Test 3

11) How many hamburgers does Ron produce in order to maximize profits? A) 20 hamburgers B) 14 hamburgers C) 30 hamburgers D) 40 hamburgers

A) 20 hamburgers

44) Which of the following statements best summarizes the law of diminishing marginal returns? A)In the short run, as more labor is hired, output increases at a diminishing rate. B)As more labor is hired, the length of time that defines the short run diminishes. C)In the short run, as more labor is hired, output diminishes. D)In the short run, the amount of labor a firm will hire diminishes as output increases.

A) In the short run, as more labor is hired, output increases at a diminishing rate.

32) Which of the following statements is true for any marginal and average? A) When the marginal is greater than the average, the average rises. B) When the marginal is equal to the average, the average falls. C) When the marginal is rising, the average is rising. D) When the marginal is less than the average, the average rises.

A) When the marginal is greater than the average, the average rises.

26)In perfect competition, each individual firm faces ________ demand curve. A) a perfectly elastic B) an inelastic C) an upward sloping D) a downward sloping

A) a perfectly elastic

35) The marginal product of labor is the A) change in output resulting from a one-unit increase in labor. B) maximum output attainable with fixed factors when labor is the only variable factor. C) output level above which the rate of total product per unit of labor falls. D) output level above which the slope of the total product curve falls.

A) change in output resulting from a one-unit increase in labor.

42) An improvement in technology would result in A)downward shifts of MC and increases in output. B)increased quality of the good, but little change in MC. C)downward shifts of MC and reductions in output. D)upward shifts of MC and reductions in output. E)upward shifts of MC and increases in output.

A) downward shifts of MC and increases in output.

3) Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a________ price and sell a ________ quantity. A) higher; smaller B) lower; smaller C) lower; larger D) higher; larger

A) higher; smaller

34) In the short run, a perfectly competitive firm shuts down if the price of its product is A) less than its minimum average variable cost. B) greater than its minimum average variable cost. C) greater than its maximum variable cost. D) less than its minimum total cost.

A) less than its minimum average variable cost.

1) A firm maximizes profit by operating at the level of output where A) marginal revenue equals marginal cost. B) average revenue equals average cost. C) marginal revenue exceeds marginal cost by the greatest amount. D) total costs are minimized.E)average revenue equals average variable cost.

A) marginal revenue equals marginal cost.

22) The most important goal of the firm is to A) maximize its profits. B) maximize its sales volume. C) minimize its costs. D) maximize its revenues.

A) maximize its profits.

9) Total revenue equals A)price multiplied by quantity sold. B) the area between the demand curve and the marginal revenue curve. C) total cost minus profit. D) marginal revenue multiplied by quantity sold.

A) price multiplied by quantity sold.

13) What is Ron's total revenue when he is maximizing profit? A) $80 B) $120 C) $40 D) $114

B) $120

16) What is the approximate value of deadweight loss in the market? A)$80 B)$20 C)$40 D)$0

B) $20

31) What is Willy's maximized profit in the short run? A)$0 B)$24,000 C)$90,000 D)$45,000

B) $24,000

28) If the market price of wheat is $0.40 per bushel, how many bushels should Willy produce to maximize profits? A) 10,000 bushels B) 0 bushels C) 30,000 bushels D) 20,000 bushels

B) 0 bushels

20) Dee's TV Repair is the only TV repair shop in a small town. Dee is a single-price monopolist. Based on the demand and cost information in the table above, which of the following quantities of TV repairs should Dee undertake to maximize profit? A) 0 per day B) 2 per day C) 4 per day D) 3 per day

B) 2 per day

41) According to the above table, what is the average product of labor when the orchard employs 5 workers? A)270 bushels B)54 bushels C)40 bushels D)8 bushels

B) 54 bushels

19) Which of the following is true for a monopolist at the output level where P=MC? A) The monopolist is not maximizing profit and should increase output. B) The monopolist is not maximizing profit and should decrease output. C) The monopolist is earning a positive profit. D) The monopolist is maximizing profit.

B) The monopolist is not maximizing profit and should decrease output.

33) In perfect competition, A) there are few buyers. B) all firms in the market sell their product at the same price. C) there are significant restrictions on entry. D) each firm can influence the price of the good.

B) all firms in the market sell their product at the same price.

6) When natural or legal forces work to protect a firm from potential competitors, the market is said to have________. A) non-competitive entry B) barriers to entry C) non-competitive supply D) restricted competition

B) barriers to entry

10) A copyright creates a monopoly by restricting ________. A) demand for the product B) entry into the market C) the prices that can be charged D) government spending

B) entry into the market

8)The monopolist that maximizes profit A) does not impose a cost on society because the selling price is above marginal cost. B) imposes a cost on society because the selling price is above marginal cost. C) imposes a cost on society because the selling price is equal to marginal cost. D) does not impose a cost on society because price is equal to marginal cost.

B) imposes a cost on society because the selling price is above marginal cost.

