Ch. 2, Microeconomics final (example questions), Micro multiple choice, Micro Ch. 6, Micro ch. 9

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A relationship that shows the quantity of goods that consumers are willing to buy at different prices is the
a) elasticity
b) market demand curve
c) market supply curve
d) market equilibrium

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The law of demand states :
a) that price and quantity demanded are inversely related.
b) that price and quantity demanded are inversely related, holding all other factors that influence demand fixed.
c) that demand for a good comes from the desire of buyers to directly consume the good itself.
d) an increase in demand results in an increase in price.

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Which of the following statements best illustrates the law of demand?
a) When the price of pepperoni rises, the demand for pizza falls.
b) When the weather gets hotter, the quantity demanded of ice cream rises.
c) When the price of lemons falls, the demand for lemonade rises.
d) When the price of eggs rises, the quantity demanded of eggs falls.

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Which of the following is not typically a factor held constant when deriving a demand curve for clothing?
a) consumer income.
b) the price of clothing.
c) the price of other goods.
d) consumer tastes.

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What is the difference between a derived demand curve and a direct demand curve?
a) Derived demand is unknown, whereas direct demand is known.
b) Derived demand is unobservable, whereas direct demand is observable.
c) Derived demand is demand determined by the demand for another good,
whereas direct demand is demand for a good itself.
d) Derived and direct demand are both terms referring to the same thing.

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What is the quantity of televisions demanded per year when the average price of a
television is $100 per unit and the demand curve for televisions is represented by Qd = 3.5million - 5000P?
a) 2.5 million televisions
b) 3.0 million televisions
c) 3.2 million televisions
d) 4.0 million televisions

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The linear demand curve is represented by the equation
a) P=Q-aP
b) Q=a-bP
c) Q=a-bP2
d) Q = AP-b

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Which of the following statements best illustrates the law of supply?
a) When the price of oil rises, the supply of automobiles falls.
b) When the price of steel falls, the supply of automobiles rises.
c) When the price of computers rises, the quantity supplied of computers rises.
d) When the price of televisions rises, the quantity supplied of televisions falls.

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A curve that shows us the total quantity of goods that their suppliers are willing to sell at different prices is
a) Market supply curve
b) Law of supply
c) Demand curve
d) Market demand curve

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Which of the following is not a factor held constant when deriving a supply curve for ski boots?
a) The price of ski lift tickets.
b) the price of ski boots
c) the wages of workers who make ski boots
d)The price of skis.

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Suppose in a market with Qd = 100 - 5P and Qs = 5P, the government imposes a price floor of $15. If the government is required to purchase any excess supply at the price floor, how much will the government have to pay to purchase the excess in this market?
a) Nothing; there is no surplus
b) $1,000
c) $1,500
d) $750

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Suppose that the supply of apples can be represented by the following equation: Qs = 2P + 500. Further suppose that the demand for apples can be represented by the following
equation: Qd = 900 - 3P. Which of the following is the equilibrium price in the market for apples?
a) 10
b) 50
c) 80
d) 100

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Suppose demand is given by Qd = 500 - 15P and supply is given by Qs = 5P. If the government imposes a $15 price ceiling the excess demand will be
a) 200
b) 225
c) 250
d) 275

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Suppose demand is given by Qd = 400 - 15P+ I, where Qd is quantity demanded, P is
price and I is income. Supply is given by Qs = 5P, where Qs is quantity supplied. When I = 200, equilibrium quantity is
a) 15
b) 20
c) 25
d) 30

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Suppose demand is given by Qd = 500 - 15P and supply is given by Qs = 5P. If the government imposes a $30 price floor the excess supply will be
a) 25
b) 50
c) 100
d) 150

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Suppose demand is given by Qd = 400 - 15P + I, where Qd is quantity demanded, P is
price and I is income. Supply is given by Qs = 5P, where Qs is quantity supplied. When I = 100, equilibrium quantity is
a) 15
b) 20
c) 25
d) 30

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Which of the following would cause an unambiguous decrease in the equilibrium quantity in a market?
a) a rightward shift in supply and a rightward shift in demand.
b) a rightward shift in supply and a leftward shift in demand.
c) a leftward shift in supply and a rightward shift in demand.
d) a leftward shift in supply and a leftward shift in demand.

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Factors that could cause a supply curve to shift to the right include all of the following except
a) a drop in the price of inputs to the supply process.
b) an increase in the number of firms in the industry.
c) an increase in demand for the product.
d) a technological innovation that makes it cheaper to produce the product.

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Factors that could cause a demand curve to shift to the left include all of the following except
a) a change in preferences away from the product in question.
b) an increase in the price of substitute products.
c) a growing awareness of a health risk associated with the product.
d) a decrease in the general level of income in the country.

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Suppose that the market for computers is initially in equilibrium. Further suppose that there is an increase in the price of computer software. Which of the following accurately describes the new equilibrium in the computer market?
a) The equilibrium price will rise; the equilibrium quantity will fall.
b) The equilibrium price will rise; the equilibrium quantity will rise.
c) The equilibrium price will fall; the equilibrium quantity will fall.
d) The equilibrium price will fall; the equilibrium quantity will rise.

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Suppose that the market for soybeans is initially in equilibrium. Further suppose that there is a decrease in the price of fertilizer. Which of the following accurately describes the new equilibrium?
a) The equilibrium price will rise; the equilibrium quantity will fall.
b) The equilibrium price will rise; the equilibrium quantity will rise.
c) The equilibrium price will fall; the equilibrium quantity will fall.
d) The equilibrium price will fall; the equilibrium quantity will rise.

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Suppose that the market for newspaper is initially in equilibrium. Further suppose that there is both an increase in the price of ink and a decrease in the price of magazines, which people may read in place of a newspaper. Which of the following accurately describes the new equilibrium?
a) The equilibrium price will rise; the equilibrium quantity is ambiguous.
b) The equilibrium price is ambiguous; the equilibrium quantity will fall.
c) The equilibrium price will fall; the equilibrium quantity is ambiguous.
d) The equilibrium price is ambiguous; the equilibrium quantity will rise.

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A higher consumer income increases the demand for a particular good. The effect of this income on market demand usually is illustrated by
a) a rightward shift in the demand curve
b) a leftward shift in the demand curve
c) a rightward movement along the demand curve
d) a leftward movement along the demand curve.

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Consider the demand curve Qd = 1000 - 20P - 6r. If the value of r falls, the demand curve will
a)shift to the left
b) shift to the right
c) remain unchanged
d)rotate along the quantity axis

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Consider the demand curve Qd = 40 - 2P + 6i. If the value of i rises, the demand curve will
a) not shift at all
b) shift to the right
c) shift to the left
d) rotate so it becomes upward sloping

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Consider the supply curve Qs = 40 + 2P + 6i. If the value of i rises, the supply curve will
a) not shift at all
b) shift to the right
c) shift to the left
d) rotate so it becomes upward sloping

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Which of the following would cause an unambiguous increase in the equilibrium price in a market?
a) a rightward shift in supply and a rightward shift in demand.
b) a rightward shift in supply and a leftward shift in demand.
c) a leftward shift in supply and a rightward shift in demand.
d) a leftward shift in supply and a leftward shift in demand.

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A simultaneous shift to the right of both supply and demand will
a) increase the equilibrium price
b) decrease the equilibrium price
c) increase the equilibrium quantity
d) decrease the equilibrium quantity

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Which of the following is False?
a) Rightward shift in demand + unchanged supply curve = higher equilibrium
price and larger equilibrium quantity
b) Rightward shift in demand + Rightward shift in supply curve = lower
equilibrium price and smaller equilibrium quantity
c) Leftward shift in supply + unchanged demand curve = higher equilibrium
price and smaller equilibrium quantity
d) Leftward shift in demand + unchanged supply curve = lower equilibrium price
and smaller equilibrium quantity
e) Rightward shift in supply + unchanged demand curve = lower equilibrium
price and larger equilibrium quantity

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A measure of the rate of percentage change of quantity demanded with respect to price, holding all other determinants of demand constant is
a) Price elasticity of market equilibrium
b) Price elasticity of demand
c) Price elasticity of supply
d) Price elasticity equilibrium

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Price elasticity of demand measures
a) the shift in demand as price changes.
b) the sensitivity of quantity demanded to price.
c) the slope of the demand curve.
d) the relationship of percentages to price.

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Consider the supply curve Qs = 2P and the demand curve Qd = 90 - P. Which expression best shows how you would calculate the elasticity of demand when P increases by 1 along the demand curve from its equilibrium value?
a) [(59 - 60)/ (31 - 30)] x (30/60)
b) [(56 - 60)/ (31 - 30)] x (30/60)
c) [(59 - 61)/ (31 - 30)] x (30/60)
d) [(59 - 62)/ (32 - 30)] x (30/60)

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Eggs would typically have a
a) low elasticity of demand, probably between -1 and -2
b) low elasticity of demand, probably between 0 and -1
c) high elasticity of demand , probably between -2 and -3
d) low elasticity of demand, probably between -2 and -3

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Suppose that when the price of a good is $15, the quantity demanded is 40 units, and when the price falls to $6, the quantity increases to 60 units. The price elasticity of demand near a price of $6 and a quantity of 60 can be calculated as:
a) -5/6
b) -2
c) -2/9
d) -9/2

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Suppose that demand is linear, Qd = 100 - 12P. At P = 5 and Q = 40, price elasticity of demand is:
a) -2/3
b) -2
c) -12
d) -3/2

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The choke price is
a) the price at which quantity supplied falls to zero.
b) the price at which quantity demanded falls to zero.
c) the price at which quantity supplied is maximized.
d) the price at which quantity demanded is maximized.

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Suppose we postulate a linear demand curve and observe, through supply shifts, two points on the demand curve. At point A, PA = 2 and QdA = 6. At point B, PB = 4 and
QdB = 2. The choke price for this demand curve is
a) 10
b) 2
c) 5
d) -2

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Suppose demand is given by Qd = 1000 - 25P and supply is given by Qs = 75P. At the equilibrium price and quantity, the price elasticity of demand is
a) -3
b) -25
c) -1/3
d) -10

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Along a linear demand curve, as price falls
a) The price elasticity of demand is constant, but the slope of demand falls.
b) the price elasticity of demand approaches zero, but the slope is constant.
c) the price elasticity of demand moves away from zero.
d) the price elasticity is the same as the slope of the demand curve.

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The constant elasticity demand curve is represented by the equation
a) P=Q-aP
b) Q=a-bP
c) Q=a-bP2
d) Q = AP-b

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Consider the demand curve Q curve
d -1 = 5P. The elasticity of demand along this demand
a) is inelastic
b) is elastic
c) is unitary elastic
d) falls as the price falls

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If demand is elastic, an increase in price
a) will increase total revenue
b) will decrease total revenue
c) will have an indeterminate effect on total revenue
d) will decrease total profit

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Of the following choices, which good should have the most inelastic price elasticity of demand?
a) Gasoline to a car owner.
b) Cigarettes to a smoker.
c) Insulin to an insulin-dependent diabetic.
d) Apples to a vegetarian.

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Identify the truthfulness of the following statements.
I. Demand tends to be more price inelastic when few substitutes for a product exist.
II. Demand tends to be more price elastic when a consumer's expenditure on the product is small.
a) Both I and II are true.
b)Both I and II are false.
c)I is true; II is false.
d) I is false; II is true.

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An income elasticity of demand for milk of 0.1 could mean that
e) as income rises by 10 percent, quantity demanded rises by 1 percent.
f) as income rises by 100 percent, quantity demanded rises by 1 percent.
g) as income rises by 20 percent, quantity demanded rises by 10 percent.
h) as income rises by 50 percent, quantity demanded rises by 25 percent.

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Income elasticity of demand measures the responsiveness of quantity demanded to changes in
a) price.
b) income.
c) demand substitutes.
d) demand complements.

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A cross price elasticity of demand for product with respect to the price of productof 0.3 means that
a) an increase in the price of A by 10 percent gives rise to an increase in quantity demanded of B by 3 percent.
b) an increase in the price of B by 10 percent gives rise to an increase in the quantity demanded of A by 3 percent.
c) an increase in the price of B by 10 percent gives rise to a decrease in the quantity demanded of A by 3 percent.
d) an increase in the price of A by 10 percent gives rise to a decrease in the quantity demanded of B by 3 percent.

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Suppose the cross-price elasticity for two goods is negative. The two goods are
a) normal goods
b) substitutes
c) complements
d) inferior goods

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Which of the following statements is true?
a) The price elasticity of demand is positive when there is an inverse relationship
between price and quantity demanded.
b) A positive income elasticity indicates that demand for a good rises asconsumer income falls.
c) A positive cross-price elasticity for two goods and would arise if and weredemand complements.
d) A negative cross-price elasticity for two goods and would arise if and weredemand complements.

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Suppose the cross-price elasticity for two goods is positive. The two goods are
a) normal goods
b) substitutes
c) complements
d) inferior goods

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All else equal, an increase in the price of bicycle helmets, would tend to
a) reduce the demand for cars
b) increase the demand for bicycles
c) reduce the demand for bicycles
d) cause more riders to walk to work.

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Why are long-run demand curves likely to be more elastic than short-run demand curves?
a) Prices tend to rise in the long-run.
b) Prices tend to be stable in the long-run.
c) Consumers have more time to adjust their purchase decisions in response to a change in price.
d) Supply tends to adjust in the long run.

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Which of the following statements best describes the relationship between short-run supply elasticity and long-run supply elasticity?
a) For many products, long-run supply is likely to be more price elastic than short-run supply.
b) For products that can be recycled, long-run supply is likely to be more price elastic than short-run supply.
c) For many products, long-run supply is likely to be less price elastic than short- run supply.
d) Both a) and b) are generally true, but c) is generally false.

