ECO 2023 Test 2 (TCC Dr. Tony Viegbesie)

Q: The total revenue effect of a movement along a demand curve can best be predicted using:

B) The price elasticity of demand.

Q: The best measure of the economic cost of doing your homework is:

A) The best opportunity you give up when you do your homework.

Q: The additional pleasure or satisfaction from a good declines as more of it is consumed in a given period. This is the definition of:

B) The law of diminishing marginal utility.

question

Larry owns his own auto repair shop, and employs three mechanics. His total parts and
sales volume this year was $322,400. Because he is well known for his repair expertise,
he is also paid $5,200 per year by a local radio station to answer auto repair questions on
"Ask the Mechanic." His explicit costs for payroll, parts and taxes, mortgage and utilities
are $290,160. Larry left a job as an accountant making $40,000 a year to own his own
business. Larry's economic profit isA). $32,240.
B). $37,440.
C). $327,600.
D). Larry is actually experiencing an economic loss of $2,560.

answer

Larry is actually experiencing an economic loss of $2,560

question

Knowing a product's price elasticity allows economists to:

answer

A). predict the amount by which quantity demanded will drop in response to a price
increase

question

Suppose a hurricane hits Florida, causing widespread damage to houses and businesses.
The governor of Florida places price ceilings on all building materials to keep the prices
reasonable. Which of the following is the most likely result?

answer

Shortages of building materials and a slower recovery from the storm.

question

A movement along a given demand curve between two prices refers to:

answer

C) A change in quantity demanded.

question

Investment decisions are made on the basis of the relationship of price to:

answer

B) Long-run fixed cost.

question

Marginal utility for a good is computed as:

answer

D) The change in total utility divided by the change in quantity.

question

Monopolistic competition is a market structure in which:

answer

C) Many firms produce a particular type of product, but each maintains some
independent control over its own price.

question

Explicit costs:

answer

B) Are the sum of actual monetary payments made for resources used to produce a
good

question

A perfectly competitive firm should expand output when:

answer

P > MC

question

The equilibrium price in a competitive market:

answer

D) all of the above

question

The market value of all resources used in producing a good or service is expressed by:

answer

B) Total costs.

question

The change in total cost that results from a 1-unit increase in production is:

answer

C) Marginal cost.

question

In which of the following cases would a firm exit from a market?

answer

D) P < long-run ATC.

question

The only costs which do not change when output changes in the short run are:

answer

B) Fixed costs.

question

The total revenue effect of a movement along a demand curve can best be predicted
using:

answer

B) The price elasticity of demand.

question

Walmart is thinking about offering a 25% discount on a brand of shoes. If the elasticity of
demand is two, then the discount would increase sales by:

answer

C). 50%.

question

The best measure of the economic cost of doing your homework is:

answer

A) The best opportunity you give up when you do your homework.

question

The additional pleasure or satisfaction from a good declines as more of it is consumed in
a given period. This is the definition of:

answer

B) The law of diminishing marginal utility.

question

Decisions which treat at least one factor of production as fixed are referred to as:

answer

B) Short-run decisions.

question

Perfect competition and monopolistic competition are best distinguished by:

answer

A) The degree of product differentiation.

question

Which market structure is characterized by many firms producing close substitutes which
are not differentiated in the eyes of the consumer?

answer

A) Perfect competition.

question

The amount of satisfaction obtained from consumption of an additional unit of a good or
service is:

answer

D) Marginal utility.

question

Economists assume the principal motivation of producers is:

answer

C) Profit.

question

A production function:

answer

B) Is a technological relationship between factors of production and output.

question

If economic profits are earned in a competitive market, then in the long run:

answer

A) Additional firms will enter the market.

question

Greater labor productivity means:

answer

D) Higher output per worker.

question

With greater consumption, total utility always:

answer

B) Increases as long as marginal utility is positive.

question

If marginal utility is negative:

answer

B) Total utility decreases with additional consumption of a good.

question

The entry of firms into a market:

answer

D) All of the above.

question

The exit of firms from a market, ceteris paribus:

answer

B) Reduces the economic losses of remaining firms in a market.

question

An essential characteristic of a perfectly competitive firm is that:

answer

B) It is a price taker.

question

Total utility will be maximized:

answer

C) When marginal utility is zero.

question

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

answer

D) All of the above.

question

The change in total output associated with one additional unit of input is:

answer

C) The marginal physical product.

question

The market demand curve in a perfectly competitive market is downward sloping:

answer

C) Because of the law of demand.

