AP Micro Test 2 Quarter 2 - Assignment Essays

question

Average fixed cost is shown as the distance between

answer

average variable cost and average total cost.

question

True statements about the theory of the firm in the short run and long run include which of the

following?

I. All input costs are fixed in the short run.

II. All input costs are variable in the long run.

III. At least on input price is fixed in the short run.

answer

II and III only

question

(graph above) On the graph above, the onset of diminishing marginal returns occurs beyond

answer

Point C.

question

Which of the following statements about a firm’s production function are true?

I. When total product is at its maximum, marginal product is zero.

II. When total product rises, marginal product is rising.

III. When marginal product is greater than average product, average product is rising.

IV. When marginal product is less than average product, average product is falling.

answer

I, III, and IV only

question

According to the graph above, if the firm is producing any quantity greater than Q2 experiencing

answer

c. diseconomies of scale (decreasing returns to scale).

question

For a perfectly competitive firm, if the market price is $8 then

answer

c. marginal revenue is equal to $8.

question

A firm’s short-run marginal cost curve will eventually increase because of

answer

d. diminishing marginal returns.

question

Assume that in the short run at the profit-maximizing output, the price is lower than average variable cost. The perfectly competitive firm should

answer

e. shut down.

question

According to the table below, which shows the costs of production for a firm, the average total cost of producing 3 units of output is

answer

e. $20.00

question

In the short run, a decrease in production costs of a product will shift

answer

c. only the supply curve to the right.

question

Assume that a perfectly competitive firm is operating where marginal revenue is greater than marginal costs. To increase profits, the firm should

answer

a. increase production.

question

The shapes of the marginal product curve and the total product curve are best explained by the

answer

e. law of diminishing returns.

question

If average variable cost of producing five units of a product is $100 and the average variable cost of producing six units is $125, then the marginal cost of producing the sixth unit is

answer

c. $250.

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

c. decrease output but keep producing

question

When a perfectly competitive firm sells additional units of output, its total revenue will

answer

e. increase at a constant rate

question

If the firm is in short-run equilibrium at a price of P4

by producing at which of the following levels of output?

answer

e. Q4

question

At which price will this perfectly competitive firm make an economic profit?

answer

e. P4

question

Which price-quantity combination represents long-run equilibrium for this perfectly competitive firm?

answer

d. Point D

question

According to the graph above, if the firm is producing at Q, the firm is

answer

d. making normal profits because the price just covers average total cost.

question

Which of the following best describes a perfectly competitive market?

answer

c. Many small firms producing an identical product and facing no significant barriers to entry

question

Which of the following represents the correct relationship between the demand curve for a perfectly competitive industry and the demand curve for a perfectly competitive firm?

answer

b. Downward Slope to the Right Perfectly Elastic

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

e. Decrease Decrease Exit

question

According to the graphs above, in which of the following ways are the industry supply curve and the equilibrium price most likely to change in the long run?

answer

b. Decrease Increase

question

If the price is P2 , the firm will

answer

produce Q2 units and earn an economic profit.

question

If the price is P1

answer

c. Produce Q1 units and earn a normal profit

question

The economic profits of firms in long-run competitive equilibrium are:

answer

c. Zero

question

Which of the following is a characteristic of equilibrium in long-run competitive markets?

answer

c. Combined consumer and producer surplus is maximized

question

The long-run industry supply curve will be horizontal:

answer

d. if resource prices remain constant as industry demand rises or falls.

question

Allocative efficiency in the production of wheat requires:

answer

a. producing every unit of wheat whose marginal benefit equals or exceeds its marginal cost.

question

"Creative destruction" refers to:

answer

b. the process by which old industries or technologies are replaced by newer ones.

question

Suppose a decrease in product demand occurs in a decreasing-cost industry. Compared to the original equilibrium the new long-run competitive equilibrium will entail:

answer

c. a higher price and a lower total output.

question

Combined consumer and producer surplus is maximized in a competitive market:

answer

b. if the market price exceeds minimum average total cost.

question

An increasing cost industry is characterized by:

answer

A. an upsloping long-run supply curve.

question

Refer to the above diagrams, which pertain to a purely competitive firm and the industry in which it operates. In the long run we should expect:

answer

d. some firms to exit, supply to decrease, and price to rise.

question

In the long run, competitive markets achieve:

answer

b. allocative efficiency because P = MC and productive efficiency because P = min ATC.

