ECON2106 Homework 10 and 11 - Assignment Essays

question

The four-firm concentration ration is the percentage of the value of _____ accounted for by the four largest firms in an industry

answer

sales

question

The Herfindahl-Hirschman Index is the _____ of the percentage market share of each firm summed across the largest _____ firms (or summed across all the firms if there are fewer than _____) in a market

answer

square; 50; 50

question

Distinguish between the short run and the long run. In the short run, _____. In the long run, ______

answer

a firm's plant is fixed; a firm can change its plant

question

Which of the following are examples of short run and long run decisions

answer

Starbucks has hired more labor to meet the increasing demand; Starbucks has opened another store to meet the increasing demand

question

Total Product is the total ______ of a good produced in a given period.
Marginal Product is the change in _____ product that results from a one-unit increase in the ______.
Average Product is the total product divided by the _____.

answer

quantity; total; quantity of labor employed; quantity of a factor of production

question

The law of diminishing returns says that as the firm uses more of _____, with a given quantity of ______, marginal product of the variable factor eventually diminishes.

answer

a variable factor of production; the fixed factor of production

question

Most production processes experience _____ marginal returns initially, but all production processes eventually reach a point of ______ marginal returns.

answer

increasing; diminishing

question

When your marginal grade exceeds your GPA, your GPA ______.

answer

rises

question

True or false: When marginal product exceeds average product, average product is rising

answer

TRUE

question

Total cost is the cost of _____ by a firm

answer

all the factors of production used

question

Total fixed cost is the cost of the _____. Specifically, the cost of _______, _________, and _______.

answer

firm's fixed factors of production; land, capital, entrpreneurship

question

Total variable cost is the cost of the _______. Specifically, the cost of ______.

answer

firm's variable factor of production; labor

question

True or False: Total variable cost and total cost both increase as output increases

answer

TRUE

question

True or False: The marginal cost curve intersects the average variable cost curve at its minimum

answer

True

question

True or False: When marginal cost is greater than average variable cost, average variable cost is increasing

answer

True

question

True or False: The marginal cost curve intersects the average fixed curve at its minimum

answer

False

question

True or False: When marginal cost is less than average total cost, average total cost is decreasing

answer

True

question

The AFC has a downward slope because

answer

when output increases, the firms spreads its total fixed cost over a larger output

question

The shape of the AVC curve arises because of:

answer

increasing returns initially and eventually diminishing returns

question

The shape of the ATC curve arises because of ________

answer

The influence of two opposing forces----spreading total fixed cost over a larger output and eventually diminishing returns

question

When Sam increases smoothie production from 4 to 5 gallons, his total cost of production increases from $32.50 to $36.85. Calculate Sam's marginal cost of producing smoothies.

answer

$4.35

question

Sue's Surfboards rents a factory. If the rent rises by $200 a week and other things remain the same, how do Sue's Surfboards short-run average cost curves and marginal cost curve change?
If other things remain the same, the average fixed cost curve _______ and the average variable cost curve _______

answer

shifts upward; does not change

question

Sue's Surfboards rents a factory. If the rent rises by $200 a week and other things remain the same, how do Sue's Surfboards short-run average cost curves and marginal cost curve change?
If other things remain the same, the average total cost curve _____ and the marginal cost curve _______

answer

shifts upward, does not change

question

Long-run average cost curve is a curve that shows the _____ average total cost at which it is _______ to produce each output when the firm has had sufficient time to change both its plant size and labor employed

answer

lowest; possible

question

When a firm is producing a given output at the least possible cost,

answer

it is operating on its long-run average cost curve

question

Perfect Competition is a market in which there are _____ firms, each selling _____ product; many buyers; ______ to the entry of new firms into the industry; no advantage to established firms; and buyers and sellers _____ about prices.

answer

many; identical; no barriers; are well informed

question

In perfect competition, each firm _______

answer

Is a price taker

question

A firm in perfect competition is a price taker because _______.

answer

It produces a tiny proportion of the total output of a particular good, and buyers are well informed about the prices and products of other firms

question

To maximize profit, a firm in perfect competition must decide ______.

answer

how to produce at minimum cost, what quantity to produce, and whether to enter or exit a market

question

In perfect competition, a firm maximizes its economic profit if it produces the output at which _______.

answer

price equals marginal cost

question

Why does a firm in perfect competition produce the quantity at which marginal cost equals price?
A firm produces the quantity at which marginal cost equals price because when marginal cost is greater the price, the firm ______.

answer

can increase economic profit by producing 1 less unit of output

question

In perfect competition, firms will be able to earn economic profits in:

answer

The short run only

question

The lowest price at which a firm will produce is the price at minimum _____ because at this price its loss equals ______

answer

average variable cost; total fixed cost

question

The short-run market supply curve is ______

answer

horizontal at the shutdown price

question

Entry is triggered in a competitive market when existing firms are _____.

answer

making an economic profit

question

Describe the process that ends further entry:

answer

New firms enter, supply increases, and the price falls until in the long run all firms are making normal profit. Market output increases and the output of each individual firm increases

question

Exit is triggered in a competitive market when existing firms are

answer

incurring an economic loss

question

Describe the process that ends further exit

answer

Some firms exit, supply decreases, and the price rises until in the long run all firms are making normal profit. Market output decreases and the output of each remaining firm increases

question

The market for pizza is perfectly competitive and has 1,000 firms. Each firm is identical. Describe each firm in long-run equilibrium.
In long run equilibrium, each firm is:

answer

making zero economic profit

question

The smartphone market is in long-run equilibrium. Then the demand for smartphones increases. Describe what happens in the market for smartphones.
in the short run, firms will _____.

