Econ 3357 Online Exam 3 Review STUDY

cooperative.

An association of businesses that are jointly owned and operated by members for mutual benefit is a: joint tenancy. cooperative. corporation. condominium.

Both I and II are true.

An effluent fee is imposed on a steel firm to reduce the amount of waste materials that it dumps in a river. Use the following two statements to answer this question: I. The more easily factors of production can be substituted for one another (for example, capital can be used to reduce waste water), the more effective the fee will be in reducing effluent. II. The greater the degree of substitution of capital for waste water, the less the firm will have to pay in effluent fees. Both I and II are false. Both I and II are true. I is false, and II is true. I is true, and II is false.

They must have the same slope.

At the profit-maximizing level of output, what is relationship between the total revenue (TR) and total cost (TC) curves? They must be tangent to each other. They must intersect, with TC cutting TR from below. They must have the same slope. They cannot be tangent to each other. They must intersect, with TC cutting TR from above.

is incorrect because the original price paid for the shares is a sunk cost and should have no bearing on whether the shares should be held or sold.

Constantine purchased 100 shares of IBM stock several years ago for $150 per share. The price of these shares has fallen to $55 per share. Constantine's investment strategy is "buy low, sell high." Therefore, he will not sell his IBM stock until the price rises above $150 per share. If he sells at a price lower than $150 per share he will have "bought high and sold low." Constantine's decision: is incorrect because the original price paid for the shares is a sunk cost and should have no bearing on whether the shares should be held or sold. is incorrect because it treats the price of the shares as an explicit cost. is correct and shows a solid command of the nature of opportunity cost. is incorrect because when the price of a stock falls, the law of demand states that he should buy more shares.

upward shifts of MC and reductions in output.

Higher input prices result in: upward shifts of MC and reductions in output. upward shifts of MC and increases in output. downward shifts of MC and increases in output. increased demand for the good the input is used for. downward shifts of MC and reductions in output.

II only

I. "Even though I hate my MBA classes, I can't quit because I've spent so much money on tuition." II. "To break into the market for soap our firm needs to spend $10M on creating an image that is unique to our new product. When deciding whether to develop the new soap, we need to take this marketing cost into account." I only II only Both I and II Neither I nor II

I and II are both true.

I. A firm's marginal cost curve does not depend on the level of fixed costs. II. As output increases the difference between a firm's average total cost and average variable cost curves cannot rise. I is false, and II is true. I is true, and II is false. I and II are both false. I and II are both true.

I and II are false.

I. An increase in the firm's fixed costs will also shift the firm's short-run supply curve to the left. II. An increase in the firm's fixed costs will not shift the firm's short-run supply curve to the right or left, but it may alter how much of the marginal cost curve is used to form the short-run supply curve. I is true and II is false. I and II are false. II is true and I is false. I and II are true.

I is true, and II is false.

I. If the marginal product of labor falls whenever more labor is used, and labor is the only factor of production used by the firm, than at every output level the firm's short-run average variable cost exceeds marginal cost. II. If labor obeys the law of diminishing returns, and is the only factor of production used by the firm, then at every output level short-run average variable costs exceed marginal costs. I is true, and II is false. I is false, and II is true. I and II are both true. I and II are both false

I is true, and II is false.

I. If the marginal product of labor is zero, the total product of labor is at its maximum. II If the marginal product of labor is at its maximum, the average product of labor is falling. Both I and II are false. Both I and II are true. I is true, and II is false. I is false, and II is true.

I and II are false.

I. Markets that have only a few sellers cannot be highly competitive. II. Markets with many sellers are always perfectly competitive. I is true and II is false. I and II are true. II is true and I is false. I and II are false.

I is false, and II is true.

I. Suppose a semiconductor chip factory uses a technology where the average product of labor is constant for all employment levels. This technology obeys the law of diminishing returns. II. Suppose a semiconductor chip factory uses a technology where the marginal product of labor rises, then is constant and finally falls as employment increases. This technology obeys the law of diminishing returns. Both I and II are true. Both I and II are false. I is false, and II is true. I is true, and II is false.

