question
A firm will maximize total revenue if it sells its product at a price that corresponds to:
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a point below the midpoint of the demand curve.
a point above the midpoint of the demand curve.
the midpoint of the demand curve.
the point at which the demand curve crosses the vertical axis.
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a point below the midpoint of the demand curve.
a point above the midpoint of the demand curve.
the midpoint of the demand curve.
the point at which the demand curve crosses the vertical axis.
answer
the midpoint of the demand curve.
At the midpoint of the demand curve the elasticity is equal to one. The firm will maximize total revenue if it sells at the price that corresponds to that point.
At the midpoint of the demand curve the elasticity is equal to one. The firm will maximize total revenue if it sells at the price that corresponds to that point.
question
Which type of supply curve is more elastic?
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long-run supply curve
medium-run supply curve
short-run supply curve
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long-run supply curve
medium-run supply curve
short-run supply curve
answer
long-run supply curve
In the long run, plant capacity and the number of firms can change. This is illustrated with an elastic supply curve. While firms have some ability to adjust output in the short run, they have a greater ability to adjust in the long-run.
In the long run, plant capacity and the number of firms can change. This is illustrated with an elastic supply curve. While firms have some ability to adjust output in the short run, they have a greater ability to adjust in the long-run.
question
What will happen to the quantity demanded of a perfectly inelastic product when its price increases by 5%?
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Quantity demanded will increase by 5%.
Quantity demanded will decrease by 5%.
Quantity demanded will drop to zero.
Quantity demanded will stay the same.
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Quantity demanded will increase by 5%.
Quantity demanded will decrease by 5%.
Quantity demanded will drop to zero.
Quantity demanded will stay the same.
answer
Quantity demanded will stay the same.
For products with perfectly inelastic demand, quantity demanded does not change when price changes.
For products with perfectly inelastic demand, quantity demanded does not change when price changes.
question
What happens to price elasticity on a linear demand curve when the price increases above the unitary elasticity point?
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It becomes more elastic.
It becomes more inelastic.
It becomes more unitary elastic.
It stays the same.
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It becomes more elastic.
It becomes more inelastic.
It becomes more unitary elastic.
It stays the same.
answer
...
question
Elastic supply curves:
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are vertical.
always pass through the origin.
always cross the quantity axis.
always cross the price axis.
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are vertical.
always pass through the origin.
always cross the quantity axis.
always cross the price axis.
answer
always cross the price axis.
Elastic supply curves always cross the vertical or price axis.
Elastic supply curves always cross the vertical or price axis.
question
If grapefruits have a price elasticity of 4, that means for every 1% decrease in price, quantity demanded will increase by:
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4%.
0.4%.
1%.
25%.
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4%.
0.4%.
1%.
25%.
answer
...
question
Montblanc produces pens that sell for hundreds of dollars. In general, the demand for Montblanc pens as compared with Bic pens would be:
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more upward sloping.
more inelastic.
unitary elastic.
more elastic.
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more upward sloping.
more inelastic.
unitary elastic.
more elastic.
answer
...
question
Assume that the price elasticity of demand for T-shirts is unitary elastic. If a surf shop increases the price of its T-shirts, what will happen to the total revenue from T-shirt sales?
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Total revenue will fall to zero.
Total revenue will stay the same.
Total revenue will decrease.
Total revenue will increase.
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Total revenue will fall to zero.
Total revenue will stay the same.
Total revenue will decrease.
Total revenue will increase.
answer
...
question
The ______ is defined as a period when plant capacity and the number of firms in an industry cannot change.
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medium run
short run
long run
market period
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medium run
short run
long run
market period
answer
...
question
Assume that a firm is selling its product at the price that corresponds to the midpoint of its demand curve. If the firm increases the price of its product, what will happen to total revenue?
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It will stay the same.
It will increase.
It will decrease.
It will fall to zero.
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It will stay the same.
It will increase.
It will decrease.
It will fall to zero.
answer
...
question
If Susan's income increases by 20% and, as a result, she buys 40% more lattes, then:
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income elasticity of demand for lattes is 0.5.
income elasticity of demand for lattes is 2.
price elasticity of demand for lattes is 0.5.
price elasticity of demand for lattes is 2.
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income elasticity of demand for lattes is 0.5.
income elasticity of demand for lattes is 2.
price elasticity of demand for lattes is 0.5.
price elasticity of demand for lattes is 2.
answer
...
question
For which of the following industries is supply most elastic in the long run?
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airlines
Hollywood movies
Coffee shops
nuclear power
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airlines
Hollywood movies
Coffee shops
nuclear power
answer
...
question
If the price of gasoline increases by 10% and the quantity demanded falls by 2%, then what is the price elasticity of demand for gasoline?
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5
20
2
0.2
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5
20
2
0.2
answer
...
question
Complements are defined as having a(n):
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income elasticity of demand greater than 1.
zero cross elasticity of demand.
negative cross price elasticity of demand.
positive cross price elasticity of demand.
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income elasticity of demand greater than 1.
zero cross elasticity of demand.
negative cross price elasticity of demand.
positive cross price elasticity of demand.
answer
...
question
Assume that a firm is selling its product at the price that corresponds to the midpoint of its demand curve. If the firm decreases the price of its product, what will happen to total revenue?
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It will fall to zero.
It will stay the same.
It will increase.
It will decrease.
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It will fall to zero.
It will stay the same.
It will increase.
It will decrease.
answer
...
question
The long run is defined as a period when _______ and the number of firms in an industry can change.
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plant capacity
consumer tastes
profits
revenue
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plant capacity
consumer tastes
profits
revenue
answer
...
question
What type of supply curves always cross the quantity axis?
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inelastic supply curves
elastic supply curves
long-run supply curves
unitary elastic supply curves
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inelastic supply curves
elastic supply curves
long-run supply curves
unitary elastic supply curves
answer
...
question
Which product is likely to have a lower elasticity of demand?
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a house
a car
a pack of gum
a refrigerator
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a house
a car
a pack of gum
a refrigerator
answer
...
question
Short-run supply curves are _____ long-run supply curves.
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exactly the same in terms of elasticity as
more elastic than
more inelastic than
about the same in terms of elasticity as
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exactly the same in terms of elasticity as
more elastic than
more inelastic than
about the same in terms of elasticity as
answer
...
question
If a 30% decrease in the price of hotdogs leads to a 30% increase in quantity demanded, price elasticity of demand for hot dogs is considered:
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perfectly inelastic.
elastic.
unit elastic.
inelastic.
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perfectly inelastic.
elastic.
unit elastic.
inelastic.
answer
...
question
After Lindsay received a 30% raise at work, she bought 15% less canned cream corn. For Lindsay, which type of good is canned creamed corn?
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luxury good
normal good
inferior good
income-superior good
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luxury good
normal good
inferior good
income-superior good
answer
inferior good
The quantity demanded of an inferior good falls when consumer income increases.
The quantity demanded of an inferior good falls when consumer income increases.
question
Stores often advertise "one day only" sales. This technique uses the time period to make demand more:
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upward sloping.
perfectly elastic.
inelastic.
elastic.
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upward sloping.
perfectly elastic.
inelastic.
elastic.
answer
...
question
When the price of product A rises, the quantity of product B that is purchased increases. Products A and B are:
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not related.
inferior goods.
substitutes.
complements.
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not related.
inferior goods.
substitutes.
complements.
answer
...
question
Charming Accessories, Inc., sold a total of 32 headbands. If the headbands were sold at a price of $2 each, what is the total revenue?
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$16
$34
$64
$30
Please choose the correct answer from the following choices, and then select the submit answer button.
$16
$34
$64
$30
answer
...
question
A firm increases its price for a good and total revenues increase. From this, we can conclude that its demand:
is price elastic.
is unitary elastic.
has zero elasticity.
is price inelastic.
is price elastic.
is unitary elastic.
has zero elasticity.
is price inelastic.
answer
...
question
The reason economists use the midpoint method to compute elasticity is that:
economists do not know how to use calculus.
it is the only way to avoid always using negative numbers.
economists want the elasticity to be the same whether the price is increasing or decreasing.
it is the only viable way to measure total revenue.
economists do not know how to use calculus.
it is the only way to avoid always using negative numbers.
economists want the elasticity to be the same whether the price is increasing or decreasing.
it is the only viable way to measure total revenue.
answer
...
question
2. If the price elasticity of demand is 10, then for every 1% increase in price, there is a:
10% decrease in quantity demanded.
1% increase in quantity demanded.
1% decrease in quantity demanded.
10% increase in quantity demanded.
10% decrease in quantity demanded.
1% increase in quantity demanded.
1% decrease in quantity demanded.
