Econ

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $.20 per pound when 500 pounds are grown. The demand for potatoes is Q = 10,000/p. If the long-run supply curve is horizontal, then how many firms will this industry sustain in the long run? A) 100 B) 0 C) 50,000 D) There is enough information to answer

A) 100

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q. The average cost of the 5th T-shirt is A) 12 B) 2 C) 60 D) 52

A) 12

Assume that food is measured on the horizontal axis and clothing on the vertical axis. If the price of food falls relative to that of clothing, the budget line will: A) Become flatter B) Shift outward C) Become steeper D) Become steeper or flatter depending on the relationship between prices and income.

A) Become flatter

When the isocost line is tangent to the isoquant, then A) The firm is producing the level of output at minimum cost. B) The firm has achieved the right economics of scale. C) MPL = MPK D) All of the above

A) The firm is producing the level of output at minimum cost.

Revenue is equal to A) price times quantity minus average cost B) price times quantity C) price times quantity minus marginal cost D) expenditure on production of output E) price times quantity minus total cost.

B) Price times quantity

Which of the following costs always declines as output increases? A) Average variable cost B) Marginal cost C) Average fixed cost D) Fixed cost E) Average cost

C) Average fixed cost

Use the production function: Q=4L^(1/2)K^(1/2) Which of the following combinations of inputs is on the isoquant to produce 400 units of output? A) L = 400, K = 0 B) L = 0, K = 400 C) L = 100, K = 100 D) all of the above E) A and B, but not C

C) L = 100, K = 100

If current output is less than the profit-maximizing output, which must be true? A) Total revenue is less than total cost B) Average revenue is greater than average cost. C) Marginal revenue is greater than marginal cost D) Marginal revenue is less than marginal cost E) Average revenue is less than average cost.

C) Marginal revenue is greater than marginal cost

Which of the following is NOT a necessary condition for long-run equilibrium under perfect competition? A) Each firm is maximizing profit B) No firm has an incentive to exit the market C) Prices are relatively low D) Each firm earns zero economic profit E) No firm has an incentive to enter the market

C) Prices are relatively low

If two bundles are on the same indifference curve, then A) No comparison can be made between the two bundles since utility cannot really be measured. B) The costs of the bundles are the same. C) The consumer derives the same level of utility from each. D) The MRS between the two bundles equals one.

C) The consumer derives the same level of utility from each.

If a firm buys a building so as to have office space for its workers, the monthly opportunity cost of the building is best measured as A) The monthly mortgage payment the firm must pay. B) Zero. C) The rent the firm could earn if it rented the building to another firm D) The price the firm paid divided by twelve.

C) The rent the firm could earn if it rented the building to another firm

If Qd = 120- P and Qs = 5P If P=$15, which of the following is true? A) There is a surplus, but it is impossible to determine how large B) There is a surplus equal to 30. C) There is a shortage equal to 30. D) There is a shortage, but it is impossible to determine how large.

C) There is a shortage equal to 30.

Use the production function: Q=4L^(1/2)K^(1/2) The production function exhibits: A) Increasing returns to scale B) decreasing returns to scale C) constant returns to scale D) all of the above at various levels of output

C) constant returns to scale

If the utility for two goods "x" and "y" can be measured as U = x, then it can be concluded that A) "x" and "y" are perfect compliments B) "y" is a "bad" C) the indifference curves on the x,y graph are vertical where "x" is measured on the horizontal axis. D) the indifference curves on the x,y graph are upward sloping where "x" is measured on the horizontal axis.

C) the indifference curves on the x,y graph are vertical where "x" is measured on the horizontal axis.

If the demand for high definition televisions increases and the supply of high definition televisions increases, then A) It is clear that prices will decrease, the change in the quantity of televisions sold is ambiguous B) It is clear that prices will increase, the change in the quantity of televisions sold is ambiguous. C) It is clear that quantity sold will decrease, the change in the price of televisions is ambiguous. D) It is clear that quantity sold will increase, the change in the price of televisions is ambiguous.

D) It is clear that quantity sold will increase, the change in the price of televisions is ambiguous.

Suppose you only consume rice and bananas. Can both of these goods be Giffen goods in your consumption? A) No, they both can be inferior, but at least one of the goods cannot be a Giffen good. B) Yes, this is possible C) We need more information about the goods to answer this question D) No, at least one of the goods must be normal

D) No, at least one of the goods must be normal

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

D) They must have the same slope.

A cubic cost function implies: A) A U-shaped marginal cost curve B) a U-shaped average cost curve C) a U-shaped average variable cost curve. D) all of the above

D) all of the above

Economists proclaim that competitive firms make zero economic profit in the long run. This shows how A) Firms cover only explicit costs when economic profits are zero. B) Detached economists are from the real world. C) Unrealistic economic theory is. D) firms cover all their costs, both explicit and implicit.

D) firms cover all their costs, both explicit and implicit.

In the short run, a perfectly competitive firm earning positive economic profit is A) below its ATC B) on the downward-sloping portion of its ATC C) where MC=ATC D) on the upward-sloping portion of its ATC E) at the minimum of its ATC

D) on the upward-sloping portion of its ATC

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

D) perfectly horizontal.

Assume that steak and potatoes are complements. When the price of steak goes up, the demand curve for potatoes: A) shifts to the right B) remains constant C) shifts to the right initially, then returns to its original position. D) shifts to the right

D) shifts to the right

If a graph of a perfectly competitive firm shows that the MR = MC point occurs where MR is above AVC but below ATC, A) the firm can cover all of the fixed costs, but only a portion of variable costs B) the firm is still earning positive profit, as long as variable costs are covered. C) the firm is earning negative profit and will shut down rather than produce that level of output. D) the firm is earning negative profit, but will continue to produce where MR = MC in the short run E) the firm is covering explicit, but not implicit, costs.

D) the firm is earning negative profit, but will continue to produce where MR = MC in the short run

Short- run situations are evident from: A) the increasing marginal cost. B) the constant price C) the absence of marginal values at Q = 0 D) the presence of positive costs at Q = 0 E) the linear marginal revenue function

D) the presence of positive costs at Q = 0

In the relevant price range, a demand curve for a Giffen good would be. A) vertical B) horizontal C) downward sloping D) upward sloping

D) upward sloping

The long-run supply curve in a constant-cost industry is linear and A) Could have any constant slope. B) Downward-sloping. C) Vertical D) Upward-sloping E) Horizontal

E) Horizontal

The demand curve facing a perfectly competitive firm is A) related to, but not the same as either its marginal revenue curve or its average revenue curve B) unrelated to average or marginal revenue C) the same as its marginal revenue curve, but not its average revenue curve D) the same as its average revenue curve, but not the same as its marginal revenue curve E) the same as its average revenue curve and its marginal revenue curve

E) the same as its average revenue curve and its marginal revenue curve