I and II are true.

I. The firm's decision to produce zero output when the price is less than the average variable cost of production is known as the shutdown rule. II. The firm's supply decision is to generate zero output for all prices below the minimum AVC. II is true and I is false. I and II are true. I is true and II is false. I and II are false.

will increase revenue more than it increases cost.

If current output is less than the profit-maximizing output, then the next unit produced will increase cost more than it increases revenue. may or may not increase profit. will increase revenue more than it increases cost. will increase revenue without increasing cost. will decrease profit.

No, the marginal product of labor is constant (for a given K).

Joe owns a coffee house and produces coffee drinks under the production function q = 5KL where q is the number of cups generated per hour, K is the number of coffee machines (capital), and L is the number of employees hired per hour (labor). The average product of labor and the marginal product of labor are both equal to AP = MP = 5K. Does labor exhibit diminishing marginal returns in this case? es, if capital also exhibits diminishing marginal returns. No, the marginal product of labor is constant (for a given K). No, the marginal product of labor is increasing (for a given K). Yes, this is true for all values of K.

the market supply elasticity for a price increase may be different than the market supply elasticity for a price decrease at the kink point.

One practical implication of a kinked market supply curve is that: producer surplus is not defined at the kink point. the MC = MR rule does not hold at the kink point. the market supply elasticity for a price increase may be different than the market supply elasticity for a price decrease at the kink point. All of these are true.

the average product of labor is greater than the marginal product of labor.

Refer to Figure 6.2.1 above. At point C: the marginal product of labor is greater than the average product of labor. the average product of labor is greater than the marginal product of labor. the marginal product of labor and the average product of labor are equal. the marginal product of labor and the average product of labor are both increasing. Both the average product of labor is greater than the marginal product of labor and the marginal product of labor and the average product of labor are both increasing are correct.

the farmer has lost an opportunity for additional profit.

Refer to Figure 8.4.2 above. If the farm produces 14 sacks of coffee when market price is $380, the farmer does not earn any profit. the farmer has lost an opportunity for additional profit. the farmer has maximized his profit. the farmer should reduce the number of sacks produced in order to increase his profit.

All of these are true.

Technological improvement: can hide the presence of diminishing returns. can be shown as a shift in the total product curve. allows more output to be produced with the same combination of inputs. All of these are true.

because of diminishing marginal product, the amount of food produced by each additional member of the population decreases.

The Malthusian dilemma relates to marginal product in that: because of diminishing marginal product, the amount of food produced by each additional member of the population increases. because of diminishing marginal product, the wage falls as the population decreases. because of diminishing marginal product, the amount of food produced by each additional member of the population decreases. because of diminishing average product, the population will not have additional capital to work with. starvation can be averted only if marginal product is constant.

the firm's output is a small fraction of the entire industry's output.

The amount of output that a firm decides to sell has no effect on the market price in a competitive industry because: the market price is determined (through regulation) by the government. the firm's output is a small fraction of the entire industry's output. the short run market price is determined solely by the firm's technology. the firm supplies a different good than its rivals. the demand curve for the industry's output is downward sloping.

$20

The average total cost to produce 100 cookies is $0.25 per cookie. The marginal cost is constant at $0.10 for all cookies produced. $20 $25 $50 $60

technological improvements have increased our ability to produce food over time.

The concerns about world food production raised by Malthus have not materialized because: Malthus was wrong about the diminishing returns to labor in agriculture. technological improvements have increased our ability to produce food over time. input prices have fallen over time. crop prices have risen over time.

isoquant curve.

The function which shows combinations of inputs that yield the same output is called a(n): isocost curve. production possibilities frontier. production function. isoquant curve.

marginal returns.

The law of diminishing returns refers to diminishing: total returns. marginal returns. average returns. all of these.

that over the long run, consumers as a whole can increase their rate of consumption only by increasing labor productivity.

The link between the productivity of labor and the standard of living is: that over the long run, consumers as a whole can increase their rate of consumption only by increasing labor productivity. inverse. that the productivity of labor grows much more erratically than the standard of living. that over the long run, consumers' rate of consumption is not related to labor productivity. tenuous and changing.

linear and upward-sloping.