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Gasoline in the long run will generally exhibit
a) greater elasticity of demand than in the short run.
b) greater elasticity of demand that for jewelry.
c) less elasticity of demand than in the short run.
d) less elasticity of demand than with regard to insulin for diabetics.

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Which of the following statements best describes the relationship between short-run demand elasticity and long-run demand elasticity?
a) For many products, long-run demand is likely to be more price elastic than short-run demand.
b) For durable goods, long-run demand is likely to be more price elastic than short-run demand.
c) For many products, long-run demand is likely to be more price inelastic than short-run demand.
d) For most products, long-run and short-run demand elasticities are the same.

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Which of the following explanations supports the statement that long-run supply curves are likely to be more elastic than short-run supply curves?
a) Firms are able to adjust fixed inputs in the long-run but not in the short-run.
b) Firms are able to adjust variable inputs in the short-run.
c) Firms prefer to hire workers rather than capital.
d) Firms have more flexibility in the short-run.

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Let the price elasticity of demand for a soft drink be - 2. In the year 2005, the per capita consumption of soft drinks was about 500 cans per person, and the average price was
$1.00 per can. If we suppose that demand for the soft drink is linear, Qd = a - bP, where a and b are constants, Qd is quantity demanded and P is price, an estimate of the demand
equation could be:
a) Qd = 100 - 2P
b) Qd = 1500 - 2P
c) Qd = 1500 - 1000P
d) Qd = 1000 - 1500P

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To identify a demand curve we must observe
a) many years of data
b) shifts in the demand curve
c) shifts in the supply curve
d) many different markets simultaneously

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Consider the following demand and supply curves: Qd = 100 - 2P, and Qs = 1⁄2 P, calculate the equilibrium P and Q for this initial situation and assuming the supply curve
changes to Qs = 1⁄2 P + 10. Which of the following is correct?

a) the initial equilibrium is P = 40, Q = 20 and the supply curve shifts left.
b) the initial equilibrium is P = 40, Q = 20 and the new equilibrium is P = 36, Q = 28.
c) the initial equilibrium is P = 40, Q = 20 and the new equilibrium remains the same.
d) the initial equilibrium is P = 40, Q = 20 and the new equilibrium is P = 38, Q= 28.

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Consider the following demand and supply curves: Qd = 100 - 2P, and Qs = 1⁄2 P, calculate the equilibrium P and Q for this initial situation and assuming the demand curve
changes to Qs = 100 - P. Which of the following is correct?

a) the initial equilibrium is P = 40, Q = 20 and the demand curve shifts left.
b) the initial equilibrium is P = 40, Q = 20 and the new equilibrium is P = 36, Q = 28.
c) the initial equilibrium is P = 40, Q = 20 and the new equilibrium is P = 66 2/3 and Q = 33 1/3.
d) the initial equilibrium is P = 40, Q = 20 and the demand curve shifts right.

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Suppose that demand and supply in the market for brazil nuts is linear, with a historic market price of $.50 per pound and 10 million pounds sold. In 2004, a news item raised health fears about the nuts. That year, the market price fell to $.45 per pound and only 8 million pounds traded. An estimate for the equation of brazil nuts would be:

a) This information only relates to demand, and so cannot be used to generate a supply equation.
b) Qs = 30 + 40P
c) Qs = 40P
d) Qs = -10+40P

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Explicit costs

a. do not involve outlays of cash
b. are greater than implicit costs
c. involve outlays of cash
d. are less than implicit costs

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Additional costs associated with attending class such as lost income from work can be
categorized as ______.

a. opportunity costs
b. explicit costs
c. tuition costs
d. none of the above

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Opportunity costs can vary from person to person and

a. can be calculated easily most of the time
b. can even be different for the same person at different points in time
c. are always known and predictable
d. represent explicit costs only

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Accounting costs include all ______.

a. explicit costs
b. explicit and implicit costs
c. explicit and opportunity costs
d. explicit and financial costs

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Sunk costs are considered to be unavoidable because ______.
A. these types of costs will occur in the future
B. the costs are extremely high
C. the costs are historical in nature
D. these costs are associated with a particular decision

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Which of the following would be best considered a sunk cost:
A. A $10 million dollar investment in a plant built 10 years ago.
B. The cost of merchandise ordered for the upcoming holiday season.
C. Insurance costs associated with a new international venture.
D. Incremental fuel costs resulting from a new transportation route.

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An example of an implicit cost would be ______.
A. transportation expenses
B. salaries
C. rental costs
D. leisure time

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Opportunity costs ______.
A. do not include explicit and implicit costs associated with an alternative
B. only include explicit costs associated with an alternative
C. depend on the decision being made
D. are independent of choices

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Economic costs ______.
A. only take into account implicit costs
B. are not the same as opportunity costs
C. consist of implicit costs
D. include the total of both explicit and implicit costs

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When evaluating alternative decisions, a decision maker should _____.
A. consider all opportunity costs
B. think about future trade-offs
C. only consider non sunk costs
D. include sunk costs in the decision

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To develop a solution to minimize costs in the long-run, a firm may want to adjust ______.
A. short-run costs
B. long-run input quantities
C. input quantities
D. long-run prices

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When a firm seeks to find an input combination that minimizes the total costs of producing a
particular level of output, this is defined as the ______.
A. cost reduction problem
B. production maximization problem
C. cost minimization problem
D. output optimization problem

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Isocost lines demonstrate ______.
A. the set of combinations of labor and capital that yield different total costs
B. labor costs in the short run
C. the set of combinations of labor and capital that yield the same total costs
D. the cost minimization process

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When a firm has limited opportunities to make substitutes among inputs, we would expect the
firm to make ______.
A. minimal changes in input selection with large price changes in the input
B. large changes in input selection with large price changes in the input
C. minimal changes in input selection with minimal price changes in the input
D. large changes in input selection with minimal price changes in the input

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If the quantity demanded of capital does not change by a large amount when the price of capital
increases by a large amount, we say that the demand elasticity of capital is ______.
A. elastic
B. cross-elastic
C. inelastic
D. none of the above

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In a short run based decision, a firm would _______.
A. face no constraints in terms of input selection
B. minimize costs
C. be subject to input constraints
D. maximize production

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You have invested about $100,000 in a new (hopefully) trendy restaurant in an urban location. These costs have gone to purchase the restaurant, prepay insurance for the following year, and purchase supplies for the restaurant. It will cost you an additional $10,000 per year to hire each waiter and waitress. (They earn tips which they get to keep.) Which of the following statements is most accurate?
a) The $100,000 sum represents sunk costs, whereas the costs for waiters and waitresses is not sunk, but all of these costs would be considered accounting costs, but do not include all of the possible economic costs of operating the business.
b) The $100,000 sum represents sunk costs, whereas the costs for waiters and waitresses is not sunk, but all of these costs would be considered accounting costs, and also include all of the possible economic costs of operating the business
c) The $100,000 sum represents sunk costs and the costs for waiters and waitresses are sunk as well.
d) The $100,000 sum represents sunk costs and all of the possible accounting costs as well.

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Sunk costs do not
a) matter.
b) affect business shutdown decisions.
c) affect business start-up decisions.
d) cost as much as marginal costs.

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Opportunity cost for a firm is
a) Costs that involve a direct monetary outlay
b) The sum of the firm's implicit costs
c) The total of explicit costs that have been incurred in the past
d) The value of the next best alternative that is forgone when another alternative is chosen

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You decide to purchase a new car for $12,000. Upon driving the car off of the lot, the resale value of the car falls to $9,000. The opportunity cost of purchasing the car is __________ and the opportunity cost of using the car is __________
a) $12,000 and $9,000.
b) $12,000 and $3,000.
c) Unknown and $9,000.
d) Unknown and $3,000.

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Economic costs
a) are the same as accounting costs.
b) are the same as implicit costs.
c) are the same as opportunity costs.
d) are the same as the sum of all past explicit costs

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Isocost lines represent
a) the same value for every firm in the industry.
b) are the same as implicit costs.
c) the same total expenditure on the inputs to the production process.
d) the sum of all past explicit costs

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An isocost line represents
a) all combinations of inputs in which the firm produces the same level of output.
b) all combinations of inputs in which the firm has the same level of total cost.
c) for a given level of output, the various points that will produce that same level of output at the same cost.
d) all combinations of output that yield the same total cost level.

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The cost-minimization problem of the firm is to
a) maximize output subject to a given cost constraint.
b) minimize total cost.
c) minimize average cost.
d) minimize total cost of producing a particular level of output.

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The long-run is
a) a time period in which all input levels are fixed.
b) a time period in which at least one input level is fixed.
c) one year.
d) a time period in which no input levels are fixed.

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The cost-minimization problem of the firm is to
a) minimize total costs.
b) minimize average costs.
c) minimize total cost of producing a particular amount of output.
d) maximize output subject to a cost constraint.

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A difference between the short run and the long run is that a firm in the short run
a) faces an unconstrained cost minimization problem, whereas the firm is constrained in the long run.
b) faces a constrained cost minimization problem, whereas the firm is unconstrained in the long run.
c) faces a constrained cost minimization problem in both the short run and the long run.
d) faces an unconstrained cost minimization problem in both the short run and the long run.

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A firm uses labor and capital, , to produce an output. The hourly cost of labor is $10, and the hourly cost of capital is $50. Which of the following combinations of labor and capital hours of use represent points on the firm's $100,000 isocost line?
a) (10000, 2000)
b) (2000, 10000)
c) (1000, 1800)
d) (1000, 1000)

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In order to solve graphically for an interior cost minimum of the firm, subject to the constraint of producing a particular target level of output, we
a) shift in the isocost line as much as possible.
b) shift out the isoquant as much as possible.
c) shift the isocost line left as much as possible subject to the constraint that it touches the target isoquant at least once.
d) shift the isoquant left as much as possible subject to the constraint that it touches the target isocost at least once.

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Which of the following statements correctly characterizes the solution to a cost minimization problem with an interior solution?
a) The isoquant is tangent to the isocost line.
b) The isoquant lies to the interior of the isocost line.
c) The isocost line lies to the interior of the isoquant.
d) The distance between the isoquant and the isocost line is maximized.

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Suppose that a firm uses only two inputs in its production process. The ratio of the marginal products of these inputs always exceeds the ratio of the prices of the inputs. What can you say about the cost-minimizing point of the firm?
a) It is an interior solution.
b) A cost-minimizing point must not exist.
c) If a cost-minimizing point exists, it must be at a corner.
d) Costs must be negative at the cost-minimizing point.

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Suppose in a particular production process that capital and labor are perfect substitutes so that three units of labor are equivalent to one unit of capital. If the price of capital is $4 per unit and the price of labor is $1 per unit, the firm should
a) employ capital only.
b) employ labor only.
c) use three times as much capital as labor.
d) use three times as much labor as capital.

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A firm's production function is given by Q = KL. The marginal products of labor and capital are, respectively, MPL = K and MPK = L. The wage rate of labor is w = $10 and the rental rate of capital is r = $20. The firm wants to produce 1,800 units of output. What is the most efficient combination of labor and capital ?
a) (10, 20)
b) (20, 90)
c) (60, 30)
d) (90, 20)

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A firm's production function is given by Q = KL. The marginal products of labor and capital are, respectively, MPL = K and MPK = L. The wage rate of labor is w = $10 and the rental rate of capital is r = $20. The firm wants to produce 1,800 units of output in the most efficient way possible. How much does the firm spend?
a) $2,000
b) $1,300
c) $1,200
d) $1,100

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A firm's production function is given by Q = KL. The marginal products of labor and capital are, respectively, MPL = K and MPK = L. The wage rate of labor is w = $10 and the rental rate of capital is r = $20. What is the most efficient combination of labor and capital that also yields a cost of exactly $1000?
a) (10, 45)
b) (25, 50)
c) (50, 25)
d) (20, 40)

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A firm's production function is given by Q = KL. The marginal products of labor and capital are, respectively, MPL = K and MPK = L. The wage rate of labor is w = $10 and the rental rate of capital is r = $20. The firm spends exactly $1000 in the most efficient way possible. How much output can the firm produce?
a) 450
b) 800
c) 1000
d) 1250

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A firm's production function is given by . The marginal products of labor and capital are, respectively, and . Further, the wage rate is and the rental rate of capital is . What is the most efficient combination of labor and capital that also results in a total cost level of exactly $1,200?
a) (20, 50)
b) (25, 47.5)
c) (30, 45)
d) (40, 40)

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A firm's production function is given by . The marginal products of labor and capital are, respectively, and . Further, the wage rate is and the rental rate of capital is . Suppose that the firm spends exactly $1200 in the most efficient way possible. How much output can the firm produce?
a) 50,000
b) 56,406.25
c) 60,750
d) 64,000

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A firm has a Cobb-Douglas production function for its inputs of capital and labor. The firm is currently paying $10 per labor hour and $5 per machine hour. The firm is currently at an efficient production level, employing an equal number of machines and workers. What can we infer about the marginal productivities of capital and labor at this point?
a) MPK = MPL
b) MPK = 2MPL
c) MPL = 2MPK
d) MPL = .5MPK

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The long-run is
a) a time period in which all input levels are fixed.
b) a time period in which at least one input level is fixed.
c) one year.
d) a time period in which no input levels are fixed.

