question
The law of diminishing marginal returns refers to the general tendency for _____ to eventually diminsh.
answer
Marginal productivity
question
Which helps explain why marginal cost eventually increases as output increases?
answer
The law of diminishing returns
question
If a firm doubles its inputs and output more than doubles, its production process exhibits
answer
economies of scale
question
Increasing complexity of management and challenges of coordination as firms produce more of the same product can be a source of
answer
diseconomies of scale
question
Constant returns to scale means that as all inputs are increased,
answer
total output increases in the same proportion as do the inputs.
question
Learning curves describe a relationship between
answer
average variable cost and the cumulative number of units produced.
question
Diseconomies of scale imply that
answer
the firm should consider a reduction in production.
question
Economies of scope exist when
answer
changing the mix of products produced reduces average cost
question
If economies of scope exist across two products, we would expect that firms will likely
answer
produce and sell both products
question
Increasing complexity of management and challenges of coordination as firms produce a wider variety of products can be a source of
answer
diseconomies of scope
question
Given that most people generally prefer to wear a bicycle helmet when riding, an increase in the price of bicycle helmets would tend to,
answer
reduce demand for bicycles
question
Higher consumer incomes increase the demand for a particular good. How is this effect generally shown?
answer
A rightward shift of the demand curve
question
Which of the following factors would NOT cause a supply curve to shift to the right?
answer
Demand increases for the product.
question
Jet fuel prices have recently increased. This will most likely lead to which of the following changes?
answer
Supply of airplane trips to decrease.
question
When the current price is higher than the equilibrium price,
answer
sellers want to produce and sell more than buyers want to produce.
question
A government agency releases a report warning consumers about the negative health effects of eating beef. Which of the following changes in the beef market is most likely to occur following the release?
answer
The demand curve will shift to the left, and price of beef will fall.
question
A new roasting innovation reduces the cost of producing coffee. As a result, the quantity of coffee ________ and the price of coffee _______.
answer
increases, falls
question
Which of the following will definitely result if there is both a leftward shift in demand and a leftward shift in supply?
answer
A decrease in equilibrium quantity.
question
Which of the following combinations would definitely result in an increase in the equilibrium price in a market?
answer
A leftward shift in supply and a rightward shift in demand.
question
Recently, you observed both an increase in the price and quantity of wheat. These two outcomes could be the result of which of the following?
answer
Demand curve for wheat shifting rightward.
question
Pat is the owner of United Local Supply, which makes zero economic profit. Pat is
answer
making a return equal to his/her opportunity cost.
question
Which of the following characteristics is most consistent with a perfectly competitive market?
answer
Firms are able to enter and exit the market freely.
question
If firms in a competitive industry begin to earn profit in the short run, new firms will enter. This will shift the industry
answer
supply curve to the right, meaning market price will fall.
question
You have recently been hired to advise the owners of KIL, which operates in a perfectly competitive industry. KIL is currently producing at a point where market price equals its marginal cost; KIL's total revenue is less than its total cost but exceeds its total variable cost. What advice should you provide KIL's owners?
answer
Continue production in the short run to minimize losses, but exit the industry in the long run.
question
Merrimack Industries sells its output in a perfectly competitive market. Which of the following statements is true about Merrimack?
answer
Merrimack will earn zero economic profits in the long-run equilibrium.
question
Suppose workers prefer a certain amount of autonomy and flexibility in their job responsibilities. Job A and B are identical in all respects except Job A offers some autonomy and flexibility. Which of the following combinations of annual salaries would you predict?
answer
A: $40,000
B: $50,000
B: $50,000
question
Which of the following types of firm is most likely to be a monopoly?
answer
Local electricity provider
question
Charlton Computer Company has a monopoly over the production of a specialized processor. It will be profitable for Charlton to increase production of its specialized processors as long as marginal cost
answer
is less than marginal revenue.
question
NMC is a monopoly in the market. Suppose it can sell 4 units of its output at $5.00 per unit and 5 unites of its output at $4.90 per unit. NMC will produce and sell the fifth unit if its marginal cost is
answer
$4.50 or less
question
Which of the following statements is true regarding the difference between monopoly prices and quantities compared to perfectly competitive prices and quantities?
answer
Monopoly prices are higher than prices in perfect competition but quantities are lower than in perfect competition.
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