The total revenue graph consistent with Table 8.1 is: concave downwards. linear and downward-sloping. linear and upward-sloping. linear and horizontal. linear and vertical.

kinked at $20.

Three hundred firms supply the market for paint. For fifty of the firms, their short-run average variable costs are minimized at $10 and short-run total costs are minimized at $15. For the remaining firms, the short-run average variable costs and short-run average total costs are minimized at $20 and $25, respectively. If each firm has a U-shaped marginal cost curve then the short-run market supply curve is: kinked at $15. U-shaped too. kinked at $25. kinked at $10. kinked at $20.

A salaried manager who has a three-year employment contract

We typically think of labor as a variable cost, even in the very short run. However, some labor costs may be fixed. Which of the following items represents an example of a fixed labor cost? An hourly employee A temporary worker who is paid by the hour A salaried manager who has a three-year employment contract None of these

both Gasoline and Copper

Which of following is an example of a homogeneous product? Gasoline Copper Personal computers Winter parkas both Gasoline and Copper

isoquants have negative slope.

A firm uses two factors of production. Irrespective of how much of each factor is used, both factors always have positive marginal products which imply that: isoquants are relevant only in the long run. isoquants have negative slope. isoquants are convex. isoquants can become vertical or horizontal. None of these

a curve that shows the least-cost combination of inputs needed to produce each level of output for given input prices.

A firm's expansion path is: the firm's production function. a curve that makes the marginal product of the last unit of each input equal for each output. a curve that shows the least-cost combination of inputs needed to produce each level of output for given input prices. None of these

very elastic.

A few sellers may behave as if they operate in a perfectly competitive market if the market demand is: highly inelastic. very elastic. unitary elastic. composed of many small buyers.

very elastic.

A few sellers may behave as if they operate in a perfectly competitive market if the market demand is: unitary elastic. highly inelastic. composed of many small buyers. very elastic.

on the downward-sloping portion of its AVC curve.

A firm never operates: at the minimum of its AVC curve. on its long-run marginal cost curve. at the minimum of its ATC curve. on the downward-sloping portion of its AVC curve. on the downward-sloping portion of its ATC curve.

$40 million

A perfectly competitive hardware manufacturer has total revenue of $85 million, total variable costs of $45 million, and fixed costs of $10 million. What is the firm's producer surplus? $85 million $40 million $70 million $30 million

the ratio of the marginal product of waste water to the marginal product of machinery.

A plant uses machinery and waste water to produce steel. The owner of the plant wants to maintain an output of 10,000 tons a day, even though the government has just imposed a $100 per gallon tax on using waste water. The reduction in the amount of waste water that results from the imposition of this tax depends on: the marginal product of waste water only. the ratio of the marginal product of waste water to the marginal product of machinery. the rental rate of machinery. the cost to the firm of using waste water before the tax was put in place. the amount of waste water used before the tax was imposed.

both a perfectly competitive firm and a firm that cannot influence the market price

A price taker is: a firm that accepts different prices from different customers. a consumer who accepts different prices from different firms. a perfectly competitive firm. a firm that cannot influence the market price. both a perfectly competitive firm and a firm that cannot influence the market price

downward shifts of MC and increases in output.

An improvement in technology would result in: increased quality of the good, but little change in MC. downward shifts of MC and increases in output. upward shifts of MC and reductions in output. upward shifts of MC and increases in output. downward shifts of MC and reductions in output.

the firm's marginal cost curve is horizontal for some ranges of output and rises in steps.

An industry analyst observes that in response to a small increase in price, a competitive firm's output sometimes rises a little and sometimes a lot. The best explanation for this finding is that: the firm's marginal cost has a very large positive slope. the firm's marginal cost curve has a very small positive slope. the firm's marginal cost curve is horizontal for some ranges of output and rises in steps. the firm's marginal cost curve is downward sloping. the firm's marginal cost curve is random.

3/10.