10% increase in quantity demanded.
answer
10% decrease in quantity demanded.
question
Using the midpoint method, what is the price elasticity of demand for a product whose price increased from $2 to $4 and whose quantity demanded decreased from 10 units to 5 units?
0.4
0.5
1.0
-0.5
0.4
0.5
1.0
-0.5
answer
...
question
Assume a good is considered elastic. If the price of the good decreases, then total revenue:
is negative.
remains constant.
increases.
decreases.
is negative.
remains constant.
increases.
decreases.
answer
...
question
If the price rises from $2 to $3 and the quantity demanded falls from 500 units to 300 units, the price elasticity of demand using the midpoint method is:
0.08
1.50
0.80
1.25
0.08
1.50
0.80
1.25
answer
...
question
Which of the following is a possible measurement of inelastic demand?
2.3
1.5
1.0
0.7
2.3
1.5
1.0
0.7
answer
...
question
In general, the flatter the supply curve is, the:
fewer the adjustments to price changes that firms can make.
more elastic is supply.
shorter the period.
less elastic is supply.
fewer the adjustments to price changes that firms can make.
more elastic is supply.
shorter the period.
less elastic is supply.
answer
...
question
Suppose the price elasticity of demand is 3.0 and the price elasticity of supply is 0.08. The burden of an excise tax:
falls primarily on producers.
falls primarily on consumers.
falls entirely on producers.
is shared evenly by consumers and producers.
falls primarily on producers.
falls primarily on consumers.
falls entirely on producers.
is shared evenly by consumers and producers.
answer
...
question
In general, the flatter the supply curve is, the:
fewer the adjustments to price changes that firms can make.
more elastic is supply.
shorter the period.
less elastic is supply.
fewer the adjustments to price changes that firms can make.
more elastic is supply.
shorter the period.
less elastic is supply.
answer
...
question
If the income elasticity of demand for tea is 0.50, tea is a:
luxury good.
normal good.
substitute for coffee.
complement of coffee.
luxury good.
normal good.
substitute for coffee.
complement of coffee.
answer
...
question
If the percentage change in quantity demanded is equal to the percentage change in price, then demand is:
inelastic.
a perfect substitute.
unitary elastic.
elastic
inelastic.
a perfect substitute.
unitary elastic.
elastic
answer
...
question
If demand is inelastic, the tax burden falls primarily on the _____ and deadweight loss is _____.
seller; large
buyer; small
seller; small
buyer; large
seller; large
buyer; small
seller; small
buyer; large
answer
buyer; small
question
The _____ is a period of time long enough for firms to alter their plant capacities and for the number of firms in the industry to change.
elasticity of time
long run
market period
short run
elasticity of time
long run
market period
short run
answer
...
question
Suppose your income falls from $35,000 to $33,000 and that your quantity demanded of a good increases from 40 units to 55 units. The good is said to be a(n):
inferior good.
luxury good.
normal good.
substitute good.
inferior good.
luxury good.
normal good.
substitute good.
answer
...
question
A grocery store announced a 50% decrease in the price of local honey. Sales increased by 200%. Based on the information, the price elasticity of honey is:
0.25.
0.4.
4.
0.04.
0.25.
0.4.
4.
0.04.
answer
...
question
A vertical demand curve represents demand that is:
inelastic.
elastic.
perfectly inelastic.
unitary elastic.
inelastic.
elastic.
perfectly inelastic.
unitary elastic.
answer
...
question
A tax in which the percentage of income tax rises as income falls is known as a:
lump-sum tax.
flat tax.
progressive tax.
regressive tax.
lump-sum tax.
flat tax.
progressive tax.
regressive tax.
answer
...
question
Knowing a product's price elasticity allows economists to:
predict the amount by which quantity supplied will change in response to a change in price.
predict the amount by which quantity demanded will change in response to a change in price.
respond quickly to tariff changes.
predict how changes in consumers' income will affect sales.
predict the amount by which quantity supplied will change in response to a change in price.
predict the amount by which quantity demanded will change in response to a change in price.
respond quickly to tariff changes.
predict how changes in consumers' income will affect sales.
answer
predict the amount by which quantity demanded will change in response to a change in price.
question
Proposals to increase an excise tax usually focus on:
products with price elastic demand.
necessities.
products with price inelastic demand.
products with many substitutes.
products with price elastic demand.
necessities.
products with price inelastic demand.
products with many substitutes.
answer
...
question
Walmart is thinking about offering a 25% discount on a brand of shoes. If the elasticity of demand is two, then the discount would increase sales by:
200%.
2%.
50%.
25%.
200%.
2%.
50%.
25%.
answer
...
question
What are all of the attainable combinations of goods given a consumer's budget line?
those on or to the left of the budget line
those to the left of the budget line
those to the right of the budget line
those on or to the left of the budget line
those to the left of the budget line
those to the right of the budget line
answer
those on or to the left of the budget line
The points on and to the left of the budget line make up all attainable combinations of goods.
The points on and to the left of the budget line make up all attainable combinations of goods.
question
The utility-maximizing rule states that utility is maximized when the _____ per dollar is equal for all products.
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marginal utility
diminishing marginal utility
utility
total utility
Please choose the correct answer from the following choices, and then select the submit answer button.
marginal utility
diminishing marginal utility
utility
total utility
answer
marginal utility
The utility-maximizing rule states that utility is maximized when the marginal utility per dollar is equal for all products.
The utility-maximizing rule states that utility is maximized when the marginal utility per dollar is equal for all products.
question
A "Buy One Get One Free" sale is an example of:
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altruism.
sunk cost fallacy.
framing bias.
price.
Please choose the correct answer from the following choices, and then select the submit answer button.
altruism.
sunk cost fallacy.
framing bias.
price.
answer
framing bias.
framing bias is one of the five factors.
framing bias is one of the five factors.
question
A budget line graphically illustrates:
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the possible combinations of three goods that can be purchased with a given income, given the prices of all of the goods.
the amount of one good that can be purchased with a given income, given the price of that good.
the possible combinations of three or more goods that can be purchased with a given income, given the prices of all goods.
the maximum possible combinations of two goods that can be purchased with a given income, given the prices of both goods.
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the possible combinations of three goods that can be purchased with a given income, given the prices of all of the goods.
the amount of one good that can be purchased with a given income, given the price of that good.
the possible combinations of three or more goods that can be purchased with a given income, given the prices of all goods.
the maximum possible combinations of two goods that can be purchased with a given income, given the prices of both goods.
answer
the maximum possible combinations of two goods that can be purchased with a given income, given the prices of both goods.
question
Stopping to help a stranger change a tire on the side of the road without accepting payment is an example of:
Please choose the correct answer from the following choices, and then select the submit answer button.
altruism.
consumer surplus.
sunk cost fallacy.
overvaluing the present relative to the future.
Please choose the correct answer from the following choices, and then select the submit answer button.
altruism.
consumer surplus.
sunk cost fallacy.
overvaluing the present relative to the future.
answer
altruism.
Altruism includes actions undertaken solely out of goodwill or generosity.
Altruism includes actions undertaken solely out of goodwill or generosity.
question
A consumer is consuming at a point on her budget line. Her income is $40 a week, and she purchases hamburgers and grilled cheese sandwiches. Both goods cost $1 each and she consumes 10 hamburgers. How many grilled cheese sandwiches does she consume?
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20
40
30
35
Please choose the correct answer from the following choices, and then select the submit answer button.
20
40
30
35
answer
30
(Price of hamburgers × Quantity of hamburgers) + (Price of sandwiches × Quantity of sandwiches) = Income. $40 − ($1 × 10) = $30; $30/$1 = 30 grilled cheese sandwiches
(Price of hamburgers × Quantity of hamburgers) + (Price of sandwiches × Quantity of sandwiches) = Income. $40 − ($1 × 10) = $30; $30/$1 = 30 grilled cheese sandwiches
question
Utility is a hypothetical measure of consumer:
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satisfaction.
wealth.
time.
income.
Please choose the correct answer from the following choices, and then select the submit answer button.
satisfaction.
wealth.
time.
income.
answer
satisfaction.
Utility is a hypothetical measure of consumer satisfaction.
Utility is a hypothetical measure of consumer satisfaction.
question
Dan purchases nonrefundable tickets to the latest animated movie for his kids. His kids want to go to the park instead. He says they can't go because he has already spent $40 on movie tickets. This is an example of:
Please choose the correct answer from the following choices, and then select the submit answer button.
price.
overvaluing the present relative to the future.
framing bias.
sunk cost fallacy.
Please choose the correct answer from the following choices, and then select the submit answer button.
price.
overvaluing the present relative to the future.
framing bias.
sunk cost fallacy.
answer
sunk cost fallacy.