question

The law of diminishing returns states that beyond some point, ceteris paribus:

answer

C) The marginal physical product of a factor of production diminishes as more of
that factor is used.

question

. Which of the following is equivalent to ATC?

answer

B) (FC + VC) / Q.

question

If a firm can change market prices by altering its output, then:

answer

A) It has market power.

question

The law of demand implies that, ceteris paribus:

answer

A) The quantity demanded increases at lower prices.

question

Firms in a perfectly competitive market will:

answer

C) Use the profit-maximizing rule MC = MR.

question

Marginal cost is equal to:

answer

B) Change in total cost x change in total output.

question

In a perfectly competitive market economy, business failures can benefit society by
causing:

answer

A) A reallocation of resources to better uses.

question

Profit is:

answer

C). (P x Q) - TC.

question

Perfectly competitive industries are characterized by:

answer

C) Independent production decisions.

question

. Which of the following determinants of demand is most directly an indication of a
consumer's utility for a good?

answer

B) Tastes.

question

The production function:

answer

D) All of the above.

question

Economic costs and economic profits are:

answer

A) Usually greater and smaller, respectively, than their accounting counterparts.

question

Other things being equal, as more firms enter a market, the market supply curve:

answer

Shifts to the right.

question

If marginal cost (MC) is less than average total cost (ATC), then:

answer

C). ATC is decreasing.

question

. If more firms enter a monopolistically competitive market, we would expect:

answer

D) The demand curves facing existing firms to shift to the right and no change in price elasticity.

question

. If the equilibrium price in a perfectly competitive market for strawberries is $1.50 per
pound, then an individual firm in this market could:

answer

C) Sell an additional pound at $1.50.

question

In which of the following cases would a firm enter a market?

answer

A) P > short-run ATC.

question

The price elasticity of demand is calculated using percentage changes in order to:

answer

D) find a constant elasticity along each demand curve

question

In making a production decision, an entrepreneur:

answer

B) Decides what level of output will maximize profits

question

Rising marginal costs result from:

answer

C) Falling marginal physical product.

question

In the long run,

answer

A) all of a firm's resources are variable

question

The slope of the production function with respect to an input is:

answer

A) The marginal physical product of the input.

question

Economic profit equals zero where:

answer

B) P = AVC.

question

President Bush once claimed, "I wouldn't eat broccoli if you paid me". We can assume
that for him the marginal utility of broccoli is

answer

D) negative

question

Carla buys one soft drink a day regardless of the price. Which of the following is correct
with respect of Carla?

answer

A) price elasticity of demand for soft drinks is 0

question

Which of the following is least likely to occur during the long run in a perfectly
competitive market experiencing economic profits?

answer

D) a decline in the ATC and MC

question

When a purely competitive firm advertises, it is attempting to increase:

answer

A) The demand and decrease the price elasticity of demand for its product.

question

A consumer maximized his or her satisfaction from a given amount of income when

answer

...

question

When total utility is at a maximum, marginal utility is

answer

C) equals to zero

question

Which of the following characterizes monopolistic competition?

answer

B) Product differentiation.

question

To maximize profits, a competitive firm will seek to expand output until:

answer

B) Price equals marginal cost.

question

A demand curve is described as perfectly inelastic if:

answer

A) The same quantity is purchased regardless of price.

question

Which of the following is equivalent to ATC?

answer

B) AFC + AVC.

question

The change in total revenue that results from a 1-unit increase in the quantity sold is:

answer

D) Marginal revenue

question

Which of the following influences the price elasticity of demand?

answer

D) All of the above.

question

A firm should shut down production when:

answer

B) P > minimum AVC.

question

Labor, land, and capital used in production are

answer

A) resources

question

The marginal utility of additional units consumed of any good

answer

D) decreases

question

Assume MUx=30 utils,MUy15, Px=$2, and Py=$0.50. This consumer

answer

D) should buy less of X and more of Y

question

If a perfectly competitive firm can sell 400 computers at $800 each, in order to sell one
more computer, the firm:

answer

C). Can sell the 41st computer at $800.

question

82. If MPP declines with greater output, then MC must increase.

answer

false

question

83 Constant returns to scale occur when an increase in all resources results in an exactly
proportionate increase in output

answer

true

question

84. Vanessa has $100 to spend on jewelry. She can buy earrings for $16 a pair and bracelets
for $20 each. The combination of three pairs of earrings and three bracelets lies outside
Vanessa's budget line.

