question
Your utility from one hamburger is 20. Your utility from the second hamburger is 10. Your utility from the third hamburger is 2. What is the economic concept that describes these changes in utility?
answer
Diminishing marginal utility
question
The price of a slice of cake is $4.00 and the price of a bag of chips is $6.00.
The relative price of a bag of chips is: 0.67 slice of cake.
The opportunity cost of a slice of cake is: 0.67 slice of cake.
The relative price of a bag of chips is: 0.67 slice of cake.
The opportunity cost of a slice of cake is: 0.67 slice of cake.
answer
1) 1.5 slices of cake.
2) 0.67 bag of chips.
2) 0.67 bag of chips.
question
A consumer faces the following situation. Her marginal utility of a luxury good with a price of $100 is 100 units. An alternative good has a marginal utility of 40 units and a price of $50. What should she do if she wishes to increase her total utility?
answer
purchase more of the luxury goods and fewer of the alternative goods.
question
What is the relationship between average product and marginal product?
answer
When marginal product exceeds average product, average product is rising.
question
The Long Run Average Cost Curve
answer
shows the lowest average cost at which it is possible to produce each output when the firm has had sufficient time to change only the amount of labor employed.
question
When a firm increases its plant size and labor employed by the same percentage, and its output increases by a smaller percentage and the average total cost increases, we say:
answer
Diseconomies of scale exist.
question
When a firm is operating on the downward-sloping portion of its long-run average cost curve, then it is experiencing:
answer
Economies of scale.
question
In the long run, perfectly competitive firms respond to positive economic profits made by existing firms in a market by entering the market . As a result, supply increases , the market supply curve shifts rightwards , and the market demand curve remains in the same position . This leads the prices to decrease and the total quantity sold in the market to increase . The profits of previously existing firms decrease and the market outcome is efficient .
answer
1. Entering the Market
2. Increases
3. Shifts Rightwards
4. Remains in the same position
5. Decrease
6. Increase
7. Efficient
2. Increases
3. Shifts Rightwards
4. Remains in the same position
5. Decrease
6. Increase
7. Efficient
question
Which of the following statement(s) is/are FALSE in perfect competition [choose all valid answers]:
answer
1. firms are price takers.
2. there are no barriers to entry.
3. there are many buyers.
4. there are many sellers.
5. there is perfect information.
6. the market outcome is efficient.
Correct Answer: none of the listed options is false.
2. there are no barriers to entry.
3. there are many buyers.
4. there are many sellers.
5. there is perfect information.
6. the market outcome is efficient.
Correct Answer: none of the listed options is false.
question
Compared to perfect competition, a monopoly [choose all valid answers]:
answer
1. Produces less quantity
2. Assigns higher prices
3. Produces a less efficient outcome
4. Exits because of barriers to entry
5. Has goods with no substitutes
2. Assigns higher prices
3. Produces a less efficient outcome
4. Exits because of barriers to entry
5. Has goods with no substitutes
question
The total revenue test using the price elasticity of demand
answer
demonstrates why a monopoly can earn an economic profit in the long run.
question
Firm A, a monopoly, earns an economic profit. Firm A, therefore, produces where ____ is less than market price.
answer
average total cost
question
What should a perfectly competitive firm do with the following conditions?
The current price = $25. Average cost = $40; average fixed cost = $20; and marginal cost = $25. The firm should:
The current price = $25. Average cost = $40; average fixed cost = $20; and marginal cost = $25. The firm should:
answer
produce in the short run, but leave the industry in the long run.
question
The marginal cost curve intersects the ________ curves at their ________ points.
answer
average total cost and average variable cost; minimum
question
Suppose that each of 8,000 firms in a perfectly competitive industry produces 1,000 units of a good and maximizes profits when the price of the good is $10. If there is a permanent increase in demand, in the short run each firm produces ________ 1,000 units and in the long run the number of firms is ________ 8,000.
answer
more than; more than
question
A perfectly competitive firm should shut down in the short-run if price falls below the minimum of
answer
average variable costs.
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