MIcro Test 3

Total cost is A) the sum of the total fixed cost and the total variable cost. B) the sum of the average fixed cost and the average variable cost. C) the difference between the average variable cost and the average fixed cost. D) the product of the marginal cost times the average total cost.

A) the sum of the total fixed cost and the total variable cost.

At that amount of output where diminishing marginal returns first sets in, A) total product will begin to decline. B) average product will begin to decline. C) marginal product will begin to decline. D) All of the above.

C) marginal product will begin to decline.

A firm's basic goal is best described as A) maximizing total revenue. B) maximizing sales. C) maximizing profit. D) minimizing total cost

C) maximizing profit.

In the short run a perfectly competitive firm will A) never shut down. B) shut down if P < ATC. C) shut down if P < AVC. D) shut down if P > AFC.

C) shut down if P < AVC.

Opportunity cost is best defined as A) how much money is paid for something. B) how much money and time it takes to consume something. C) the value of the next best alternative that is given up in making a choice. D) the total of all other alternatives that are given up in making a choice.

C) the value of the next best alternative that is given up in making a choice.

Economic profit is equal to A) total revenue minus economic depreciation. B) explicit costs plus implicit costs. C) total revenue minus opportunity cost. D) normal profit.

C) total revenue minus opportunity cost.

The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total cost of producing 50 bikes? A) $100 B) $200 C) $300 D) $400

D) $400

In the short-run equilibrium, a firm in perfect competition produces at an output level where A) P > ATC and MR = MC. B) P = ATC and MR = MC. C) P < ATC and MR = MC. D) All of the above are possible outcomes.

D) All of the above are possible outcomes.

A firm will expand the amount of output it produces as long as its A) average total revenue exceeds its average total cost. B) average total revenue exceeds its average variable cost. C) marginal cost exceeds its marginal revenue. D) marginal revenue exceeds its marginal cost.

D) marginal revenue exceeds its marginal cost.

Which market type has characteristics as follows: one firm, good or service produced has no close substitutes, barriers to entry prevent new firms from entering into the industry? A) perfect competition B) monopolistic competition C) oligopoly D) monopoly

D) monopoly

With free trade, producer surplus is a. $845. b. $1,620. c. $1,690. d. $3,240.

b. $1,620.

As a result of trade, total surplus increases by a. $50. b. $100. c. $250. d. $500.

c. $250.

The perfectly competitive firm's supply curve is its A) marginal cost curve, at all points above the minimum average variable cost curve. B) marginal cost curve, at all points above the minimum average fixed cost curve. C) marginal revenue curve, at all points above the minimum average revenue curve. D) marginal revenue curve, at all points above the minimum average total cost curve.

A) marginal cost curve, at all points above the minimum average variable cost curve.

In the above figure, the firm is making an economic loss at A) point a. B) point c. C) points b and d. D) points a, b, and d

A) point a.

The figure above shows the demand and cost curves for a single-price monopolist. What economic profit does this firm earn? A) zero B) $600 C) $400 D) $200

D) $200

Consider the perfectly competitive firm in the above figure. The shutdown point occurs at a price of A) $11. B) $12. C) $16. D) $22.

A) $11.

Mr. Sweet opened a candy store. He rented a building for $30,000 a year. During the first year of operation, Sweet paid $40,000 to his employees, $10,000 for utilities, and $20,000 for goods he bought from other firms. His total revenue was $135,000. Sweet's best alternative to running this candy store is to work for Walmart as a sales associate for $15,000 a year. What is Sweet's economic profit? A) $20,000 B) −$20,000 C) zero D) $35,000

A) $20,000

The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total fixed cost associated with producing 64 bikes? A) $200 B) $300 C) $400 D) $500

A) $200

The long run is a period of time in which A) all inputs are variable. B) all inputs are fixed. C) some but not all inputs are fixed. D) some but not all inputs are variable.

A) all inputs are variable.

The relative price of a good is A) an opportunity cost. B) equal to the money price of a good. C) equal to the price of that good divided by the quantity demanded of another good. D) what you get paid for babysitting your cousin.

A) an opportunity cost.

The figure above shows the demand and cost curves for a single-price monopolist. What price will the firm charge? A) $50 per unit B) $30 per unit C) $20 per unit D) $10 per unit

B) $30 per unit

The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total variable cost associated with producing 60 bikes? A) $200 B) $300 C) $400 D) $500

B) $300

The figure above shows the demand and cost curves for a single-price monopolist. What level of output maximizes the firm's economic profit? A) 0 units B) 20 units C) 30 units D) 50 units

B) 20 units

Why can a monopoly earn an economic profit in the long run? A) Because there are close substitutes for the firm's product. B) Because the firm is protected by barriers to entry. C) Because there is only a single firm in the market. D) ALL of the above are reasons why a monopoly can earn an economic profit in the long run.

