Sample Test 4 ECON
In the above table, based on the four-firm concentration ratio, which industry is the most concentrated?
Blodgets
The above table shows the short-run total product schedule for the campus bookstore. At what levels of books sold per hour will the marginal product of labor be greater than the average product of labor?
Both A and B are correct
Bud opened a flower shop....REFER TO TEST
Bud's opportunity cost of running his business? $57,300
In the above figure, the total fixed cost curve is curve
C
If a firm's marginal product of labor is LESS THAN its average product of labor, then an increase in the quantity of labor it employs definitely will
DECREASE its average product of labor
The difference between the market price of a new car used by a firm and the market price of the same car one year later is known as
ECONOMIC DEPRECIATION
A company needs to know the price of each resource it employs if it wants to determine whether or not it is achieving
ECONOMIC EFFICIENCY
Emma owns a firm the produces umbrellas. Currently, produces 2,500 umbrellas a day. Emma cannot produce more umbrellas in a day unless she purchases another machine or hires more workers.
Emma is TECHNOLOGICALLY efficient.
The owner of a proprietorship has UNLIMITED liability and MIGHT BE required
to use all of his or her entire wealth to pay for the firm's losses.
Which of the following statements regarding principal-agent relations is CORRECT?
Managers are both principals and agents
As output increases, total cost INCREASES
total fixed cost DOES NOT CHANGE, and total variable cost INCREASES
The average product of labor is equal to the
total product divided by the total number of workers hired
The national concentration ratio
underestimates concentration for the newspaper industry and overestimates it for the automobile industry
Based on the table above, which shows the firms and sales in an industry,
what is the four-firm concentration ratio? 74
Which of the following statements is TRUE?
when marginal product is less than average product, average product is decreasing
All the decisions made by people who operate firms have overriding objective,
which is to MAKE MAXIMUM ATTAINABLE PROFIT
If an industry were perfectly competitive, the four-firm concentration ratio would be close to 0 and the Herfindahl-Hirshman Index
would be close to 0
When Acme Inc. produces a certain amount of output by using the least amount of inputs, Acme Inc. definitely
achieves technological efficiency
By making most of its employees owners of the company, United Airlines attempted to
address the principal-agent problem between the workers and managers
The long run is a period of time in which
all factors of production are variable
There are six firms in an industry, with market shares of 50 percent, 25 percent, 10 percent, 10 percent, 3 percent and 2 percent. The four firm concentration ratio is 95
and the HHI is 3338
Economists define the short run as a period of time so short that
at least one factor of production cannot be varied
The short run is a time frame in which
at least one factor of production is FIXED
If as output increases average product increases, then
average variable cost decreases
In the above figure, the long-run average cost curve exhibits diseconomies of scale
between 20 and 25 units per hour
In the long run, a firm can vary
both its labor and its capital
Technological efficiency occurs when the firm produces a given output
by using the least amount of inputs
Over the years, the U.S. economy has become increasingly
competitive
The above table shows the market shares for all the landscaping services in a suburban area. The four-firm
concentration ratio equals 65 percent
The average total cost curves for plants A,B,C, and D are shown in the above figure. It is possible that the long-run average cost curve runs through points
d, e and f
The principal-agent problem refers to the fact that firms must
devise incentives to get employees to work in the best interest of the firm's workers
Tudor's Deli and Catering could have sold their delivery van on Dec 31,2010 for $16,000. If they could sell the same van on Dec 31, 2011, for $13,000 , then the
economic depreciation in 2011 for this van is $3,000.
The average total cost curves for Plant 1, ATC0 and Plant 2, ATC1, are shown in the figure above. Over what range of output is it efficient to operate Plant 2?
greater than 25
Use the data in the table above and suppose that labor is the only variable factor of production. When 122 dozen donuts are produced at Decent Donuts, the MC Curve
has a positive slope
The marginal product of labor is equal to the
increase in the total product that results from hiring one more worker with all other inputs remaining the same
The above table shows the market shares for all the landscaping services in a suburban area. A MERGER between the three largest firms would
increase the four-firm concentration ratio and increase the Herfindahl-Hirschman Index(HHI)
Profit maximization
increases the likelihood that a firm will survive
The output at which average variable cost is a minimum is LESS THAN the output at which AVERAGE TOTAL COST
is a minimum
A firm's average total cost is $80, its fixed cost is $1000, and its output is 100 units. Its average variable cost
is more than $60
When Fatz confectionery can lower the cost of manufacturing and packaging a pound of candy by doubling the quantity manufactured and packaged each day,
it will achieve economies of SCALE
Diseconomies of scale definitely means that as the firm increases its output, its
long-run average total cost increases
Even though the market for bricks has a low concentration ratio nationally, the U.S. Justice Department might still scrutinize any mergers in this industry because the
market is regional not national, and the regional concentration might be high.