An industry has 1000 competitive firms, each producing 50 tons of output. At the current market price of $10, half of the firms have a short-run supply curve with a slope of 1; the other half each have a short-run supply curve with slope 2. The short-run elasticity of market supply is: 1/50. 3/10. 1/5. 2/5. None of these

is a curve that shows all the combinations of inputs that yield the same total output.

An isoquant: must be linear. is a curve that shows all possible output levels that can be produced at the same cost. is a curve that shows the maximum total output as a function of the level of labor input. cannot have a negative slope. is a curve that shows all the combinations of inputs that yield the same total output.

cannot be derived from a production function when a firm is assumed to maximize profits.

An upward sloping isoquant: can be derived from a production function with one input. can be derived from a production function that uses more than one input where reductions in the use of any input always reduces output. cannot be derived from a production function when a firm is assumed to maximize profits. can be derived whenever one input to production is available at zero cost to the firm. None of these

The marginal product of labor declines as new workers enter the expanding work force.

As an economy recovers from a recession, the observed level of labor productivity tends to decline. Why? The marginal product of labor declines as new workers enter the expanding work force. The total product remains the same during the recovery, but the number of workers declines. The marginal product of labor increases at a slower rate than the decline in employment. The total product increases during the recovery, but the number of workers declines.

-4/5.

Assume that a firm spends $500 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis). If the wage rate is $20 per hour and the rental cost of capital is $25 per hour, the slope of the isocost curve will be: 25/500. 25/20 or 1.25. 500. -4/5.

All of these

At the optimum combination of two inputs, the slopes of the isoquant and isocost curves are equal. costs are minimized for the production of a given output. the marginal rate of technical substitution equals the ratio of input prices. All of these the slopes of the isoquant and isocost curves are equal and the marginal rate of technical substitution equals the ratio of input prices only

is zero.

At the profit-maximizing level of output, marginal profit may be positive, negative or zero. is increasing. is zero. is also maximized. is positive.

I and II are both true.

I. Increases in the rate of income tax decrease the opportunity cost of attending college. II. The introduction of distance learning, which enables students to watch lectures at home, decreases the opportunity cost of attending college. I and II are both false. I is false, and II is true. I and II are both true. I is true, and II is false.

I and II are true

I. Markets may be highly (but not perfectly) competitive even if there are a few sellers. II. There is no simple indicator that tells us when markets are highly competitive. I and II are false I and II are true I is false and II is true I is true and II is false

Both I and II are true.

I. The average total cost of a given level of output is the slope of the line from the origin to the total cost curve at that level of output. II. The marginal cost of a given level of output is the slope of the line that is tangent to the variable cost curve at that level of output. Both I and II are true. I is true, and II is false. Both I and II are false. I is false, and II is true.

I and II are both true.

I. The marginal cost curve intersects the average total cost and average variable cost curves at their minimum values. II. When a firm has positive fixed costs, the output level associated with minimum average variable costs is less than the output associated with minimum average total costs. I is false, and II is true. I is true, and II is false. I and II are both true. I and II are both false.

I and II are false.

I. Under perfect competition, an upward shift in the marginal cost curve (perhaps due to a higher price for a variable input) also shifts the average variable cost curve upward. II. Under perfect competition, an upward shift in the marginal cost curve (perhaps due to a higher price for a variable input) reduces firm output but may increase firm profits. I and II are true. I and II are false. II is true and I is false. I is true and II is false.

I is false, and II is true.

I. Whenever a firm's average variable costs are falling as output rises, marginal costs must be falling too. II. Whenever a firm's average total costs are rising as output rises, average variable costs must be rising too. I and II are both false. I and II are both true. I is true, and II is false. I is false, and II is true.

Both I and II are true.

I. With convex isoquants, a firm's expansion path cannot be negatively sloped. II. If a firm uses only two factors of production, one of whose marginal product becomes negative when its use exceeds a certain level, then a cost-minimizing firm's expansion path will have vertical or horizontal segments. Both I and II are true. Both I and II are false. I is false, and II is true. I is true, and II is false.

the profit-maximizing output is found where MC = MR and MC is increasing.