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Let a firm use labor (L) and capital (K) as its only inputs to produce an output, Q. The cost of labor is w = $5 per labor hour and the cost of capital is r = $15 per machine hour. What is the equation of the $1.5-million isocost line?
a) 1.5m = L + K.
b) 1.5m = 5L + 15K.
c) 1.5m = (5L)(15K).
d) 1.5m = (5L + 15K)Q.

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The "equal bang per buck" condition refers to the firm equating
a) marginal revenue with marginal cost.
b) the marginal productivity of the last dollar spent on labor with the marginal productivity of the last dollar spent on capital.
c) the marginal productivity of capital with the marginal productivity of labor.
d) the cost of capital with the cost of labor.

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A firm uses capital and labor to produce an output. The absolute value of the slope of the isocost line equals:
a) the ratio of the marginal productivities of the inputs.
b) the ratio of the output prices.
c) the ratio of the input prices.
d) the ratio of capital to labor.

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A firm's production function is given by . The marginal products of labor and capital are, respectively, and . Further, the wage rate is and the rental rate of capital is . Suppose the firm wants to produce 27,000 units of output. What is the most efficient combination of labor and capital ?
a) (20, 20)
b) (30, 30)
c) (30, 90)
d) (90, 30)

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A firm's production function is given by . The marginal products of labor and capital are, respectively, and . Further, the wage rate is and the rental rate of capital is . Suppose that the firm wants to produce 27,000 units of output in the most efficient way possible. How much does the firm spend?
a) $600
b) $900
c) $1,500
d) $2,100

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Suppose capital and labor are perfect complements for a particular production process. If the price of labor increases, holding the price of capital and the level of output constant, the firm should
a) use more capital and less labor.
b) use more labor and less capital.
c) use the same amounts of capital and labor.
d) eliminate all use of labor.

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Suppose capital and labor are perfect substitutes for a particular production process. If the price of labor increases, holding the price of capital and the level of output constant, the firm may
a) use more capital and less labor.
b) use more labor and less capital.
c) use the same amounts of capital and labor.
d) Either use more capital and less labor or use the same amounts of both inputs.

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Suppose that capital and labor are perfect complements in a one-to-one ratio in a firm's production function. The firm is currently at an efficient production level, employing an equal number of machines and workers. Suppose the cost of labor were to double and the cost of capital were to fall by half. If the firm wanted to produce the previous level of output, the firm would hire
a) more labor and less capital.
b) less labor and more capital.
c) the same amounts of labor and capital.
d) twice as much labor as capital.

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Suppose that a firm uses only capital, K, and labor, L, in its production process. At the firm's current long-run combination of capital and labor, it uses positive amounts of both inputs and measures the marginal products as and . The rental rate of capital is r = 6 and the current wage rate for labor is w = 3. The firm
a) is currently minimizing total cost in the long run.
b) could lower cost by increasing the usage of capital and decreasing the usage of labor.
c) could lower cost by increasing the usage of labor and decreasing the usage of capital.
d) cannot lower cost without also lowering the level of output

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The expansion path graphs
a) the combinations of capital and labor that minimize total cost for various levels of output.
b) the combinations of capital and labor that have the same total cost for various levels of output.
c) the combinations of capital and labor that have the same level of output.
d) how the firm can expand output while holding total cost constant.

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An increase in the quantity of output will cause the cost minimizing quantity of an input to go ________ if the input is a normal input and will cause the cost minimizing quantity of the input to go _________ if the input is an inferior input.
a) up; up
b) up; down
c) down; up
d) down; down

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For a production process with ten inputs, how many inputs could be inferior inputs?
a) 5
b) 0
c) 9
d) 10

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An input demand curve represents
a) how the cost-minimizing amount of input varies with the level of output.
b) how the cost-minimizing output varies with an input's price.
c) how the cost minimizing amount of input changes with the input's price.
d) how the cost minimizing output varies with the output price.

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A curve that shows how the firm's cost-minimizing quantity of capital varies with the price of capital is the firm's
a) Price-expansion curve
b) Labor demand curve
c) Capital demand curve
d) Elasticity of demand curve

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Suppose that a firm's production function of output Q is a function of only two inputs, labor (L) and capital (K) and can be written Q = 25LK with marginal products MPL = 25K and MPK = 25L. Let the wage rate for labor be w = 1 and the rental rate of capital be r= 1. If the firm produces 100 units of output, how many units of labor will it use?
a) 1
b) 2
c) 3
d) 4

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When the elasticity of substitution between capital and labor is low,
a) labor demand will be price elastic.
b) labor demand will be price inelastic.
c) the capital-labor ratio will be low.
d) the labor demand curve will be a flat line.

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A high elasticity of substitution between capital and labor implies that labor demand will be
a) price elastic.
b) unitary price elastic.
c) price inelastic.
d) more inelastic than capital demand.

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Suppose that a firm has a Cobb-Douglas production function for its inputs of capital and labor. The firm is currently paying $10 per labor hour and $5 per machine hour. The firm is currently at an efficient production level, employing an equal number of machines and workers. Suppose the cost of labor were to double and the cost of capital were to fall by half. If the firm wanted to produce the previous level of output for the previous cost, the firm would hire
a) more labor and less capital.
b) less labor and more capital.
c) equal amounts of labor and capital.
d) twice as much labor as capital.

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Identify the truthfulness of the following statements.
I. All fixed costs are sunk costs.
II. All sunk costs are fixed costs.

a) Both I and II are true.
b) Both I and II are false.
c) I is true; II is false.
d) I is false; II is true.

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Identify the truthfulness of the following statements.
I. A firm decides to purchase a computer for $1,500 at the end of the month. The computer will be used for administrative purposes that do not vary with the volume of product that the firm makes. The computer has no re-sale value. This is a fixed cost. At the beginning of the month, this cost is non-sunk.
II. A firm decides to purchase a computer for $1,500 at the beginning of the month. The computer will be used for administrative purposes that do not vary with the volume of product that the firm makes. The computer has no re-sale value. This is a fixed cost. At the end of the month, this cost is sunk.
a) Both I and II are true.
b) Both I and II are false.
c) I is true; II is false.
d) I is false; II is true.

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Consider a production process with two inputs and assume the level of one of the inputs is fixed in the short run. To determine the optimal level of the variable input you should
a) solve the total cost equation for the level of the variable input.
b) solve the total cost equation for the level of the fixed input and substitute that into the production function.
c) solve the production function for the level of the fixed input.
d) solve the production function for the level of the variable input.

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A firm's production process uses labor, L, and capital, K, and materials, M, to produce an output, Q according to the function Q = KLM, where the marginal products of the three inputs are MPL = KM, MPK = LM, and MPM = KL. The wage rate for labor is w = 2, the rental rate of capital is r = 1, and the cost of materials is m = 4 per unit. What is the long run cost-minimizing level of capital that the firm must use to produce a target level of output, Q = 1000?
a) K = 5
b) K = 10
c) K = 20
d) K = 40

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A firm's production process uses labor, L, and capital, K, and materials, M, to produce an output, Q according to the function Q = KLM, where the marginal products of the three inputs are MPL = KM, MPK = LM, and MPM = KL. The wage rate for labor is w = 2, the rental rate of capital is r = 1, and the cost of materials is m = 4 per unit. Let materials input be fixed now at M = 2. What is the cost minimizing level of capital that the firm must use to produce a target level of output, Q = 1600?
a) K = 5
b) K = 10
c) K = 20
d) K = 40

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An indivisible input is
a) an input that cannot be seen by the naked eye.
b) an important input that the firm cannot identify.
c) an input that can only be obtained in a certain minimum size.
d) an input the firm cannot stop using.

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A firm's long-run average cost curve is comprised of
a) the minimum points of each of the firm's short-run average cost curves.
b) the lower envelope of the firm's short-run average cost curves.
c) the minimum points of each of the firm's short-run marginal cost curves.
d) the series of points where the short-run marginal cost curves intersect the short-run average cost curves.

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When average cost is "u-shaped" (neither always rising or always falling), the marginal cost curve will
a) cross through (intersect) the average cost curve at its maximum.
b) not intersect with the average cost curve at all.
c) be a fixed distance above the average cost curve.
d) cross through (intersect) the average cost curve at its minimum.

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The long-run total cost curve shows
a) the various combinations of capital and labor that will produce different levels of output at the same cost.
b) the various combinations of capital and labor that will produce the same level of output.
c) the minimum total cost to produce any level of output, holding input prices fixed, and choosing all inputs to minimize cost.
d) for a fixed level of capital, the minimum cost to produce a given level of output.

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A long-run total cost curve
a) must be equal to zero when the level of output is zero.
b) may be greater than or equal to zero when the level of output is zero.
c) must be decreasing when the level of output is zero.
d) will be equal to fixed cost, which is greater than zero, when the level of output is zero.

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Which of the following is not an accurate specification of a firm's long-run total cost curve? FC stands for fixed cost, VC stands for variable cost, and AC stands for average cost, below.
a) , where FC = 0
b) TC=FC + VC, where FC > 0
c) , where L and K are chosen to minimize cost, and w and r are input prices.
d) TC = AC x Q

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The long-run total cost curve tends to
a) rotate upward when input prices fall.
b) rotate upward when input prices rise.
c) shift vertically upward by a fixed amount.
d) shift vertically downward by a fixed amount.

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Assume that capital is measured along the vertical axis, and labor is measured along the horizontal axis. The firm has an initial isocost line called . Now suppose that the price of labor trebles and the price of capital also trebles. Which statement accurately describes the movement of the isocost line from to ?
a) The slope of the isocost line becomes flatter.
b) The slope of the isocost line becomes steeper.
c) The slope of the isocost line is unchanged.
d) We cannot determine whether the slope becomes flatter or steeper.

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When the price of all inputs increase by the same percentage,
a) the firm's total cost curve will rotate upward by a higher percentage if the firm's production technology exhibits decreasing returns to scale.
b) the firm's total cost curve will rotate upward by the same percentage.
c) the firm's total cost curve will rotate upward by a higher percentage if the firm's production technology exhibits increasing returns to scale.
d) the firm's total cost curve will remain unchanged since the cost-minimizing combination of inputs is unchanged.

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An increase in the price of one input
a) will always rotate the long-run total cost curve upward.
b) may rotate the long-run total cost curve upward or may leave the long-run total cost unchanged.
c) could actually rotate the long-run total cost downward.
d) will have no effect on the long-run total cost curve as long as long as the firm is using positive amounts of both inputs.

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Cost driver is
a) a mathematical relationship that shows how total costs vary with the factors that influence total costs
b) a factor that influences or "drives" total or average costs
c) a factor that influences quality of output and prices of inputs
d) a cost level.

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When the prices of all inputs increase by a proportionate amount,
a) the firm's total cost curve will remain unchanged since the cost-minimizing combination of inputs is unchanged.
b) the firm's total cost curve may rotate upward or may leave the long-run total cost curve unchanged.
c) will always rotate the long-run total cost curve upward.
d) could actually rotate the long-run total cost downward if the firm chooses to produce a lower level of output.

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Identify the truthfulness of the following statements.
I. Marginal cost can be measured as the slope of the total cost curve.
II. Average total cost can be measured as the slope of the ray from the origin to the total cost curve.
a) Both I and II are true.
b) Both I and II are false.
c) I is true; II is false.
d) I is false; II is true.

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For a firm, let total cost be TC(Q) = 160+10Q2 and marginal cost be MC(Q) = 20Q. What is the minimum efficient scale for this firm?
a) 0
b) 2
c) 4
d) indeterminate

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Identify the truthfulness of the following statements.
When marginal cost is rising, average total cost is rising.
When marginal cost is below average total cost, average total cost is falling.
a) Both I and II are true.
b) Both I and II are false.
c) I is true; II is false.
d) I is false; II is true.

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If average cost is constant for all levels of output,
a) the marginal cost curve will intersect the average cost at a single point, the minimum of average cost.
b) marginal cost will be equal to average cost for all levels of output.
c) marginal cost will be above average cost when average cost is increasing and marginal cost will be below average cost when average cost is decreasing.
d) marginal cost will have a region of diminishing marginal cost.

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Marginal cost
a) is equal to average cost at the minimum point of the marginal cost curve.
b) is equal to average cost at the maximum point of the average cost curve.
c) is decreasing whenever average cost is decreasing.
d) is equal to average cost at the minimum point of the average cost curve.

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When the production function is given by Q = L, which of the following statements is true?
a) TC = wQ2, L = Q2 and AC = w
b) TC = w - Q, L = Q and AC = w
c) TC = wQ, L = Q and AC = w
d) TC = wQ, L = Q and AC = L

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Suppose a firm's total cost curve is given by the equation . The firm's marginal cost is . At what level of does the firm's average cost curve reach a minimum?
a) 100
b) 2
c) 10
d) 20

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Suppose a firm produces 50,000 units of output, and determines that its marginal cost is $0.72 and its average total cost is $0.72. At this quantity of output, what is the slope of this firm's long run average total cost curve?
a) Upward-sloping.
b) Downward-sloping.
c) Horizontal.
d) Vertical.

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Marginal cost is
a) the cost per unit of output.
b) the increase in total cost from producing an additional unit of output.
c) the same thing as total variable cost.
d) is only relevant in the long-run.

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A firm notices that when it increases output beyond an initial level , average total cost decreases. For this firm, the region of output beyond is characterized by
a) economies of scale.
b) diseconomies of scale.
c) constant economies of scale.
d) the minimum efficient scale.

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Which of the following factors may explain diseconomies of scale?
a) Increasing returns to scale of inputs.
b) Specialization of labor.
c) Indivisible inputs.
d) Managerial diseconomies.

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The output elasticity of total cost is equal to
a) the slope of the isocost line.
b) the ratio of marginal cost to average cost.
c) the ratio of average cost to marginal cost.
d) the ratio of average cost to total cost.