5) The change in total cost from producing another unit of output equals the A) variable cost. B) marginal cost. C) average variable cost. D) average total cost.

B) marginal cost.

37) The smallest quantity of output at which long-run average cost is at a minimum is a firm's ________. A )maximum efficient scale B) minimum efficient scale C) profit-maximizing output point D) efficient output point

B) minimum efficient scale

43) A market structure in which one firm produces a good or service that has no close substitutes is called A)perfect competition. B)monopoly. C)oligopoly. D)monopolistic competition.

B) monopoly.

18) The return that an entrepreneur can expect to earn, on average, is called A) accounting profit. B) economic profit. C) profit. D) normal profit.

D) normal profit.

27) What is the breakeven price for Willy's Wheat Farm? A)$0.40 B)$1 C)$2 D)$0

C) $2

15) What is Ron's maximized economic profit? A) $80 B) $114 C) $40 D) $120

C) $40

30) If the market price of wheat is $3 per bushel, how much revenue per year does Willy make when he is maximizing profits? A)$78,000 B)$24,000 C)$90,000 D)$0

C) $90,000

40)According to the above table, what is the marginal product of the 4th worker? A) 230 bushels B)57.4 bushels C)50 bushels D)12.4 bushels

C) 50 bushels

36) Which of the following is true forBOTH monopoly and perfect competition? A) The marginal revenue curve is horizontal at the industry equilibrium price. B) The demand for the individual firm's product is perfectly elastic. C) Profits are maximized by producing at the level of output where marginal revenue is equal to marginal cost. D) Economic profits can be sustained indefinitely over time.

C) Profits are maximized by producing at the level of output where marginal revenue is equal to marginal cost.

38) As firms enter a perfectly competitive industry, the price A)falls and the existing firms' economic losses do not change. B)falls and the existing firms' economic profits do not change. C)falls and the existing firms' economic profits decrease. D)rises and the existing firms' economic profits decrease.

C) falls and the existing firms' economic profits decrease.

2) The marginal revenue curve for a non-price discriminating monopoly A) is the same as its demand curve. B) is horizontal. C) lies below its demand curve. D) lies above its demand curve.

C) lies below its demand curve.

7) In a perfectly competitive industry, a permanent increase in demand initially brings a higher price, economic A) loss, and entry into the industry. B) profit, and exit from the industry. C) profit, and entry into the industry. D) loss, and exit from the industry.

C) profit, and entry into the industry.

24) The following are key features of a monopoly EXCEPT A) the monopoly has a strong influence over the price of the good or service. B) no close substitutes exist for the good or service. C) the monopoly has severe diseconomies of scale. D) the monopoly is protected by a barrier to entry.

C) the monopoly has severe diseconomies of scale.

4) The short run is a period of time in which A) the quantities used of all resource are fixed. B) output prices are fixed. C) the quantity used of at least one resource is fixed. D) resource prices are fixed.

C) the quantity used of at least one resource is fixed.

39) Suppose at the current level of output for a firm, long-run marginal cost is $50 and long-run average cost is$75. This implies that: A) there are neither economies nor diseconomies of scale. B) there are diseconomies of scale. C)there are economies of scale.

C) there are economies of scale.

21) Dee's TV Repair is the only TV repair shop in a small town. Dee is a single-price monopolist. Based on the demand and cost information in the table above, what is the amount of economic profit earned or loss incurred at the quantity of TV repairs that profits are maximized or losses minimized? A) -$40 B) $80 C) -$20 D) $1022)

D) $10

12) What price should Ron charge for a hamburger to maximize profit? A) $3.80 B) $4 C) $2 D) $6

D) $6

14)What is his total cost when he is maximizing profit? A) $114 B) $40 C) $120 D) $80

D) $80

29) If the market price of wheat is $3.00 per bushel, how many bushels should Willy produce to maximize profits? A ) 20,000 bushels B) 0 bushels C) 10,000 bushels D) 30,000 bushels

D) 30,000 bushels

23) Perfectly competitive firms A) are price takers. B) sell homogeneous products. C) are small relative to the size of the market. D) All of the above are correct.

D) All of the above are correct.

25) In the short run, why does a production function eventually display diminishing returns to labor? A) The opportunity cost of hiring additional workers must eventually rise. B) As a firm hires more workers the skills and the work ethic of the additional workers will eventually decline. C) As the number of workers increases it becomes difficult to monitor them. D) As the number of workers increases eventually the gains from the division of labor and specialization are used up.

D) As the number of workers increases eventually the gains from the division of labor and specialization are used up.

17) If economic profits are equal to zero then A) its profits as measured by accountants must also be equal to zero. B) below normal profits are being earned. C) its profits as measured by accountants must be less than zero. D) normal profits are being earned.

D) normal profits are being earned.

45) Explicit costs are ________ and implicit costs are ________. A) used to maximize profits; used to minimize costs B) paid in money; paid in interest C)not measurable; measurable D) paid in money; incurred when a firm gives up an alternate action

D) paid in money; incurred when a firm gives up an alternate action