BA1310 Practice Exam 2 - Assignment Essays

question

Economists assume the central goal of any business is to:

maximize revenues
maximize market share.
maximize profit.
minimize costs.

answer

maximize profit.

question

Suppose Winston's annual salary as an accountant is $60,000 and his financial assets generate $4,000 per year in interest. One day, after deciding to be his own boss, he quits his job and uses his financial assets to establish a consulting business, which he runs out of his home. He outlays $8,000 in cash to cover all the costs involved with running the business and earns revenues of $150,000. What is Winston's accounting profit?

$138,000
$78,000
$150,000
$142,000

answer

$142,000

question

Suppose Winston's annual salary as an accountant is $60,000 and his financial assets generate $4,000 per year in interest. One day, after deciding to be his own boss, he quits his job and uses his financial assets to establish a consulting business, which he runs out of his home. He outlays $8,000 in cash to cover all the costs involved with running the business and earns revenues of $150,000. What is Winston's economic profit?

$138,000
$142,000
$78,000
$150,000

answer

$78,000

question

The relationship between the quantity of inputs and the quantity of outputs is called a(n):

input-output function.
resource function.
cost function.
production function.

answer

production function.

question

Labor (# of employees) Total Output
0 0
1 10
2 50
3 110
4 160
5 200
6 230
7 255
8 275
9 290
10 300
11 305

The table shows the total production of hats at a factory given various numbers of employees. What is the marginal product of the fifth worker?

30
50
40
200

answer

question

The principle of diminishing marginal product states that:

the marginal product of an input decreases as the quantity of the input increases.
the total output produced decreases as the quantity of the input increases.
the total output produced increases as the quantity of the input increases.
the marginal product of an input eventually will be negative.

answer

the marginal product of an input decreases as the quantity of the input increases.

question

Suppose Sam's Shoe Co. makes one kind of shoe. An example of a fixed cost for this company would be:

All of these are examples of fixed costs.
sewing machine needles that need to be replaced every 1,000 pairs.
the lease for the factory building.
the leather needed to make the shoes.

answer

the lease for the factory building.

question

The total cost curve:

always lies above the variable cost curve.
is the sum of the variable cost curve and fixed cost curve.
is parallel to the variable cost curve.
All of these are correct.

answer

All of these are correct.

question

Average total cost:
All of these are correct.
is the sum of average fixed costs and average variable costs.
is minimized when it equals marginal cost.
is total cost divided by total output.

answer

All of these are correct.

question

How long is the short run?

It is generally less than a year.
All of these are correct.
It is typically defined by the process cycle of the particular firm.
It is defined by the presence of a fixed cost for a firm.

answer

It is defined by the presence of a fixed cost for a firm.

question

Economies of scale occur when:

None of these are correct.
an increase in the quantity of output decreases average total cost in the long run.
average total cost does not depend on the quantity of output in the long run.
an increase in the quantity of output increases average total cost in the long run.

answer

an increase in the quantity of output decreases average total cost in the long run.

question

A competitive market is one in which:

A. government oversees the market's operation.
B. a few large sellers compete for a majority of the market share.
C. individual sellers and buyers have a lot of influence over market price.
D. fully informed price-taking buyers and sellers easily trade a standardized good.

answer

fully informed price-taking buyers and sellers easily trade a standardized good

question

Which of the following is an essential characteristic of a perfectly competitive market?

A. Buyers have complete control over the market price and sellers have none.
B. Buyers and sellers have no control over the market price.
C. Sellers have complete control over the market price and buyers have none.
D. Sellers are selling unique products.

answer

Buyers and sellers have no control over the market price.

question

For firms that sell one product in a perfectly competitive market, marginal revenue is:

All of these are correct.
the additional revenue gained from selling one more unit.
equal to market price.
equal to average revenue.

answer

All of these are correct.

question

Firms in perfectly competitive markets who wish to maximize profits should produce where ______ are equal.

marginal revenue and market price
marginal revenue and marginal cost
marginal cost and average cost
marginal revenue and average revenue

answer

marginal revenue and marginal cost

question

In the short run, a firm must consider its ______ when deciding whether to shut down production.

average total costs
average fixed costs
average variable costs
fixed costs

answer

average variable costs

question

If a firm in a perfectly competitive market faces the curves in the graph shown and observes a market price of $16, the firm:

A. can earn positive profits by producing less than 43 units.
B. should continue to operate in the short run, but plan to exit in the long run.
C. can earn positive profits by producing where marginal cost equals marginal revenue.
D. cannot make positive profits and should shut down in the short run.