answer

true

question

85. Brand loyalty makes the demand curve facing the perfectly competitive firm less priceinelastic.

answer

...

question

86. An increase in consumer income increases the quantity demanded of an inferior good.

answer

false

question

87. When businesses earn zero economic profit, they have no incentive to stay in business.

answer

false

question

88. In a perfectly competitive market, firms will earn economic profits in the long run.

answer

false

question

89. To maximize profits, a firm should expand production as long as it is making profits.

answer

true

question

90. When the price of a good is expected to fall next month, there should be a downward
movement along the current demand curve.

answer

false

question

91. Economic profit is the difference between a firm=s total revenue and its direct costs.

answer

true

question

92. A sunk cost is a cost that has occurred but can be recovered.

answer

false

question

93. When a firm produced nothing, total fixed cost is equal to total cost.

answer

true

question

94. Marginal utility is always positive

answer

false

question

95. Economic profit is zero when a firm's revenues just cover its economic cost.

answer

true

question

99. Since a perfectly competitive firm has no market power, its marginal cost curve is flat
(i.e. horizontal).

answer

false

question

100. A demand curve is perfectly inelastic if consumers reduce their quantity demanded to
zero when price rises by even the slightest amount.

answer

false

question

101. A perfectly competitive firm has no market power.

answer

true

question

102. The law of diminishing marginal utility helps explain the law of demand.

answer

false

question

103. Economic losses would lead to firms exiting a market in the short run.

answer

true

question

104. Minimizing average total cost always leads to the maximization of total profit.

answer

true

question

105. The law of diminishing returns indicates that the marginal physical product of a variable
input declines as more of it is employed, ceteris paribus.

answer

true

question

106. Total output may continue to rise even though marginal physical product is negative.

answer

false

question

107. Monopolistically competitive firms are very sensitive to any increase in marginal costs.

answer

...

question

108. Short-run choices imply that at least one factor of production is fixed.

answer

true

question

109. When entrepreneurs decide to build a plant, they are making an investment decision.

answer

true

question

110. If there is no budget constraint, utility maximization is achieved when marginal utility is
zero.

answer

true

question

111. Normal profit is zero when a firm's revenues just cover its economic cost.

answer

true

question

112. The production function shows the minimum output that would equal the opportunity
cost of the resources used to produce the output.

answer

false

question

113. A distinguishing characteristic of monopolistic competition is that there are many firms
in an industry.

answer

true

question

114. Diseconomies of scale imply that the average total cost curve is downward-sloping in the
long run.

answer

false

question

115. A negative cross-price elasticity indicates goods are substitutes because a positive
percentage increase in one good results in a negative percentage increase in the other.

answer

false

question

116. When resources are earning zero economic profits for a firm the resources could earn
more in their next best alternative use.

answer

true

question

117. When firms enter a monopolistically competitive industry, the market supply curve shifts
to the left.

answer

true

1 of 108

question

answer

Larry is actually experiencing an economic loss of $2,560

question

Knowing a product's price elasticity allows economists to:

answer

A). predict the amount by which quantity demanded will drop in response to a price
increase

question

answer

Shortages of building materials and a slower recovery from the storm.

question

A movement along a given demand curve between two prices refers to:

answer

C) A change in quantity demanded.

question

Investment decisions are made on the basis of the relationship of price to:

answer

B) Long-run fixed cost.

question

Marginal utility for a good is computed as:

answer

D) The change in total utility divided by the change in quantity.

question

Monopolistic competition is a market structure in which:

answer

C) Many firms produce a particular type of product, but each maintains some
independent control over its own price.

question

Explicit costs:

answer

B) Are the sum of actual monetary payments made for resources used to produce a
good

question

A perfectly competitive firm should expand output when:

answer

P > MC

question

The equilibrium price in a competitive market:

answer

D) all of the above

question

The market value of all resources used in producing a good or service is expressed by:

answer

B) Total costs.

question

The change in total cost that results from a 1-unit increase in production is:

answer

C) Marginal cost.

question

In which of the following cases would a firm exit from a market?

answer

D) P < long-run ATC.

question

The only costs which do not change when output changes in the short run are:

answer

B) Fixed costs.

question

The total revenue effect of a movement along a demand curve can best be predicted
using:

answer

B) The price elasticity of demand.

question

Walmart is thinking about offering a 25% discount on a brand of shoes. If the elasticity of
demand is two, then the discount would increase sales by:

answer

C). 50%.