question

When a firm is producing zero output, the total cost equals

answer

c. the fixed cost

question

Marginal cost can be found at the change in either of which two types of cost when output increases by one?

answer

...

question

Which of the following is correct about costs?

answer

e. AVC=ATC-AFC

question

The slope of the total cost curve equals

answer

e. Marginal Cost

question

Which of the following always decreases when the quantity of output increases?

answer

c. Average Fixed Cost

question

If labor is the only variable input and the wage rate is fixed, which of the following move in the opposite directions each time the quantity of output increases?

answer

e. Marginal cost and marginal production of labor

question

on the basis of the data in the table below, what is the marginal cost of the third unit of output?

answer

a. $40

question

In the long run

answer

a. all inputs are variable

question

which of the following is always considered the long run?

answer

e. none of the above

question

which of the following statements is generally correct?

answer

e. The long-run average total cost is u-shaped

question

when making decisions which of the following costs should be ignored?

answer

d. Sunk Costs

question

There is a different short-run average total cost curve for each level of

answer

c. Fixed Cost

question

If long-run average total cost decreases as the number of output increases, the firm is experiencing

answer

c. economies of scale

question

When the current amount of fixed cost minimizes the long-run average total cost for the quantity of output being produced, the short-run average total cost curve is necessarily

answer

e. touching the long-run average total cost curve

question

Which of the following is true for a perfectly competitive industry?

answer

b. The firms in the industry produce standardized product

question

which of the following is true for a monopoly?

answer

a. It consists of only one firm

question

Which of the following is true for an oligopoly?

answer

d. There is a small number of interdependent firms.

question

Which of the following is true for a monopolistically competitive industry

answer

a. There are many firms, each will a small market share

question

which of the following is an example of differentiated products?

answer

a. Coca Cola and Pepsi

question

Which two market structures are normally characterized by free entry and exit in the long run?

answer

c. Perfect Competition and monopolistic competition

question

Economies of scale are the defining characteristics of which market structure?

answer

d. natural monopoly

question

A perfectly competitive firm will maximize profit at the quantity at which the firm's marginal revenue equals

answer

d. Marginal cost

1 of 57

question

Average fixed cost is shown as the distance between

answer

average variable cost and average total cost.

question

True statements about the theory of the firm in the short run and long run include which of the

following?

I. All input costs are fixed in the short run.

II. All input costs are variable in the long run.

III. At least on input price is fixed in the short run.

answer

II and III only

question

(graph above) On the graph above, the onset of diminishing marginal returns occurs beyond

answer

Point C.

question

Which of the following statements about a firm’s production function are true?

I. When total product is at its maximum, marginal product is zero.

II. When total product rises, marginal product is rising.

III. When marginal product is greater than average product, average product is rising.

IV. When marginal product is less than average product, average product is falling.

answer

I, III, and IV only

question

According to the graph above, if the firm is producing any quantity greater than Q2 experiencing

answer

c. diseconomies of scale (decreasing returns to scale).

question

For a perfectly competitive firm, if the market price is $8 then

answer

c. marginal revenue is equal to $8.

question

A firm’s short-run marginal cost curve will eventually increase because of

answer

d. diminishing marginal returns.

question

Assume that in the short run at the profit-maximizing output, the price is lower than average variable cost. The perfectly competitive firm should

answer

e. shut down.

question

According to the table below, which shows the costs of production for a firm, the average total cost of producing 3 units of output is

answer

e. $20.00

question

In the short run, a decrease in production costs of a product will shift

answer

c. only the supply curve to the right.

question

Assume that a perfectly competitive firm is operating where marginal revenue is greater than marginal costs. To increase profits, the firm should

answer

a. increase production.

question

The shapes of the marginal product curve and the total product curve are best explained by the

answer

e. law of diminishing returns.

question

If average variable cost of producing five units of a product is $100 and the average variable cost of producing six units is $125, then the marginal cost of producing the sixth unit is

answer

c. $250.

question

answer

c. decrease output but keep producing

question

When a perfectly competitive firm sells additional units of output, its total revenue will

answer

e. increase at a constant rate

question

If the firm is in short-run equilibrium at a price of P4

by producing at which of the following levels of output?

answer

e. Q4

question

At which price will this perfectly competitive firm make an economic profit?

