question
A firm is currently operating where the MC of the last unit produced is $84, and
the MR of this unit is $70. What would you advise this firm to do?
the MR of this unit is $70. What would you advise this firm to do?
answer
Decrease output
question
Which of the following is a primary difference between price takers and price
searchers that operate in markets with low barriers to entry?
searchers that operate in markets with low barriers to entry?
answer
The price searchers will have to search for the price, while price takers
will have to take the price determined in the market
will have to take the price determined in the market
question
If a price-taker firm selling in a competitive market offers its product at a higher
price than others, it will
price than others, it will
answer
not be able to sell any output
question
The Wheeler Wheat Farm sells wheat to a grain broker in Seattle, Washington.
Since the market for wheat is generally considered to be competitive, the Wheeler
Wheat Farm maximizes its profit by choosing
Since the market for wheat is generally considered to be competitive, the Wheeler
Wheat Farm maximizes its profit by choosing
answer
the quantity at which the farm's marginal cost of production is equal to
the market price
the market price
question
Assume a certain competitive price-taker firm is producing Q = 1,000 units of
output. At Q = 1,000, the firm's average total cost equals $11. The firm sells its
output for $12 per unit. What is the firm's profit?
output. At Q = 1,000, the firm's average total cost equals $11. The firm sells its
output for $12 per unit. What is the firm's profit?
answer
$1,000
question
A firm is operating in a competitive price-taker market. The firm is producing 40
units of output, has an average total cost of production equal to $5, and is earning
$240 economic profit in the short run. What is the current market price?
units of output, has an average total cost of production equal to $5, and is earning
$240 economic profit in the short run. What is the current market price?
answer
$11
question
A competitive price-searcher market is best described as
answer
many firms with some control over price, and some product differentiation
question
In the short run a price searcher wishing to maximize profits or minimize losses,
should produce the output that
should produce the output that
answer
equates marginal cost with marginal revenue
question
The short-run average total cost (ATC) curve of a firm will tend to be U-shaped
because
because
answer
at low levels of output, AFC will be high, while at high levels of output,
MC will be high as the result of diminishing returns
MC will be high as the result of diminishing returns
question
Economists generally define the short run as being
answer
that period of time in which at least one of the firm's inputs, usually firm
size, is fixed
size, is fixed
question
If we add successive laborers to work a given amount of land on a wheat farm,
eventually
eventually
answer
the increases in wheat harvested will get smaller and smaller.
question
A decrease in long-run average costs resulting from increases in output is
answer
attributed to economies of scale
question
Which of the following is most likely to be an implicit cost of production?
answer
interest income foregone on funds invested in the firm by the owners
question
. A foreign exchange student bought a used car for $10,000 and resold it one year
later for $6,500. Insurance, license, and operating costs for the year were $1,500.
What was his economic cost of owning and operating the car for the year if the
market rate of interest was 10 percent (that is, he could have made 10% interest
for 1 year if he had left the money in the bank)?
later for $6,500. Insurance, license, and operating costs for the year were $1,500.
What was his economic cost of owning and operating the car for the year if the
market rate of interest was 10 percent (that is, he could have made 10% interest
for 1 year if he had left the money in the bank)?
answer
$6,000
question
Which of the following is NOT a characteristic of a perfectly competitive market?
answer
It is difficult for a firm to enter or leave the market
question
Which is always true at a firm's profit-maximizing rate of production?
answer
Marginal Revenue = Marginal Cost
question
Which of the following is true in perfect competition at long-run equilibrium?
answer
P = ATC = MC = MR
ATC is minimized
economic profit is $0
ATC is minimized
economic profit is $0
question
Mr. Capps recently built a dental floss factory in Montana. It cost $500,000 and is
expected to last ten years. The plant can only be used to produce dental floss and
will have no scrap value. When a recession occurs, the yearly revenue from the
plant declines to $35,000, compared to costs of $25,000 just for the variable
resources required to produce the current rate of output. Mr. Capps should
expected to last ten years. The plant can only be used to produce dental floss and
will have no scrap value. When a recession occurs, the yearly revenue from the
plant declines to $35,000, compared to costs of $25,000 just for the variable
resources required to produce the current rate of output. Mr. Capps should
answer
continue to operate since he is covering his variable costs and the cost of
the plant is a sunk cost
the plant is a sunk cost
question
In price-taker markets, individual firms have no control over price. Therefore, the
firm's marginal revenue curve is
firm's marginal revenue curve is
answer
constant at the market price of the product
question
If marginal revenue exceeds marginal cost, a price-taker firm should
answer
expand output
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