question
Fixed costs are
answer
a production expense that does not vary with output.
question
A specific tax of $1 per unit of output will affect a firm's
answer
average total cost, average variable cost, and marginal cost
question
If the cost of labor decreases, the isocost line
answer
rotates outward around the point where only capital is employed in production
question
The slope of the isocost line tells the firm how much
answer
capital must be reduced to keep total cost constant when hiring one more unit of labor
question
When the isocost line is tangent to the isoquant, then:
answer
all of the above
question
When the isocost line is tangent to the isoquant, then
answer
the firm is producing that level of output at minimum cost.
question
If the marginal rate of technical substitution for a cost minimizing firm is 2, and the wage rate for labor is $5, what is the rental rate for capital in dollars? (K on the vertical axis.)
answer
0.5
question
A firm can minimize cost by
answer
all of the above
question
The long run average cost curve may initially slope downward due to
answer
economies of scale
question
If there are diseconomies of scale within a given range of output, which of following is(are) TRUE?
answer
The long-run average cost curve must be upward sloping within that range of output.
question
Economists define a market to be competitive when the firms
answer
are price takers
question
If a profit-maximizing firm finds that, at its current level of production, MR < MC, it will
answer
decrease output
question
The above figure shows the cost curves for a competitive firm. The firm will incur economic losses if the price is less than
answer
$10
question
The above figure shows the cost curves for a competitive firm. If the profit-maximizing level of output is 40 price is equal to
answer
$15
question
The above figure shows the cost curves for a competitive firm. If the market price is $15 per unit, the firm will earn profits of
answer
$160
question
If a competitive firm maximizes short-run profits by producing some quantity of output, which of the following must be true at that level of output?
answer
All of the above
question
A firm will shut down in the short run if
answer
total revenue from operating would not cover variable costs
question
An increase in the cost of a variable input will result
answer
all of the above
question
If a competitive firm is in short-run equilibrium, then
answer
an increase in its fixed cost will have no effect on output
question
The competitive firm's supply curve is equal to
answer
the portion of its marginal cost curve that lies above the AVC
question
There are currently N identical firms in a market. If it is a perfectly competitive market, the short-run market supply curve at any given price is
answer
N times the supply of an individual firm
question
In the long run, profits will equal zero in a competitive market because of
answer
free entry and exit
question
Assuming a horizontal long-run market supply curve, which of the following statements if (are) true about competitive firms in the long run
answer
P=AC
question
Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. If the long-run supply curve is horizontal. then
answer
the long-run price will be $0.20 per pound
question
Long-run market supply curves are upward sloping if
answer
input prices rises as the industry expands
question
Isoquants that are downward sloping straight lines exhibit
answer
a constant marginal rate of technical substitution
question
The slope of the isoquant tells the firm how much
answer
capital must decrease to keep output constant when labor increases by one unit
question
The above figure shows the isoquants for producing steel. Constant returns to scale are
answer
present when producing between 10,000 and 20,000 tons
question
Joey's Lawncutting Service rents office space from Joey's dad for $300 per month. Joey's dad is thinking of increasing the rent to $400 per month. As a result Joey's marginal cost of cutting grass will
answer
not change
question
Assume baseball player salaries are fully determined before the season starts. From the point of view of the baseball team owner, player salaries during the course of the season are then
answer
fixed costs
question
The above figure shows the isoquants for producing steel. When producing less than 10,000 tons there are
answer
increasing returns to scale
question
The producer surplus is equal to
answer
the difference between price and marginal cost for all units sold
question
A competitive market maximizes social welfare because in a competitive market
answer
price equals marginal cost of the last unit produced
question
Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Jones' producer surplus is
answer
$5,000
question
The total welfare associated with a market that includes a government sales tax equals
answer
consumer surplus plus producer surplus plus government tax revenue
question
If activists successfully lobbied government to force firms to produce more output than they normally would in a perfectly competitive market,
answer
total surplus in the market would decline
question
The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the loss in social welfare will equal (Hint: draw an after-tax supply curve)
answer
F+g
question
The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the loss in consumer surplus will equal
answer
b+f
question
The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the tax revenue is
answer
$2*Q1
question
The above figure shows supply and demand curves for an apartment units in a large city. If the city government passes a law that establishes $350 per month as the legal maximum rent, the loss in social welfare equals
answer
f+g
question
The above figure shows supply and demand curves for apartment units in a large city. If the city government passes a law that establishes $350 per month as the legal maximum rent, the consumer's net gain in surplus equals
answer
c-f
question
The above figure shows supply and demand curves for apartment units in a large city. If the city government passes a law that establishes $350 per month as the legal maximum rent, producer surplus decreases by
answer
c+g
question
Variable costs are
answer
A) a production expense that changes with the quantity of output produced
question
If average cost is decreasing
answer
A) marginal cost is less than average cost
question
Suppose a firm can only vary the quantity of labor hired in the short run. An increase in the cost of capital will
answer
C) have no effect on marginal cost
question
Which of the following will cause the average fixed cost curve making cigarettes to shift?
answer
C) a $5 million penalty charged to each cigarette smoker
question
Which of the following will cause the marginal cost curve of making cigarettes to shift?
answer
C) A $1 per pack tax on cigarettes
question
Which of the following will cause the average cost curve of making cigarettes to shift?
answer
D) All of the above
question
Assume Congress decides that oil companies are making too much profit and decides to tax oil companies for each gallon of gasoline produced. This would
answer
B) shift the marginal cost curve up
question
The slope of the isocost line tells the firm how much
answer
C) capital must be reduced to keep the total cost constant when hiring one more unit of labor
question
Suppose each worker must use only one shovel to dig a trench, and shovels are useless by themselves. In the short run, an increase in the price of shovels will result in
answer
B) no change in the firm's output
question
When the isocost line is tangent to the isoquant, then
answer
the firm is producing that level of output at minimum cost
question
Long-run average cost is never greater than short-run average cost because in the long run
answer
C) the firm can move to the lowest possible isocost line
question
Firms that exhibit price-taking behavior
answer
A) have outputs that are too small to influence market prices and this take it as given
question
If consumers view the output of any firm in a market to be identical to the output of any other firm in the market, the demand curve for the output of any given firm
answer
C) horizontal
question
14) If a competitive firm maximizes short-run profits by producing some quantity of output, which of the following must be true at that level of output?
answer
p greater than or equal to AVC
question
Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. If the long-run supply curve is horizontal, then
answer
the long-run price will be $0.20 per pound
question
If a firm is a price taker, then its marginal revenue will always equal
answer
price
question
If a competitive firm is in short-run equilibrium, then
answer
All of the above are possible in the short-run
question
Which is an important aspect of the perfectly competitive market that leads to long run equilibrium?
answer
freedom of entry and exit
question
Long-run market supply curves are downward sloping if
answer
input prices fall as the industry expands
question
Downward sloping long-run supply curves occur in markets
answer
with decreasing returns to scale
question
Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Jones' producer surplus is
answer
$5,000
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