question

The best measure of the economic cost of doing your homework is:

answer

A) The best opportunity you give up when you do your homework.

question

The additional pleasure or satisfaction from a good declines as more of it is consumed in
a given period. This is the definition of:

answer

B) The law of diminishing marginal utility.

question

Decisions which treat at least one factor of production as fixed are referred to as:

answer

B) Short-run decisions.

question

Perfect competition and monopolistic competition are best distinguished by:

answer

A) The degree of product differentiation.

question

Which market structure is characterized by many firms producing close substitutes which
are not differentiated in the eyes of the consumer?

answer

A) Perfect competition.

question

The amount of satisfaction obtained from consumption of an additional unit of a good or
service is:

answer

D) Marginal utility.

question

Economists assume the principal motivation of producers is:

answer

C) Profit.

question

A production function:

answer

B) Is a technological relationship between factors of production and output.

question

If economic profits are earned in a competitive market, then in the long run:

answer

A) Additional firms will enter the market.

question

Greater labor productivity means:

answer

D) Higher output per worker.

question

With greater consumption, total utility always:

answer

B) Increases as long as marginal utility is positive.

question

If marginal utility is negative:

answer

B) Total utility decreases with additional consumption of a good.

question

The entry of firms into a market:

answer

D) All of the above.

question

The exit of firms from a market, ceteris paribus:

answer

B) Reduces the economic losses of remaining firms in a market.

question

An essential characteristic of a perfectly competitive firm is that:

answer

B) It is a price taker.

question

Total utility will be maximized:

answer

C) When marginal utility is zero.

question

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

answer

D) All of the above.

question

The change in total output associated with one additional unit of input is:

answer

C) The marginal physical product.

question

The market demand curve in a perfectly competitive market is downward sloping:

answer

C) Because of the law of demand.

question

The law of diminishing returns states that beyond some point, ceteris paribus:

answer

C) The marginal physical product of a factor of production diminishes as more of
that factor is used.

question

. Which of the following is equivalent to ATC?

answer

B) (FC + VC) / Q.

question

If a firm can change market prices by altering its output, then:

answer

A) It has market power.

question

The law of demand implies that, ceteris paribus:

answer

A) The quantity demanded increases at lower prices.

question

Firms in a perfectly competitive market will:

answer

C) Use the profit-maximizing rule MC = MR.

question

Marginal cost is equal to:

answer

B) Change in total cost x change in total output.

question

In a perfectly competitive market economy, business failures can benefit society by
causing:

answer

A) A reallocation of resources to better uses.

question

Profit is:

answer

C). (P x Q) - TC.

question

Perfectly competitive industries are characterized by:

answer

C) Independent production decisions.

question

. Which of the following determinants of demand is most directly an indication of a
consumer's utility for a good?

answer

B) Tastes.

question

The production function:

answer

D) All of the above.

question

Economic costs and economic profits are:

answer

A) Usually greater and smaller, respectively, than their accounting counterparts.

question

Other things being equal, as more firms enter a market, the market supply curve:

answer

Shifts to the right.

question

If marginal cost (MC) is less than average total cost (ATC), then:

answer

C). ATC is decreasing.

question

. If more firms enter a monopolistically competitive market, we would expect:

answer

D) The demand curves facing existing firms to shift to the right and no change in price elasticity.

question

. If the equilibrium price in a perfectly competitive market for strawberries is $1.50 per
pound, then an individual firm in this market could:

answer

C) Sell an additional pound at $1.50.

question

In which of the following cases would a firm enter a market?

answer

A) P > short-run ATC.

question

The price elasticity of demand is calculated using percentage changes in order to:

answer

D) find a constant elasticity along each demand curve

question

In making a production decision, an entrepreneur:

answer

B) Decides what level of output will maximize profits

question

Rising marginal costs result from:

answer

C) Falling marginal physical product.

question

In the long run,

answer

A) all of a firm's resources are variable

question

The slope of the production function with respect to an input is:

answer

A) The marginal physical product of the input.

question

Economic profit equals zero where:

answer

B) P = AVC.

question

President Bush once claimed, "I wouldn't eat broccoli if you paid me". We can assume
that for him the marginal utility of broccoli is

answer

D) negative

question

Carla buys one soft drink a day regardless of the price. Which of the following is correct
with respect of Carla?

answer

A) price elasticity of demand for soft drinks is 0

question

Which of the following is least likely to occur during the long run in a perfectly
competitive market experiencing economic profits?

