econ 8
The table below sets out the amount of capital needed for certain investment projects and the rate of return for each project. What is this firm's demand for physical capital if their hurdle rate is 5%?
$23 million
If accounting profits for a firm are 20% of output, and the opportunity cost of financial capital is 8% of output, then what do the firm's economic profits equal?
12% of output
If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its
allocative efficiency
If the price that a firm charges is higher than its ________________ cost of production for that quantity produced, then the firm will earn profits.
average
If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses.
average cost
If the average product for six workers is fifteen and the marginalproduct of the seventh worker is eighteen, then
average product is rising.
In economics, labor demand is synonymous with
derived demand.
When I'MaGoldMiner chooses what quantity of gold each of it/s mines will produce over the next 12 months, this quantity, along with the prices prevailing in the market for output and inputs, will
determine the company's total revenue, total costs, and its profits.
Which of the following can be thought of as an adjustment for the risks involved with respect to the cost of a firm acquiring financial capital?
imposition of hurdle rates of interest
A manufacturer would likely make an ___________ in a market following the long-run process of beginning and expanding production in response to ________________ .
entry; a sustained pattern of profits
In the ________, the perfectly competitive firm will react to profits by __________________________ .
long run; increasing its production
In the ________, the perfectly competitive firm will react to losses by __________________________ .
long run; reducing production or shutting down
In economics, the term "shutdown point" refers to the point where the
marginal cost curve crosses the average variable cost curve.
Under perfect competition, any profit-maximizing producer faces a market price equal to its
marginal costs
I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company
must accept market price for its physical capital inputs.
Idaho farmers can sell as large a quantity of their potato crop as they wish,
provided each is willing to accept the prevailing market price.
Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products.
perfect competition
If a perfectly competitive firm is a price taker, then
pressure from competing firms will force acceptance of the prevailing market price.
If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers?
price of competing products
The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.
price taker
In Sam's greenhouse operation, labor is the only short term variable input. After completing a cost analysis, if the marginal product of labor is the same for each unit of labor, this will imply that
the average product of labor is always equal to the marginal product of labor.
In the _________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _____________________ .
short run; losses are smallest
In the _________, the perfectly competitive firm will seek out ________________________ .
short run; the quantity of output where profits are highest
If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ .
shutdown point
For a perfectly competitive firm, the marginal cost curve is identical to the firm's ________________ .
supply curve
Even when competitive firms are unable to calculate marginal revenue product directly, _________________________________________ will push wage rates toward the marginal revenue product of labor.
the pressures of competition in the labor market
Refer to the diagram below. Which of the following explains the slope of the total revenue curve illustrated in this graph?
the slope of the total revenue curve is explained by both a and b above
Refer to the diagram below. In this instance, at the range of output represented at point b,
total costs exceed total revenues.
In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice?
what quantity to produce
Refer to the diagram below. Based on the information illustrated in this graph, which of the following is an accurate statement?
MC is initially downward sloping in the region of increasing MR at low output levels
Refer to the diagram below. In this instance, at the range of output represented at point c,
profits will be maximized.
When a firm makes plans for investments in physical capital, it compares the _______________ on these investments with ______________________ .
projected rates of return; the cost of financial capital to the firm
In order to produce 100 oatmeal cookies, GoodieCookieCo incurs an average total cost of $0.25 per cookie. The company's marginal cost is constant at $0.10 for all oatmeal cookies produced. The total cost to produce 50 oatmeal cookies is
$20
Why are some producers forced to sell their products at the prevailing market price?
high degree of similarity to competitor's products
Neil's Bakery is famous for its giant cinnamon buns. The bakery has fixed costs of $100. Neil must pay each worker a wage of $10.00 per hour and each works an 8 hour shift. He earns $2 for each cinnamon bun that is sold. The following table shows how many cinnamon buns he can sell, depending on the number of workers he hires. Refer to the table below. To maximize his profits in this competitive market, how many workers should he hire?
3 workers
______________________ refers to the additional revenue gained from selling one more unit.
Marginal revenue
Refer to the diagram below. At the point marked m,
TR is exactly equal to TC, so profits equal zero.
In a perfectly competitive market setting, which of the following would be a true statement?
Wage rates trend toward marginal revenue product levels.
The fact that a consumer is not required to buy the goods that a given firm produces, as well as the fact that the consumer might want the goods a firm produces, but may choose to buy from other firms instead
are two stark realities any business firm must recognize
Temperatures have persisted below freezing levels in Florida throughout the months of December and January. As a result, demand for electricity sharply increased and the price of electricity rose sharply. The price of coal also rose. In these circumstances, any resulting shifts in the supply curves for coal miners and electricity producers
can also be interpreted as shifts of their respective marginal cost curves.
Refer to the table below. In this instance, expansion of output
causes input prices to rise as demand for inputs increases.
A perfectly competitive industry is a ____________________
hypothetical extreme.
Economic profit can be derived from calculating total revenues minus all of the firm's costs,
including its opportunity costs.
Refer to the diagram below. In this instance, the range of production possibilities at point d,
is a steeper slope reflecting a return to losses due to diminishing returns.
I'maSolarPanelCo. manufactures and distributes solar panels in the US market. Two years ago, it had 5 US competitors, but government stimulus in the industry has encouraged 7 new US competitors to enter the market. In these circumstances, I'maSolarPanelCo.'s price for its output
is dictated by the forces of demand and supply.
Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should
keep the business open in the short-run, but plan to go out of business in the long-run.
Refer to the table below. In this instance, confirmation that this firm is operating in a perfectly competitive market can readily be ascertained by the fact that its
marginal revenue is constant.
What happens in a perfectly competitive industry when economic profit isgreater than zero?
new firms may enter the industry and all of the above