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When the output elasticity of total cost is less than one,
a) Marginal cost is less than average cost and average cost decreases as Q increases.
b) Marginal cost is less than average cost and average cost increases as Q increases.
c) Marginal cost is greater than average cost and average cost decreases as Q increases.
d) Marginal cost is greater than average cost and average cost increases as Q increases.

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Minimum efficient scale is
a) the lowest level of efficiency the firm can achieve.
b) the highest level of output the firm can achieve.
c) the lowest level of long-run average cost.
d) the smallest quantity at which the long-run average cost achieves a minimum.

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Economies of scale exist when firms have
a) increasing returns to scale.
b) constant returns to scale.
c) decreasing returns to scale.
d) constant marginal cost.

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Suppose a firm's production function can be specified as Q = 10KL. This firm's cost function exhibits
a) economies of scale
b) diseconomies of scale
c) neither diseconomies nor economies of scale.
d) economies of scale for output levels less than some level, Q1= 1/4, and diseconomies of scale thereafter.

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Suppose a firm's total cost curve can be written TC(Q) = Q - .5Q2 + Q3, with marginal cost MC(Q) = 1 - Q + 3Q2. This cost function exhibits:
a) economies of scale
b) diseconomies of scale
c) neither diseconomies nor economies of scale.
d) economies of scale for output levels less than some level, Q1 = 1/4, and diseconomies of scale thereafter.

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Suppose the output elasticity of total cost is 1.5. This implies the average cost curve exhibits
a) increasing returns to scale.
b) economies of scale.
c) neither economies nor diseconomies of scale.
d) diseconomies of scale.

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If the output elasticity of total cost is less than one, then the long-run average cost curve experiences
a) economies of scale.
b) diseconomies of scale.
c) decreasing returns to scale.
d) the minimum efficient scale.

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Diseconomies of scale exist when
a) the firm's total cost falls as the level of output increases.
b) the firm's total cost increases as the level of output increases.
c) the firm's average cost decreases as the level of output decreases.
d) the firm's average cost decreases as the level of output increases.

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Which of the following factors would not explain economies of scale?
a) Increasing returns to scale of inputs.
b) Specialization of labor.
c) Indivisible inputs.
d) Managerial diseconomies

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Suppose a firm's production technology exhibits constant returns to scale. The firm's long-run average cost curve will
a) be U-shaped
b) exhibit economies of scale.
c) exhibit diseconomies of scale.
d) be a horizontal straight line.

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The short-run total cost curve is the sum of two components
a) Short-run and long-run
b) Total variable cost curve and total fixed cost curve
c) Average cost curve and marginal cost curve
d) Economies of scale and economies of scope

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The short-run total cost curve
a) shows the minimized total cost of producing a given quantity of output.
b) shows the outputs that correspond to minimized total cost when at least one input is fixed.
c) shows the minimized total cost of producing a given quantity of output when at least one input is fixed.
d) shows the minimized total cost of producing a given quantity of output when all inputs are fixed.

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Suppose STC(Q) = 2Q + 20. Short run marginal cost is
a) indeterminate, since we don't know the level of .
b) 22
c) 20
d) 2

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Economies of ______ occur when a single firm can produce two products together for a lower total cost than two firms could produce those same products separately, one at each firm.
a) scale.
b) scope.
c) efficiency.
d) output.

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Economies of scope
a) are related to the average cost of producing a good when you double the scale of output.
b) are higher the more specialized a firm is in production.
c) means the rotation of the long-run total cost curve in a downward direction.
d) are a production characteristic in which the total cost of producing given quantities of two goods in the same firm is less than the total cost of producing those quantities in two single-product firms.

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The experience curve (also called the learning curve) shows the relationship between
a) average total cost and output.
b) average variable cost and returns to scale.
c) output and marginal cost.
d) average variable cost and cumulative production volume.

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The percentage change in average variable cost for every 1 percent increase in cumulative volume is referred to as
a) experience elasticity
b) experience curve
c) experience output
d) experience slope

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Economies of experience are exhibited when
a) it takes a professor a smaller quantity of time to prepare a lesson for a new class than for the first class he taught.
b) an older professor is more intelligent than a younger professor.
c) a professor goes into business as a consultant.
d) a professor reaches age 65 and begins to get a senior citizen discount.

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Let the average variable cost of production be $20 when 10 units are produced in the first year. In the second year, after the second 10 units have been produced, the average variable cost of production is $12. The slope of the experience curve for this firm is:
a) 85%
b) 60%
c) 175%
d) 12%

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Identify the truthfulness of the following statements.
I. Economies of Experience imply that Economies of Scale must exist.
II. Economies of Scale imply that Economies of Experience must exist.
a) Both I and II are true.
b) Both I and II are false.
c) I is true; II is false.
d) I is false; II is true.

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Let a firm's long run total cost be described by the constant elasticity total cost function. The coefficient of the log of output in this function is interpreted as the
a) average cost.
b) marginal cost.
c) output elasticity of total cost.
d) cost driver.

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Let a firm's long run total cost be described by the constant elasticity total cost function. The coefficients of the log of the wage and the log of capital in this function should
a) add up to one.
b) be negative.
c) be of opposite sign.
d) of indeterminate sign.

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The following is not a property of the translog cost function:
a) The constant elasticity cost function is a special case of it.
b) The average cost may be U-shaped.
c) It is a good approximation for almost any production function.
d) It only applies to long run total costs.

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A constant elasticity cost function
a) takes a form such as TC = a Qb wc rd and is useful in empirical work because it can be converted into a linear form using logarithms.
b) takes a form such as , where L and K are chosen to minimize cost, and w and r are input prices.
c) takes a form such as TC = a Q2 + KL.
d) is given by TC = AC x Q.

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Monopoly is a market structure where:
A) there is a single seller producing s unique product
b) a few firms dominate the market
c)many firms produce differentiated products
c) many firms produce identical products

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law of diminishing marginal productivity applies to short run because:
a) all inputs are variable in the short run
b)tech always changes
c) some inputs are fixed in the short
d) all inputs are fixed in the short run

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The AVC curve decreases until it intersects the:
a)ATC curve
b) MC curve
c) AR curve
d)MR curve

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the marginal cost is:
a) the additional revenue gained from producing an extra unit of output
b) total cost of production
c) avg cost of production
d) the additional cost of producing one additional unit of output

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in a perfectly competitive market:
a) the firm determines the price
b) the firm must sell at the price dictated by the market
c) the entrepreneur determines the price
d) the govt determines the price

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a monopoly firm selling lemonade to tourists on an island is currently maximizing profits by charging a price of 5$ per glass. it follows the the marginal cost of lemonade:
a) is equal to 5$
b)is less than 5$
c) is greater then 5$
d) is greater than the avg cost

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a firm is producing an output level at which:
a) mr exceeds mc then the firm should reduce its output level to maximize profits
b) mr is less than mc then the firm should expand its output level to maximize profits
c) price exceeds atc then it is earning an economic profit
d) price is less than the minimum atc then the firm should shut down

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in a perfectly competitive market;
a) firms sell a differentiated product where one firms output can be distinguished from another firms output
b) there are so many firms selling in the market than no one indi firm has the ability to control the market price
c) economic profits can be earned in the long run
d) very strong barriers to entry

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MP is zero:
a) where total product is the origin
b) where the total product curve is at its maximum
c) the point of inflection on the tp curve
d) never

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MP reaches a maximum:
a) where tp is at the origin
b) where tp is at its max
c) at the point of inflection on the tp curve
c) never

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the more subs availableL:
a) the larger is the income elasticity of demand
b) the larger is the price elasticity of demand
c) the smaller is the income price elasticity of demand
d) the smaller is the price elasticity of demand

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A significant long run diff between monopoly and monopolistic comp is:
a) free entry and exit in a monopolized mkt whereas barriers to entry exist in a comp mkt
b) comp firms control mkt supply: whereas a monopolists influence on mkt supply is imperceptible
c)profits are driven to zero in a perfectly comp mkt where as positive profits may persist in a monopolized mkt
d) vice versa " "

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the profit maximizing monopolist will produce output where:
a) demand equal marginal cost
b) marginal revenue equals marginal cost
c) mc equals atc
d) mr equals zero

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the demand curve reps the erlationship between:
a) price and quantity supplied
b) elasticity and quantity supplied
c) price and quantity demanded
d) elasticity and quantity demanded

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the demand curve for the monopolist differs from the demand curve faced by a comp firm bc the demand curve for:
a) a monopolist lies below it mr curve
b) a monopolist is the mkt demand curve
c) a comp firm lies above its mr curve
d) a comp firm is inelastic

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the profit maximizing condition of a perfectly competitive firm is
a) MC=ATC
b) mr=avc
c)mc=mr
d) mc = avc

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a perfectly competitive firm in the long run earns ______ normal profits but _______ economic profits
A) neg, 0
b) pos 0
c) pos, pos
d) )0,0

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question

AFC:
a) is constant over an entire range of output
b)decreases initially then increases when mc exceeds it
c) falls as output is increased in the short run
d) equals tc divided by quantity

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question

to discuss janes utility one does not need to know
a) whether jane prefers a or b
b) how jane ranks her preferences
c) which combos of goods gives jane the same utility
d) the numerical values asso with janes utility

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question

the economic model of oligopoly assumes that firms use:
a) strategic decision making
b) monopolistoc decision making
c) economic decision making
d) comp decision making

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question

avg rev for a monopolist is equal to
a) mr
b) the price the monopolist sets
c) atc
d) none

answer

d, demand

question

what happens to producer and consumer surplus when a monopolist increases output above the profit maximizing output level
a) producer surplus falls but consumer surplus rises
b) both prod and consumer surplus
c) both decrease
d) prod surplus rises but consumer sur falls

answer

a
B!!!!??

question

if a price ceiling is imposed on corn the likely result will be
a) a lower eq price for the corn as the supply shifts out
b) a higher eq price for corn as the demand curve shifts out
c) shortage of corn as the pc keeps the mkt from reaching eq
d) a surplus of corn as the pc keeps the mkt from reaching eq

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question

the mc curve:
a) first rises then declines
b) rises when the atc curve lies above the avc curve
c) crosses the tvs and tc curves at their max pt
d) begind to rise when the mp begins to fall

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question

the mkt structure in which many diff firms supply similar but slightly differentiated products is
a) monopoly
b) monopolistic comp
c) oligpoly
d) perfect competition

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question

if a monopolist produces less than the quantity where mc equals mr then
a) the additional revenue it gets is below the mc
b) the tr it gets is below the tc
c) the additional revenue it gets is above the additonal costs
d) the tr it gets is above the tc

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question

other things equal, when the extra output obtained from hiring the 5th worker is smaller than the extra output obtained from hiring the 4th worker:
a) mc will fall
b) mc will rise
C) mp must rise
d) ac must fall

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question

if your restaurant got the "best in midwest" award whichof th e following would most likely happen
a) demand curve would shift inward
b) demand curve would shift outward
c) supply curve would become indefinitely inelastic
d) quantity demanded would drop

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question

a price elasticity of 0.5 means
a) demand is elastic
b) quantity demanded changes 0.5% for each 1% change in price
c) quantity demanded changes 0.5 units for each 1% change in price
d) quantuty demanded changes 5% for each 1% change in price

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question

according to the law of demand and increase in the price of gas will
a) decrease the quantity demanded of gas other things constant
b) decrease the demand for gas
c) increase the quantity demanded for gas all other things constant
d) increase the demand for gas

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question

a price ceiling creates a shortage by
a) increasing the quantity supplied relative to equilibrium
b) decreasing the quantity supplied relative to equilibrium
c) increasing prod costs
d) changing the elasticity of demand

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question

as a consumer moves along an indifference curve: a) prices and income are held constant but total utility changes
b) prices held constant but income changes
c) total utility is held constant but prices and income changes
d) income is held constant but prices change

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question

the mc curve:
a) declines until atc increases
b) first rises then declines
c) never becomes a firms supply curve
d) rises when the point of diminishing marginal product is reached

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question

breakeven point is when:
a) zero economic profit
b) zero tr
c) zero tc
d) already exited in the short run

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question

mp tells:
a) the additional profit from adding one worker
b) the additional number of worker needed to increase output by 1%
c) the additional output from adding one worker
d) the additional number of workers needed to increse output by 1

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question

in the short run a firm should shut down immediately if tr is less than
a) tc
b) tfc
c) tvc
d) ac

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question

in perfect comp a firms supply curve is taken from its
a) tc curve
b) mc curve
c) ac curve
d) tvc curve

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question

the point at which the mc curve intersects the atc curve is the
a) min ATC
b) max ATC
C) min MC
d) max MC

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question

if the assumption "specialization of labor" was eliminated the MP curve would
a) be a horizontal line then rise
b) rise without falling
c) rise and then fall
d) immediately begin falling

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long run decisions are
a) constrained bc all inputs are variable
b) constrained because all inputs are fixed
c) constrained bc labor is fixed and all other inputs are variable
d) unconstrained

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question

the mr of a firm in perf comp is :
a ) less than selling price
b) more than selling price
c) equal to selling price
d) it depends: sometimes below and sometimes above the selling price

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question

in perf comp a firm faces a
a) horizontal supply curve
b) horizontal demand curve
c) downward sloping demand curve
d) downward sloping supply curve

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question

in the long run of perfectly comp mkts the zero profit condition exists bc:
a) prices rise in the long run
b) prices fall in rhe long run
c) firms can freely enter exit in the long run
d) barriers to entry arise in the long run