Sunk cost fallacy occurs when people make decisions based on how much was already spent rather than how the decision might affect their current well-being.
Sunk cost fallacy occurs when people make decisions based on how much was already spent rather than how the decision might affect their current well-being.
question
Suppose that a consumer has $10 to spend. A candy bar costs $2 and a bag of peanuts costs $1.50. Which of the following combinations lies ON the budget line?
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three candy bars and one bag of peanuts
one candy bar and four bags of peanuts
two candy bars and four bags of peanuts
two candy bars and one bag of peanuts
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three candy bars and one bag of peanuts
one candy bar and four bags of peanuts
two candy bars and four bags of peanuts
two candy bars and one bag of peanuts
answer
two candy bars and four bags of peanuts
Two candy bars and five bags of peanuts would cost (2 × $2) + (4 × $1.50) = $10. This combination lies on the budget line.
Two candy bars and five bags of peanuts would cost (2 × $2) + (4 × $1.50) = $10. This combination lies on the budget line.
question
Which of the following is a flaw of marginal utility theory?
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It does not help to explain consumer behavior.
It assumes that consumers can accurately measure the utility of consumption.
It is not effective at predicting consumer behavior.
It does not model actual consumer behavior.
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It does not help to explain consumer behavior.
It assumes that consumers can accurately measure the utility of consumption.
It is not effective at predicting consumer behavior.
It does not model actual consumer behavior.
answer
It assumes that consumers can accurately measure the utility of consumption.
The major flaw of marginal utility theory is its assumption that consumers can accurately measure the utility of consumption.
The major flaw of marginal utility theory is its assumption that consumers can accurately measure the utility of consumption.
question
Madison decides to buy a house now rather than wait six months, when interest rates are expected to have fallen. This is an example of:
Please choose the correct answer from the following choices, and then select the submit answer button.
overvaluing the present relative to the future.
sunk cost fallacy.
framing bias.
altruism.
Please choose the correct answer from the following choices, and then select the submit answer button.
overvaluing the present relative to the future.
sunk cost fallacy.
framing bias.
altruism.
answer
...
question
Megan decides to quit one of her part-time jobs. Her income decreases by $200 each week. What happens to Megan's budget line?
Please choose the correct answer from the following choices, and then select the submit answer button.
It pivots outward.
It shifts inward.
It shifts outward.
It stays the same.
Please choose the correct answer from the following choices, and then select the submit answer button.
It pivots outward.
It shifts inward.
It shifts outward.
It stays the same.
answer
...
question
Megan receives a promotion at work. Her hourly wages increase from $12.50 per hour to $15 per hour. What happens to Megan's budget line after her promotion?
Please choose the correct answer from the following choices, and then select the submit answer button.
It stays the same.
It pivots outward.
It shifts inward.
It shifts outward.
Please choose the correct answer from the following choices, and then select the submit answer button.
It stays the same.
It pivots outward.
It shifts inward.
It shifts outward.
answer
shifts outward
question
If the price of one good rises, marginal utility analysis concludes that:
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consumers will maximize their utility by purchasing more of the product.
consumers will maximize their utility by purchasing less of the product.
consumers will minimize their utility by purchasing more of the product.
consumers will minimize their utility by purchasing less of the product.
Please choose the correct answer from the following choices, and then select the submit answer button.
consumers will maximize their utility by purchasing more of the product.
consumers will maximize their utility by purchasing less of the product.
consumers will minimize their utility by purchasing more of the product.
consumers will minimize their utility by purchasing less of the product.
answer
...
question
ABC Corp. has spent nearly $10 million developing a new adhesive that has proved ineffective in company trials. The product line manager tries to convince the board of directors that the project cannot be abandoned because the company has already spent $10 million on its development. This is an example of:
Please choose the correct answer from the following choices, and then select the submit answer button.
overvaluing the present relative to the future.
sunk cost fallacy.
framing bias.
altruism.
Please choose the correct answer from the following choices, and then select the submit answer button.
overvaluing the present relative to the future.
sunk cost fallacy.
framing bias.
altruism.
answer
sunk cost fallacy.
Sunk cost fallacy occurs when people make decisions based on how much was already spent rather than how the decision might affect their well-being.
Sunk cost fallacy occurs when people make decisions based on how much was already spent rather than how the decision might affect their well-being.
question
Mark makes a nonrefundable deposit on a cruise. He realizes he has less paid time off than he thought and considers canceling the trip. He decides to go on the cruise because he has already paid the $400 deposit. This is an example of:
Please choose the correct answer from the following choices, and then select the submit answer button.
framing bias.
overvaluing the present relative to the future.
sunk cost fallacy.
altruism.
Please choose the correct answer from the following choices, and then select the submit answer button.
framing bias.
overvaluing the present relative to the future.
sunk cost fallacy.
altruism.
answer
sunk cost fallacy.
Sunk cost fallacy occurs when people make decisions based on how much was already spent rather than how the decision might affect their well-being.
Sunk cost fallacy occurs when people make decisions based on how much was already spent rather than how the decision might affect their well-being.
question
Constance decides she really wants to buy a couch today rather than save her money and buy one next year. She decides to finance the couch at 27% interest. This is an example of:
Please choose the correct answer from the following choices, and then select the submit answer button.
overvaluing the present relative to the future.
sunk cost fallacy.
framing bias.
altruism.
Please choose the correct answer from the following choices, and then select the submit answer button.
overvaluing the present relative to the future.
sunk cost fallacy.
framing bias.
altruism.
answer
over valuing
question
What is a disadvantage of a sole proprietorship?
Please choose the correct answer from the following choices, and then select the submit answer button.
personal assets subject to unlimited liability
difficulty of establishing and managing
ease of raising capital
relatively little paperwork
Please choose the correct answer from the following choices, and then select the submit answer button.
personal assets subject to unlimited liability
difficulty of establishing and managing
ease of raising capital
relatively little paperwork
answer
personal assets subject to unlimited liability
In a sole proprietorship, the owner's personal assets are subject to unlimited liability.
In a sole proprietorship, the owner's personal assets are subject to unlimited liability.
question
Increasing marginal returns occur when:
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an additional worker adds to total output but at a diminishing rate.
a new worker adds more to total output than the previous worker, so that both average and marginal products are rising.
a new worker adds nothing to total output.
a new worker adds less to total output than the previous worker.
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an additional worker adds to total output but at a diminishing rate.
a new worker adds more to total output than the previous worker, so that both average and marginal products are rising.
a new worker adds nothing to total output.
a new worker adds less to total output than the previous worker.
answer
a new worker adds more to total output than the previous worker, so that both average and marginal products are rising.
Increasing marginal returns occur when a new worker adds more to total output than the previous new worker, so that both average and marginal products are rising.
Increasing marginal returns occur when a new worker adds more to total output than the previous new worker, so that both average and marginal products are rising.
question
economies of scale.
When a firm has economies of scale, its long-run average total costs decrease with increased output. Economies of scale can result from specialization of labor and management, better use of capital, and increased possibilities for making several products that utilize complementary production techniques.
When a firm has economies of scale, its long-run average total costs decrease with increased output. Economies of scale can result from specialization of labor and management, better use of capital, and increased possibilities for making several products that utilize complementary production techniques.
answer
t
question
Which of the following is an implicit cost?
the wages paid to the part-time employees who work in the maintenance department
lease payments
interest that could have been earned with start-up capital
the wages paid to the part-time employees who work in the maintenance department
lease payments
interest that could have been earned with start-up capital
answer
interest that could have been earned with start-up capital
Implicit costs are the opportunity costs of using resources that belong to the firm.
Implicit costs are the opportunity costs of using resources that belong to the firm.
question
`Total production is 2 units when the first worker is hired. Total production is 5 units when the second worker is hired and rises to 10 units when the third worker is hired. The company has:
Please choose the correct answer from the following choices, and then select the submit answer button.
constant marginal returns.
increasing marginal returns.
diminishing marginal returns.
decreasing marginal returns.
Please choose the correct answer from the following choices, and then select the submit answer button.
constant marginal returns.
increasing marginal returns.
diminishing marginal returns.
decreasing marginal returns.
answer
increasing marginal returns.
Increasing marginal returns occur when a new worker adds more to total output than the previous new worker, so that both average and marginal products are rising.
Increasing marginal returns occur when a new worker adds more to total output than the previous new worker, so that both average and marginal products are rising.
question
Which of the following is a fixed cost?