answer

e. P4

question

Which price-quantity combination represents long-run equilibrium for this perfectly competitive firm?

answer

d. Point D

question

According to the graph above, if the firm is producing at Q, the firm is

answer

d. making normal profits because the price just covers average total cost.

question

Which of the following best describes a perfectly competitive market?

answer

c. Many small firms producing an identical product and facing no significant barriers to entry

question

Which of the following represents the correct relationship between the demand curve for a perfectly competitive industry and the demand curve for a perfectly competitive firm?

answer

b. Downward Slope to the Right Perfectly Elastic

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

e. Decrease Decrease Exit

question

According to the graphs above, in which of the following ways are the industry supply curve and the equilibrium price most likely to change in the long run?

answer

b. Decrease Increase

question

If the price is P2 , the firm will

answer

produce Q2 units and earn an economic profit.

question

If the price is P1

answer

c. Produce Q1 units and earn a normal profit

question

The economic profits of firms in long-run competitive equilibrium are:

answer

c. Zero

question

Which of the following is a characteristic of equilibrium in long-run competitive markets?

answer

c. Combined consumer and producer surplus is maximized

question

The long-run industry supply curve will be horizontal:

answer

d. if resource prices remain constant as industry demand rises or falls.

question

Allocative efficiency in the production of wheat requires:

answer

a. producing every unit of wheat whose marginal benefit equals or exceeds its marginal cost.

question

"Creative destruction" refers to:

answer

b. the process by which old industries or technologies are replaced by newer ones.

question

Suppose a decrease in product demand occurs in a decreasing-cost industry. Compared to the original equilibrium the new long-run competitive equilibrium will entail:

answer

c. a higher price and a lower total output.

question

Combined consumer and producer surplus is maximized in a competitive market:

answer

b. if the market price exceeds minimum average total cost.

question

An increasing cost industry is characterized by:

answer

A. an upsloping long-run supply curve.

question

Refer to the above diagrams, which pertain to a purely competitive firm and the industry in which it operates. In the long run we should expect:

answer

d. some firms to exit, supply to decrease, and price to rise.

question

In the long run, competitive markets achieve:

answer

b. allocative efficiency because P = MC and productive efficiency because P = min ATC.

question

When a firm is producing zero output, the total cost equals

answer

c. the fixed cost

question

Marginal cost can be found at the change in either of which two types of cost when output increases by one?

answer

...

question

Which of the following is correct about costs?

answer

e. AVC=ATC-AFC

question

The slope of the total cost curve equals

answer

e. Marginal Cost

question

Which of the following always decreases when the quantity of output increases?

answer

c. Average Fixed Cost

question

If labor is the only variable input and the wage rate is fixed, which of the following move in the opposite directions each time the quantity of output increases?

answer

e. Marginal cost and marginal production of labor

question

on the basis of the data in the table below, what is the marginal cost of the third unit of output?

answer

a. $40

question

In the long run

answer

a. all inputs are variable

question

which of the following is always considered the long run?

answer

e. none of the above

question

which of the following statements is generally correct?

answer

e. The long-run average total cost is u-shaped

question

when making decisions which of the following costs should be ignored?

answer

d. Sunk Costs

question

There is a different short-run average total cost curve for each level of

answer

c. Fixed Cost

question

If long-run average total cost decreases as the number of output increases, the firm is experiencing

answer

c. economies of scale

question

When the current amount of fixed cost minimizes the long-run average total cost for the quantity of output being produced, the short-run average total cost curve is necessarily

answer

e. touching the long-run average total cost curve

question

Which of the following is true for a perfectly competitive industry?

answer

b. The firms in the industry produce standardized product

question

which of the following is true for a monopoly?

answer

a. It consists of only one firm

question

Which of the following is true for an oligopoly?

answer

d. There is a small number of interdependent firms.

question

Which of the following is true for a monopolistically competitive industry

answer

a. There are many firms, each will a small market share

question

which of the following is an example of differentiated products?

answer

a. Coca Cola and Pepsi

question

Which two market structures are normally characterized by free entry and exit in the long run?

answer

c. Perfect Competition and monopolistic competition

question

Economies of scale are the defining characteristics of which market structure?

answer

d. natural monopoly

question

A perfectly competitive firm will maximize profit at the quantity at which the firm's marginal revenue equals

answer

d. Marginal cost

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