answer

D) a decline in the ATC and MC

question

When a purely competitive firm advertises, it is attempting to increase:

answer

A) The demand and decrease the price elasticity of demand for its product.

question

A consumer maximized his or her satisfaction from a given amount of income when

answer

...

question

When total utility is at a maximum, marginal utility is

answer

C) equals to zero

question

Which of the following characterizes monopolistic competition?

answer

B) Product differentiation.

question

To maximize profits, a competitive firm will seek to expand output until:

answer

B) Price equals marginal cost.

question

A demand curve is described as perfectly inelastic if:

answer

A) The same quantity is purchased regardless of price.

question

Which of the following is equivalent to ATC?

answer

B) AFC + AVC.

question

The change in total revenue that results from a 1-unit increase in the quantity sold is:

answer

D) Marginal revenue

question

Which of the following influences the price elasticity of demand?

answer

D) All of the above.

question

A firm should shut down production when:

answer

B) P > minimum AVC.

question

Labor, land, and capital used in production are

answer

A) resources

question

The marginal utility of additional units consumed of any good

answer

D) decreases

question

Assume MUx=30 utils,MUy15, Px=$2, and Py=$0.50. This consumer

answer

D) should buy less of X and more of Y

question

If a perfectly competitive firm can sell 400 computers at $800 each, in order to sell one
more computer, the firm:

answer

C). Can sell the 41st computer at $800.

question

82. If MPP declines with greater output, then MC must increase.

answer

false

question

83 Constant returns to scale occur when an increase in all resources results in an exactly
proportionate increase in output

answer

true

question

answer

true

question

85. Brand loyalty makes the demand curve facing the perfectly competitive firm less priceinelastic.

answer

...

question

86. An increase in consumer income increases the quantity demanded of an inferior good.

answer

false

question

87. When businesses earn zero economic profit, they have no incentive to stay in business.

answer

false

question

88. In a perfectly competitive market, firms will earn economic profits in the long run.

answer

false

question

89. To maximize profits, a firm should expand production as long as it is making profits.

answer

true

question

90. When the price of a good is expected to fall next month, there should be a downward
movement along the current demand curve.

answer

false

question

91. Economic profit is the difference between a firm=s total revenue and its direct costs.

answer

true

question

92. A sunk cost is a cost that has occurred but can be recovered.

answer

false

question

93. When a firm produced nothing, total fixed cost is equal to total cost.

answer

true

question

94. Marginal utility is always positive

answer

false

question

95. Economic profit is zero when a firm's revenues just cover its economic cost.

answer

true

question

99. Since a perfectly competitive firm has no market power, its marginal cost curve is flat
(i.e. horizontal).

answer

false

question

100. A demand curve is perfectly inelastic if consumers reduce their quantity demanded to
zero when price rises by even the slightest amount.

answer

false

question

101. A perfectly competitive firm has no market power.

answer

true

question

102. The law of diminishing marginal utility helps explain the law of demand.

answer

false

question

103. Economic losses would lead to firms exiting a market in the short run.

answer

true

question

104. Minimizing average total cost always leads to the maximization of total profit.

answer

true

question

105. The law of diminishing returns indicates that the marginal physical product of a variable
input declines as more of it is employed, ceteris paribus.

answer

true

question

106. Total output may continue to rise even though marginal physical product is negative.

answer

false

question

107. Monopolistically competitive firms are very sensitive to any increase in marginal costs.

answer

...

question

108. Short-run choices imply that at least one factor of production is fixed.

answer

true

question

109. When entrepreneurs decide to build a plant, they are making an investment decision.

answer

true

question

110. If there is no budget constraint, utility maximization is achieved when marginal utility is
zero.

answer

true

question

111. Normal profit is zero when a firm's revenues just cover its economic cost.

answer

true

question

112. The production function shows the minimum output that would equal the opportunity
cost of the resources used to produce the output.

answer

false

question

113. A distinguishing characteristic of monopolistic competition is that there are many firms
in an industry.

answer

true

question

114. Diseconomies of scale imply that the average total cost curve is downward-sloping in the
long run.

answer

false

question

115. A negative cross-price elasticity indicates goods are substitutes because a positive
percentage increase in one good results in a negative percentage increase in the other.

answer

false

question

116. When resources are earning zero economic profits for a firm the resources could earn
more in their next best alternative use.

answer

true

question

117. When firms enter a monopolistically competitive industry, the market supply curve shifts
to the left.

answer

true

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