question

In general, economists assume that firms

answer

maximize economic profit.

question

At point D, the firm is

answer

breaking even.

question

Geometrically, marginal cost at any level of output may be interpreted as the slope of

answer

the total cost curve at that level of output.

question

Returns to scale refers to

answer

what happens to output when all inputs are varied in some proportion.

question

When the marginal product curve lies below the average product curve

answer

the average product curve must be falling

question

At the output where MC = ATC = P, the firm

answer

has no economic profit

question

Say you are the owner of a Pizza place. You know that when you produce 10 pizzas, the average product of each of your workers is 10, and the marginal product of your last worker is 15. From this information you know that

answer

the average product is increasing.

question

In the long run

answer

all inputs are variable.

question

Suppose labor and capitals are both used to produce output. In the long run, if the wage rate rises while the rental rate on capital remains unchanged,

answer

the process will become more capital intensive.

question

The elasticity of supply is given by

answer

All are correct

question

Total cost is broken down into two components:

answer

variable cost and fixed cost.

question

Assume initially this firm is at point A. The following would be a reason for a movement to point B.

answer

Wages go down and per unit capital cost go up.

question

Suppose that at a firm's current level of production the marginal product of capital is equal to 10 units, while the marginal rate of technical substitution between capital and labor is 2. Given this, we know the marginal product of labor must be

answer

20

question

Which of the following is not a condition for perfect competition?

answer

Firms are protected by barriers to entry.

question

Geometrically, the marginal product

answer

at any point is the slope of the total product curve at that point.

question

For any constant returns production function, the isoquants for Q = 1, Q = 2, Q = 3, etc. will

answer

be equally spaced, in that the distance between Q = 1 and Q = 2 is the same as Q = 2 and Q = 3, etc.

question

On an isoquant, the MRTS is defined as

answer

MPK/MPL at the relevant point on the isoquant.

question

In a decreasing cost industry, as output grows over time,

answer

prices will fall.

question

ATC equals

answer

(TFC + TVC)/Q.

question

The marginal product of a variable input is

answer

the change in the total product that occurs in response to a unit change in the variable input.

question

The vertical distance between the total variable cost and total cost curves

answer

is everywhere equal to total fixed cost

question

Say a competitive firm is producing at point where ATC = $10, AVC = $2. If the firm charges $5 for its output, then in the short-run this firm should

answer

continue to operate.

question

Gravel is made by hand in Nepal, but by machine in the U.S. because

answer

the relative prices of labor and capital differ so dramatically in the two countries.

question

A production function for which proportional changes in all inputs leads to a more-than-proportional change in output is said to exhibit

answer

increasing returns to scale.

question

Once we enter the region of diminishing returns, total variable cost

answer

increases at an increasing rate.

question

In the graph below at a price of P*, the profit maximizing level of output is

answer

Q*.

question

Given input prices and the usual strategy of a profit-maximizing firm, efficient production occurs at

answer

the lowest isocost C for a given isoquant Q

question

When the perfectly competitive firm maximizes profits the price of its product always equals

answer

All of the choices are correct****

marginal costs.

average revenue.

marginal revenue.

marginal costs.

average revenue.

marginal revenue.

question

The total fixed cost function

answer

is horizontal.

question

The long-run total cost of zero output is equal to

answer

0

question

If capital and labor are perfect substitutes in a production function, the isoquants for this function will be

answer

a straight line.

question

Let the TC curve be given by the equation TC(Q) = 6Q. The FC curve can be expressed as

answer

0

question

When the price is P1, in order to maximize profits this firm must produce a quantity equal to

answer

q1