Econ Exam 3
C
A competitive firm's marginal cost curve is regarded as its supply curve because A. the position of the marginal cost curve determines the price for which the firm should sell its product. B. among the various cost curves, the marginal cost curve is the only one that slopes upward. C. the marginal cost curve determines the quantity of output the firm is willing to supply at any price. D. the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized.
A
A local potato chip company plans to keep and maintain its chip factory, which is estimated to last 25 years. All cost decisions it makes during the 25-year period A. are short-run decisions. B. are long-run decisions. C. involve only maintenance of the factory. D. are zero, since the cost decisions were made at the beginning of the business.
A
A long-run supply curve is flatter than a short-run supply curve because A. firms can enter and exit a market more easily in the long run than in the short run. B. long-run supply curves are sometimes downward sloping. C. competitive firms have more control over demand in the long run. D. firms in a competitive market face identical cost structures.
A
A market might have an upward-sloping long-run supply curve if A. firms have different costs. B. consumers exercise market power over producers. C. all factors of production are essentially available in unlimited supply. D. the entry of new firms into the market has no effect on the cost structure of firms in the market
D
As Al's Radiator Company adds workers while keeping the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Al's Radiator Company encounters A. economies of scale. B. diseconomies of scale. C. increasing marginal returns. D. diminishing marginal returns.
A
Assume a certain firm regards the number of workers it employs as variable, and that it regards the size of its factory as fixed. This assumption is often realistic A. in the short run, but not in the long run. B. in the long run, but not in the short run. C. both in the short run and in the long run. D. neither in the short run nor in the long run
B
Constant returns to scale occur when A. long-run total costs are constant as output increases. B. long-run average total costs are constant as output increases. C. the firm's long-run average cost curve is falling as output increases. D. the firm's long-run average cost curve is rising as output increases.
D
Economies of scale arise when A. an economy is self-sufficient in production. B. individuals in a society are self-sufficient. C. fixed costs are large relative to variable costs. D. workers are able to specialize in a particular task
losing profit
If P<ATC, the firm is __________
making profit
If P>ATC, the firm is __________
A
If a competitive firm is (i) selling 1,000 units of its product at a price of $9 per unit and (ii) earning a positive profit, then A. its total cost is less than $9,000. B. its marginal revenue is less than $9. C. its average revenue is greater than $9. D. the firm cannot be a competitive firm since competitive firms can only earn zero profit.
C
If a firm in a perfectly competitive market triples the number of units of output sold, then total revenue will A. more than triple. B. less than triple. C. exactly triple. D. Any of the above may be true depending on the firm's labor productivity.
variable cost
If a firm produces nothing, which of the following costs will be zero? A. total cost B. fixed cost C. opportunity cost D. variable cost
B
In a competitive market with free entry and exit, if all firms have the same cost structure, then A. all firms will operate at efficient scale in the short run. B. all firms will operate at efficient scale in the long run. C. the price of the product will differ across firms. D. the number of sellers in the market will steadily decrease over time
D
In a market with 1,000 identical firms, the short-run market supply is the A. marginal cost curve (above average variable cost) for a typical firm in the market. B. quantity supplied by the typical firm in the market. C. sum of the prices charged by each of the 1,000 individual firms. D. sum of the quantities supplied by each of the 1,000 individual firms.
C
In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is A. zero. B. equal to the industry profits. C. the market supply curve. D. a horizontal line
D
In the long-run equilibrium of a market with free entry and exit, marginal firms are operating A. at the point where average variable cost equals marginal cost. B. at the minimum point on their marginal cost curves. C. at their efficient scale. D. where accounting profit is zero.
D
In the short run, a firm incurs fixed costs A. only if it incurs variable costs. B. only if it produces no output. C. only if it produces a positive quantity of output. D. whether it produces output or not.
Total Product
Marginal Product can be calculated by looking at the change in ____________
D
Suppose a firm in a competitive market received $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? A. $5 and 50 B. $5 and 100 C. $10 and 50 D. $10 and 100
B
Suppose that a given firm experiences decreasing marginal product of labor with the addition of each worker regardless of the current output level. Refer to Scenario 13-4. Average fixed cost will be A. rising at all points. B. falling at all points. C. U-shaped. D. constant.
C
Suppose that in a competitive market the market price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market? A. Less than $2.50. B. More than $2.50. C. $2.50. D. The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm.
B
The amount by which total cost rises when the firm produces one additional unit of output is called A. average cost. B. marginal cost. C. fixed cost. D. variable cost
A
The long-run average total cost curve is always A. flatter than the short-run average total cost curve, but not necessarily horizontal. B. horizontal. C. falling as output increases. D. rising as output increases.
D
The marginal cost curve crosses the average total cost curve at A. the efficient scale. B. the minimum point on the average total cost curve. C. a point where the marginal cost curve is rising. D. All of the above are correct.
B
The marginal product of labor can be defined as A. change in profit/change in labor. B. change in output/change in labor. C. change in labor/change in output. D. change in labor/change in total cost
A
The short-run market supply curve in a perfectly competitive industry A. shows the total quantity supplied by all firms at each possible price. B. is perfectly inelastic at the market price. C. is perfectly elastic at the market price. D. is usually downward-sloping.
A
When a firm has little ability to influence market prices it is said to be in a. A. competitive market. B. a strategic market. C. a thin market. D. a power market.
B
When a firm's average total cost curve continually declines, the firm is a A. government-created monopoly. B. natural monopoly. C. revenue monopoly. D. All of the above are correct.
D
When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit, this task is accomplished by producing the quantity at which price is equal to A. sunk cost. B. average fixed cost. C. average variable cost. D. marginal cost.
B
When marginal cost exceeds average total cost, A. average fixed cost must be rising. B. average total cost must be rising. C. average total cost must be falling. D. marginal cost must be falling.
B
When new firms enter a perfectly competitive market, A. demand increases. B. the short-run market supply curve shifts right. C. the short-run market supply curve shifts left. D. existing firms will increase prices to keep the new firms from entering.
B
Whenever a perfectly competitive firm chooses to change its level of output, holding the price of the product constant, its marginal revenue A. increases if MR < ATC and decreases if MR > ATC. B. does not change. C. increases. D. decreases.
D
Which of the following is an implicit cost? A. Salaries paid to owners who work for the firm B. Interest on money borrowed to finance equipment purchases C. Cash payments for raw materials D. Foregone rent on office space owned and used by the firm
D
Which of the following must always be true as the quantity of output increases? A. Marginal cost must rise. B. Average total cost must rise. C. Average variable cost must rise. D. Average fixed cost must fall
C
Which of the following statements about costs is correct? A. When marginal cost is less than average total cost, average total cost is rising. B. The total cost curve is U-shaped. C. As the quantity of output increases, marginal cost eventually rises. D. All of the above are correct.