Econ 4 and 5
If Sara can produce 25 muffins for a total cost of $15, but her production process is subject to increasing marginal costs, which of the following could be the total cost of producing 100 muffins?
$80.
In 2010 American Electric Power (AEP), an electric utility with operations from Texas to Michigan, produced 206 million megawatt-hours of electricity (a megawatt-hour measures the output of an electricity-generating plant). The company also had 19,000 U.S. employees. What is the average labor productivity of AEP (in megawatt-hours per worker)?
10842.1
In 2010 American Electric Power (AEP), an electric utility with operations from Texas to Michigan, produced 210 million megawatt-hours of electricity (a megawatt-hour measures the output of an electricity-generating plant). The company also had 19,000 U.S. employees. What is the average labor productivity of AEP (in megawatt-hours per worker)?
11052.6
A business has revenues of $4 million per month and costs of $3 million per month. It's annual profits are
12 million
If a local car dealership can sell 8 cars per day at a price of $25,000 each, but must reduce the price to $24,000 to sell one more car, what is the marginal revenue of the 9th car?
16,000
If a local diner can sell 50 burgers per day at a price of $5 each, but must reduce the menu price to $4.95 to sell one more burger, what is the marginal revenue of the 51st burger?
2.45
A business has revenues of $5 million per month and costs of $3 million per month. It's annual profits are
24 million
The local department store used to be ___________ before technological change.
a monopoly
Inputs to production do NOT include
average product.
Output divided by the number of hours worked or by the number of workers is called
average product.
Theodore can make 6 pizzas in one hour. If Theodore's labor has a diminishing marginal product, what must be true about the number of pizzas that Theodore can make in three hours?
It must be less than 18
The total cost of production is determined by adding which of the following costs?
Labor, capital and land, intermediate inputs, and accumulating business know-how.
The extra amount of output a business can generate by adding one more hour of labor is called
Marginal product
In the long run, monopolistic competition starts to look like
Perfect competition.
The __________ summarizes the output of the business, given the level of inputs.
Production
What word describes the money that customers pay for the output of a business
Revenue
___________ is the amount of money a company receives for selling its product or service.
Revenue
When a business expands production and increases sales, what generally happens to revenue?
Revenue rises because the business is selling more output.
In a simple grass-mowing business, the lawn mower and labor would be
inputs
What word describes the goods and services that are used to produce outputs for a business?
inputs
The goods or services purchased by a business for immediate use in the production process are known as
intermediate inputs.
AT&T is an example of a business that used market power to
invest in important research benefiting society.
The hours of work supplied by various types of workers are referred to by economists as
labor
Which of the following is NOT an example of a barrier to entry?
lower costs.
In perfect competition, a profit-maximizing business will expand until its _________ equals the market price.
marginal cost
The added expense of producing one more unit of output is called the
marginal cost.
As the market price of a good rises, businesses will respond by producing more of that good because
marginal revenue exceeds marginal cost after the price increase.
All other things equal, a business making shirts would choose not to expand when
marginal revenue per shirt equals $7 and the marginal cost per shirt equals $10
The additional money a business gets from producing and selling one more unit of output is
marginal revenue.
From World War II to the early 1970s, GM, Ford, and Chrysler enjoyed
market power.
A market where there is only one seller, and buyers have no good alternative, is called a(n)
monopoly.
In general, as markets have
more competition, production rises and costs fall over the long run
A profit-maximizing monopolist will always charge _______ a perfect competitor would
more than
A _______ monopoly is an industry in which it makes economic sense to have only one provider.
natural
A good example of monopolistic competition is
neighborhood restaurants.
A profitable business will attract
new competitors.
Average product is not as reliable an indicator of how a business is doing as it used to be because of
outsourcing labor
If music was perfectly competitive, then all performers would
play the same music and charge the same price for concerts.
What is the economic process of turning inputs into outputs that a business will sell to customers?
production
The main objective of a business in a market economy is
profit maximization.
Companies will often spend considerable amounts of money to create a ____________ in regards to their brand name.
reputation effect
In a market where businesses are earning high profits, new entrants will cause the supply curve to shift to the _________ and the market price to _________.
right; fall
Marginal cost generally ________ quantity produced.
rises with
In short-run profit maximization, businesses focus on the ______, holding fixed costs constant.
short term production function
Variable costs are also known as
short-term costs
If all of the restaurants in a small town colluded and agreed to raise dinner prices, this would lead to a loss to society because
some dinners that could be served are not.
Natural monopolies have been slowly eroded by
technological change.
In perfect competition, higher-cost businesses
tend to go out of business if unable to adjust.
Natural monopolies include
the local water company.
Many hospitals and private universities are nonprofit institutions. This means
they do not seek to maximize their profits
The easiest way to have a monopoly today is
to have the government protect you.
A business can escape perfect competition by building a better, more innovative product.
true
A production function tells you, given the inputs, what the output will be.
true
In a market with perfect competition, given enough time and no barriers to entry, profits will tend toward zero in the long run.
true
In perfect competition, all buyers and sellers are price takers.
true
In perfect competition, if there are no barriers to entry, only the lowest-cost businesses survive over the long run.
true
Marginal cost is the added expense of producing one more unit of output.
true
Revenue is the money that customers pay for the output of a business.
true
Under the right circumstances, competition could be a win-win proposition for companies and consumers
true
Consider the following products. For each one, identify whether the market has one, few, or many sellers.
A) Apples in the grocery store ( Many seller) B) plane tickets from new york to seattle ( many sellers) C) tickets to a professional football game in your town ( few sellers ) D) Passenger train service ( few seller)
__________ is paid communication with potential customers in a public medium, such as newspapers and television.
Advertising
Businesses will generally shut down if they lose money for one or two years.
False
In perfect competition, a profit-maximizing business will expand until its marginal cost equals the market price.
False
Marshall Field's and Sterns Department Stores are examples of low-cost producers in a perfect competition market.
False
_________ collusion can occur even when oligopolistic businesses do not directly communicate with each other.
Implicit
______ shows the potential cost for each level of output.
The cost function
The profit-maximizing rule says that a seller will expand output up to the point
Where marginal revenue equals marginal cost.
Does the stock market resemble a perfectly competitive market?
Yes, the stock market does resemble a perfectly competitive market.
Monopolistic competition is characterized by
a large number of sellers with a similar product.
An example of an oligopoly is the
airline industry.
If two drugstores in a market agree that they will both sell Fritos at a higher price, and neither will undercut the other, this is called
collusion
If two or more oligopolistic companies work together to keep their prices high and split the market between them, this is called
collusion
What word describes the money that a business pays for its inputs?
cost
Profit is the difference between revenue and
cost.
If you add too many inputs, your business may experience
diminishing marginal product
Cost is what a business receives after subtracting expenses from revenue.
false
Inputs for a business are the goods and services that it sells to its customers.
false
The average product is calculated by dividing input by the number of hours worked.
false