Please choose the correct answer from the following choices, and then select the submit answer button.
supermarket cashiers' wages
gasoline for a delivery service
liability insurance for a lawn care company
raw material purchases for a construction company
Please choose the correct answer from the following choices, and then select the submit answer button.
supermarket cashiers' wages
gasoline for a delivery service
liability insurance for a lawn care company
raw material purchases for a construction company
answer
liability insurance for a lawn care company
Fixed costs do not change as a firm's output expands or contracts; such costs are often called overhead. These payments include items such as lease payments, administrative expenses, property taxes, and insurance.
Fixed costs do not change as a firm's output expands or contracts; such costs are often called overhead. These payments include items such as lease payments, administrative expenses, property taxes, and insurance.
question
A firm is an economic institution that transforms _____ into outputs for consumers.
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explicit costs
inputs
profit
revenue
Please choose the correct answer from the following choices, and then select the submit answer button.
explicit costs
inputs
profit
revenue
answer
inputs
A firm is an economic institution that transforms inputs, or factors of production, into outputs for consumers.
A firm is an economic institution that transforms inputs, or factors of production, into outputs for consumers.
question
Ted's Lawn Care hired a new employee, then saw diminishing marginal returns. In this case, total output _____ at a(n) _____ rate.
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decreases; diminishing
increases; diminishing
increases; increasing
decreases; increasing
Please choose the correct answer from the following choices, and then select the submit answer button.
decreases; diminishing
increases; diminishing
increases; increasing
decreases; increasing
answer
increases; diminishing
Diminishing marginal returns occur when an additional worker adds to total output but at a diminishing rate.
Diminishing marginal returns occur when an additional worker adds to total output but at a diminishing rate.
question
Which of the following is an implicit cost?
Please choose the correct answer from the following choices, and then select the submit answer button.
interest that could have been earned on the money the owner used to buy the equipment for the business
taxes
the insurance premium on the office equipment
wages paid to the part-time employees who work in the maintenance department
Please choose the correct answer from the following choices, and then select the submit answer button.
interest that could have been earned on the money the owner used to buy the equipment for the business
taxes
the insurance premium on the office equipment
wages paid to the part-time employees who work in the maintenance department
answer
interest that could have been earned on the money the owner used to buy the equipment for the business
Implicit costs are the opportunity costs of using resources that belong to the firm.
Implicit costs are the opportunity costs of using resources that belong to the firm.
question
The third worker adds 5 units to total production. When the fourth worker is hired, she adds 1 unit to total production. The company has:
Please choose the correct answer from the following choices, and then select the submit answer button.
decreasing marginal returns.
diminishing marginal returns.
constant marginal returns.
increasing marginal returns.
Please choose the correct answer from the following choices, and then select the submit answer button.
decreasing marginal returns.
diminishing marginal returns.
constant marginal returns.
increasing marginal returns.
answer
diminishing marginal returns.
Diminishing marginal returns occur when an additional worker adds to total output but at a diminishing rate.
Diminishing marginal returns occur when an additional worker adds to total output but at a diminishing rate.
question
When a firm has _____ its long-run average total costs increase with increased output.
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constant returns to scale
diseconomies of scale
economies of scope
economies of scale
Please choose the correct answer from the following choices, and then select the submit answer button.
constant returns to scale
diseconomies of scale
economies of scope
economies of scale
answer
diseconomies of scale
When a firm has diseconomies of scale, its long-run average total costs increase with increased output. Diseconomies of scale can result from a firm becoming so big that management cannot efficiently control its operations.
When a firm has diseconomies of scale, its long-run average total costs increase with increased output. Diseconomies of scale can result from a firm becoming so big that management cannot efficiently control its operations.
question
Which of the following is considered an explicit cost?
Please choose the correct answer from the following choices, and then select the submit answer button.
payment of the electric bill
opportunity cost of the firm's capital
depreciation of a work truck
depletion of a prepaid service contract
Please choose the correct answer from the following choices, and then select the submit answer button.
payment of the electric bill
opportunity cost of the firm's capital
depreciation of a work truck
depletion of a prepaid service contract
answer
payment of the electric bill
Explicit costs are paid directly to another economic entity; they include wages, lease payments, taxes, and utilities.
Explicit costs are paid directly to another economic entity; they include wages, lease payments, taxes, and utilities.
question
A company has diminishing marginal returns. If the third worker adds 7 units to total production, how much does the fourth worker add to total production?
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8 units
between 1 and 6 units
no units
between 7 and 15 units
Please choose the correct answer from the following choices, and then select the submit answer button.
8 units
between 1 and 6 units
no units
between 7 and 15 units
answer
between 1 and 6 units
Diminishing marginal returns occur when an additional worker adds to total output but at a diminishing rate.
Diminishing marginal returns occur when an additional worker adds to total output but at a diminishing rate.
question
What illustrates the lowest unit cost at which any particular output can be produced in the long run?
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long-run average fixed cost
short-run average total cost
short-run average fixed cost
long-run average total cost
Please choose the correct answer from the following choices, and then select the submit answer button.
long-run average fixed cost
short-run average total cost
short-run average fixed cost
long-run average total cost
answer
long-run average total cost
The long-run average total cost is the lowest unit cost at which any particular output can be produced in the long run, when a firm is able to adjust all of the factors of production.
The long-run average total cost is the lowest unit cost at which any particular output can be produced in the long run, when a firm is able to adjust all of the factors of production.
question
_____ are expenses paid directly to some other economic entity.
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Sunk costs
Explicit costs
Economic costs
Implicit costs
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Sunk costs
Explicit costs
Economic costs
Implicit costs
answer
Explicit costs
Explicit costs are paid directly to some other economic entity.
Explicit costs are paid directly to some other economic entity.
question
Suppose Ted's Lawn Care hired a new employee. If the company saw total output decrease, there were _____ marginal returns.
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It is not possible that hiring another worker would cause a reduction in output.
negative
diminishing
increasing
Please choose the correct answer from the following choices, and then select the submit answer button.
It is not possible that hiring another worker would cause a reduction in output.
negative
diminishing
increasing
answer
negative
Negative marginal returns occur when adding a worker actually leads to less total output than previous new worker.
Negative marginal returns occur when adding a worker actually leads to less total output than previous new worker.
question
Firms that produce a number of products often find it cheaper to produce another product whose production processes are interdependent. This is called:
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constant returns to scale.
economies of scope.
diseconomies of scale.
economies of scale.
Please choose the correct answer from the following choices, and then select the submit answer button.
constant returns to scale.
economies of scope.
diseconomies of scale.
economies of scale.
answer
economies of scope.
When firms produce a number of products, it is often cheaper for them to produce another product whose production processes are interdependent. These economies are called economies of scope.
When firms produce a number of products, it is often cheaper for them to produce another product whose production processes are interdependent. These economies are called economies of scope.
question
_____ refer to all of the opportunity costs of using resources that belong to the firm.
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Economic costs
Explicit costs
Implicit costs
Sunk costs
Please choose the correct answer from the following choices, and then select the submit answer button.
Economic costs
Explicit costs
Implicit costs
Sunk costs
answer
Implicit costs
Implicit costs are all of the opportunity costs of using resources that belong to the firm.
Implicit costs are all of the opportunity costs of using resources that belong to the firm.
question
Willco Manufacturing hired a new employee, after which it saw increasing marginal returns. In this case, average product _____ and marginal product _____.
Please choose the correct answer from the following choices, and then select the submit answer button.
decreases; increases
increases; decreases
decreases; decreases
increases; increases
Please choose the correct answer from the following choices, and then select the submit answer button.
decreases; increases
increases; decreases
decreases; decreases
increases; increases
answer
increases; increases
Increasing marginal returns occur when a new worker adds more to total output than the previous new worker, so that both average and marginal products are rising.
Increasing marginal returns occur when a new worker adds more to total output than the previous new worker, so that both average and marginal products are rising.
question
Which of the following is a variable cost?
Please choose the correct answer from the following choices, and then select the submit answer button.
lease payments for a furniture show room. maker
liability insurance for a convenience store
electricity costs for a theater
membership dues paid to a professional organization
Please choose the correct answer from the following choices, and then select the submit answer button.
lease payments for a furniture show room. maker
liability insurance for a convenience store
electricity costs for a theater
membership dues paid to a professional organization
answer
electricity costs for a theater
Variable costs, including expenses such as labor and material costs, fluctuate with output.
Variable costs, including expenses such as labor and material costs, fluctuate with output.
question
Typically, businesses that require large amounts of capital need more time to make _____ adjustments.
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fiscal period
market period
short-run
long-run
Please choose the correct answer from the following choices, and then select the submit answer button.
fiscal period
market period
short-run
long-run
answer
long-run
Typically, businesses that require large amounts of capital need more time to make long-run adjustments.