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question

the ultimate goal of monopoly reg is:
a) to increase quantity produced
b) to avoid economic efficiancy at all costs
c) to destrot monopolies
d) to increase consumer dead weight loss

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question

economis efficiency is defined as _______ and ALWAYS exists in ________ markets
a) p=ac regulated monopolistic
b) p=mc perf comp
c) mr=mc perf comp
d) p=ac monopoloistic

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question

this mkt extracts consumer surplus NEALY perfectly
a) auction mkt
b) pref comp
c) regulated monopoly
d) oligpoly

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question

if at least one input is fixed the time period for which it is fixed is called the

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short run

question

compared to a firm in perf comp, a monopolist produces
a) lower output at lower price
b) larger output at higher prive
c) larger output at lower price
d) lower output at higher price

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question

dwl results from monopoly price being
a) less than mc
b) more thsn mc
c) equal to mc
d) greater than atc

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question

to eliminate economic profits govt regualators will set price equal to
a) mc
b) atc
c) afc
d0avc

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question

product differentiation from many firms is key in this mkt structure
a) perf comp
b) oligpoly
c) monopoly
d) monopolistic comp

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question

monopolistically comp firms will have long run eq prices that
a) is equal to mc
b) is equal to mr
c) exceeds mc
d) exceeds atc

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question

oligpoly is characterized by
a) many sellers
b) many buyers
c) many barriers to entry
d) high mkt concentration

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question

which of the following is not typical with nationalization
a) econimic efficency
b) greater dwl
c) atc rise
d) revenur from other sources are needed to cover operational costs

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question

monopolists face a ______ demand curve
a) vertical
b) horizontal
c) upward sloping
d) downward sloping

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question

avg rev for a monopolist is equal to
a) mr
b) the price the monopolist sets
c) atc
d) none

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question

an increase in the price of food would cause the budget lime to
a) rotate inward
b) shift outward parallel to the budget line
c) rotate outward
d) shift inward parallel to the orig budget line

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question

economic profit is calculated by
a) tr-tc
b) total expenditure - tc
c) ac- mr
d) normal profit - mr

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question

if the quantity of cars supplied to the car market in an area increases 2% when the price goes up 10% the elasticity of supply would be
a) .2
b) .5
c) 2
b) 5

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question

graphically a consumer maximizes utility where:
a) the indifference curve and the budget line have the same slope
b) the slope of the budget line is -1
c) the slope of the indifference curve is -1
d) the slope of the indifference curve is greater than the slope of the budget line

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question

as s manager you have determined that the demand for your good is quite elastic. therefore:
a) increasing theprice of your good will increase revenurs
b) devreasing the price of your good will increase revenues
c) increasing the price of your good will have no impact on the quantity demanded
d) decreasing the price of your good will not impact revenues

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question

Factors of production are
a) inputs and outputs.
b) outputs only
c) inputs only
d) the minimum set of inputs that can produce a certain fixed quantity of output.

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question

Given the simple production function Q = 3K + 4L, where L is the quantity of labor employed and K is the quantity of capital employed, assuming K = 2 and L = 3, what would it mean if output was less than 18?
a) The firm is out of business.
b) The firm is not employing labor and capital efficiently.
c) The production function was not specified correctly.
d) Labor is less productive than capital.

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question

The production function represents
a) the quantity of inputs necessary to produce a given level of output.
b) the various recipes for producing a given level of output.
c) the minimum amounts of labor and capital needed to produce a given level of output.
d) the set of all feasible combinations of inputs and outputs.

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A labor requirements function represents
a) the set of feasible levels of labor that will produce a given level of output.
b) the various recipes for producing a given level of output.
c) the minimum amount of labor necessary to produce a given level of output.
d) the set of all feasible combinations of labor and outputs.

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question

Technically inefficient points are
a) points in the production set but not on the production function.
b) points on the production function.
c) points contained in neither the production set nor the production function.
d) points that are never observed in practice.

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question

Identify the truthfulness of the following statements.
I. Because the production function identifies the maximum amount of output that can be produced from a given combination of inputs, only technically efficient input combinations are found on the production function.
II. The production function identifies the technically feasible combinations of inputs.
a) Both I and II are true.
b) Both I and II are false.
c) I is true; II is false.
d) I is false; II is true.

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The labor requirements function is derived from
a) the demand curve.
b) the supply curve.
c) the production function.
d) the capital requirement function.

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question

The production set represents
a) the set of all technically feasible combinations of inputs and outputs.
b) the technically efficient combinations of inputs and outputs.
c) the maximum output the firm can produce from a given level of inputs.
d) the minimum amounts of inputs necessary to produce a given level of output.

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question

When labor is the only input to the production function, why must it be true that when the marginal product of labor is greater than the average product of labor, the average product of labor is increasing and vice versa?
a) When the marginal product of labor is above the average product of labor, an additional unit of labor will produce a greater marginal product than average, thus raising the average.
b) When the marginal product of labor is below the average product of labor, an additional unit of labor will produce a greater marginal product than average, thus raising the average.
c) When the marginal product of labor is above the average product of labor, an additional unit of labor will produce a smaller marginal product than average, thus reducing the average.
d) When the marginal product of labor is above the average product of labor, an additional unit of labor will produce a zero marginal product.

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question

For a simple graph of a production function with Q on the y-axis and L on the x-axis, which of the following statements is true?
a) The slope of the production function at a specific point equals the marginal product of labor whereas the average slope of the production function equals the average product of labor.
b) The average product of labor is equal to the slope of the ray from the origin to the apex of the production function for all values of L.
c) The slope of the production function at a specific point equals the marginal product of labor whereas the slope between the origin and a specific point on the production function equals the average product of labor.
d) The average product of labor is never equal to the slope of the ray from the origin to the apex of the production function.

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Suppose a production function has only one input, labor. What can you tell about the slope of the production function, assuming output is on the y-axis and labor is on the x-axis, if production exhibits constant marginal returns to labor?
a) The slope of the production function is positive and increasing exponentially.
b) The slope of the production function is a positive constant.
c) The slope of the production function is negative.
d) The slope cannot be determined.

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question

Identify the truthfulness of the following statements.
I. When the marginal product of labor is falling, the average product of labor is falling.
II. When the marginal product curve lies above the average product curve, then average product is rising.
a) Both I and II are true.
b) Both I and II are false.
c) I is true; II is false.
d) I is false; II is true.

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question

If marginal product is greater than average product
a) total product must be increasing.
b) marginal product must be decreasing.
c) marginal product must be increasing.
d) average product may be increasing or decreasing.

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question

Which one of these is false when compared to the relationship between marginal and average product?
a) When average product is increasing in labor, marginal product is greater than average product. That is, if APL increases in L, then MPL > APL.
b) When average product is decreasing in labor, marginal product is less than average product. That is, if APL decreases in L, then MPL < APL.
c) The relationship between MPL and APL is not the same as the relationship between the marginal of anything and the average of anything.
d) When average product neither increases nor decreases in labor because we are at a point at which APL is at a maximum, then marginal product is equal to average

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question

Diminishing marginal returns occur when the total product function is
a) decreasing.
b) increasing at a decreasing rate.
c) increasing at a constant rate.
d) increasing at an increasing rate.

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question

Increasing marginal returns occur when the total product function is
a) decreasing.
b) increasing at a decreasing rate.
c) increasing at a constant rate.
d) Increasing at an increasing rate.

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question

The law of diminishing marginal returns states that
a) when the marginal product is above the average product, average product must be increasing.
b) when the marginal product is below the average product, average product must be decreasing.
c) as the use of one input increases holding the quantities of the other inputs fixed, the marginal product of the input eventually declines.
d) as the use of all inputs increases, the marginal product of the inputs eventually declines.

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question

Given the production function Q = L2, calculate the average product of labor for L = 2, and also calculate the marginal product of labor between L = 1 and L = 2.
a) The average product of labor is 2 and the marginal product of labor is 2.
b) The average product of labor is 1 and the marginal product of labor is 3.
c) The average product of labor is 3 and the marginal product of labor is 2.
d) The average product of labor is 2 and the marginal product of labor is 3.

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question

An isoquant represents
a) all combinations of inputs that produce a given level of output at the same cost.
b) all combinations of inputs that produce a given level of output.
c) all combinations of output that require the same levels of inputs.
d) all combinations of inputs that cost the same amount

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question

Suppose the production function can be expressed as. Which of the following combinations of capital and labor lie on the same isoquant?
a) (5, 6) and (4, 5)
b) (3, 2) and (7, 1)
c) (4, 3) and (2, 6)
d) (10, 3) and (15, 4)

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question

MPL = change in quantity of output Q/change in quantity of labor L ---K is held constant

= ΔQ/ΔL ---K is held constant
a) Product hill
b) Marginal product of labor
c) Non-marginal product
d) Total product

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question

The rate at which one input can be exchanged for another input without altering the level of output is called the
a) marginal product curve.
b) average product curve.
c) marginal rate of technical substitution.
d) law of diminishing marginal productivity.

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question

The marginal rate of technical substitution of labor for capital is defined as
a) The rate at which the quantity of capital can be decreased for every one unit increase in the quantity of labor, holding the quantity of output constant
b) The rate at which the quantity of capital must be increased for every one unit decrease in the quantity of labor, holding the cost of output constant.
c) The rate at which the cost of labor and capital increases as output rises.
d) The rate at which output rises as capital increases, holding labor constant.

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question

Consider a production function of the form with marginal products MPK = 2KL2 and MPL = 2K2L. What is the marginal rate of technical substitution of labor for capital at the point where K = 5 and L = 5?
a) 5
b) 25
c) 50
d) 1

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question

When isoquants are convex to the origin,
a) the marginal rate of technical substitution is inverted.
b) the marginal rate of technical substitution is decreasing.
c) the marginal rate of technical substitution is constant.
d) the marginal rate of technical substitution is increasing.

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question

The slope of the isoquant can be expressed as
a) the ratio of the input prices.
b) the ratio of the inputs.
c) the ratio of the marginal productivities of the inputs.
d) the sum of the marginal productivities of the inputs.

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question

total product hill is
a) A single line graph that shows the relationship between the quantity of output and the quantity of one of two inputs employed by the firm
b) A two-dimensional graph that shows the relationship between the quantity of output and the quantity of one of two inputs employed by the firm
c) A three-dimensional graph that shows the relationship between the quantity of output and the quantity of the two inputs employed by the firm
d) A four-dimensional graph that shows the relationship between the quantity of output and the quantity of the two inputs employed by the firm

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question

When a production function can be expressed as , the relationship between capital and labor in the production function is that
a) capital and labor are perfect substitutes, and the isoquants are linear.
b) capital and labor must be combined in fixed proportions, and the isoquants are L-shaped.
c) capital and labor are substitutable, and the isoquants are convex to the origin.
d) capital and labor are perfect substitutes, and the isoquants are L-shaped.

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question

When a production function can be expressed as , the relationship between capital and labor in the production function is that
a) capital and labor are perfect substitutes, and the isoquants are linear.
b) capital and labor must be combined in fixed proportions, and the isoquants are L-shaped.
c) capital and labor are easily substituted, and the isoquants are convex to the origin.
d) capital and labor are perfect substitutes, and the isoquants are L-shaped.

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question

A measure of how quickly the marginal rate of technical substitution of labor for capital changes as we move along an isoquant is the
a) capital-labor ratio
b) elasticity of substitution
c) input substitution possibility frontier
d) rate of technological progress

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question

The marginal rate of technical substitution in production is analogous to the marginal rate of substitution for the consumer's optimization problem in that
a) the slope of the consumer's indifference curve is the opposite of the ratios of the marginal utilities of the two goods, whereas the slope of the production isoquant is the opposite of the ratio of the marginal product of labor relative to the marginal product of capital.
b) the slope of the consumer's indifference curve is equal to the ratio of the marginal utilities of the two goods, whereas the slope of the production isoquant is the opposite of the ratio of the marginal product of labor relative to the marginal product of capital.
c) the slope is equal in both instances.
d) they are calculated by subtracting the price ratio from the output level.

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question

If capital cannot easily be substituted for labor, then the elasticity of substitution is
a) negative.
b) close to zero.
c) close to one.
d) approaching infinity.

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question

Consider a production function Q = 3K + 4L, when L is graphed on the x-axis and K is graphed on the y-axis, the marginal rate of technical substitution is equal to
a) 4/3 and the isoquant is convex to the origin.
b) 4/3 and the isoquant is a straight line.
c) ¾ and the isoquant is a straight line.
d) 12 and the isoquant is convex to the origin

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question

When a production function has the form Q = aL + bK, we can say that
a) the production function is linear and the inputs are perfect substitutes.
b) the production function is linear and the inputs are perfect complements.
c) the production function is linear and the inputs are used in fixed factor proportions only.
d) the production function is non-linear and the inputs are perfect substitutes.

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question

Which of the following is true?
a) The Cobb-Douglas production function is given by the general formula Q = ALαKβ and the constant elasticity of substitution is equal to 0.
b) The Cobb-Douglas production function is given by the general formula Q = ALαKβ and the constant elasticity of substitution is equal to 1.
c) The Cobb-Douglas production function does not exhibit a constant elasticity of substitution.
d) The Cobb-Douglas production function always takes the form Q = K2 L2.

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question

The region of upward sloping backward bending isoquants is
a) Economic region of production
b) Uneconomic region of production
c) Marginal rate of production
d) Marginal rate of technical substitution

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question

For the production function Q = aL + bK, where a and b are constants, the
a) declines as the firm substitutes labor for capital.
b) remains constant as the firm substitutes labor for capital.
c) implies upward-sloping, straight-line isoquants.
d) is undefined.

