ECON 2106 Quiz 4

You own an orange juice stand in a competitive market, and so you are a price-taking firm. Which event would MOST likely increase your market power?

You acquire exclusive rights to harvest oranges from all domestic citrus orchards.

The market for breakfast cereals is dominated by four producers: Kellogg's, General Mills, Post Foods, and Quaker. The market contains hundreds of similar types of cereals, such as Fruit Loops, Cornflakes, and Rice Krispies, that are seen by buyers as different products. This situation violates the perfect competition assumption of:

a standardized product

The total product curve indicates the relationship between _____ when all other inputs are fixed.

a variable input and output

If a perfectly competitive firm decreases production from 110 units to 100 units, and the market price is $20 per unit, the firm's total revenue will be:

$2000.

The long run is best defined as a time period

during which all inputs can be varied

A firm's ___________________ are costs that are incurred even if there is no output. In the short run, these costs ___________________ as production increases.

fixed costs; do not change

A perfectly competitive firm will incur an economic loss but continue to produce a positive quantity of output in the short run if the price is:

greater than average variable cost and less than average total cost.

If the price is consistently below the average variable cost, then in the short run, a perfectly competitive firm should:

shut down

A firm's ___________________ are costs that increase as quantity produced increases. These costs often show _______________________ by increasing at an increasing rate.

variable costs; diminishing marginal returns

The LOWEST point on a perfectly competitive firm's short-run supply curve corresponds to the minimum point on the ____ curve.

AVC curve

Penelope is a student at Fresno State University. Which of the following statements is NOT true about Penelope attending university?

Opportunity cost is synonymous with explicit cost.

Diminishing returns to an input occur when:

at least one input is fixed.

In making an "either-or" decision, it is generally recommended to:

choose the activity that results in the greater economic profit.

The marginal cost curve may decrease at low quantities, but soon it starts to increase. The increase is explained by

increasing difficulty and cost of production.

The assumptions of perfect competition imply that:

individuals in the market accept the market price as given.

A perfectly competitive firm will maximize profit when:

marginal revenue is equal to marginal cost.

Marginal cost is defined as

the change in total cost from producing one more unit of output.

One thing that distinguishes the short run and the long run is

the existence of at least one fixed input.

Which of the following options is NOT included in the marginal cost of a production decision?

the fixed salary of the site manager