Econ test 3
Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's profit-maximizing level of output is ______.
800
Which of the following is a defining characteristic of all perfectly competitive markets?
All firms sell the same standardized product.
Refer to the accompanying figure. At quantities less than 50 doughnuts per day
average cost is declining because marginal cost is less than average cost.
A price-taker faces a demand curve that is
horizontal at the market price.
When plotting marginal and average cost curves, the ______ cost curve always crosses the ______ cost curve at its ______.
marginal; average total; minimum
Average variable cost is defined as
variable cost divided by total output.
Suppose 30 employees can produce 50 units of output per day. Assuming the presence of diminishing marginal returns, producing 100 units of output per day would require
more than 30 additional employees.
If a firm spends $100 to produce 10 units of output and spends $200 to produce 18 units, then between 10 and 18 units of output, the marginal cost of production is:
$12.50.
Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's total revenue at its profit-maximizing level of output is ______.
$2,400
If a firm spends $400 to produce 20 units of output and spends $880 to produce 40 units, then between 20 and 40 units of output, the marginal cost of production is:
$24
Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's total cost at its profit-maximizing level of output is ______.
1600
If the market for mugs is perfectly competitive, and mugs sell for $7.50 each, then Aiko should make ______ mugs per day.
4
Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit if output is $15, what is this firm's profit-maximizing level of output?
60
Which of the following would be considered a factor of production in the provision of bus service?
Bus drivers
In the graph above, the average variable cost curve is labeled _____, the average total cost curve is labeled _____, and the marginal cost curve is labeled ______.
C; B; A
MC of total cost of production
Change in cost of production/change in output
TC
FC+VC
Which of the following is NOT true of a perfectly competitive firm?
It seeks to maximize revenue.
TR
P x Q
ATC
TC/Q
MC
TC/Q
AVC
TVC/Q or ATC-AFC
The price equals marginal cost rule for profit maximization is a specific example of which core principle?
The Cost-Benefit Principle
Which of the following is the most likely to be a fixed factor of production at a farm?
The land on which the farm is located
Variable cost (VC)
a cost that depends on the quantity of output produced
The short run is best defined as
a period of time sufficiently short that at least one factor of production is fixed.
Suppose a profit-maximizing firm in a perfectly competitive market is earning an economic profit of $1,345. If the firm's fixed cost increases from $200 to $300, the firm will
earn a smaller profit.
If a perfectly competitive firm produces an output level at which price is greater than marginal cost, then the firm should
expand output to earn greater profits or smaller losses
A fixed factor of production
is fixed only in the short run.
Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $15, then at this firm's profit-maximizing level of output, it will earn a ______ of ______.
loss, $60
In general, perfectly competitive firms maximize their profit by producing the level of output at which
marginal cost equals price.
If a production process exhibits diminishing returns, then as output rises
marginal cost will eventually increase.
As the market price of a service increases, more potential sellers will decide to perform that service because
more potential sellers will find that the market price exceeds their reservation price.
A profit-maximizing perfectly competitive firm must decide
only how much to produce, taking price as fixed.
Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $15, then this firm should
produce 60 units of output.
Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $9, then this firm should
shut down in the short run.
Profit maximizing
subtract new from old in regards to marginal cost price.
diminishing return
subtract new from old, must be less than price
One reason that variable factors of production tend to show diminishing returns in the short run is that
there is only so much that can be produced using additional variable inputs when some factors of production are fixed.
profit
total revenue- total cost