question
For exit from a particular industry to occur, which of the following myst be true?
answer
Economic Profits <0
question
A profit-maximizing firm's primary goal is to maximize
answer
the difference between total revenues and total explicit and implicit costs
question
Which of the following is NOT true of a perfectly competitive firm
answer
It seeks to maximize revenue
question
The primary objective of all private firms is to
answer
maximize profit
question
Assume the typical firm has long run cost structure shown above, what can we expect to happen in the long run? (graph 2)
answer
new firms would be likely to enter the industry
question
A firm is producing 25 units. its average cost is $2 and its average total cost is $5. Its fixed cost is?
answer
75
question
Luke was employed at an accounting firm and earned 55,000 a year. One year he left and opened his own business. He charges 40 per hour and makes 60,000 in total annual revenue. His cost includes 3,600/year for rend and 2,400/year for electricity. Luke's economic profit (loss) is
answer
-1000
question
The optimal number of works for a perfectly competitive firm to hire occurs when
answer
The wage rate equals the value of marginal product of the last worker
question
The value of marginal product
answer
equals marginal product times price
question
To say a firm is earning normal profits means
answer
accounting profits are large enough to cover the owners opportunity costs
question
Suppose the firm knows that it is not going to shutdown but it is going to earn a loss. It should pick the output level where
answer
price equals marginal costs
question
Which of the following is not an example of implicit costs
answer
the salary of the CEO
question
In a perfectly competitive industry over the long run,
answer
economic profits and losses are driven towards zero by entry and exit
question
The last worker hired at a competitive firm M has a value of marginal product of 17$ and he is paid the market wage of 15$. Firm M could increase profits by
answer
using more workers
question
The short run is defined as
answer
A period in which at least one factor of production is fixed
question
If the firm produces an output level where prices is greater than marginal costs, then the firm should
answer
expand output to earn greater profits or smaller losses
question
A firm's output price is 5$ and the firm is producing 37 units with marginal cost of 3$. The firm should
answer
increase production
question
If a firm in perfect competition was earning economic profit, a slight decrease in the price the firm receives for its output will cause the firm to
answer
contract output and earn smaller profits or earn a loss
question
Kelly works for a perfectly competitive firm and receives a wage rate of 15$. One can infer that
answer
Kelly's value of marginal product is at least 15$
question
A profit maximizing perfectly competitive firm must decide
answer
only on how much to produce, taking price of the good as fixed
question
all else held constant, an increase in the price firms receive for the output will
answer
increase labor demand
question
Suppose a firm is profit maximizing and collecting 1345 in total revenues. If the total costs of its fixed factors of production rises from 200 to 300, once can expect that the firm will
answer
earn smaller profits or greater losses
question
When the price is 10$, what is the profit maximizing output? (graph 4)
answer
300 (highest point on MC)
question
When price is $10, what is the total revenue? (graph 4)
answer
3000 (300*10)
question
When price is $10, this producer will earn a _____ of _____. (graph 4)
answer
Profit of 600$
question
Economic profits are
answer
equal to total revenue minus both explicit and implicit costs
question
Judith owns a button factory and hires workers in a competitive labor market to case the bags of bottoms. Her company's weekly output of cases and buttons varies with the number of workers hired, as shown in the table: If each case sells for $5 more than the cost of the materials used in producing it and the competitive market wage is $625/week, how many workers would Judith hire (graph 5)
answer
4
question
Judith owns a button factory and hires workers in a competitive labor market to case the bags of bottoms. Her company's weekly output of cases and buttons varies with the number of workers hired, as shown in the table: If each case sells for 3$ more than the cost of the materials used in production it, then the most Judith would pay the 5th worker is (graph 5)
answer
360 (120+3)
question
What is the price paid by buyers in equilibrium after the tax (graph 3)
answer
140
question
What is the amount of the tax (graph 3)
answer
70
question
What is the consumer surplus after the tax? (graph 3)
answer
1000 ((1/2)(100)(20))
question
What is the amount of the deadweight loss after tax (graph 3)
answer
350 ((1/2)(70)(10)
question
The table above shows some of the costs for a firm. Fixed costs for this firm are (Table 1)
answer
300
question
The table above, what is the marginal cost for the 5th unit of output (1st table)
answer
110
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