answer

can earn positive profits by producing where marginal cost equals marginal revenue

question

In the long run, in a perfectly competitive market:

supply is perfectly elastic when all firms have the same cost structure.
firms operate at an efficient scale.
firms earn zero economic profits.
All of these are correct.

answer

All of these are correct.

question

A firm that is the sole producer of a good or service with no close substitutes is called a(n):

perfectly competitive firm.
monopolistically competitive firm.
oligopolist.
monopolist.

answer

monopolist

question

The monopolist faces a:

perfectly elastic demand curve.
perfectly inelastic demand curve.
perfectly elastic supply curve.
downward sloping demand curve

answer

downward sloping demand curve

question

Which of the following statements describes how a monopolist's revenue curves compare to those of a perfectly competitive firm?

A. The monopolist's marginal revenue curve is flat, while the perfectly competitive firm's is downward sloping.
B. The monopolist's total revenue curve is linear, while the perfectly competitive firm's is convex.
C. The monopolist's average revenue curve is not equal to price, as it is for a perfectly competitive firm.
D. The monopolist's marginal revenue curve is downward sloping, while the perfectly competitive firm's is flat.

answer

The monopolist's marginal revenue curve is downward sloping, while the perfectly competitive firm's is flat.

question

The graph shown represents the cost and revenue curves faced by a monopoly.

answer

Qmc, P

question

What is the formula to calculate profits in the short run?

answer

(P - ATC) x Q

question

In general, with a monopolist's outcome:

All of these are true.
monopolies earn profit.
deadweight loss occurs.
consumers lose surplus.

answer

All of these are true.

question

Two antitrust acts actively used by the U.S. government to prevent monopoly power in markets are the _______ and the _______.

Bergman Antitrust Act; Stapleton Act
Sherman Antitrust Act; Clayton Act
Sherman Antitrust Act; Stapleton Act
Bergman Antitrust Act; Clayton Act

answer

Sherman Antitrust Act; Clayton Act

question

The practice of charging customers different prices for the same good is called:

price discrimination.
customer discrimination.
price marking.
group discounting.

answer

price discrimination.

question

Monopolistic competition describes a market in which _______ firms sell _______ goods and services.

few; similar but slightly different
few; standardized
many; similar but slightly different
many; standardized

answer

many; similar but slightly different

question

This firm will charge a price of _______ in the _______ and earn _______ profits.

answer

80, short run, positive

question

In the short run, monopolistically competitive firms can maximize profits by:

acting like monopolists.
None of these is true.
acting like perfectly competitive firms.
playing strategic games like oligopolists

answer

acting like monopolists.

question

The process of entry and exit into a monopolistically competitive market continues until profits are:

Any of these could be true.
zero.
positive.
negative.

answer

zero.

question

Which of the following is a defining characteristic of an oligopoly?

A few large firms have market power.
Barriers to entry prevent new firms from entering the market.
Easy entry and exit into the market prevents firms from earning long run profits.
All firms in the market sell a standardized product.

answer

A few large firms have market power.

question

The act of firms working together to make decisions about price and quantity is called:

artificial competition.
bulk ordering.
price discrimination.
collusion.

answer

collusion.

question

The Herfindahl-Hirschman Index is a measure of industry concentration that is calculated by:

summing the market shares of the four largest firms in the industry.
dividing the market share of the largest firm by the market share of the smallest firm.
summing the market shares of all of the firms in the industry.
summing the squares of the market shares of each firm in the industry.

answer

summing the squares of the market shares of each firm in the industry.

question

The demand for factors of production is known as _______ demand.

primary
production
implied
derived

answer

derived

question

The question of how much labor a firm will hire comes down to:

whether added workers are going to generate more revenue than what it costs to hire them.
the healthcare costs the firm will incur by hiring added workers.
if the added workers are going to add revenues to the firm.
whether the value of the marginal product is greater than, less than, or equal to the average total cost.

answer

whether added workers are going to generate more revenue than what it costs to hire them.

question

The value of the marginal product is the:

marginal revenue generated by an additional unit of output multiplied by the number of workers hired.
average revenue generated by workers at a firm.
additional inputs required to produce one more additional unit of output.
marginal product generated by an additional unit of input multiplied by the price of output.

answer

marginal product generated by an additional unit of input multiplied by the price of output.

question

The competitive firm's profit-maximizing quantity of labor occurs where:

the value of the marginal product of labor is equal to the profit.
the quantity of the marginal product of labor is equal to the market wage.
the value of the marginal product of labor is equal to the market wage.
the quantity of the marginal product of labor is equal to zero.

answer

the value of the marginal product of labor is equal to the market wage.

question

More college graduates with engineering degrees will affect the labor market for engineers. With a(n) _______ in labor supply, we would expect wages to ______.

decrease; decrease
increase; increase
decrease; increase
increase; decrease

answer

decrease; increase

question

An increase in the demand for spinach will cause an increase in the price for spinach and will affect the labor market for spinach farm workers. We would expect to see a(n) _______ in labor demand, resulting in _______ wages.

increase; higher
increase; lower
decrease; higher
decrease; lower

answer

increase; higher

question

The table shown displays the production schedule for a bakery in a competitive market that sells cookies for $2 each.

