question
If the market price is $10, how many widgets should this profit-maximizing firm produce?
answer
16,000
question
At market price $6, the profit-maximizing rate of output will result in
answer
normal profits
question
According to the table above, which shows the costs of production for a firm, the average total cost of producing 3 units of output is
answer
20.00
question
Which of the following is always true of the relationship between average and marginal costs?
answer
Average variable costs are increasing when marginal costs are higher than average variable costs.
question
Which of the following is true about a firm's average variable cost?
answer
It will equal average total cost when fixed costs are zero.
question
The table above shows the amount of labor inputs necessary to produce given levels of output. If the cost of a unit of labor is $20 and total fixed cost is $100, the average total cost of producing 20 units of output is
answer
$7
question
Assume that total fixed costs are $46, that the average product of labor is 5 units when 10 units of output are produced, and that the wage rate is $12. If labor is the only variable input, what is the average total cost of producing 10 units of output?
answer
$7
question
The average total cost to the firm of producing 2 units of output is
answer
$95.00
question
If the product price is $85, how many units of output must the firm produce in order to maximize profits?
answer
5
question
If labor is the only variable input and it costs $15 per hour and if the marginal product of labor is 3 units per hour, the short-run marginal cost of 1 unit of output is approximately
answer
$5.00
question
A perfectly competitive firm, earning economic profits, produces and sells 100 units of output at a price of $20 per unit. If its marginal cost of increasing output to a rate of 101 units is $18, which of the following statements is correct?
answer
The total profit from selling 101 units is $2 greater than the total profit from selling 100 units.
question
The chart below gives a firm's total cost of producing different levels of output.
The profit-maximizing level of output for this firm is
The profit-maximizing level of output for this firm is
answer
impossible to determine from the information given
question
The chart below gives a firm's total cost of producing different levels of output.
The marginal cost of producing the fourth unit of output is
The marginal cost of producing the fourth unit of output is
answer
$4
question
The chart below gives a firm's total cost of producing different levels of output.
The total variable cost of producing five units of output is
The total variable cost of producing five units of output is
answer
$30
question
A competitive firm produces a product using labor and plastic. The firm is initially in equilibrium. If the cost of plastic suddenly increases, which of the following will occur?
answer
The firm's marginal costs will increase at each level of output.
question
In the short run in perfect competition, the industry's demand curve and a firm's demand curve have which of the following slopes?
answer
Industry's Demand Curve-Downward sloping, Firm's Demand Curve- Horizontal
question
At the price 0A, economic profits are
answer
ABKH
question
In the short run, the firm will stop production when the price falls below
answer
0D
question
The relationship in the graph above best illustrates the economic concept of
answer
diminishing marginal returns in production
question
For a firm where labor is the only variable input, which of the following happens when diminishing returns set in?
answer
Marginal cost begins to increase.
question
Which of the following are characteristics of a perfectly competitive industry?
New firms can enter the industry easily.
There is no product differentiation.
The industry's demand curve is perfectly elastic.
The supply curve of an individual firm in the industry is perfectly elastic.
New firms can enter the industry easily.
There is no product differentiation.
The industry's demand curve is perfectly elastic.
The supply curve of an individual firm in the industry is perfectly elastic.
answer
I and II only
question
Which of the following indicates the presence of economies of scale as the quantity of output increases?
answer
Long-run average total cost decreases.
question
Economies of scale exist when
answer
long-run average total cost decreases as output increases
question
F&D Manufacturing Company increases all its inputs by 50 percent each. If F&D's output increases by 100 percent, then F&D is experiencing
answer
increasing returns to scale
question
Which of the following is true for a perfectly competitive firm in long-run equilibrium?
answer
It is allocatively efficient.
question
If there are many firms in an industry and each firm's product is indistinguishable from the products of all other firms, the individual firm's demand curve will be
answer
horizontal and identical for every firm
question
When a perfectly competitive firm sells additional units of output, its total revenue will
answer
increasing at a constant rate
question
The diagram above shows a perfectly competitive firm's short-run cost curves. If the price of the output increases from $8 to $10, the profit-maximizing firm will
answer
increase output to 18 units because this is the output at which price equals marginal cost
question
One characteristic of perfectly competitive markets is that individual firms
answer
are free to enter or exit an industry in the long run
question
Which of the following best describes a perfectly competitive market?
answer
Many small firms producing a homogeneous product and facing no significant barriers to entry
question
The following questions refer to the graph below, which shows the cost curves of a firm.