Typically, businesses that require large amounts of capital need more time to make long-run adjustments.
question
When a firm has _____ its long-run average total costs decrease with increased output.
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economies of scope
constant returns to scale
diseconomies of scale
economies of scale
Please choose the correct answer from the following choices, and then select the submit answer button.
economies of scope
constant returns to scale
diseconomies of scale
economies of scale
answer
economies of scale
When a firm has economies of scale, its long-run average total costs decrease with increased output. Economies of scale can result from specialization of labor and management, better use of capital, and increased possibilities for making several products that utilize complementary production techniques.
When a firm has economies of scale, its long-run average total costs decrease with increased output. Economies of scale can result from specialization of labor and management, better use of capital, and increased possibilities for making several products that utilize complementary production techniques.
question
A firm that is generating zero economic profit after implicit costs are factored in is earning:
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implicit profits.
explicit profits.
economic profits.
normal profits.
Please choose the correct answer from the following choices, and then select the submit answer button.
implicit profits.
explicit profits.
economic profits.
normal profits.
answer
normal profits.
A firm that is generating zero economic profit after implicit costs are factored in is earning normal profits.
A firm that is generating zero economic profit after implicit costs are factored in is earning normal profits.
question
Which of the following is an implicit cost?
Please choose the correct answer from the following choices, and then select the submit answer button.
utility bills
taxes
the salary and benefits the owner could have earned in her former profession
the insurance premium on the office equipment
Please choose the correct answer from the following choices, and then select the submit answer button.
utility bills
taxes
the salary and benefits the owner could have earned in her former profession
the insurance premium on the office equipment
answer
...
question
When a firm has _____, its long-run average total costs stay the same with increased output.
Please choose the correct answer from the following choices, and then select the submit answer button.
economies of scope
diseconomies of scale
economies of scale
constant returns to scale
Please choose the correct answer from the following choices, and then select the submit answer button.
economies of scope
diseconomies of scale
economies of scale
constant returns to scale
answer
...
question
The _____ is a period sufficient for firms to adjust all factors of production.
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market period
short run
long run
fiscal period
Please choose the correct answer from the following choices, and then select the submit answer button.
market period
short run
long run
fiscal period
answer
long run
The long run is a period sufficient for firms to adjust all factors of production.
The long run is a period sufficient for firms to adjust all factors of production.
question
Which of the following is a variable cost?
Please choose the correct answer from the following choices, and then select the submit answer button.
employee's wages for a delivery company
liability insurance for a construction company
property taxes for a retail store in a strip mall
membership dues for a professional organization
Please choose the correct answer from the following choices, and then select the submit answer button.
employee's wages for a delivery company
liability insurance for a construction company
property taxes for a retail store in a strip mall
membership dues for a professional organization
answer
employee's wages for a delivery company
Variable costs, including expenses such as labor and material costs, fluctuate with output.
Variable costs, including expenses such as labor and material costs, fluctuate with output.
question
The _____ is a period over which at least one factor of production is fixed.
Please choose the correct answer from the following choices, and then select the submit answer button.
short run
market period
fiscal period
long run
Please choose the correct answer from the following choices, and then select the submit answer button.
short run
market period
fiscal period
long run
answer
short run
The short run is a period over which at least one factor of production is fixed.
The short run is a period over which at least one factor of production is fixed.
question
The ninth worker adds 15 units to total production. When the tenth worker is hired, he adds 12 units to total production. The company has:
Please choose the correct answer from the following choices, and then select the submit answer button.
increasing marginal returns.
diminishing marginal returns.
decreasing marginal returns.
constant marginal returns.
Please choose the correct answer from the following choices, and then select the submit answer button.
increasing marginal returns.
diminishing marginal returns.
decreasing marginal returns.
constant marginal returns.
answer
diminishing marginal returns.
Diminishing marginal returns occur when an additional worker adds to total output but at a diminishing rate.
Diminishing marginal returns occur when an additional worker adds to total output but at a diminishing rate.
question
Willco Manufacturing has made the decision to increase output. What will happen to the average fixed cost as the output increases?
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It will increase.
It will decrease to a certain point and then it will increase.
It will decrease.
It will stay the same.
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It will increase.
It will decrease to a certain point and then it will increase.
It will decrease.
It will stay the same.
answer
It will decrease.
Average fixed costs decrease continuously as more output is produced.
Average fixed costs decrease continuously as more output is produced.
question
Ted's Lawn Care has total fixed costs of $300,000, total variable costs of $200,000, and an output of 50,000 units. What is Ted's Lawn Care's average total cost?
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$10
$4
$5
$11
Please choose the correct answer from the following choices, and then select the submit answer button.
$10
$4
$5
$11
answer
Average total cost is determined by dividing the total costs by the output. Total cost equals fixed costs plus variable costs. The equation is $500,000/50,000, or $10.
question
Marginal product is:
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calculated by dividing the total output by the number of workers.
fixed cost plus variable cost.
the amount of product being produced.
the change in output that results from a change in labor.
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calculated by dividing the total output by the number of workers.
fixed cost plus variable cost.
the amount of product being produced.
the change in output that results from a change in labor.
answer
the change in output that results from a change in labor.
Marginal product is the change in output that results from a change in labor.
Marginal product is the change in output that results from a change in labor.
question
As output increases, _____ cost will decrease to a certain point and then increase.
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average fixed
average total
total
fixed
Please choose the correct answer from the following choices, and then select the submit answer button.
average fixed
average total
total
fixed
answer
average total
Average total costs decrease to a certain point and then begin to increase as more output is produced.
Challenge this Question
Average total costs decrease to a certain point and then begin to increase as more output is produced.
Challenge this Question
question
What is a disadvantage of a sole proprietorship?
answer
limited ability to raise capital
Single owners are limited in their ability to raise capital
Single owners are limited in their ability to raise capital
question
Which of the following is a fixed cost?
Please choose the correct answer from the following choices, and then select the submit answer button.
lease payments for a supermarket
inventory purchases for a toy store
wages for hourly employees at a manufacturing plant
raw material purchases for a construction company
Please choose the correct answer from the following choices, and then select the submit answer button.
lease payments for a supermarket
inventory purchases for a toy store
wages for hourly employees at a manufacturing plant
raw material purchases for a construction company
answer
lease payments for a supermarket
Fixed costs do not change as a firm's output expands or contracts; these costs are often called overhead. These payments include items such as lease payments, administrative expenses, property taxes, and insurance.
Fixed costs do not change as a firm's output expands or contracts; these costs are often called overhead. These payments include items such as lease payments, administrative expenses, property taxes, and insurance.
question
Which of the following is an explicit cost?
Please choose the correct answer from the following choices, and then select the submit answer button.
interest that could have been earned with start-up capital
wages the owner could have made at his or her old job
wages paid to employees
depreciation of a work truck
Please choose the correct answer from the following choices, and then select the submit answer button.
interest that could have been earned with start-up capital
wages the owner could have made at his or her old job
wages paid to employees
depreciation of a work truck
answer
wages paid to employees
Explicit costs are paid directly to another economic entity.
Explicit costs are paid directly to another economic entity.
question
Willco Manufacturing undersells its competitors because its higher production levels have decreased its long-run average total costs. This is because of:
Please choose the correct answer from the following choices, and then select the submit answer button.
economies of scope.
constant returns to scale.
economies of scale.
diseconomies of scale.
Please choose the correct answer from the following choices, and then select the submit answer button.
economies of scope.
constant returns to scale.
economies of scale.
diseconomies of scale.
answer
economies of scale.
Economies of scale occur as a firm's output increases and specialization and other efficiencies cause long-run average total costs to decrease.
Economies of scale occur as a firm's output increases and specialization and other efficiencies cause long-run average total costs to decrease.
question
Ted's Lawn Care has total variable costs of $200,000 and an output of 50,000 units. What is Ted's Lawn Care's average variable cost?
Please choose the correct answer from the following choices, and then select the submit answer button.
$1
$2
$3
$4
Please choose the correct answer from the following choices, and then select the submit answer button.
$1
$2
$3
$4
answer
$4
Average variable cost is determined by dividing the total variable costs by the output. The solution is $200,000/50,000 = $4.
Average variable cost is determined by dividing the total variable costs by the output. The solution is $200,000/50,000 = $4.
question
A firm that operates in a market with many buyers and sellers is NOT operating under which market structure?
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pure competition
monopoly
perfect competition
monopolistic competition
Please choose the correct answer from the following choices, and then select the submit answer button.
pure competition
monopoly
perfect competition
monopolistic competition
answer
monopoly
Monopolies are characterized by one firm.