Number of Workers Quantity of Cookies
0 0
1 80
2 180
3 280
4 360
5 420
6 470
7 510
8 540
9 560

If each worker is paid $90 per day, how many workers should the bakery hire?

4
6
1
9

answer

1 of 40

question

Economists assume the central goal of any business is to:

maximize revenues
maximize market share.
maximize profit.
minimize costs.

answer

maximize profit.

question

answer

$142,000

question

Suppose Winston's annual salary as an accountant is $60,000 and his financial assets generate $4,000 per year in interest. One day, after deciding to be his own boss, he quits his job and uses his financial assets to establish a consulting business, which he runs out of his home. He outlays $8,000 in cash to cover all the costs involved with running the business and earns revenues of $150,000. What is Winston's economic profit?

$138,000
$142,000
$78,000
$150,000

answer

$78,000

question

The relationship between the quantity of inputs and the quantity of outputs is called a(n):

input-output function.
resource function.
cost function.
production function.

answer

production function.

question

answer

question

answer

the marginal product of an input decreases as the quantity of the input increases.

question

answer

the lease for the factory building.

question

The total cost curve:

always lies above the variable cost curve.
is the sum of the variable cost curve and fixed cost curve.
is parallel to the variable cost curve.
All of these are correct.

answer

All of these are correct.

question

Average total cost:
All of these are correct.
is the sum of average fixed costs and average variable costs.
is minimized when it equals marginal cost.
is total cost divided by total output.

answer

All of these are correct.

question

answer

It is defined by the presence of a fixed cost for a firm.

question

answer

an increase in the quantity of output decreases average total cost in the long run.

question

answer

fully informed price-taking buyers and sellers easily trade a standardized good

question

answer

Buyers and sellers have no control over the market price.

question

answer

All of these are correct.

question

answer

marginal revenue and marginal cost

question

In the short run, a firm must consider its ______ when deciding whether to shut down production.

average total costs
average fixed costs
average variable costs
fixed costs

answer

average variable costs

question

answer

can earn positive profits by producing where marginal cost equals marginal revenue

question

answer

All of these are correct.

question

A firm that is the sole producer of a good or service with no close substitutes is called a(n):

perfectly competitive firm.
monopolistically competitive firm.
oligopolist.
monopolist.

answer

monopolist

question

The monopolist faces a:

perfectly elastic demand curve.
perfectly inelastic demand curve.
perfectly elastic supply curve.
downward sloping demand curve

answer

downward sloping demand curve

question

answer

The monopolist's marginal revenue curve is downward sloping, while the perfectly competitive firm's is flat.

question

The graph shown represents the cost and revenue curves faced by a monopoly.

answer

Qmc, P

question

What is the formula to calculate profits in the short run?

answer

(P - ATC) x Q

question

In general, with a monopolist's outcome:

All of these are true.
monopolies earn profit.
deadweight loss occurs.
consumers lose surplus.

answer

All of these are true.

question

answer

Sherman Antitrust Act; Clayton Act

question

The practice of charging customers different prices for the same good is called:

price discrimination.
customer discrimination.
price marking.
group discounting.

answer

price discrimination.

question

answer

many; similar but slightly different

question

This firm will charge a price of _______ in the _______ and earn _______ profits.

answer

80, short run, positive

question

answer

acting like monopolists.

question

The process of entry and exit into a monopolistically competitive market continues until profits are:

Any of these could be true.
zero.
positive.
negative.

answer

zero.

question

answer

A few large firms have market power.

question

The act of firms working together to make decisions about price and quantity is called:

artificial competition.
bulk ordering.
price discrimination.
collusion.

answer

collusion.

question

answer

summing the squares of the market shares of each firm in the industry.

question

The demand for factors of production is known as _______ demand.

primary
production
implied
derived

answer

derived

question

answer

whether added workers are going to generate more revenue than what it costs to hire them.

question

answer

marginal product generated by an additional unit of input multiplied by the price of output.

question

answer

the value of the marginal product of labor is equal to the market wage.

question

answer

decrease; increase

question

answer

increase; higher

question

answer

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