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question

A fixed proportions production function
a) is not observed in practice.
b) has straight line isoquants.
c) has L-shaped isoquants.
d) has a constant marginal rate of technical substitution as the firm substitutes labor for capital.

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question

A production function of the form is a(n)
a) isoquant function
b) Cobb-Douglas production function
c) fixed-proportions function
d) perfect compliments function

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question

Suppose every molecule of salt requires exactly one sodium atom, NA, and one chlorine atom, CL. The production function that describes this is
a) Q = NA + CL
b) Q = NA x CL
c) Q = min(NA, CL)
d) Q = max(NA, CL)

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question

Consider the CES production function. The elasticity of substitution is
a) 0.3
b) 1.5
c) 0.67
d) 3.00

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question

A type of production function that includes linear production functions, fixed-proportions production functions, and Cobb-Douglas production functions as special cases is
a) Cobb-Douglas production function
b) Constant elasticity of substitution (CES) production function
c) Fixed proportions production functions
d) Linear production functions

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question

Returns to scale refers to
a) the increase in output that accompanies an increase in one input, all other inputs held constant.
b) a change in a production process that enables a firm to achieve more output from a given combination of inputs.
c) the number of units of increase in output that can be obtained from an increase in one unit of input.
d) the percentage by which output will increase when all inputs are increased by a given percentage

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question

The production function exhibits
a) increasing returns to scale.
b) constant returns to scale.
c) decreasing returns to scale.
d) undefined returns to scale

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question

The production function exhibits
a) decreasing returns to scale.
b) constant returns to scale.
c) increasing returns to scale.
d) either decreasing or constant returns to scale, but more information is needed to determine which one.

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question

Assuming a firm uses capital and labor to produce output, which of the following is not always a true statement?
a) Assuming the marginal products of labor and capital are greater than zero, doubling the inputs of capital and labor will lead to greater output.
b) Assuming the marginal products of labor and capital are less than zero, doubling the inputs of capital and labor will lead to less output.
c) Assuming the marginal products of labor and capital are greater than zero, doubling the inputs of capital and labor will lead to double the output.
d) Assuming the marginal products of labor and capital are greater than zero, doubling the input of capital and keeping the input of labor constant will lead to greater output.

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question

Consider the CES production function. This production function exhibits
a) decreasing returns to scale.
b) constant returns to scale.
c) increasing returns to scale.
d) either decreasing or constant returns to scale, but more information is needed to determine which one.

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question

A production manager notices that when she triples all of her inputs simultaneously, her output doubles. The production manager determines that for this range of output, the production function exhibits
a) increasing returns to scale.
b) constant returns to scale.
c) decreasing returns to scale.
d) undefined returns to scale.

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question

Given a production function Q = 3LK, we can say that
a) this production function is not Cobb-Douglas.
b) this production function is Cobb-Douglas and exhibits decreasing returns to scale.
c) this Cobb-Douglas production function does not exhibit a constant elasticity of substitution.
d) this production function is Cobb-Douglas and exhibits increasing returns to scale.

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question

Identify the true statement.
a) Decreasing returns to scale and diminishing marginal returns are just two different ways of saying the same thing.
b) Returns to scale pertains to the impact on output of increasing all inputs simultaneously; diminishing marginal returns pertains to the impact of changing a single input while holding all other inputs constant.
c) Returns to scale pertains to the impact on output of changing a single input while holding all other inputs constant; diminishing marginal returns pertains to the impact on output of increasing all inputs simultaneously.
d) Returns to scale can be identified by calculating the slope of an isoquant.

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question

Assume that labor is measured along the horizontal axis and capital is measured along the vertical axis. If the decreases as we move inward toward the origin along the ray (slope of the isoquant becomes flatter), we are observing
a) neutral technological progress.
b) labor-saving technological progress.
c) capital-saving technological progress.
d) both labor-saving and capital-saving technological progress.

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question

Suppose over time that a firm's production process undergoes capital-saving technological progress. This implies
a) the isoquants corresponding to any particular level of output will shift outward from the origin and the along any ray from the origin will increase.
b) the isoquants corresponding to any particular level of output will shift outward from the origin and the along any ray from the origin will decrease.
c) the isoquants corresponding to any particular level of output will shift inward toward the origin and the along any ray from the origin will increase.
d) the isoquants corresponding to any particular level of output will shift inward toward the origin and the along any ray from the origin will decrease.

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question

Let a firm's production function be The production function then becomes Which of the following statements is true?
a) Neutral technological progress has occurred.
b) Labor-saving technological progress has occurred
c) Capital-saving technological progress has occurred.
d) Economies of scale have increased.

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question

Consider the production function . where is some constant. This production function exhibits
a) decreasing returns to scale.
b) constant returns to scale.
c) increasing returns to scale.
d) either decreasing or constant returns to scale, but more information is needed to determine which one

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question

*The marginal productivity of the third worker is
a) 30.
b) 40.
c) 50.
d) 90.

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question

*The average productivity of the fifth worker is
a) 20.
b) 28.
c) 30.
d) 140.

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question

*Marginal productivity is maximized with the ___________ worker.
a) second
b) third
c) fourth
d) sixth

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question

*Average productivity is maximized with the ____________ worker.
a) second
b) third
c) fourth
d) sixth

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question

*Average product reaches a maximum when labor equals
a) 100
b) 200
c) 300
d) 400

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question

*Marginal product reaches a maximum when labor equals
a) 100
b) 200
c) 300
d) 400

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question

*When labor equals 100
a) average product is less than marginal product
b) average product is greater than marginal product.
c) average product is equal to marginal product.
d) the relationship between average product and marginal product cannot be determined from a total product graph.

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question

*Diminishing marginal returns set in at labor equals
a) 100
b) 200
c) 300
d) 400

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question

*Holding labor constant, what do you notice about the marginal productivity of capital?
a) The marginal productivity of capital is always increasing.
b) The marginal productivity of capital is always constant.
c) The marginal productivity of capital is always decreasing.
d) The marginal productivity of capital increases, then decreases.

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question

*Holding capital constant at 3 units, the marginal productivity of the second laborer is
a) 8.
b) 12.
c) 21.
d) 24.

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question

*Holding labor constant at 2 units, the average productivity of three units of capital is
a) 8.
b) 12.
c) 21.
d) 24.

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question

For the production function, the equation for a typical isoquant is
a)
b)
c)
d)

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question

Linear production function
a. σ = 1
b. σ = 0
c. σ = ∞

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question

Fixed-proportions production function
a. σ = 1
b. σ = 0
c. σ = ∞

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Cobb-Douglas production function
a. σ = 1
b. σ = 0
c. σ = ∞

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Consider the production function. The is
a) 2.00
b) 1.50
c) 1.00
d) 0.50

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One characteristic of perfect competition is
a) a differentiated product.
b) many firms.
c) restricted entry.
d) preferred access to resources.

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In a perfectly competitive industry, individual firms act as
a) price makers.
b) a single, cooperative entity.
c) profit minimizers.
d) price takers.

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A perfectly competitive firm will always maximize its profit or minimize its loss by
a) setting marginal cost equal to marginal revenue in order to determine the optimal quantity of output.
b) setting marginal cost above average cost.
c) setting total cost minus total revenue at its maximum level.
d) creating a unique product.

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Sunk costs
a) will not affect any aspect of decision making by a competitive firm in the short run.
b) are costs that can only be controlled by reducing labor input.
c) affect the shutdown price in that higher sunk costs raise the shutdown price.
d) do not affect the profit or losses of a firm.

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When the average variable cost curve is "u-shaped" and not everywhere upward or downward sloping, marginal cost will
a) never intersect the average variable cost curve.
b) never equal marginal revenue.
c) intersect or "bisect" the average variable cost curve at its minimum.
d) always be increasing.

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Which of the following is not a characteristic of perfect competition?
a) The industry is fragmented.
b) Firms produce undifferentiated products.
c) Consumers have imperfect information.
d) Firms have equal access to resources.

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An industry in which any potential entrant has access to the same technology and inputs as existing firms is said to be characterized by
a) Open entry
b) restricted entry
c) free entry
d) profitable entry

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Which of the following is not an assumption of a perfectly competitive market?
a) Fragmented industry
b) Differentiated product
c) Perfect information
d) Equal access to resources

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Explain the truthfulness of the following statements
I. A characteristic of a perfectly competitive market is that products are undifferentiated. That is, consumers perceive products to be identical.
II. Equal access to resources is a condition in which all firms, including prospective entrants, have access to the same technology and inputs.
a) Both I and II are true
b) Both I and II are false
c) I is true; II is false.
d) I is false; II is true.

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Which of the following will not be true of a perfectly competitive market?
a) Each individual buyer or seller has an imperceptible effect on the market price.
b) A new firm may incur a cost upon entering a market, but has access to the same technology and inputs as established firms.
c) Different consumers may pay different prices for the same product.
d) Buyers and sellers take the market price as given when making purchasing or production decisions.

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Identify the truthfulness of the following statements.
A firm can earn a positive accounting profit but a negative economic profit.
Opportunity cost is included in the definition of economic profit but not in the definition of accounting profit.
a) Both I and II are true.
b) Both I and II are false.
c) I is true; II is false.
d) I is false; II is true.

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Economic Value Added is defined as
a) the same as accounting profit.
b) total revenue less total explicit costs.
c) Accounting profit net of the minimum return on invested capital demanded by the firm's investors.
d) The same as economic profit.

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Suppose Joe starts his own business. In the first year the business earns $100,000 in revenue and incurs $85,000 in explicit costs. In addition, Joe has a standing offer to come work for his brother for $40,000 per year. Joe's accounting profit is _________ and Joe's economic profit is __________.
a) -$25,000 and $15,000
b) $15,000 and $65,000
c) $15,000 and $60,000
d) $15,000 and -$25,000

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Suppose that for last year, Sarah's small business earned an accounting profit of $70,000 and an economic profit of $20,000. What can we correctly infer about Sarah's business?
a) The difference between Sarah's total opportunity costs and her accounting costs is $50,000.
b) Sarah's explicit costs were $50,000
c) Sarah's total opportunity cost of her resources was $50,000.
d) Sarah's firm cannot be maximizing profit.

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For the data in the following table, which level of q will maximize profit?
q MR MC
0 0 0
10 40 10
20 30 20
30 20 30
40 10 40
50 5 50
a) 10
b) 20
c) 30
d) 40

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A short-run market supply curve in a competitive industry is derived by
a) multiplying the quantity supplied by each identical firm in the industry times the number of firms at each relevant price.
b) multiplying the quantity supplied by each differentiated firm in the industry times the number of firms at each relevant price.
c) adding market supply and market demand at each relevant price.
d) not usually upward sloping.

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Characteristics of a short run perfectly competitive equilibrium always include
a) zero profits.
b) the condition that marginal cost is greater than average cost.
c) the condition that homogeneous firms are producing the same level of output.
d) the condition that sunk costs are zero.

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Suppose a $1 tax is levied on each unit of output in a perfectly competitive industry, we know that
a) the number of firms in the industry will increase in the long run as long as the demand curve is downward sloping.
b) the number of firms in the industry will decrease in the long run as long as the demand curve is downward sloping.
c) firms will no longer produce at the bottom of the average cost curve in long run equilibrium.
d) firms will no longer produce at the top of the average cost curve in long run equilibrium.

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A decreasing-cost industry is characterized by
a) more firms than an increasing-cost industry.
b) some type of economies of scale.
c) accounting profit net of the minimum return on invested capital demanded by the firm's investors.
d) some type of diseconomies of scale.

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Suppose that, at the current level of output, a firm in a perfectly competitive market is producing at a level such that price exceeds marginal cost, P > MC. Marginal cost is normally shaped (U-shaped). The firm
a) is currently maximizing profit since it is charging a price higher than marginal cost.
b) could increase profit by lowering the level of output.
c) could increase profit by increasing the level of output.
d) cannot increase profit without raising price.

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Which of the following statements about marginal revenue for a perfectly competitive firm is incorrect, where TR stands for total revenue, P stands for price and q stands for output?
a)
b)
c)
d) Marginal revenue is the rate at which total revenue changes with respect to changes in output.

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hich of the following does not represent a profit-maximizing condition for a firm operating in a perfectly competitive industry?
a) .
b) .
c) must be increasing.
d) MC must be falling.

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A fixed cost that the firm cannot avoid if it shuts down and produces zero output must be:
a) An accounting cost
b) A marginal cost
c) An equilibrium cost
d) A sunk cost

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Which of the following is an example of a fixed cost that is also a sunk cost for a bakery as of January 15?
a) The electric bill for the coming calendar year.
b) An accountant's fees for tax preparation in April.
c) The cost of a one-year lease on a building, signed January 1.
d) The salary of the baker for the month of February.

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The short-run supply curve for a firm operating in perfect competition is
a) the firm's marginal cost curve.
b) the firm's average variable cost curve.
c) the firm's average variable cost curve above marginal cost.
d) the firm's marginal cost curve above the shut down price

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The market for sweet potatoes consists of 1,000 identical firms. Each firm has a short-run total cost curve of STC = 100 + 100 q + 100q2, and a short-run marginal cost curve of SMC=100+200q where q is output. Suppose that sunk costs are 75 and non-sunk costs are 25. What is the equation of an individual firm's short-run supply curve?
a) for P≥100, and q=0 otherwise.
b) for P≥200, and q=0 otherwise.
c)
d) for P ≥200, and q=0 otherwise.