If a competitive firm has a U-shaped marginal cost curve then: the profit-maximizing output is found where MC = MR and MC is decreasing. the profit-maximizing output is found where MC = MR and MC is constant. the profit-maximizing output will always generate positive producer surplus. the profit-maximizing output will always generate positive economic profit. the profit-maximizing output is found where MC = MR and MC is increasing.

its short-run supply curve is the upward-sloping portion of the marginal cost curve that lies above the short-run average variable cost curve

If a competitive firm's marginal cost curve is U-shaped, then: its short-run supply curve is U-shaped too its short-run supply curve is the upward-sloping portion of the marginal cost curve that lies above the short-run average variable cost curve its short-run supply curve is the downward-sloping portion of the marginal cost curve its short-run supply curve is the upward-sloping portion of the marginal cost curve that lies above the short-run average total cost curve its short-run supply curve is the upward-sloping portion of the marginal cost curve

positive because price exceeds average total costs

If a competitive firm's marginal costs always increase with output, then at the profit maximizing output level, producer surplus is: zero because price equals marginal costs. positive because revenues are increasing faster than variable costs. positive because price exceeds average total costs. zero because marginal costs equal marginal revenue. positive because price exceeds average variable costs.

there may still be enough competition in the industry to make the model of perfect competition usable.

If any of the assumptions of perfect competition are violated, graphs with downward-sloping demand curves cannot be used to study the firm. supply-and-demand analysis cannot be used to study the industry. there may still be enough competition in the industry to make the model of perfect competition usable. graphs with flat demand curves cannot be used to study the firm. one must use the monopoly model instead.

rate at which the firm can replace capital with labor without changing the output rate.

If capital is measured on the vertical axis and labor is measured on the horizontal axis, the slope of an isoquant can be interpreted as the: marginal product of capital. rate at which the firm can replace capital with labor without changing the output rate. marginal product of labor. average rate at which the firm can replace capital with labor without changing the output rate.

they are more likely to become takeover targets of profit-maximizing firms.

If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth, they are more likely to have higher profit than if they had pursued that policy explicitly. they are more likely to become takeover targets of profit-maximizing firms. they are less likely to be replaced by stockholders. they are less likely to be replaced by the board of directors. their companies are more likely to survive in the long run.

All of these.

If the capital market is competitive, the user cost of capital equals: the rental rate of capital. the return in that market. the rate of return of investing elsewhere. All of these.

the marginal rate of technical substitution of inputs is constant.

If the isoquants are straight lines, then: the marginal rate of technical substitution of inputs is constant. only one combination of inputs is possible. inputs have fixed costs at all use rates. there are constant returns to scale.

after some level of employment, the marginal product of labor must fall.

If the law of diminishing returns applies to labor then: after some level of employment, the marginal product of labor must fall. the average product of labor must rise and then fall as employment increases. the marginal product of labor must rise and then fall as employment rises. the marginal product of labor must eventually become negative. the average product of labor must eventually become negative.

the marginal revenue doubles.

If the market price for a competitive firm's output doubles, then: at the new profit maximizing output, price has risen more than marginal revenue. the marginal revenue doubles. competitive firms will earn an economic profit in the long-run. at the new profit maximizing output, price has increased more than marginal cost. the profit maximizing output will double.

a leftward shift in the market supply curve.

Imposition of an output tax on all firms in a competitive industry will result in: a downward shift in each firm's average cost curve. a downward shift in each firm's marginal cost curve. higher profits for the industry as price rises. a leftward shift in the market supply curve. the entry of new firms into the industry.

area between the equilibrium price line and the supply curve to the left of equilibrium output.

In a supply-and-demand graph, producer surplus can be pictured as the area under the demand curve to the left of equilibrium output. area between the equilibrium price line and the supply curve to the left of equilibrium output. area under the supply curve to the left of equilibrium output. vertical intercept of the supply curve. area between the demand curve and the supply curve to the left of equilibrium output.

operate at zero profit in order to provide low electricity prices for the member-owners.