Which of the following will be true if the firm is in a perfectly competitive market and the price is P1 ?
Which of the following will be true if the firm is in a perfectly competitive market and the price is P1 ?
answer
In the long run, existing firms in the industry will produce an output level greater than Q1.
question
The following questions refer to the graph below, which shows the cost curves of a firm.
If the firm produces Q1 units of output with two inputs, the firm will be experiencing which of the following in the short run and in the long run?
If the firm produces Q1 units of output with two inputs, the firm will be experiencing which of the following in the short run and in the long run?
answer
Short Run-Diminishing marginal returns, Long Run-Economies of sale
question
If this were a perfectly competitive industry with the same costs as shown on the graph, the equilibrium price and output would be which of the following?
answer
Price 0T, Output Q3
question
The following questions refer to the graph below, which shows the cost curves for a profit maximizing, perfectly competitive firm.
The vertical distance CF represents the
The vertical distance CF represents the
answer
average fixed cost of producing Q1 units of output
question
The following questions refer to the graph below, which shows the cost curves for a profit maximizing, perfectly competitive firm.
If marginal revenue is equal to P1, all of the following statements are true EXCEPT:
If marginal revenue is equal to P1, all of the following statements are true EXCEPT:
answer
The firm will increase production in the long run.
question
At 100 units of a firm's output, average total cost is $10, average variable cost is $8, average fixed cost is $2, and marginal cost is $12. How will each of the following change as the firm's output further increases?
answer
ATC-Increase, AVC-Increase, AFC-Decrease
question
Assume that a competitive industry producing a normal good is in long-run equilibrium. If average consumer income decreases, which of the following changes will occur?
answer
Short-Run Price:Decrease, Short-Run Industry Output:Decrease, Movement Firms:Exit
question
At the current production level of good X, price is greater than marginal cost. Which of the following actions would lead to greater efficiency?
answer
Increasing the production of good X
question
Which of the following factors can cause a firm's cost curves to shift upward?
answer
An increase in wages
question
Under which of the following circumstances is a firm experiencing economics of scale?
answer
The firm doubles its inputs, and output triples.
question
Locotek produces toy trains and pays each worker $350 per week. Five workers can produce 40 trains per week and six workers can produce 45 trains per week. The marginal product per week of the sixth worker is
answer
5 trains
question
A farmer produces peppers in a perfectly competitive market. If the price falls, in the short run the farmer should
answer
continue to produce only if the new price covers average variable costs
question
Which of the following statements is true for both a monopolistically competitive firm and a perfectly competitive firm in long-run profit-maximizing equilibrium?
answer
Economic profits equal zero, and marginal revenue equals marginal cost.
question
A constant-cost, perfectly competitive industry is in long-run equilibrium. If the demand for the good increases, which of the following will occur in the long run?
answer
The price will remain unchanged.
question
The long-run average cost curve will be sloping downward if a firm experiences
answer
economies of scale
question
Marginal cost is defined as the
answer
change in total cost resulting from producing an additional unit of output
question
A market is clearly NOT perfectly competitive if which of the following is true in equilibrium?
answer
Price exceeds marginal cost.
question
The table above shows the various units of output that can be produced with different combinations of capital and labor. Which of the following statements is correct according to the information in the table?
answer
In the long run, there are constant returns to scale.
question
Which of the following statements about cost is always true for both monopolies and perfectly competitive firms?
answer
Average total cost equals marginal cost when average total cost is a minimum.