answer

make an economic profit

question

The smartphone market is in long-run equilibrium. Then the demand for smartphones increases. Describe what happens in the market for smartphones.
Some firms will ______ the market, and the market supply curve will shift ________

answer

enter; rightward

question

A firm producing where price equals marginal cost that has variable costs equaling $60 million; fixed costs equaling $40 million; and revenues equaling $50 million should:

answer

shut down and leave the industry in the long run

question

Given the following facts, what should the firm do in the short run? In the long run? Fixed costs are $50,000. Total costs are $90,000. Total revenues are $45,000.

answer

Continue to produce in the short run; leave the industry in the long run

1 of 43

question

The four-firm concentration ration is the percentage of the value of _____ accounted for by the four largest firms in an industry

answer

sales

question

answer

square; 50; 50

question

Distinguish between the short run and the long run. In the short run, _____. In the long run, ______

answer

a firm's plant is fixed; a firm can change its plant

question

Which of the following are examples of short run and long run decisions

answer

Starbucks has hired more labor to meet the increasing demand; Starbucks has opened another store to meet the increasing demand

question

answer

quantity; total; quantity of labor employed; quantity of a factor of production

question

The law of diminishing returns says that as the firm uses more of _____, with a given quantity of ______, marginal product of the variable factor eventually diminishes.

answer

a variable factor of production; the fixed factor of production

question

Most production processes experience _____ marginal returns initially, but all production processes eventually reach a point of ______ marginal returns.

answer

increasing; diminishing

question

When your marginal grade exceeds your GPA, your GPA ______.

answer

rises

question

True or false: When marginal product exceeds average product, average product is rising

answer

TRUE

question

Total cost is the cost of _____ by a firm

answer

all the factors of production used

question

Total fixed cost is the cost of the _____. Specifically, the cost of _______, _________, and _______.

answer

firm's fixed factors of production; land, capital, entrpreneurship

question

Total variable cost is the cost of the _______. Specifically, the cost of ______.

answer

firm's variable factor of production; labor

question

True or False: Total variable cost and total cost both increase as output increases

answer

TRUE

question

True or False: The marginal cost curve intersects the average variable cost curve at its minimum

answer

True

question

True or False: When marginal cost is greater than average variable cost, average variable cost is increasing

answer

True

question

True or False: The marginal cost curve intersects the average fixed curve at its minimum

answer

False

question

True or False: When marginal cost is less than average total cost, average total cost is decreasing

answer

True

question

The AFC has a downward slope because

answer

when output increases, the firms spreads its total fixed cost over a larger output

question

The shape of the AVC curve arises because of:

answer

increasing returns initially and eventually diminishing returns

question

The shape of the ATC curve arises because of ________

answer

The influence of two opposing forces----spreading total fixed cost over a larger output and eventually diminishing returns

question

When Sam increases smoothie production from 4 to 5 gallons, his total cost of production increases from $32.50 to $36.85. Calculate Sam's marginal cost of producing smoothies.

answer

$4.35

question

answer

shifts upward; does not change

question

Sue's Surfboards rents a factory. If the rent rises by $200 a week and other things remain the same, how do Sue's Surfboards short-run average cost curves and marginal cost curve change?
If other things remain the same, the average total cost curve _____ and the marginal cost curve _______

answer

shifts upward, does not change

question

answer

lowest; possible

question

When a firm is producing a given output at the least possible cost,

answer

it is operating on its long-run average cost curve

question

answer

many; identical; no barriers; are well informed

question

In perfect competition, each firm _______

answer

Is a price taker

question

A firm in perfect competition is a price taker because _______.

answer

It produces a tiny proportion of the total output of a particular good, and buyers are well informed about the prices and products of other firms

question

To maximize profit, a firm in perfect competition must decide ______.

answer

how to produce at minimum cost, what quantity to produce, and whether to enter or exit a market

question

In perfect competition, a firm maximizes its economic profit if it produces the output at which _______.

answer

price equals marginal cost

question

answer

can increase economic profit by producing 1 less unit of output

question

In perfect competition, firms will be able to earn economic profits in:

answer

The short run only

question

The lowest price at which a firm will produce is the price at minimum _____ because at this price its loss equals ______

answer

average variable cost; total fixed cost

question

The short-run market supply curve is ______

answer

horizontal at the shutdown price

question

Entry is triggered in a competitive market when existing firms are _____.

answer

making an economic profit

question

Describe the process that ends further entry:

answer

New firms enter, supply increases, and the price falls until in the long run all firms are making normal profit. Market output increases and the output of each individual firm increases

question

Exit is triggered in a competitive market when existing firms are

answer

incurring an economic loss

question

Describe the process that ends further exit

answer

Some firms exit, supply decreases, and the price rises until in the long run all firms are making normal profit. Market output decreases and the output of each remaining firm increases

question

The market for pizza is perfectly competitive and has 1,000 firms. Each firm is identical. Describe each firm in long-run equilibrium.
In long run equilibrium, each firm is:

answer

making zero economic profit

question

The smartphone market is in long-run equilibrium. Then the demand for smartphones increases. Describe what happens in the market for smartphones.
in the short run, firms will _____.

answer

make an economic profit

question

answer

enter; rightward

question

A firm producing where price equals marginal cost that has variable costs equaling $60 million; fixed costs equaling $40 million; and revenues equaling $50 million should:

answer

shut down and leave the industry in the long run

question

Given the following facts, what should the firm do in the short run? In the long run? Fixed costs are $50,000. Total costs are $90,000. Total revenues are $45,000.

answer

Continue to produce in the short run; leave the industry in the long run

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