of labor can produce. D) maximum amount of amount of output produced by a given quantity of labor divided by price of the output.

C) maximum output that a given quantity of labor can produce.

A perfectly competitive market is characterized by 39) A) high barriers to entry. B) firms facing a downward sloping demand curve. C) no restrictions on entry into the market. D) firms that are price setters.

C) no restrictions on entry into the market.

1) A period of time in which the quantity of at least one factor of production used by a firm is fixed is called the A) market period. B) intermediate run. C) short run. D) long run.

C) short run

2) A cost that has already been made and cannot be recovered is called a A) variable cost. B) fixed cost. C) sunk cost. D) marginal cost.

C) sunk cost

A firm's total fixed cost (TFC) is a cost 6) A) that is dependent on marginal cost. B) it is certain ("fixed") that the firm must pay. C) that does not change as output changes. D) that is paid in only the long run.

C) that does not change as output changes.

When a firm is experiencing economies of scale 37) A) the MC curve slopes downward. B) the MP curve slopes upward. C) the LRAC curve slopes downward. D) diminishing returns to labor have been suspended

C) the LRAC curve slopes downward.

In perfect competition, ________. 38) A) only firms know their competitors' prices B) firms in the market have advantages over firms that plan to enter the market C) there are many firms that sell identical products D) there are restrictions on entry into the market

C) there are many firms that sell identical products

For a perfectly competitive firm, the shutdown point is the 55) A) price at which total opportunity cost is zero. B) amount of output at which price equals minimum average total cost. C) amount of output at which price equals minimum average variable cost. D) price at which economic profit is zero.

C)amount of output at which price equals minimum average variable cost.

If Steve's Apple Orchard, Inc. is a perfectly competitive firm, the demand for Steve's apples has 46) A) unitary elasticity. B) elasticity equal to the price of apples. C) infinite elasticity. D) zero elasticity.

C)infinite elasticity

For a single-price monopolist, price is ________ marginal revenue. 3) A) less than B) less than or equal to but never more than C) equal to D) greater than

D

Which of the following is ALWAYS true for a profit-maximizing single-price monopolist? 5) A) P > MR B) P > MC C) MR = MC D) All of the above are always true.

D

Which of the following is TRUE for a single-price monopolist? 4) A) P < MR B) P = MR C) P = elasticity of demand D) P > MR

D

32) The marginal cost (MC) curve intersects the 32) A) ATC and AFC curves at their minimum points. B) AVC and AFC curves at their minimum points. C) ATC, AVC, and AFC curves at their minimum points. D) ATC and AVC curves at their minimum points.

D) ATC and AVC curves at their minimum points.

A firm is producing the profit-maximizing amount of output when it is producing where its ________ curve intersects its ________ curve. 51) A) MC; ATC B) MC; TR C) MC; AVC D) MC; MR

D) MC;MR

4. Which of the following is a characteristic of a monopoly? A) The firm is a price taker. B) Demand is perfectly elastic. C) There are many close substitutes for the firm's product. D) Price exceeds marginal revenue.

D) Price exceeds marginal revenue.

Which of the following is NOT an assumption of perfect competition? 40) A) There are many buyers. B) There are no restrictions on entry into the market. C) There are many firms, each selling an identical product. D) The price each firm sets differs from the prices set by the other firms.

D) The price each firm sets differs from the prices set by the other firms.

Which of the following statements is TRUE? 14) A) When marginal product is falling, average product is decreasing. B) When marginal product is rising, average product is decreasing. C) When marginal product is less than average product, average product is increasing. D) When marginal product is less than average product, average product is decreasing.

D) When marginal product is less than average product, average product is decreasing.

6. Which of the following is ALWAYS true for a profit-maximizing single-price monopolist? A) P > MC B) P > MR C) MR = MC D) All of the above are always true.

D) all of the above are always true

The shutdown point occurs at the level of output for which the ________ is at its minimum. 58) A) average fixed cost B) marginal cost C) total cost D) average variable cost

D) average variable cost

7. Monopolies can earn an economic profit in the long run because of A) rent seeking by competitors. B) the elastic demand for the monopoly's product. C) the cost-savings gained by the monopoly. D) barriers to enter the monopoly's market.

D) barriers to enter the monopoly's market.

Because each perfectly competitive firm sells a product identical to that of the other firms 42) A) each firm expects to earn some economic profit. B) each firm tries to cut prices to increase its market share. C) the demand for each firm's product is perfectly inelastic. D) each firm's output is a perfect substitute for the output of any other firm.

D) each firm's output is a perfect substitute for the output of any other firm.

The goal of a perfectly competitive firm is to maximize its 43) A) revenue. B) normal profit. C) output. D) economic profit.

D) economic profit

6. The difference between a perfectly competitive firm's total revenue and its total cost is A) always positive. B) always negative. C) always zero. D) greatest at the profit-maximizing level of output.

D) greatest at the profit-maximizing level of output.

3. Which of the following is NOT a defining characteristic of perfectly competitive industries? A) many buyers and sellers B) unrestricted entry and exit C) consumer knowledge about prices charged by each firm D) higher prices being charged for certain name brands

D) higher prices being charged for certain name brands

5. Single-price monopolies maximize profit by producing the amount of output where A) total revenue is maximized. B) price is equal to marginal cost. C) price is equal to marginal revenue. D) marginal revenue is equal to marginal cost.

D) marginal revenue is equal to marginal cost.

Consider the perfectly competitive firm in the above figure. What will the firm choose to do in the short-run and why? 63) A) stay in business because it is making zero economic profit B) stay in business because the firm is making an economic profit C) shut down because the firm incurs an economic loss D) stay in business because the firm's economic loss is less than fixed costs

D) stay in business because the firm's economic loss is less than fixed costs

6) Average product of labor is equal to ________. A) total product multiplied by the quantity of labor employed. B) the total product produced C) the quantity of labor employed divided by total product D) total product divided by the quantity of labor employed

D) total product divided by the quantity of labor employed

13) Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. What is Ernie's total variable cost? A) $2,400 B) $2,000 C) $1,600 D) $800

c)$1,600 2000-400 2000=400+TVC TC=TFC+TVC

15) Ernie's Earmuffs produces 200 earmuffs per year at a total cost of $2,000 and $400 of this cost is fixed. If he increases output to 220 earmuffs, his total cost increases to $2100, and his fixed cost remains $400. What is Ernie's marginal cost per earmuff? A) $105 B) $35 C) $9.55 D) $5

mc= change in total cost/ change in output 100/20=5