B) Because the firm is protected by barriers to entry

In the figure above, curve C is the ____ curve. A) average fixed cost B) average variable cost C) average total cost D) marginal cost

B) average variable cost

In the above figure, the firm is breaking even at points A) a and c. B) b and d. C) c and d. D) a and d.

B) b and d.

In comparison with a perfect competition, a single-price monopolist with the same costs A) generates a smaller consumer surplus but a larger economic profit. B) generates a smaller consumer surplus and a smaller economic profit. C) generates a larger consumer surplus and a larger economic profit. D) generates a larger consumer surplus and a smaller economic profit.

B) generates a smaller consumer surplus and a smaller economic profit.

Opportunity cost differs from the costs measured by an accountant because opportunity cost includes all A) profits. B) implicit costs. C) conventional depreciation. D) economic profit.

B) implicit costs.

In perfect competition, the price of the product is determined where the A) industry elasticity of supply equals the industry elasticity of demand. B) industry supply curve and industry demand curve intersect. C) industry average variable cost equals the industry average total cost. D) firm marginal cost equals the firm's marginal revenue.

B) industry supply curve and industry demand curve intersect.

In the long run, the economic profits of a firm in a perfectly competitive industry A) will be below zero. B) will equal zero. C) will be above zero. D) can be above, below, or equal to zero

B) will equal zero.

The figure above depicts the marginal revenue and costs of a perfectly competitive firm. The price the firm charges is A) $4 per unit. B) $8 per unit. C) $16 per unit. D) None of the above answers is correct

C) $16 per unit.

Consider the perfectly competitive firm in the above figure. At what price will long-run equilibrium occur? A) $11. B) $12. C) $22. D) $23.

C) $22.

The figure above depicts the marginal revenue and costs of a perfectly competitive firm. The firm's profit is maximized when the firm produces A) 90 units of output. B) 130 units of output. C) 170 units of output. D) 210 units of output.

C) 170 units of output.

The above table shows the per day total cost for Kiley's Baseball Glove Company. Each glove is priced at $50 and Kiley's Baseball Glove Company is a perfectly competitive firm. At which of the following output levels is the economic profit maximized for Kiley's Baseball Glove Company? A) 0 B) 2 C) 5 D) 8

C) 5

A market with the characteristics of many firms selling an identical product, many buyers, and no restrictions on entry or exit to the market is A) a monopoly market. B) an oligopolistic market. C) a perfectly competitive market. D) a monopolistically competitive market.

C) a perfectly competitive market.

Market power is the A) size of the market. B) forces of supply and demand. C) ability of a firm to set its price. D) political power of monopolies.

C) ability of a firm to set its price.

Freedom of entry and exit in perfect competition A) means that firms' price and average total cost of producing are always equal. B) never allows firms to earn economic profits. C) leads to falling prices when new firms enter the market. D) forces firms to abandon product differentiation but only in the long run

C) leads to falling prices when new firms enter the market.

In the figure above, curve A is the ____ curve. A) average fixed cost B) average variable cost C) average total cost D) marginal cost

D) marginal cost

Trade raises the economic well-being of a nation in the sense that a. the gains of the winners exceed the losses of the losers. b. everyone in an economy gains from trade. c. since countries can choose what products to trade, they will pick those products that are most beneficial to society. d. the nation joins the international community when it begins to engage in trade.

a. the gains of the winners exceed the losses of the losers.

For any country, if the world price of copper is lower than the domestic price of copper without trade, that country should a. export copper. b. import copper. c. neither export nor import copper, since that country cannot 10 gain from trade. d. neither export nor import copper, since that country already produces copper at a low cost compared to other countries.

b. import copper.

Spain allows trade with the rest of the world. We know that Spain has a comparative advantage in producing olive oil if we know that a. Spain imports olive oil. b. the world price of olive oil is higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed. c. consumer surplus in Spain would exceed producer surplus in Spain if trade with other countries were not allowed. d. All of the above are correct

b. the world price of olive oil is higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed.

With free trade, this country will a. import 50 calculators. b. import 100 calculators. c. export 50 calculators. d. export 100 calculators.

d. export 100 calculators.