question
Beyond a certain level of output, the short-run marginal cost will rise because
answer
at least one input is fixed and eventually diminishing returns will occur
question
A merger of two firms may increase economic efficiency by
answer
decreasing average total cost through an increase in economies of scale
question
In microeconomics, the short run is defined as which of the following?
answer
A period during which some inputs in a firm's production process cannot be changed
question
At the current output level, a firm finds that it has the potential to increase its profit by expanding output. If P = price, MR = marginal revenue, and MC = marginal cost, which of the following must hold at the current output for this firm?
answer
MR > MC
question
Which of the following is true if a perfectly competitive market is in long-run equilibrium?
answer
Marginal revenue is equal to average total cost.
question
Assume that a firm is maximizing short-run profits and that price is greater than average variable cost. Which of the following must be true at the firm's level of output?
answer
Marginal revenue is equal to marginal cost.
question
In a perfectly competitive industry, the market price of the product is $12. A firm produces at a level of output where average total cost is $16, marginal cost is $16, and average variable cost is $8. To maximize its profit, the firm should
answer
decrease output but keep producing
question
If a perfectly competitive industry is in long-run equilibrium, which of the following is most likely to be true?
answer
Firms are earning a return on investment that is equal to their opportunity costs.
question
As its output increases, a firm's short-run marginal cost will eventually increase because of
answer
diminishing returns
question
Which of the following statements is true about a firm that sells its output in a perfectly competitive market?
answer
The firm will earn zero economic profits in long-run equilibrium.
question
If a perfectly competitive firm increases its price above the market equilibrium price, which of the following will be true for this firm?
answer
It will not be able to sell any output.
question
Which of the following is true for a perfectly competitive firm?
answer
The firm is a price taker.
question
In most cases the supply curve for a perfectly competitive industry can be described as which of the following?
answer
More elastic in the long run than in the short run
question
The following question refers to the diagram below, which shows the demand and cost curves for a profit-maximizing firm.
Which of the following statements best describes the graph?
Which of the following statements best describes the graph?
answer
Economic losses are incurred, and exit of firms from the market will cause prices to increase in the long run.
question
If a perfectly competitive firm wishes to maximize profits and is producing where price exceeds both marginal cost and average variable cost, then the firm is
answer
producing too little output
question
Given the cost and demand schedules depicted above, if the firm increased output from q1 to q2, it would
answer
experience a decline in profits
question
Which of the following best describes the relationship between the average total cost curve and the marginal cost curve in the short run?
answer
If the average total cost curve is rising, the marginal cost curve is above the average total cost curve.
question
In the short run, a profit-maximizing firm should shut down if which of the following is true?
answer
Its product price is less than its average variable cost.
question
In the short run, a perfectly competitive firm should shut down whenever
answer
minimum average variable cost exceeds price
question
For a perfectly competitive firm, assume the price equals a rising marginal cost at 200 units of output. At this output, average total cost is $8 and average variable cost is $5. If the price is $4, by how much can this firm reduce its losses by shutting down?
answer
$200
question
Technological advances will lead to
answer
a decrease in average total costs
question
If a single firm can produce and supply an entire market at a lower unit cost than many small firms can, the long-run average total cost must be
answer
decreasing as the firm's output increases
question
Which of the following best explains why the short-run average total cost curve is U-shaped?
answer
Spreading total fixed costs over a larger output, and eventually diminishing returns
question
When marginal product exceeds average product, which of the following must be true?
answer
Average product is increasing.
question
An increase in which of the following will cause a firm's marginal cost curve to shift upward?
answer
The price of a variable input
question
If the price of a firm's variable input increases, which of the following will occur?
answer
The firm will decrease its level of production.
question
Which of the following statements is true for a perfectly competitive firm but not true for a monopoly?
answer
The firm cannot affect the market price for its good.
question
A perfectly competitive firm is currently in long-run equilibrium. Its total revenue is $100,000, and the average total cost of production is $100. Which of the following can be concluded from this information?
answer
The firm's output is 1,000 units, and its profit is zero.
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