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A perfectly competitive firm's short-run supply curve is determined by the equation:
a) P= AC where . Otherwise, supply is zero.
b) P=AVC where . Otherwise, supply is zero.
c) P=SMC where . Otherwise, supply is zero.
d) where or or, depending on the level of sunk costs. Otherwise, supply is zero.

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Short-run perfectly competitive equilibrium is defined as
a) The market price and quantity at which quantity demanded equals quantity supplied in the short term.
b) The output level and price where all firms in the market are profit maximizing.
c) The point at which all firms earn zero profits.
d) The point where there is no incentive to enter the market.

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29. Identify the truthfulness of the following statements.
A profit-maximizing firm never produces where .
A profit-maximizing firm never produces where .
a) Both I and II are true.
b) Both I and II are false.
c) I is true; II is false.
d) I is false; II is true.

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If and where q is output, what is the minimum level of average variable cost?
a) 0
b) 2
c) 6
d) 8

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the market for sweet potatoes consists of 1,000 identical firms. Each firm has a short-run total cost curve of STC = 100 + 100q + 100q2, and a short-run marginal cost curve of where q is output. What is the equation of an individual firm's short run supply curve in this market?
a)
b)
c)
d) for P ≥100, and q=0 otherwise.

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If , , where q is output and all fixed costs are sunk, the firm's short-run supply curve is
a) for P≥2 and zero otherwise.
b)
c) for P≥0 and zero otherwise.
d)

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For a particular perfectly competitive firm and , where q is output. If the market price is equal to 40, at what level of output should the firm operate to maximize profit in the short run?
a) 10
b) 20
c) 30
d) 40

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For a particular perfectly competitive firm and . If the market price is equal to 40, what is the maximum profit the firm can earn?
a) 400
b) 200
c) 100
d) 0

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The market for sweet potatoes consists of 1,000 identical firms. Each firm has a short-run total cost curve of STC = 100 + 100 q + 100q2, and a short-run marginal cost curve of SMC=100+200q, where q is output. Suppose that sunk costs are 75 and non-sunk costs are 25. What is the equation of an individual firm's average non-sunk cost curve?
a)
b)
c)
d)

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and , where q is output. Sunk fixed costs are 56 and non-sunk fixed costs are 144. What is the minimum level of average non-sunk cost?
a) 6
b) 50
c) 56
d) 144

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Sometimes a firm will continue to operate even if that firm incurs short-run negative profits (losses). Which of the following characterizes this situation?
a) .
b) .
c) where but .
d) where but P < AVC.

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40. The short-run market supply curve is derived by ________ supplied of the individual firm supply curves.
a) vertically summing the prices and quantities
b) horizontally summing the prices and quantities
c) vertically summing the quantities
d) horizontally summing the quantities

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The market for sweet potatoes consists of 1,000 identical firms. Each firm has a short-run total cost curve of STC = 100 + 100 q + 100q2, and a short-run marginal cost curve of SMC=100+200q where q is output. All fixed costs are sunk. What is the equation of the short-run market supply curve?
a) Qs = 5P-500 for P≥100, and Qs=0 otherwise.
b) P = 100000+200000q, P≥200, and Qs=0 otherwise.
c) Qs = P/200 - .5 for P≥100, and Qs = 0 otherwise.
d) Qs= 5P-500 for P ≥200, and Qs=0 otherwise.

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The market for sweet potatoes consists of 1,000 identical firms. The market demand curve is given by Qd = 1000 - 5P. Each firm has a short-run total cost curve of STC = 100 + 100 q + 100q2, and a short-run marginal cost curve of SMC=100+200q, where q is output. All fixed costs are sunk. In short run market equilibrium, each individual firm will
a) earn a short-run profit.
b) earn a short-run loss.
c) earn zero economic profit.
d) produce an output of q = 4.

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Suppose that the tricorder industry is perfectly competitive. The firm of JL Picard is making a short-term economic profit. The firm of WT Riker decides to enter the tricorder industry. However, when the WT Riker firm enters the industry, it bids up some input prices. For this industry, we will likely observe a(n)
a) upward-sloping long-run market supply curve.
b) downward-sloping long-run market supply curve.
c) horizontal long-run market supply curve.
d) vertical long-run market supply curve.

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Which of the following is not true in a long-run perfectly competitive equilibrium?
a) , where P is market price and MC is the marginal cost of a firm.
b) , where P is market price and AC is the average cost of a firm.
c) , where is the supply of an individual firm, is the number of firms in the industry, and Qd is the market demand for a product.
d) Firms may earn negative profits.

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In the long run, free entry drives the market price to the minimum level of ________, and each firm supplies a quantity equal to its ____________.
a) long-run average cost; price.
b) marginal cost; minimum efficient scale.
c) long-run average cost; minimum efficient scale.
d) marginal cost; price.

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In a constant cost industry, which of the following statements is true?
a) The long run market supply curve and the long run firm supply curve are both horizontal.
b) While the long run market supply curve is horizontal, the long run firm supply curve generally is upwards-sloping.
c) The long run market supply curve and the long run firm supply curve are both upwards-sloping.
d) While the long run market supply curve is upwards-sloping, the long run firm supply curve is horizontal.

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In an increasing cost industry, the long-run market supply curve is
a) downward sloping
b) horizontal
c) upward sloping
d) vertical

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Each firm in a perfectly competitive market has long run average cost represented as AC(q) = 100q- 10+100/q. Long run marginal cost is MC=200q-10. The market demand is Qd = 2150-5P. Find the long run equilibrium output per firm, q, the long run equilibrium price, P, and the number of firms in the industry, n*.
a) q=1; P=190; n*=1200
b) q=2; P=240; n*=1200
c) q=50; P=15; n*=200
d) q=100; P=9991; n*=500

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Economic rent can be defined as
a) always the same as economic profit.
b) the maximum amount that firms would be willing to pay for a fixed input.
c) the minimum amount that firms actually have to pay for a fixed input.
d) the difference between the maximum amount that firms would be willing to pay for a fixed input and the minimum amount that firms actually have to pay for that input.

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Economic rent is associated with __________; economic profit is associated with _______.
a) a firm; a scarce input.
b) a scarce input; a firm.
c) a fixed input; a variable input.
d) a scarce input; a fixed input.

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Identify the truthfulness of the following statements.
Economic rent may equal economic profit.
Economic rent may exceed economic profit.
a) Both I and II are true.
b) Both I and II are false.
c) I is true; II is false.
d) I is false; II is true.

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For an individual firm operating in the long run, producer surplus equals
a) the difference between total revenues and total opportunity costs.
b) the difference between total revenues and total sunk costs.
c) economic rent.
d) The difference between market demand and market supply.

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For an entire perfectly competitive industry, which of the following statements is incorrect in the long run?
a) Economic profit for the industry equals zero.
b) Producer surplus equals economic rent.
c) Economic profit equals total revenues less total costs.
d) Producer surplus for the industry equals economic profit for the industry.

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Producer surplus for an individual firm is
a) total revenue less total variable cost.
b) total revenue less total fixed cost.
c) total revenue less total non-sunk cost.
d) total revenue less total implicit cost.

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Producer surplus for an entire market is
a) the difference between quantity supplied and quantity demanded.
b) the area below the market demand curve and above the market supply curve.
c) the area below price and above the market supply curve.
d) the area above price and below the market demand curve.

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Producer surplus is
a) always equal to zero for a competitive firm in long run equilibrium.
b) always greater than zero for a competitive firm in long run equilibrium.
c) defined as the area below the supply curve and above the price.
d) defined as the area above the supply curve and above the price.

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For an individual firm operating in the short run, producer surplus equals the difference between total revenues and total non-sunk costs. Thus,
a) producer surplus equals economic profit.
b) producer surplus is less than economic profit.
c) producer surplus is greater than economic profit.
d) producer surplus equals economic rent.

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In a perfectly competitive, increasing-cost industry in the long run, economic profit for the industry __________ and economic rent __________.
a) can be positive; can be positive.
b) can be positive; equals zero.
c) equals zero; can be positive.
d) equals zero; equals zero.

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Consider the utility function U = min (5x, 7y). The indifference curves for this utility function will be
A) vertical
B) horizontal
C) upward sloping
D) L-shaped

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. The substitution effect is

A) the change in the amount of the good consumed holding the level of income constant.
B) the change in the amount of the good consumed as the price of the good changes holding income constant.
C) the change in the amount of the good consumed as the price of the good changes holding utility constant.
D) the change in the amount of the good consumed holding relative prices constant and changing the level of income.

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A relationship that shows the quantity of goods that consumers are willing to buy at different prices is the
a) elasticity
b) market demand curve
c) market supply curve
d) market equilibrium

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The linear demand curve is represented by the equation
a) P=Q-aP
b) Q=a-bP
c) Q=a-bP2
d) Q = AP-b

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A curve that shows us the total quantity of goods that their suppliers are willing to sell at different prices is
a) Market supply curve
b) Law of supply
c) Demand curve
d) Market demand curve

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Suppose demand is given by Qd = 500 - 15P and supply is given by Qs = 5P. If the government imposes a $15 price ceiling the excess demand will be
a) 200
b) 225
c) 250
d) 275

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Suppose demand is given by Qd = 500 - 15P and supply is given by Qs = 5P. If the government imposes a $30 price floor the excess supply will be
a) 25
b) 50
c) 100
d) 150

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Consider the demand curve Qd = 1000 - 20P - 6r. If the value of r falls, the demand curve will
a)shift to the left
b) shift to the right
c) remain unchanged
d)rotate along the quantity axis

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Consider the demand curve Qd = 40 - 2P + 6i. If the value of i rises, the demand curve will
a) not shift at all
b) shift to the right
c) shift to the left
d) rotate so it becomes upward sloping

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Consider the supply curve Qs = 40 + 2P + 6i. If the value of i rises, the supply curve will
a) not shift at all
b) shift to the right
c) shift to the left
d) rotate so it becomes upward sloping

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Suppose that demand is linear, Qd = 100 - 12P. At P = 5 and Q = 40, price elasticity of demand is:
a) -2/3
b) -2
c) -12
d) -3/2

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Suppose demand is given by Qd = 1000 - 25P and supply is given by Qs = 75P. At the equilibrium price and quantity, the price elasticity of demand is
a) -3
b) -25
c) -1/3
d) -10

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The constant elasticity demand curve is represented by the equation
a) P=Q-aP
b) Q=a-bP
c) Q=a-bP2
d) Q = AP-b

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Consider the demand curve Q curve
d -1 = 5P. The elasticity of demand along this demand
a) is inelastic
b) is elastic
c) is unitary elastic
d) falls as the price falls

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If demand is elastic, an increase in price
a) will increase total revenue
b) will decrease total revenue
c) will have an indeterminate effect on total revenue
d) will decrease total profit

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Income elasticity of demand measures the responsiveness of quantity demanded to changes in
a) price.
b) income.
c) demand substitutes.
d) demand complements.

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Suppose the cross-price elasticity for two goods is negative. The two goods are
a) normal goods
b) substitutes
c) complements
d) inferior goods

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Suppose the cross-price elasticity for two goods is positive. The two goods are
a) normal goods
b) substitutes
c) complements
d) inferior goods

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To identify a demand curve we must observe
a) many years of data
b) shifts in the demand curve
c) shifts in the supply curve
d) many different markets simultaneously

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Explicit costs

a. do not involve outlays of cash
b. are greater than implicit costs
c. involve outlays of cash
d. are less than implicit costs

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Additional costs associated with attending class such as lost income from work can be
categorized as ______.

a. opportunity costs
b. explicit costs
c. tuition costs
d. none of the above

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Accounting costs include all ______.

a. explicit costs
b. explicit and implicit costs
c. explicit and opportunity costs
d. explicit and financial costs

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An example of an implicit cost would be ______.
A. transportation expenses
B. salaries
C. rental costs
D. leisure time

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Economic costs ______.
A. only take into account implicit costs
B. are not the same as opportunity costs
C. consist of implicit costs
D. include the total of both explicit and implicit costs

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To develop a solution to minimize costs in the long-run, a firm may want to adjust ______.
A. short-run costs
B. long-run input quantities
C. input quantities
D. long-run prices

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In a short run based decision, a firm would _______.
A. face no constraints in terms of input selection
B. minimize costs
C. be subject to input constraints
D. maximize production

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Sunk costs do not
a) matter.
b) affect business shutdown decisions.
c) affect business start-up decisions.
d) cost as much as marginal costs.

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Economic costs
a) are the same as accounting costs.
b) are the same as implicit costs.
c) are the same as opportunity costs.
d) are the same as the sum of all past explicit costs

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The long-run is
a) a time period in which all input levels are fixed.
b) a time period in which at least one input level is fixed.
c) one year.
d) a time period in which no input levels are fixed.

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A firm's production function is given by Q = KL. The marginal products of labor and capital are, respectively, MPL = K and MPK = L. The wage rate of labor is w = $10 and the rental rate of capital is r = $20. The firm wants to produce 1,800 units of output in the most efficient way possible. How much does the firm spend?
a) $2,000
b) $1,300
c) $1,200
d) $1,100

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A firm's production function is given by Q = KL. The marginal products of labor and capital are, respectively, MPL = K and MPK = L. The wage rate of labor is w = $10 and the rental rate of capital is r = $20. What is the most efficient combination of labor and capital that also yields a cost of exactly $1000?
a) (10, 45)
b) (25, 50)
c) (50, 25)
d) (20, 40)

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A firm's production function is given by Q = KL. The marginal products of labor and capital are, respectively, MPL = K and MPK = L. The wage rate of labor is w = $10 and the rental rate of capital is r = $20. The firm spends exactly $1000 in the most efficient way possible. How much output can the firm produce?
a) 450
b) 800
c) 1000
d) 1250

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The long-run is
a) a time period in which all input levels are fixed.
b) a time period in which at least one input level is fixed.
c) one year.
d) a time period in which no input levels are fixed.

