question
In economics, labor demand is synonymous with...
1. market demand
2. average demand
3. marginal demand
4. derived demand
1. market demand
2. average demand
3. marginal demand
4. derived demand
answer
derived demand
question
Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products.
1. a perfect monopoly
2. perfect competition
3. an oligopoly
4. a free market
1. a perfect monopoly
2. perfect competition
3. an oligopoly
4. a free market
answer
perfect competition
question
If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its...
1. allocative efficiency
2. productive efficiency
3. utility-maximizing efficiency
4. minimum price efficiency
1. allocative efficiency
2. productive efficiency
3. utility-maximizing efficiency
4. minimum price efficiency
answer
allocative efficiency
question
If both marginal and average costs in a competitive firm's short-run production process are falling as output is increased, then...
1. marginal cost is above average variable cost
2. marginal cost is below average fixed cost
3. marginal cost is below average variable cost
4. average fixed cost is constant
1. marginal cost is above average variable cost
2. marginal cost is below average fixed cost
3. marginal cost is below average variable cost
4. average fixed cost is constant
answer
marginal cost is below average variable cost
question
In a perfectly competitive market setting, which of the following would be a true statement?
1. market price automatically sets itself exactly at equilibrium
2. market price rarely trends toward equilibrium value
3. wage rates mirror marginal revenue product levels exactly
4. marginal rates trend toward marginal revenue product levels
1. market price automatically sets itself exactly at equilibrium
2. market price rarely trends toward equilibrium value
3. wage rates mirror marginal revenue product levels exactly
4. marginal rates trend toward marginal revenue product levels
answer
wage rates trend toward marginal revenue product levels
question
If a competitive firm experiences a shift in costs of production that decreases marginal costs at all levels of output...
1. expanding output levels at any given price will be profitable.
2. producing less at any market price will off-set marginal cost .
3. the firm's marginal cost curve will shift to the left.
4. the firm's demand curve will also shift to the left.
1. expanding output levels at any given price will be profitable.
2. producing less at any market price will off-set marginal cost .
3. the firm's marginal cost curve will shift to the left.
4. the firm's demand curve will also shift to the left.
answer
expanding output levels at any given price will be profitable.
question
The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.
1. price setter
2. business entity
3. price taker
4. trend setter
1. price setter
2. business entity
3. price taker
4. trend setter
answer
price taker
question
If accounting profit for a firm is 20% of sales, and the implicit cost of financial capital is equal to 8% of sales, then what does the firm's economic profit equal?
1. 28% of sales
2. 10% of output
3. 12% of sales
4. 8% of output
1. 28% of sales
2. 10% of output
3. 12% of sales
4. 8% of output
answer
12% of sales
question
If the price that a firm charges is higher than its ________________ cost of production for that quantity produced, then the firm will earn profits.
1. marginal
2. variable
3. average
4. fixed
1. marginal
2. variable
3. average
4. fixed
answer
average
question
What happens in a perfectly competitive industry when economic profit is greater than zero?
1. existing firms may expand their operations
2. firms may move along their LRAC curves to new outputs
3. there may be pressure on the market price to fall
4. new firms may enter the industry and all of the above
1. existing firms may expand their operations
2. firms may move along their LRAC curves to new outputs
3. there may be pressure on the market price to fall
4. new firms may enter the industry and all of the above
answer
new firms may enter the industry and all of the above
question
When a firm uses retained profits to invest in more energy efficient equipment, an economist would calculate the _________________ of investing in physical capital.
1. typical hurdle rate
2. opportunity cost
3. degree of risk
4. hurdle rate premium
1. typical hurdle rate
2. opportunity cost
3. degree of risk
4. hurdle rate premium
answer
opportunity cost
question
Which of the following can be thought of as an adjustment for the risks involved with respect to the cost of a firm acquiring financial capital?
1. higher retained earnings from past profits
2. cost of financial capital paid by a firm
3. imposition of hurdle rates of interest
4. tax credits for physical capital investments
1. higher retained earnings from past profits
2. cost of financial capital paid by a firm
3. imposition of hurdle rates of interest
4. tax credits for physical capital investments
answer
imposition of hurdle rates of interest
question
Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should...
1. raise her prices above the perfectly competitive level set by the market.
2. keep the business open in the short-run, but plan to go out of business in the long-run.
3. keep the business open in the short-run, and plan to expand the business in the long-run.
4. lay-off her staff, break her lease, and close the business down immediately.
1. raise her prices above the perfectly competitive level set by the market.
2. keep the business open in the short-run, but plan to go out of business in the long-run.
3. keep the business open in the short-run, and plan to expand the business in the long-run.
4. lay-off her staff, break her lease, and close the business down immediately.
answer
keep the business open in the short-run, but plan to go out of business in the long-run.
question
An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________________ .
1. accounting profit, excluding implicit cost
2. accounting profit, including implicit cost
3. economic profit, excluding explicit cost
4. opportunity cost, including economic profit
1. accounting profit, excluding implicit cost
2. accounting profit, including implicit cost
3. economic profit, excluding explicit cost
4. opportunity cost, including economic profit
answer
accounting profit, excluding implicit cost
question
Given the data provided in the table below, what will the marginal cost equal for production at quantity (Q) level 4?
1. $5
2. $4
3. $1
4. $3
1. $5
2. $4
3. $1
4. $3
answer
$4
question
Refer to the diagram above. In this instance, point e shown on the graph indicates...
1. the point where profits will increase by increasing output
2. the point where profits will increase by reducing output
3. the profit-maximizing point where MR = MC
4. the profit-maximizing point where MR is less an MC
1. the point where profits will increase by increasing output
2. the point where profits will increase by reducing output
3. the profit-maximizing point where MR = MC
4. the profit-maximizing point where MR is less an MC
answer
the profit-maximizing point where MR = MC
question
Refer to the table below. In this instance, confirmation that this firm is operating in a perfectly competitive market can readily be ascertained by the fact that its...
1. marginal cost is increasing.
2. total cost is increasing.
3. economic profits are zero.
4. marginal revenue is constant.
1. marginal cost is increasing.
2. total cost is increasing.
3. economic profits are zero.
4. marginal revenue is constant.
answer
marginal revenue is constant
question
Refer to Exhibit 23-8. What is the total revenue of Firm B at the point where it produces in the short run?
1. $300
2. $700
3. $1,000
4. $400
1. $300
2. $700
3. $1,000
4. $400
answer
$1000
question
Refer to Exhibit 23-4. The firm sells its product at P 1 and produces Q 1. Given this situation...
1. total variable cost is equal to areas 2 + 3.
2. total revenue is equal to areas 1 + 2.
3. total cost is equal to areas 1 + 2 + 3.
4. profit equals area 1.
5. none of the above
1. total variable cost is equal to areas 2 + 3.
2. total revenue is equal to areas 1 + 2.
3. total cost is equal to areas 1 + 2 + 3.
4. profit equals area 1.
5. none of the above
answer
total cost is equal to areas 1 + 2 + 3
question
Neil's Bakery is famous for its giant cinnamon buns. The bakery has fixed costs of $100. Neil must pay each worker a wage of $10.00 per hour and each works an 8 hour shift. He earns $2 for each cinnamon bun that is sold. The following table shows how many cinnamon buns he can sell, depending on the number of workers he hires. Refer to the table below. To maximize his profits in this competitive market, how many workers should he hire?
1. 2 workers
2. 3 workers
3. 4 workers
4. 5 workers
1. 2 workers
2. 3 workers
3. 4 workers
4. 5 workers
answer
3 workers
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