The most important goal of the firm is to
maximize its profits
When the total product curve is drawn in a figure that measures employment along the horizontal axis, it is a graph that shows the
maximum output attainable for each quantity of labor employed
Total product is
maximum output that a given quantity of labor can produce
An advantage of the corporate form of organization is that
owners have limited liability
Under oligopoly, there are A few firms selling
products that are EITHER IDENTICAL OR DIFFERENT
One reason why firms replace markets for some activities is that firms
reduce the number of transactions required
After constructing a new factory, the cost of building the factory is
sunk cost
A period of time in which the quantity of all factors of production used by a firm can be varied is called
the LONG RUN
When a firm is experiencing economies of scale
the LRAC curve slopes downward
Silvio's Pizza is a small pizzeria.... When Silvio's use 2 ovens and hires the 3rd worker,
the marginal product of labor is LESS THAN the average product of labor, and therefore the average product of labor INCREASES
The table above shows four methods for producing 10 computer desks a day. If the cost of a worker is $100 a day and the cost of capital is $100 a day,
the method that is economically efficient is A (1 unit of workers, 3 units of capital)
The long run is distinguished from the short run because only in the long run
the quantities of all factors of production can be VARIED
The short run is a period of time in which
the quantity of at least one factor or production is fixed
In the short run
the size of the plant is fixed
Using the data in the above table, if the price of an hour of labor is $20 and the price of a unit of capital is $10, then the most economically efficient technique for producing 100 sweaters is
A (10 units of labor, and 35 units of capital)
The above table gives techniques Jitters Coffee Company can use to package 5,000 pounds of coffee. If the cost of capital is $50 per unit and cost of labor is $100 per unit, the economically efficient technique for packaging 5000 pounds of coffee is
A (70 units of capital and 20 units of labor)
In a corporation, the managers are the stockholders'
AGENTS
An example of a variable factor of production in the short run is
AN EMPLOYEE
The table above gives production information for Bob's baseball cap company. Bob's total cost when zero caps are produced is $200 and workers cost $10 an hour. The total fixed cost of producing 10 baseball hats per hour is
$200
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 of producing 60 bikes?
$300
Sheila's Sports Shop.....Sheila's costs for resources bought in the market equal
$330,000 per year
The above table shows some cost data for Tracey's Tents. What is the average total cost when output is 3?
$40
In the above figure, the marginal cost curve is curve
A
The above table shows the market shares for all the landscaping services in a suburban area. The Herfindahl-Hirschman Index equals
1600
Using the table above, what is the marginal product of the 5th worker hired at Decent Donuts?
22 dozen donuts per day
Using the data in the table above, if the firm employs 5 workers, total product and average product and marginal product of the fifth worker are
25, 5.00, and 2 respectively
In the above table, the marginal product of the third worker is
4
The above table shows the total product of producing baseball hats. The average product of 3 workers is equal to
6.00 baseball hats
In the above table, the marginal product of the 7th worker is 6. What is the total product when 7 workers are employed?
70
Unlimited liability is NOT a characteristic of
CORPORATION
Where large amounts of CAPITAL are used, the dominant form of business organization is the
CORPORATION
Which of the following types of business organization have limited liability?
CORPORATION ONLY
Mr.Sweet rented a candy store with $30,000 for building, $40,000 salary costs, $10,000 utility costs, $20,000 in costs of goods, and total revenue of $135,000.
His best alternative is a sales associate for walmart $15,000 a year. What is Mr. Sweets TOTAL OPPORTUNITY COST? $115,000
If a firm chooses to produce 100 units of output for $150 with 10 units of labor and 12 units of capital, when they could produce the same 100 units for $120 with 10 units of labor and 8 units of capital, the firm is technologically
INEFFICIENT and economically INEFFICIENT
Kris wants to purchase a house. She buys newspapers to read the classified advertisements and spends her evenings with realtors looking at houses.
Kris has incurred the TRANSACTIONS costs of making a purchase.
Which of the following statements does NOT correctly characterize normal profit?
It is equal to a firm's total revenue minus its opportunity cost.
Which is the major advantage of the corporate form of business organization?
Its owners have limited liability
In the short run
NO firm experiences economies of SCALE
The table below shows four alternative techniques for assembling a car. The cost of labor is $20 per hour, and the cost of capital is $10 an hour. Which of the four techniques for assembling a car is economically efficient?
T-4(100 units of labor and 200 units of capital)
Taco Bell produces both tacos and burritos because when it does so,
Taco Bell experiences economies of SCOPE
Which of the following is a CORRECT statement
Technological efficiency depends only on production methods, while economic efficiency depends on the costs of the resources
Cindy's Sweaters' production function is shown in the above table. Cindy rents two knitting machines for $30 a day each and hires workers at a wage rate of $40 a day.
What is the marginal cost of the 19th sweater? $20.00
Joe quits his job as an insurance agent and opens his own sporting goods store. If his profits as measured by his accountant are greater than zero, then
There is not enough information to determine his economic profit, if any.
A firm finds that it can produce several different goods at a lower average cost by using some of the same production facilities than it could if it produced each of the goods with separate production facilities.
This firm is gaining economies of scope
Electric utility companies have built larger and larger electric generating stations and, as a result, the long-run average cost of producing each kilowatt hour decreased.
This is an example of ECONOMIES OF SCALE
Dell uses outsourcing, that is, Dell buys the components of the computers it produces from other firms.
This is an example of MARKET COORDINATION
Suppose that Tracy & Pat start a business. Because of a series of bad decisions by Tracy, the company goes bankrupt, owing $50,000.
Tracy is penniless and Pat is a millionaire. If the company were organized as a partnership, Pat would be responsible for $50,000 of debt
Heidi quit her job as a chef making $40,000 a year to start a restaurant. The first year, Heidi's restaurant earned $100,000 in revenue. Heidi pays $50,000 in wages, and $20,000 to buy food.
What is Heidi's economic profit for the year? -$10,000
The above table gives some production and cost information for Flaming Fernando's, a restaurant that sells Fiery Frijoles.
What is the average total cost of producing 4,500 frijoles? $2
Silvio's Pizza is a small pizzeria.....Suppose Silvio's uses Plant 1 and hires 3 workers.
What is the firm's average fixed cost? $11.00
In the above table, if price of labor is $10 per hour and price of capital is $20 per unit
Which method of producing 50 space crafts is economically efficient? Technique Y
A cost that has already been made and cannot be recovered is called
a SUNK COST
An economic profit for a self-employed entrepreneur is
a profit over and above opportunity cost