In many rural areas, electric generation and distribution utilities were initially set up as cooperatives in which the electricity customers were member-owners. Like most cooperatives, the objective of these firms was to: maximize profits for the member-owners. maximize total revenue that could be redistributed to the member-owners. minimize the costs of production. operate at zero profit in order to provide low electricity prices for the member-owners.

on the upward-sloping portion of its ATC.

In the short run, a perfectly competitive firm earning positive economic profit is: on the downward-sloping portion of its ATC. below its ATC. on the upward-sloping portion of its ATC. at the minimum of its ATC. above its ATC.

average total cost is positive and constant and average total cost equals marginal cost are correct.

In the short run, suppose average total cost is a straight line and marginal cost is positive and constant. Then, we know that marginal cost is less than average total cost. average total cost is positive and constant. average total cost equals marginal cost. marginal cost is less than average total cost and average total cost is positive and constant are correct. average total cost is positive and constant and average total cost equals marginal cost are correct.

marginal

Incremental cost is the same concept as ________ cost. marginal fixed average variable

AP = 5K

Joe owns a coffee house and produces coffee drinks under the production function q = 5KL where q is the number of cups generated per hour, K is the number of coffee machines (capital), and L is the number of employees hired per hour (labor). What is the average product of labor? AP = 5 AP = 5K AP = 5K/L AP = 5L

Point B

Refer to Figure 6.2.1 above. At which point on the total product curve is the average product of labor the highest? Point A Point B Point C Point D None of these

capital and labor will be used in fixed proportions.

Refer to Figure 6.3.3 above. An examination of the production isoquants in the diagram below reveals that: capital and labor will be used in fixed proportions. capital and labor are perfectly substitutable. the MRTS is constant. Both capital and labor are perfectly substitutable and the MRTS is constant are correct. None of these

Point D

Refer to Figure 6.3.4 above. The diagram below shows an isoquant for the production of wheat. Which point has the highest marginal productivity of labor? Point A Point B Point C Point D

B to A.

Refer to Figure 7.3.5. A technological change that allows for the same amount of output to be produced using less inputs is illustrated by a move from: the outward shift of the isocost line. B to A. the outward shift of the isoquant. A to B.

At point B

Refer to Figure 8.3.1 above. At which point or range is profit maximized? At point B Between points B and C At point C Between points A and B

in panel (a).

Refer to Figure 8.3.2 above. The demand of a price taker is illustrated: in both panels. in panel (b) by neither curve. in panel (a).

$8.360.

Refer to Figure 8.4.2 above. When profit is maximized, the total revenue of the farmer equals: $2.170. $996. $8.360. $5.320.

the supply curve of the firm.

Refer to Figure 8.5.1 above. The dashed portion of the marginal cost curve refers to: the portion where an increase in output results in an increase in profit. the portion of the curve where the firm shuts down when it suffers losses. the supply curve of the firm. the portion where marginal cost is always equal to average total cost (ATC), when ATC is at its minimum.

below market price and above the supply curve.

Refer to Figure 8.6.3 above. Producer surplus in the figure equals the area: below market demand and above market price. between market supply and market demand, from zero to the equilibrium quantity. below market price and above the supply curve. below the supply curve, from zero to the equilibrium quantity.

price times quantity.

Revenue is equal to: price times quantity minus average cost. price times quantity. price times quantity minus total cost. expenditure on production of output. price times quantity minus marginal cost.

Output decreases because the marginal cost curve shifts upward.

Ronny's Pizza House operates in the perfectly competitive local pizza market. If the price of pizza cheese increases (ceteris paribus), what is the expected impact on Ronny's profit-maximizing output decision? Output decreases because the marginal cost curve shifts upward. Output increases because the marginal cost curve shifts upward. Output decreases because the price of pizza must also increase. Output increases to cover the higher input cost.

price-taking assumption and free entry assumption are correct.

Several years ago, Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world. This market was not perfectly competitive because this situation violated the: rice-taking assumption. homogeneous product assumption. free entry assumption. price-taking assumption and homogeneous product assumption are correct. price-taking assumption and free entry assumption are correct.