Monopolies are characterized by one firm.
question
Marginal cost is calculated as:
Please choose the correct answer from the following choices, and then select the submit answer button.
ΔTR/ΔQ.
P × Q.
ΔTC/ΔQ.
TR/Q.
Please choose the correct answer from the following choices, and then select the submit answer button.
ΔTR/ΔQ.
P × Q.
ΔTC/ΔQ.
TR/Q.
answer
ΔTC/ΔQ.
Marginal cost is the change in total cost when one more unit of output is produced.
Marginal cost is the change in total cost when one more unit of output is produced.
question
What is the shape of the long-run supply curve in a constant cost industry?
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downward sloping
upward sloping
vertical
horizontal
Please choose the correct answer from the following choices, and then select the submit answer button.
downward sloping
upward sloping
vertical
horizontal
answer
horizontal
The long-run supply curve in a constant cost industry is represented by a horizontal line.
The long-run supply curve in a constant cost industry is represented by a horizontal line.
question
In the market for many construction products (e.g., wallboard, lumber) production by all firms is based on government standards. This would be an example of:
Please choose the correct answer from the following choices, and then select the submit answer button.
monopoly.
barriers to entry.
price takers.
homogeneous products.
Please choose the correct answer from the following choices, and then select the submit answer button.
monopoly.
barriers to entry.
price takers.
homogeneous products.
answer
homogeneous products.
This is an example of homogeneous, or standardized, products.
This is an example of homogeneous, or standardized, products.
question
When price is below the minimum point of the _____ curve, but above the minimum point of the average variable cost curve, the firm continues to operate, but it suffers an economic loss.
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price
average fixed cost
marginal revenue
average total cost
Please choose the correct answer from the following choices, and then select the submit answer button.
price
average fixed cost
marginal revenue
average total cost
answer
average total cost
Average total cost includes average variable cost and average fixed cost. When price is below the minimum point of the average total cost curve, but above the minimum point of the average variable cost curve, the firm continues to operate, but it has an economic loss.
Average total cost includes average variable cost and average fixed cost. When price is below the minimum point of the average total cost curve, but above the minimum point of the average variable cost curve, the firm continues to operate, but it has an economic loss.
question
In the long run, which factor of production can a firm NOT adjust?
Please choose the correct answer from the following choices, and then select the submit answer button.
labor
capital
energy
All factors of production can be adjusted in the long run.
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labor
capital
energy
All factors of production can be adjusted in the long run.
answer
All factors of production can be adjusted in the long run.
In the long run, firms can adjust all factors, even to the point of leaving an industry.
In the long run, firms can adjust all factors, even to the point of leaving an industry.
question
The commercial airliner manufacturing industry is dominated by two firms that supply products to the entire world. There are few other firms because of the industry's expensive start-up costs. This industry is an example of which type of market structure?
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perfect competition
monopolistic competition
oligopoly
monopoly
Please choose the correct answer from the following choices, and then select the submit answer button.
perfect competition
monopolistic competition
oligopoly
monopoly
answer
oligopoly
An oligopoly is an industry in which there are only a small number of firms and high barriers to entry.
An oligopoly is an industry in which there are only a small number of firms and high barriers to entry.
question
Marginal cost is the:
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change in total revenue when one more unit of output is sold.
change in total cost when one more unit of output is produced.
same as total revenue.
average revenue per product sold.
Please choose the correct answer from the following choices, and then select the submit answer button.
change in total revenue when one more unit of output is sold.
change in total cost when one more unit of output is produced.
same as total revenue.
average revenue per product sold.
answer
change in total cost when one more unit of output is produced.
Marginal cost is the change in total cost when one more unit of output is sold.
Marginal cost is the change in total cost when one more unit of output is sold.
question
The commercial airliner manufacturing industry tends to have very little competition because it is prohibitively expensive to start a new company in this industry. This is an example of:
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barriers to entry.
the nature of the industry's products.
the extent to which individual firms can control prices.
the number of firms in the industry.
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barriers to entry.
the nature of the industry's products.
the extent to which individual firms can control prices.
the number of firms in the industry.
answer
barriers to entry.
Prohibitively expensive start-up costs are considered a barrier to entry when performing a market structure analysis.
Prohibitively expensive start-up costs are considered a barrier to entry when performing a market structure analysis.
question
If normal profit is being earned in a perfectly competitive market, P − ATC is:
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less than zero.
greater than zero.
less than or equal to zero.
equal to zero.
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less than zero.
greater than zero.
less than or equal to zero.
equal to zero.
answer
equal to zero.
P − ATC is equal to zero when normal profit is being earned in a perfectly competitive market.
Challenge this Q
P − ATC is equal to zero when normal profit is being earned in a perfectly competitive market.
Challenge this Q
question
Firms will earn normal profits in a perfectly competitive industry in:
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the long run.
constant cost industries.
decreasing cost industries.
the short run only.
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the long run.
constant cost industries.
decreasing cost industries.
the short run only.
answer
the long run.
In the long run, firms can only earn normal profits because firms can enter and leave the industry and change the total output for the industry.
In the long run, firms can only earn normal profits because firms can enter and leave the industry and change the total output for the industry.
question
Individual firms are price takers, which means that in a perfectly competitive market they get their prices from the _____ since they are so small they cannot influence market price.
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government
suppliers
market
customers
Please choose the correct answer from the following choices, and then select the submit answer button.
government
suppliers
market
customers
answer
market
Individual firms are price takers, which means that in a competitive market they get their prices from the market since they are so small they cannot influence market price.
Individual firms are price takers, which means that in a competitive market they get their prices from the market since they are so small they cannot influence market price.
question
Normal profits are earned if price is:
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equal to marginal costs.
greater than average variable cost.
greater than average fixed costs.
equal to average total costs.
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equal to marginal costs.
greater than average variable cost.
greater than average fixed costs.
equal to average total costs.
answer
equal to average total costs.
Normal profits are equal to zero economic profits (price equals average total costs).
Normal profits are equal to zero economic profits (price equals average total costs).
question
In a perfectly competitive market, price is currently $8 and average total cost is $11. What is expected to happen to the number of firms in this market in the long run?
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The number of firms should increase.
All firms will exit the market.
The number of firms should stay the same.
The number of firms should decrease.
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The number of firms should increase.
All firms will exit the market.
The number of firms should stay the same.
The number of firms should decrease.
answer
The number of firms should decrease.
When losses are being earned, firms will exit the market.
When losses are being earned, firms will exit the market.
question
Industries with one firm have:
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a high degree of competition.
the highest degree of competition.
no competition.
a moderate degree of competition.
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a high degree of competition.
the highest degree of competition.
no competition.
a moderate degree of competition.
answer
no competition.
Industries with more firms have a higher degree of competition.
Industries with more firms have a higher degree of competition.
question
Short-run _____ will cause firms to exit an industry in the long run.
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zero economic profits
normal profits
economics losses
economic profits
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zero economic profits
normal profits
economics losses
economic profits
answer
economics losses
Short-run losses will likely cause firms to exit an industry in the long run.
Short-run losses will likely cause firms to exit an industry in the long run.
question
Able Pads, Inc., sells plain white printer paper in a perfectly competitive market. What does its individual demand curve look like?
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downward-sloping line
upward-sloping line
vertical line
horizontal line
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downward-sloping line
upward-sloping line
vertical line
horizontal line
answer
horizontal line
Although the market demand curve in a perfectly competitive market is downward sloping, the individual demand curve is a horizontal line.
Although the market demand curve in a perfectly competitive market is downward sloping, the individual demand curve is a horizontal line.
question
Marginal revenue is calculated as:
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ΔTC/ΔQ.
ΔTR/ΔQ.
P × Q.
TR/Q.
Please choose the correct answer from the following choices, and then select the submit answer button.
ΔTC/ΔQ.
ΔTR/ΔQ.
P × Q.
TR/Q.
answer
ΔTR/ΔQ.
Marginal revenue is the change in total revenue when one more unit of output is sold.
Marginal revenue is the change in total revenue when one more unit of output is sold.
question
Some fast-food restaurants and retail stores seem to be able to clone their operations from market to market without a noticeable rise in costs. We'd expect the long-run supply curve to be:
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downward sloping.
upward sloping.
vertical.
horizontal.
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downward sloping.
upward sloping.
vertical.
horizontal.
answer
horizontal.
The long-run supply curve in a constant cost industry is represented by a horizontal line.
The long-run supply curve in a constant cost industry is represented by a horizontal line.
question
Hybrid cars run on batteries that are made using lithium. This element is costly to extract, and firms are reluctant to invest in new plants. As hybrid cars become more and more popular, lithium is likely to be an example of a(n):
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constant cost industry.
decreasing cost industry.
zero cost industry.
increasing cost industry.
