Exam 2
Refer to the data. The value for W is
20
All of the following are long-run changes, except
A firm produces more output by acquiring more raw materials for its existing factory
Which of the following is correct as it relates to cost curves?
Marginal cost intersects average total cost at the latter's minimum point.
In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs
are $1,250.
The price elasticity of demand of a straight-line demand curve is
elastic in high-price ranges and inelastic in low-price ranges.
An industry comprising 40 firms, none of which has more than 3 percent of the total market for a differentiated product, is an example of
monopolistic competition
Mary says, "You would have to pay me $50 to attend that pro wrestling event." For Mary, the marginal utility of the event is
negative
If a firm is a price taker, then the demand curve for the firm's product is
perfectly elastic
The accompanying table shows cost data for a firm that is selling in a purely competitive market. The firm will produce its output only if the price is at least equal to what minimum level?
$4
Refer to the accompanying diagram. At the profit-maximizing output, total revenue will be
0AHE.
According to the accompanying diagram, at the profit-maximizing output, total variable cost is equal to
0CFE
Marginal product is zero when the total product is
58
Suppose a firm sells its product at a price lower than the per-unit implicit costs of producing it. Which of the following statements is definitely true?
The firm may earn positive accounting profits, but will face economic losses
A perfectly inelastic demand curve
a vertical line reflecting a situation in which any price change has no effect on the quantity demanded; the elasticity value equals zero
DASH Airlines is considering the addition of a flight from Red Cloud to David City. The total cost of the flight would be $1,100, of which $800 are fixed costs already incurred. Expected revenues from the flight are $600. DASH should
add this flight, because marginal revenue exceeds marginal costs and total revenue exceeds total variable cost.
According to the accompanying diagram, at the profit-maximizing output, the firm will realize
an economic profit of ABGH.
Economists would describe the U.S. automobile industry as
an oligopoly
The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.
downsloping, perfectly elastic
The primary force encouraging the entry of new firms into a purely competitive industry is
economic profits earned by firms already in the industry.
Refer to the diagram for a purely competitive producer. If product price is P3,
economic profits will be zero.
In the provided diagram, at the profit-maximizing output, total profit is
efbc
The short run is characterized by
fixed plant capacity
Which of the following is not a basic market model?
free enterprise
If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will
increase the amount demanded by more than 10 percent.
If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will
increase the quantity demanded by about 25 percent.
Assume a purely competitive firm is selling 200 units of output at $3 each. At this output, its total fixed cost is $100 and its total variable cost is $350. This firm
is making a profit, but not necessarily the maximum profit.
If a firm decides to produce no output in the short run, its costs will be
its fixed costs
Assume for a competitive firm that MC = AVC at $12, MC = ATC at $20, and MC = MR at $16. This firm will
minimize its losses by producing in the short run.
Which characteristic would best be associated with pure competition?
price takers
A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should
produce because the resulting loss is less than its TFC.
In which of the following industry structures is the entry of new firms the most difficult?
pure monopoly
According to the information in the provided diagram, this firm is selling its product in a(n)
purely competitive market
Production costs to an economist
reflect opportunity costs.
If at the MC = MR output, AVC exceeds price,
some firms should shut down in the short run
Refer to the diagram for a purely competitive producer. The firm's short-run supply curve is
the bcd segment and above on the MC curve.
Diminishing returns begin to occur with the hiring of the _________ unit of labor.
third
Diminishing marginal returns become evident with the addition of the
third worker
Suppose that, when producing 10 units of output, a firm's AVC is $22, its AFC is $5, and its MC is $30. This firm's
total cost is $270.
All of the following statements apply to a purely competitive market in the long run, except
total fixed costs remain constant even when output expands in the long run.
The ability of a good or service to satisfy wants is called
utility
In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if
total revenue is less than total variable cost
Refer to the diagram. Between prices of $5.70 and $6.30,
D1 is more elastic than D2.
Over the range of positive, but diminishing, marginal returns for an input, the total product curve
rises at a decreasing rate