Shifts rightward

Suppose a pizza restaurant has two pizza ovens that may be used to bake pizzas, so the restaurant has a maximum capacity constraint that affects the shape of the firm's short-run marginal cost curve. What happens to maximum capacity segment of this curve if the firm adds another pizza oven? Shifts upward Shifts downward Shifts leftward Shifts rightward

Firm produces more than optimal quantity and earns lower profits.

Suppose a plant manager ignores some implicit marginal costs of production so that the perceived MC curve is below the actual MC curve. What is the likely outcome from this error? Firm produces more than optimal quantity and earns higher profits. Firm produces less than optimal quantity and earns higher profits. Firm produces more than optimal quantity and earns lower profits. Firm produces less than optimal quantity and earns lower profits.

Average fixed cost curve

Suppose a technological innovation shifts the marginal cost curve downward. Which one of the following cost curves does NOT shift? Firm's short-run supply curve Average variable cost curve Average total cost curve Average fixed cost curve

perfectly elastic; zero

Suppose all firms have constant marginal costs that are the same for each firm in the short run. In this case, the market level supply curve is ________ and producer surplus equals ________. perfectly inelastic; zero perfectly elastic; zero perfectly elastic; fixed costs perfectly inelastic; fixed costs

We will only use labor in the production process.

Suppose capital and labor are perfect substitutes in a long-run production process. If labor costs $15 per hour and the rental rate of capital is $20 per hour, what can we say about the profit maximizing choice of labor and capital inputs? We will only use capital in the production process. We will only use labor in the production process. The optimal capital-labor ratio is 0.75-to-1. We will use equal amounts of capital and labor

exceed the profit-maximizing level of output.

Suppose your firm has a U-shaped average variable cost curve and operates in a perfectly competitive market. If you produce where the product price (marginal revenue) equals average variable cost (on the upward sloping portion of the AVC curve), then your output will: generate zero economic profits. exceed the profit-maximizing level of output. be smaller than the profit-maximizing level of output. equal the profit-maximizing level of output.

perfectly horizontal.

The demand curve facing a perfectly competitive firm is downward-sloping and more flat than the market demand curve. perfectly horizontal. the same as the market demand curve. downward-sloping and less flat than the market demand curve. perfectly vertical.

the same as its average revenue curve and its marginal revenue curve.

The demand curve facing a perfectly competitive firm is: the same as its average revenue curve, but not the same as its marginal revenue curve. not defined in terms of average or marginal revenue. the same as its average revenue curve and its marginal revenue curve. the same as its marginal revenue curve, but not its average revenue curve. not the same as either its marginal revenue curve or its average revenue curve.

the opportunity costs of the factors of production that the firm owns.

The difference between the economic and accounting costs of a firm are: the opportunity costs of the factors of production that the firm owns. the corporate taxes on profits . the accountant's fees. the sunk costs incurred by the firm. the explicit costs of the firm.

minimized when the ratio of marginal product to input price is equal for all inputs.

The total cost of producing a given level of output is: minimized when the ratio of marginal product to input price is equal for all inputs. minimized when the marginal products of all inputs are equal. maximized when a corner solution exists. minimized when marginal product multiplied by input price is equal for all inputs.

horizontal.

The perfectly competitive firm's marginal revenue curve is: exactly the same as the marginal cost curve. upward-sloping. horizontal. downward-sloping, at twice the (negative) slope of the market demand curve. vertical.

producer surplus is positive.

The shutdown decision can be restated in terms of producer surplus by saying that a firm should produce in the short run as long as: profit and producer surplus are equal. producer surplus exceeds fixed cost. revenue exceeds producer surplus. producer surplus exceeds variable cost. producer surplus is positive.

of all of these reasons.

The textbook for your class was not produced in a perfectly competitive industry because: there are so few firms in the industry that market shares are not small, and firms' decisions have an impact on market price. upper-division microeconomics texts are not all alike. it is not costless to enter or exit the textbook industry. of all of these reasons.