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constant cost industry.
decreasing cost industry.
zero cost industry.
increasing cost industry.
answer
increasing cost industry.
An increasing cost industry experiences upward pressure on the prices of the key input, such as lithium, due to industry expansion. Thus, costs will increase.
An increasing cost industry experiences upward pressure on the prices of the key input, such as lithium, due to industry expansion. Thus, costs will increase.
question
The short-run supply curve is the marginal cost curve above the minimum point on the _____ curve.
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average total cost
average variable cost
marginal revenue
price
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average total cost
average variable cost
marginal revenue
price
answer
average variable cost
The short-run supply curve is the marginal cost curve above the minimum point on the average variable cost curve (the shutdown point).
The short-run supply curve is the marginal cost curve above the minimum point on the average variable cost curve (the shutdown point).
question
For more than two decades, the global commercial airliner manufacturing industry was dominated by Boeing (an American company) and Airbus (a European company). More recently, Embraer (from Brazil) and Bombardier (from Canada) have been gaining market share. With these new entrants the commercial airliner manufacturing industry is an example of which type of market structure?
answer
oligopoly
An oligopoly is an industry in which there are only a small number of large firms.
An oligopoly is an industry in which there are only a small number of large firms.
question
If price is $12 and average total cost is $11, actual profits in a perfectly competitive market are:
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equal to zero.
greater than or equal to zero.
greater than zero.
less than zero.
Please choose the correct answer from the following choices, and then select the submit answer button.
equal to zero.
greater than or equal to zero.
greater than zero.
less than zero.
answer
greater than zero.
P − ATC is greater than zero when actual profit exceeds normal profit.
P − ATC is greater than zero when actual profit exceeds normal profit.
question
The electric company in Alice's neighborhood is the only firm from whom Alice can receive electricity for her home. This is an example of which type of market structure?
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oligopoly
monopolistic competition
perfect competition
monopoly
Please choose the correct answer from the following choices, and then select the submit answer button.
oligopoly
monopolistic competition
perfect competition
monopoly
answer
monopoly
A monopoly is a market structure in which there is only a single firm.
A monopoly is a market structure in which there is only a single firm.
question
If price is $12 and average total cost is $11, normal profit in a perfectly competitive market is:
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greater than or equal to actual profit.
greater than actual profit.
equal to actual profit.
less than actual profit.
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greater than or equal to actual profit.
greater than actual profit.
equal to actual profit.
less than actual profit.
answer
less than actual profit.
Actual profit exceeds normal profit when P > ATC.
Actual profit exceeds normal profit when P > ATC.
question
At the level of output at which marginal revenue (MR) equals marginal cost (MC), a firm could:
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have losses, break even, or earn economic profits.
stop production to increase profits.
decrease production to increase profits.
increase production to increase profits.
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have losses, break even, or earn economic profits.
stop production to increase profits.
decrease production to increase profits.
increase production to increase profits.
answer
have losses, break even, or earn economic profits.
When MR = MC the firm is producing its "best" level of output. However, "best" may mean minimizing losses, breaking even, or earning economic profits.
When MR = MC the firm is producing its "best" level of output. However, "best" may mean minimizing losses, breaking even, or earning economic profits.
question
The cable TV company in Taryn's neighborhood is the only firm from which Taryn can get cable TV for her home. This is an example of which type of market structure?
Please choose the correct answer from the following choices, and then select the submit answer button.
perfect competition
monopolistic competition
oligopoly
monopoly
Please choose the correct answer from the following choices, and then select the submit answer button.
perfect competition
monopolistic competition
oligopoly
monopoly
answer
monopoly
A monopoly is a market structure in which there is only one firm.
A monopoly is a market structure in which there is only one firm.
question
Ocean Magic is a surfboard company that sells surfboards in a perfectly competitive market. The market price in the long run for surfboards is $325. If Ocean Magic sells 37 surfboards at $325, what is its long-run average total cost?
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$300
$325
$350
$375
Please choose the correct answer from the following choices, and then select the submit answer button.
$300
$325
$350
$375
answer
$325
When a firm is selling at the long-run market equilibrium price, the price equals long-run average total cost.
Challenge this Question
When a firm is selling at the long-run market equilibrium price, the price equals long-run average total cost.
Challenge this Question
question
Marginal revenue is the:
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average revenue per product sold.
same as total revenue.
change in total revenue when one more unit of output is sold.
change in total cost when one more unit of output is sold.
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average revenue per product sold.
same as total revenue.
change in total revenue when one more unit of output is sold.
change in total cost when one more unit of output is sold.
answer
change in total revenue when one more unit of output is sold.
Marginal revenue is the change in total revenue when one more unit of output is sold.
Marginal revenue is the change in total revenue when one more unit of output is sold.
question
The commercial airliner manufacturing industry is dominated by two firms that supply products to the entire world. There are few other firms because of the industry's expensive start-up costs. This industry is an example of which type of market structure?
Please choose the correct answer from the following choices, and then select the submit answer button.
perfect competition
monopolistic competition
oligopoly
monopoly
Please choose the correct answer from the following choices, and then select the submit answer button.
perfect competition
monopolistic competition
oligopoly
monopoly
answer
oligopoly
An oligopoly is an industry in which there are only a small number of firms and high barriers to entry.
An oligopoly is an industry in which there are only a small number of firms and high barriers to entry.
question
If price is $10 and quantity sold is 55, total revenue is equal to:
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$55.
$550.
$10.
$5,550.
Please choose the correct answer from the following choices, and then select the submit answer button.
$55.
$550.
$10.
$5,550.
answer
$550.
Total revenue is equal to price multiplied by quantity.
Total revenue is equal to price multiplied by quantity.
question
Ocean Magic is a surfboard company that sells surfboards in a competitive market. If it sells surfboards for $400 each and the average total cost for each surfboard is $300, what is the average profit (AP)?
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$700
$100
$500
$300
Please choose the correct answer from the following choices, and then select the submit answer button.
$700
$100
$500
$300
answer
$100
Average profit is equal to price minus average total cost, so the equation looks like: AP = $400 − $300, AP = $100.
Average profit is equal to price minus average total cost, so the equation looks like: AP = $400 − $300, AP = $100.
question
Many agricultural markets are characterized by standardized products. This is be an example of which type of market structure?
Please choose the correct answer from the following choices, and then select the submit answer button.
perfect competition
monopolistic competition
monopoly
oligopoly
Please choose the correct answer from the following choices, and then select the submit answer button.
perfect competition
monopolistic competition
monopoly
oligopoly
answer
perfect competition
A perfectly competitive market is one that deals with homogeneous, or standardized, products.
A perfectly competitive market is one that deals with homogeneous, or standardized, products.
question
Short-run _____ will cause firms to enter an industry in the long run.
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zero economic profits
economic profits
normal profits
economic losses
Please choose the correct answer from the following choices, and then select the submit answer button.
zero economic profits
economic profits
normal profits
economic losses
answer
economic profits
Short-run economic profits will likely cause firms to enter an industry in the long run.
Short-run economic profits will likely cause firms to enter an industry in the long run.
question
If the quantity demanded of personal computers increases by 5% every time the price of personal computers decreases by 10%, the price elasticity of personal computers is (remember to report the absolute value):
a) 4
b) 0.5
c) 1
d) 2
a) 4
b) 0.5
c) 1
d) 2
answer
b
question
You sell t-shirts in the street corner in order to support some of your tuition costs. Around the middle of the semester, your friend Carlos gives you the following advice: "if you increase the price of each t-shirt you sell you will be able to make a lot more money selling your t-shirts". For Carlos to be right, the price elasticity of t-shirts must be price:
a) Constant
b) Elastic
c) Unitary
d) Inelastic
a) Constant
b) Elastic
c) Unitary
d) Inelastic
answer
In elastic
question
An increase in competition within an industry would likely:
make the good produced in that industry more inelastic
make the good produced in that industry more elastic
make the good produced in that industry unitary elastic
make the good produced in that industry close to perfectly inelastic
make the good produced in that industry more inelastic
make the good produced in that industry more elastic
make the good produced in that industry unitary elastic
make the good produced in that industry close to perfectly inelastic
answer
make the good produced in that industry more elastic
question
)Economists for McDonalds estimate that the price elasticity of demand for their french fries is 0.8. So, if McDonalds raises the price of its french fries by 20 percent, the quantity demanded will decrease by ____ percent.