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A firm's production function is given by . The marginal products of labor and capital are, respectively, and . Further, the wage rate is and the rental rate of capital is . Suppose the firm wants to produce 27,000 units of output. What is the most efficient combination of labor and capital ?
a) (20, 20)
b) (30, 30)
c) (30, 90)
d) (90, 30)

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A firm's production function is given by . The marginal products of labor and capital are, respectively, and . Further, the wage rate is and the rental rate of capital is . Suppose that the firm wants to produce 27,000 units of output in the most efficient way possible. How much does the firm spend?
a) $600
b) $900
c) $1,500
d) $2,100

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For a production process with ten inputs, how many inputs could be inferior inputs?
a) 5
b) 0
c) 9
d) 10

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A high elasticity of substitution between capital and labor implies that labor demand will be
a) price elastic.
b) unitary price elastic.
c) price inelastic.
d) more inelastic than capital demand.

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A firm's production process uses labor, L, and capital, K, and materials, M, to produce an output, Q according to the function Q = KLM, where the marginal products of the three inputs are MPL = KM, MPK = LM, and MPM = KL. The wage rate for labor is w = 2, the rental rate of capital is r = 1, and the cost of materials is m = 4 per unit. Let materials input be fixed now at M = 2. What is the cost minimizing level of capital that the firm must use to produce a target level of output, Q = 1600?
a) K = 5
b) K = 10
c) K = 20
d) K = 40

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For a firm, let total cost be TC(Q) = 160+10Q2 and marginal cost be MC(Q) = 20Q. What is the minimum efficient scale for this firm?
a) 0
b) 2
c) 4
d) indeterminate

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Suppose a firm's total cost curve is given by the equation . The firm's marginal cost is . At what level of does the firm's average cost curve reach a minimum?
a) 100
b) 2
c) 10
d) 20

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Which of the following factors may explain diseconomies of scale?
a) Increasing returns to scale of inputs.
b) Specialization of labor.
c) Indivisible inputs.
d) Managerial diseconomies.

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Economies of scale exist when firms have
a) increasing returns to scale.
b) constant returns to scale.
c) decreasing returns to scale.
d) constant marginal cost.

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Which of the following factors would not explain economies of scale?
a) Increasing returns to scale of inputs.
b) Specialization of labor.
c) Indivisible inputs.
d) Managerial diseconomies

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Suppose STC(Q) = 2Q + 20. Short run marginal cost is
a) indeterminate, since we don't know the level of .
b) 22
c) 20
d) 2

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The AVC curve decreases until it intersects the:
a)ATC curve
b) MC curve
c) AR curve
d)MR curve

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in a perfectly competitive market:
a) the firm determines the price
b) the firm must sell at the price dictated by the market
c) the entrepreneur determines the price
d) the govt determines the price

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MP is zero:
a) where total product is the origin
b) where the total product curve is at its maximum
c) the point of inflection on the tp curve
d) never

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MP reaches a maximum:
a) where tp is at the origin
b) where tp is at its max
c) at the point of inflection on the tp curve
c) never

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the profit maximizing monopolist will produce output where:
a) demand equal marginal cost
b) marginal revenue equals marginal cost
c) mc equals atc
d) mr equals zero

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the demand curve reps the erlationship between:
a) price and quantity supplied
b) elasticity and quantity supplied
c) price and quantity demanded
d) elasticity and quantity demanded

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the profit maximizing condition of a perfectly competitive firm is
a) MC=ATC
b) mr=avc
c)mc=mr
d) mc = avc

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a perfectly competitive firm in the long run earns ______ normal profits but _______ economic profits
A) neg, 0
b) pos 0
c) pos, pos
d) )0,0

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AFC:
a) is constant over an entire range of output
b)decreases initially then increases when mc exceeds it
c) falls as output is increased in the short run
d) equals tc divided by quantity

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the economic model of oligopoly assumes that firms use:
a) strategic decision making
b) monopolistoc decision making
c) economic decision making
d) comp decision making

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avg rev for a monopolist is equal to
a) mr
b) the price the monopolist sets
c) atc
d) none

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d, demand

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a
B!!!!??

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the mc curve:
a) first rises then declines
b) rises when the atc curve lies above the avc curve
c) crosses the tvs and tc curves at their max pt
d) begind to rise when the mp begins to fall

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the mkt structure in which many diff firms supply similar but slightly differentiated products is
a) monopoly
b) monopolistic comp
c) oligpoly
d) perfect competition

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the mc curve:
a) declines until atc increases
b) first rises then declines
c) never becomes a firms supply curve
d) rises when the point of diminishing marginal product is reached

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breakeven point is when:
a) zero economic profit
b) zero tr
c) zero tc
d) already exited in the short run

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in the short run a firm should shut down immediately if tr is less than
a) tc
b) tfc
c) tvc
d) ac

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in perfect comp a firms supply curve is taken from its
a) tc curve
b) mc curve
c) ac curve
d) tvc curve

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the point at which the mc curve intersects the atc curve is the
a) min ATC
b) max ATC
C) min MC
d) max MC

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if the assumption "specialization of labor" was eliminated the MP curve would
a) be a horizontal line then rise
b) rise without falling
c) rise and then fall
d) immediately begin falling

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long run decisions are
a) constrained bc all inputs are variable
b) constrained because all inputs are fixed
c) constrained bc labor is fixed and all other inputs are variable
d) unconstrained

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the mr of a firm in perf comp is :
a ) less than selling price
b) more than selling price
c) equal to selling price
d) it depends: sometimes below and sometimes above the selling price

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in perf comp a firm faces a
a) horizontal supply curve
b) horizontal demand curve
c) downward sloping demand curve
d) downward sloping supply curve

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the ultimate goal of monopoly reg is:
a) to increase quantity produced
b) to avoid economic efficiancy at all costs
c) to destrot monopolies
d) to increase consumer dead weight loss

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economis efficiency is defined as _______ and ALWAYS exists in ________ markets
a) p=ac regulated monopolistic
b) p=mc perf comp
c) mr=mc perf comp
d) p=ac monopoloistic

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this mkt extracts consumer surplus NEALY perfectly
a) auction mkt
b) pref comp
c) regulated monopoly
d) oligpoly

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if at least one input is fixed the time period for which it is fixed is called the

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compared to a firm in perf comp, a monopolist produces
a) lower output at lower price
b) larger output at higher prive
c) larger output at lower price
d) lower output at higher price

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dwl results from monopoly price being
a) less than mc
b) more thsn mc
c) equal to mc
d) greater than atc

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to eliminate economic profits govt regualators will set price equal to
a) mc
b) atc
c) afc
d0avc

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product differentiation from many firms is key in this mkt structure
a) perf comp
b) oligpoly
c) monopoly
d) monopolistic comp

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monopolistically comp firms will have long run eq prices that
a) is equal to mc
b) is equal to mr
c) exceeds mc
d) exceeds atc

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oligpoly is characterized by
a) many sellers
b) many buyers
c) many barriers to entry
d) high mkt concentration

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which of the following is not typical with nationalization
a) econimic efficency
b) greater dwl
c) atc rise
d) revenur from other sources are needed to cover operational costs

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monopolists face a ______ demand curve
a) vertical
b) horizontal
c) upward sloping
d) downward sloping

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avg rev for a monopolist is equal to
a) mr
b) the price the monopolist sets
c) atc
d) none

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an increase in the price of food would cause the budget lime to
a) rotate inward
b) shift outward parallel to the budget line
c) rotate outward
d) shift inward parallel to the orig budget line

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economic profit is calculated by
a) tr-tc
b) total expenditure - tc
c) ac- mr
d) normal profit - mr

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if the quantity of cars supplied to the car market in an area increases 2% when the price goes up 10% the elasticity of supply would be
a) .2
b) .5
c) 2
b) 5

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Factors of production are
a) inputs and outputs.
b) outputs only
c) inputs only
d) the minimum set of inputs that can produce a certain fixed quantity of output.

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The labor requirements function is derived from
a) the demand curve.
b) the supply curve.
c) the production function.
d) the capital requirement function.

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Diminishing marginal returns occur when the total product function is
a) decreasing.
b) increasing at a decreasing rate.
c) increasing at a constant rate.
d) increasing at an increasing rate.

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Increasing marginal returns occur when the total product function is
a) decreasing.
b) increasing at a decreasing rate.
c) increasing at a constant rate.
d) Increasing at an increasing rate.

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When a production function can be expressed as , the relationship between capital and labor in the production function is that
a) capital and labor are perfect substitutes, and the isoquants are linear.
b) capital and labor must be combined in fixed proportions, and the isoquants are L-shaped.
c) capital and labor are easily substituted, and the isoquants are convex to the origin.
d) capital and labor are perfect substitutes, and the isoquants are L-shaped.

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If capital cannot easily be substituted for labor, then the elasticity of substitution is
a) negative.
b) close to zero.
c) close to one.
d) approaching infinity.

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A production function of the form is a(n)
a) isoquant function
b) Cobb-Douglas production function
c) fixed-proportions function
d) perfect compliments function

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Consider the CES production function. The elasticity of substitution is
a) 0.3
b) 1.5
c) 0.67
d) 3.00

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The production function exhibits
a) increasing returns to scale.
b) constant returns to scale.
c) decreasing returns to scale.
d) undefined returns to scale

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*The marginal productivity of the third worker is
a) 30.
b) 40.
c) 50.
d) 90.

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*The average productivity of the fifth worker is
a) 20.
b) 28.
c) 30.
d) 140.

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*Marginal productivity is maximized with the ___________ worker.
a) second
b) third
c) fourth
d) sixth

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*Average productivity is maximized with the ____________ worker.
a) second
b) third
c) fourth
d) sixth

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*Average product reaches a maximum when labor equals
a) 100
b) 200
c) 300
d) 400

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*Marginal product reaches a maximum when labor equals
a) 100
b) 200
c) 300
d) 400

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*Diminishing marginal returns set in at labor equals
a) 100
b) 200
c) 300
d) 400

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*Holding capital constant at 3 units, the marginal productivity of the second laborer is
a) 8.
b) 12.
c) 21.
d) 24.

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*Holding labor constant at 2 units, the average productivity of three units of capital is
a) 8.
b) 12.
c) 21.
d) 24.

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For the production function, the equation for a typical isoquant is
a)
b)
c)
d)

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Linear production function
a. σ = 1
b. σ = 0
c. σ = ∞

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Fixed-proportions production function
a. σ = 1
b. σ = 0
c. σ = ∞

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Cobb-Douglas production function
a. σ = 1
b. σ = 0
c. σ = ∞

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Consider the production function. The is
a) 2.00
b) 1.50
c) 1.00
d) 0.50

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One characteristic of perfect competition is
a) a differentiated product.
b) many firms.
c) restricted entry.
d) preferred access to resources.

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In a perfectly competitive industry, individual firms act as
a) price makers.
b) a single, cooperative entity.
c) profit minimizers.
d) price takers.

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Which of the following is not an assumption of a perfectly competitive market?
a) Fragmented industry
b) Differentiated product
c) Perfect information
d) Equal access to resources

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For the data in the following table, which level of q will maximize profit?
q MR MC
0 0 0
10 40 10
20 30 20
30 20 30
40 10 40
50 5 50
a) 10
b) 20
c) 30
d) 40

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hich of the following does not represent a profit-maximizing condition for a firm operating in a perfectly competitive industry?
a) .
b) .
c) must be increasing.
d) MC must be falling.

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A fixed cost that the firm cannot avoid if it shuts down and produces zero output must be:
a) An accounting cost
b) A marginal cost
c) An equilibrium cost
d) A sunk cost

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If and where q is output, what is the minimum level of average variable cost?
a) 0
b) 2
c) 6
d) 8

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If , , where q is output and all fixed costs are sunk, the firm's short-run supply curve is
a) for P≥2 and zero otherwise.
b)
c) for P≥0 and zero otherwise.
d)

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For a particular perfectly competitive firm and . If the market price is equal to 40, what is the maximum profit the firm can earn?
a) 400
b) 200
c) 100
d) 0

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The market for sweet potatoes consists of 1,000 identical firms. Each firm has a short-run total cost curve of STC = 100 + 100 q + 100q2, and a short-run marginal cost curve of SMC=100+200q, where q is output. Suppose that sunk costs are 75 and non-sunk costs are 25. What is the equation of an individual firm's average non-sunk cost curve?
a)
b)
c)
d)

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and , where q is output. Sunk fixed costs are 56 and non-sunk fixed costs are 144. What is the minimum level of average non-sunk cost?
a) 6
b) 50
c) 56
d) 144

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The market for sweet potatoes consists of 1,000 identical firms. Each firm has a short-run total cost curve of STC = 100 + 100 q + 100q2, and a short-run marginal cost curve of SMC=100+200q where q is output. All fixed costs are sunk. What is the equation of the short-run market supply curve?
a) Qs = 5P-500 for P≥100, and Qs=0 otherwise.
b) P = 100000+200000q, P≥200, and Qs=0 otherwise.
c) Qs = P/200 - .5 for P≥100, and Qs = 0 otherwise.
d) Qs= 5P-500 for P ≥200, and Qs=0 otherwise.

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In an increasing cost industry, the long-run market supply curve is
a) downward sloping
b) horizontal
c) upward sloping
d) vertical

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Consider the utility function U = min (5x, 7y). The indifference curves for this utility function will be
A) vertical
B) horizontal
C) upward sloping
D) L-shaped

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