Micro exam 3
Suppose ventilator manufacturers are profit-maximizing firms with costs outlined in this chapter (large fixed costs and increasing marginal costs). These firms typically operate in a competitive market, though the government is considering the following policies to boost production. For each policy, explain whether production will in fact increase. The government gives each firm a large sum of money with no strings attached. Will ventilator production increase? A. No, a no-strings-attached sum of money will not impact marginal revenue or marginal cost, so production will remain unchanged. B. No, the large sum of money will increase marginal revenue, making it profitable for firms to decrease production. C. Yes, the large sum of money will induce all firms to increase production.
A-No, a no-strings-attached sum of money will not impact marginal revenue or marginal cost, so production will remain unchanged.
The ____ curve shows the additional cost of producing each additional unit of output A- marginal cost B- total cost C- average cost D- marginal product
A- marginal cost
The larger the output, the more output over which fixed cost is distributed. called the ___ effect, this leads to a ___ average ___ cost as output rises A- spreading; lower; fixed B-diminishing returns; lower; variable C- spreading; higher; fixed D-diminishing returns; higher; variable
A- spreading; lower; fixed
Which of the following equations calculates the profits of a firm? A. Total revenues−Total costs B. Total revenues−Fixed costs C. Total costs−Fixed costs D. Total revenues + Total costs
A-Total revenues−Total costs
All firms in a perfectly competitive market are said to be __________. A. price takers. B. price leaders. C. price neutral. D. profitable in the long run.
A-price takers.
If a nation exports a good when the economy is opened to trade, relative to the autarky price, the domestic price of the good will _____ and domestic consumption will _____. A-rise; fall B-rise; rise C-fall;rise D-fall;fall
A-rise; fall
Which of the following firms is the most likely to operate in a perfectly competitive industry? A- Exxon, one of the few domestic oil refiners and gasoline producers B- A farm in Kansas that grows corn C-Time Warner Cable, which is the only cable and internet provider in Durham, NC D-Thundercloud Subs, one of many sandwich shops in Austin, TX focusing on cold submarine sandwiches
B- A farm in Kansas that grows corn
in a perfectly competitive market, a seller _______, chooses to raise the price of its good since all sellers in the market produce _______, so raising the price would result in _______ A- Can, similar goods, more customers B-Cannot, Identical goods, losing all its customers C- cannot, identical goods, keeping the same customers D- can, Identical goods, losing all its customers
B- Cannot, Identical goods, losing all its customers
Suppose ventilator manufacturers are profit-maximizing firms with costs outlined in this chapter (large fixed costs and increasing marginal costs). These firms typically operate in a competitive market, though the government is considering the following policies to boost production. Via tax subsidies, the government reduces the cost of labor and parts. Will ventilator production increase? A. No, if the government subsidizes production, it will incentive firms to save money and cut production. B. Yes, the subsidy will lower costs and encourage entry into the market, causing production to increase. C. No, the subsidy will change how many units consumers demand, but it will not impact production.
B-Yes, the subsidy will lower cost and encourage entry into the market, causing production to increase.
According to the profit-maximizing principle of marginal analysis if the marginal benefit is ____ the marginal cost ____ A. more than; an activity should be reduced B. less than; an activity should be reduced C. equal to; an activity should be reduced D. more than; net benefit is maximized
B. less than; an activity should be reduced
What is the difference between accounting profit and economic profit? A. Accounting profit only subtracts implicit costs from total revenue, while economic profit only subtracts explicit costs. B. Accounting profit subtracts both explicit and implicit costs from total revenue, while economic profit only subtracts explicit costs. C. Economic profit subtracts both explicit and implicit costs from total revenue while accounting profit only subtracts explicit costs. D. Economic profit only subtracts implicit costs from total revenue, while accounting profit only subtracts explicit costs.
C- Economic profit subtracts both explicit and implicit costs from total revenue while accounting profit only subtracts explicit costs.