All of these

Which of the following examples represents a fixed-proportion production system with capital and labor inputs? Clerical staff and computers Airplanes and pilots Horse-drawn carriages and carriage drivers All of these

all of these

Which of the following inputs are variable in the long run? Labor Capital and equipment Plant size all of these

Both this would violate a technical efficiency condition and additional inputs will not be used by profit maximizing firms if those inputs decrease output are true.

Two isoquants, which represent different output levels but are derived from the same production function, cannot cross because: isoquants represent different utility levels. this would violate a technical efficiency condition. isoquants are downward sloping. additional inputs will not be used by profit maximizing firms if those inputs decrease output. Both this would violate a technical efficiency condition and additional inputs will not be used by profit maximizing firms if those inputs decrease output are true.

Neither, the costs are identical.

Two small airlines provide shuttle service between Las Vegas and Reno. The services are alike in every respect except that Fly Right bought its airplane for $500,000, while Fly by Night rents its plane for $30,000 a year. If Fly Right were to go out of business, it would be able to rent its plane to another airline for $30,000. Which airline has the lower costs? Fly Right. Fly by Night Neither, the costs are identical. Neither, Fly by Night has lower costs at small output levels and Fly Right has lower costs at high output levels.

may or may not be perfect competitors, but their position on the river has nothing to do with it.

Two soft-drink firms, Fizzle & Sizzle, operate on a river. Fizzle is farther upstream, and gets cleaner water, so its cost of purifying water for use in the soft drinks is lower than Sizzle's by $500,000 yearly. would be perfectly competitive if their purification costs were equal; otherwise, not. would be perfectly competitive if it costs Fizzle $500,000 yearly to keep that land. may or may not be perfect competitors, but their position on the river has nothing to do with it. cannot be perfect competitors because they are not identical firms.

the minimum value of the firm's average variable cost lies between $5 and $10.

When the price faced by a competitive firm was $5, the firm produced nothing in the short run. However, when the price rose to $10, the firm produced 100 tons of output. From this we can infer that: the minimum value of the firm's average variable cost lies between $5 and $10. the firm's average cost of production was less than $10. the firm's marginal costs of production never fall below $5. the firm's total cost of producing 100 tons is less than $1000. the firm's marginal cost curve must be flat.

Total Cost and Variable Cost

Which of the following costs are always increasing as output increases? Variable Cost only Total Cost only Marginal Cost only Fixed Cost only Total Cost and Variable Cost

All of these

Which of the following costs may provide barriers to entry in a market? High research and development expenditures License fees Sunk costs associated with specialized facilities All of these

Rising marginal cost implies that average total cost is also rising.

Which of the following relationships is NOT valid? Rising marginal cost implies that average total cost is also rising. When marginal cost is below average total cost, the latter is falling. When marginal cost is above average variable cost, AVC is rising. None of these

Government policies have shifted the health care production function downward over time.

Which of the following statements does not explain why US health care expenditures are higher than in other countries? Consumer incomes have increased, which allows consumers to purchase more health care. Government policies have shifted the health care production function downward over time. The US health care system is relatively inefficient compared to other countries. Demand for health care in the US has increased, so health care production occurs at a higher point on the total product curve than in other countries.

Accounting costs include only explicit costs.

Which of the following statements is true regarding the differences between economic and accounting costs? Accountants consider only implicit costs when calculating costs. Economic costs include implied costs only. Accounting costs include all implicit and explicit costs. Accounting costs include only explicit costs

ΔQ / ΔL.

Writing total output as Q, change in output as △Q, total labor employment as L, and change in labor employment as △L, the marginal product of labor can be written algebraically as: ΔL / ΔQ. ΔQ ∙ L. ΔQ / ΔL. Q / L.

AP = 3 cars per worker

You operate a car detailing business with a fixed amount of machinery (capital), but you have recently altered the number of workers that you employ per hour. As you increased the number of employees hired per hour from three to five, your total output increased by 5 cars to 15 cars per hour. What is the average product of labor at the new levels of labor? AP = 3 cars per worker AP = 5 cars per worker AP = 4 cars per worker We do not have enough information to answer this question.