The following graph shows the short-run production function of a firm. Please take a look at the graph above. When do we observe a negative return to inputs? A-This production process does not exhibit negative returns B-When the first unit of input is hired C-When the tenth unit of input is hired D-When the second unit of input is hired
C-When the tenth unit of input is hired
in the economics, maximization of the total profit of an activity occurs when: a. MB=MC b. MB>MC c. MB<MC d. MB approaches MC
a. MB=MC
When the ATC curve is decreasing, we know that the MC curve is ______
below the ATC curve
Suppose ventilator manufacturers are profit-maximizing firms with costs outlined in this chapter (large fixed cost and increasing marginal costs). These firms typically operate in a competitive market, though the government is considering the following policies to boost production. The government promises to buy ventilators at an above-market price. Will ventilator production increase? A. Yes, when prices rise, the quantity supplied rises as well. B. No, if the government pays an above-market price, it will result in a decrease in production. C. No, the government promising to buy ventilators at an above-market price will have no impact on production.
A-Yes, when prices rise, the quantity supplied rises as well.
cenario: In 2012, the company behind the EpiPen settled a lawsuit by agreeing to allow a generic competitor into the market in 2015, potentially cutting into a big part of its business. The company, Mylan, had already been steadily increasing the price of EpiPen, an injector containing a drug that can save people from life-threatening allergy attacks. After the settlement, it started to raise the price even faster. Now, as Mylan faces growing public furor over its pricing of EpiPen, the company's history of pricing the product highlights a common tactic in the drug industry: sharply raising prices in the years just before a generic competitor reaches the market, as a sort of final attempt to milk big profits from the brand-name drug. Whether the looming generic competition was a motive for the price increases is not entirely clear, because Mylan has declined to answer questions about its thinking. But while the company was once taking two 10 percent price increases a year, it has made two 15 percent increases annually starting in 2014, when the generic competition seemed imminent. Over all, the list price for a pack of two EpiPens is now over $600, up from a little more than $100 in 2007, the year Mylan acquired the product. Most of that increase-a rise to $609 from $265-has come in the last three years. (Source: "Mylan Raised EpiPen's Price Before the Expected Arrival of a Generic," New York Times, August 24, 2016.)Refer to the scenario above. Which condition of a perfectly competitive market could most directly be hampered in the market for epinephrine autoinjectors? A-Each seller produces an identical good or service. B-Each seller produces a negligible fraction of the total market supply. C-There is free entry to and exit from the market. D-None. The market for the product satisfies all the conditions for perfect competition.
B-Each seller produces a negligible fraction of the total market supply.
Under which of the following examples is it likely that the accounting profit is positive and the economic profit is negative? A. Opening a bank branch near a university campus. B. Using a store in the mall to sell clothes instead of shoes. C. If you use a diamond mine as a tourist attraction instead of using it for mining. D. Such a scenario, where accounting cost is positive and economic profit is negative, is not possible.
C-If you use a diamond mine as a tourist attraction instead of using it for mining.
the average total cost of production is ___________. A. annual wages multiplied by the number of fixed-up houses per year. B. annual wages. C. the number of fixed-up houses per year. D. annual wages divided by the number of fixed-up houses per year.
D- annual wages divided by the number of fixed-up houses per year.
Assume Catrina's Crepes has the following production schedule and that workers are paid $500 per week and the rent on the shop is $1000 per week. Which of the following cost curves would shift if the rent on Catrina's shop went up by $100 per month? A-AFC, AVC, ATC, and MC B-AFC, ATC, and MC C-This would not shift the cost curves. D-AFC and ATC
D-AFC and ATC
If a firm is maximizing profits in the short run at a level of output where Average total cost > Price > Average variable cost, then the firm is ________. A-earning positive economic profits B-breaking even (zero economic profits) C-realizing losses and will minimize losses by shutting down D-realizing losses but minimizing losses by continuing to produce
D-realizing losses but minimizing losses by continuing to produce
Is it possible for accounting profit to be positive and economic profit to be negative? A. No, economic profit must always be larger than accounting profit. B. Yes, this could occur if implicit costs were modest and explicit costs were high. C. No, economic profit and accounting profit will always end up being the same. D. Yes, this could occur if explicit costs were modest and implicit costs were high.
D-Yes, this could occur if explicit costs were modest and implicit costs were high.
and when the ATC curve is increasing, we know that MC is _____
above the ATC curve