20
8
16
25
20
8
16
25
answer
16
question
Elasticity is likely to be highest for goods that:
have many substitutes and are not necessary for basic living
have few substitutes and are not necessary for basic living
have many substitutes and are necessities
have few substitutes and are necessities
have many substitutes and are not necessary for basic living
have few substitutes and are not necessary for basic living
have many substitutes and are necessities
have few substitutes and are necessities
answer
have many substitutes and are not necessary for basic living
question
If a 20% off sale on Diesel jeans increases sales of Diesel jeans by 30%, what is the elasticity of demand for Diesel jeans?
0.5
1.5
2.0
3.0
0.5
1.5
2.0
3.0
answer
1.5
question
Suppose that a 10% discount on the price of Tempur-Pedic mattresses results in quantity demanded to increase by 5%. Based on this information, demand for Tempur-Pedic is:
inelastic
elastic
unitary elastic
income elastic
inelastic
elastic
unitary elastic
income elastic
answer
inelastic
question
Suppose the government wants to reduce teenage smoking by 50%. If the teenage elasticity of demand for a pack of cigarettes is 2, by what percentage would the government have to increase the price of a pack of cigarettes to achieve their goal?
10%
25%
50%
100%
10%
25%
50%
100%
answer
25%
question
Each month, you have $15 to spend on toys and treats for your cat. Cat toys cost $3 each, and cat treats cost $1.50 each. Which of the following combinations of toys and treats would appear on your budget line?
answer
...
question
Jon enjoys fishing (which costs $20) and golf (which costs $30). Last month, Jon fished four times and golfed twice. The last fishing outing provided Jon a marginal utility of 50, and the last round of golf provided a marginal utility of 120. Did Jon maximize his utility according to the utility maximization rule?
answer
...
question
If you do not spend your entire budget in a given month, your consumption will appear:
as a point on your budget line
as a point above your budget line
as a point below your budget line
as two points corresponding to the goods purchased
as a point on your budget line
as a point above your budget line
as a point below your budget line
as two points corresponding to the goods purchased
answer
as a point below your budget line
question
Joe has $50 to spend on pizza and movies. If movies are $5 each and a pizza is $10, assuming he spends all his money, he can buy:
6 movies and 2 pizzas
8 movies and 4 pizzas
2 movies and 6 pizzas
6 movies and 4 pizzas
6 movies and 2 pizzas
8 movies and 4 pizzas
2 movies and 6 pizzas
6 movies and 4 pizzas
answer
...
question
Scruffie the cat has a budget of $30. A cat toy costs $2 and a can of tuna costs $1. Which of the following combinations of goods is NOT on her budget line?
10 cat toys and 10 cans of tuna
8 cat toys and 16 cans of tuna
5 cat toys and 20 cans of tuna
All of the above combinations are on her budget line
10 cat toys and 10 cans of tuna
8 cat toys and 16 cans of tuna
5 cat toys and 20 cans of tuna
All of the above combinations are on her budget line
answer
...
question
The budget line will shift parallel to the left if:
income increases
income decreases
the price of the good on the vertical axis increases
the price of the good on the vertical axis decreases
income increases
income decreases
the price of the good on the vertical axis increases
the price of the good on the vertical axis decreases
answer
...
question
The utility maximization rule says that:
the average utility per dollar spent is the same for all goods
the marginal utility per dollar spent is the same for all goods
the total utility per dollar spent is the same for all goods
the marginal utility per dollar will fall the more items you buy
the average utility per dollar spent is the same for all goods
the marginal utility per dollar spent is the same for all goods
the total utility per dollar spent is the same for all goods
the marginal utility per dollar will fall the more items you buy
answer
...
question
Using a budget line, if Jeff's budget increases while prices stay the same,
Jeff's budget line will pivot inwards
Jeff's budget line will pivot outwards
Jeff's budget line will shift inwards parallel
Jeff's budget line will shift outwards parallel
Jeff's budget line will pivot inwards
Jeff's budget line will pivot outwards
Jeff's budget line will shift inwards parallel
Jeff's budget line will shift outwards parallel
answer
...
question
In a small town the income elasticity of demand for BBQ sandwiches is -0.08. Based on this we can conclude that consumers in that town considered BBQ sandwiches ___________ goods.
substitute
normal
complementary
inferior
substitute
normal
complementary
inferior
answer
...
question
Lorena considers coffee and tea to be substitutes. Therefore, the cross elasticity of demand between coffee and tea for Lorena must be:
positive
negative
positive and higher than 1
positive and less than 1
positive
negative
positive and higher than 1
positive and less than 1
answer
...
question
Which of the following goods probably has the highest price elasticity of supply?
antique chairs
baseball stadiums
golf courses
blue pencils
antique chairs
baseball stadiums
golf courses
blue pencils
answer
...
question
If the cross-price elasticity between DVD movie rentals and pay-per-view movies is 0.8, while the cross-price elasticity between Pay-Per-View movies and movie theatre tickets is 1.2, an increase in the price of Pay-Per-View movies by 20% will result in:
a decrease in demand for DVD movies rentals by 16%
an increase in demand for movie theatre tickets by 24%
an decrease in demand for pay-per-view movies by 40%
an increase in demand for DVD movie rentals by 40%
a decrease in demand for DVD movies rentals by 16%
an increase in demand for movie theatre tickets by 24%
an decrease in demand for pay-per-view movies by 40%
an increase in demand for DVD movie rentals by 40%
answer
...
question
The following would be an example of a variable input in the production of pizza:
the rent on the locale
the oven
the cash register
cheese
the rent on the locale
the oven
the cash register
cheese
answer
...
question
)If Katy decides to open a new silk plant shop, her opportunity costs would include:
the salary she gave up from her former job
investment earnings she could have earned from the money invested in her shop
neither 'a' or 'b'
both 'a' and 'b'
the salary she gave up from her former job
investment earnings she could have earned from the money invested in her shop
neither 'a' or 'b'
both 'a' and 'b'
answer
...
question
Jeff operates a small fiber optic installation company. His revenues are $50,000. His costs include $10,000 in parts and equipment, $15,000 to pay his buddy who helps him, and $5,000 in insurance and license fees. By running this business, he gives up working on weekends at his other job where he could have earned $15,000 in overtime pay. What is Jeff's economic profit?
$5,000
$15,000
$20,000
$30,000
$5,000
$15,000
$20,000
$30,000
answer
...
question
When each additional input produces fewer and fewer additional units of production, this is referred to as:
economies of scale
economies of scope
increasing marginal returns
diminishing marginal returns
economies of scale
economies of scope
increasing marginal returns
diminishing marginal returns
answer
diminishing marginal returns
question
Bruno's Gelato Café has a fixed cost of $100. The variable cost of producing 10 gelatos is $20, and the variable cost of producing 11 gelatos is $22. What is the total cost and marginal cost of producing 11 gelatos?
$122; $2
$122; $22
$42; $2
$42; $22
$122; $2
$122; $22
$42; $2
$42; $22
answer
...
question
Suppose that the average score in a class before the final exam was 80%. The average score on the final exam was 85%. How does the marginal score (final exam average) affect overall grades?
The marginal score lies below the average and overall grades fall.
The marginal score lies above the average and overall grades rise.
The marginal score lies below the average and overall grades rise.
The marginal score lies above the average and overall grades fall.
The marginal score lies below the average and overall grades fall.
The marginal score lies above the average and overall grades rise.
The marginal score lies below the average and overall grades rise.
The marginal score lies above the average and overall grades fall.
answer
...
question
At levels of output where the firm's short-run average total cost curve is rising,
the marginal cost curve is above the short-run average total cost curve
the marginal cost curve is below the short-run average total cost curve
the marginal cost curve is equal to the short-run average total cost curve
the marginal cost curve is below the short-run average variable cost curve
the marginal cost curve is above the short-run average total cost curve
the marginal cost curve is below the short-run average total cost curve
the marginal cost curve is equal to the short-run average total cost curve
the marginal cost curve is below the short-run average variable cost curve
answer
...
question
If the total cost of 3 units is $40 and the total cost of 4 units is $50, the marginal cost of the 4th unit is:
$90
$50
$40
$10
$90
$50
$40
$10
answer
$10
question
Suppose output = 100 units, fixed cost = $300, total cost = $800, and marginal cost = $60. What is the firm's total variable cost?
$360
$500
$1,100
$6,000
$360
$500
$1,100
$6,000
answer
500
question
Which of the following is the additional cost of producing one more unit?
average fixed cost
average variable cost
economic cost
marginal cost
average fixed cost
average variable cost
economic cost
marginal cost
answer
average variable cost
question
Which of the following is most likely a variable cost?
The cost of property insurance
The cost of the machinery used in the production process
The cost of furniture used by the staff
The cost of electricity used in the production process
The cost of property insurance
The cost of the machinery used in the production process
The cost of furniture used by the staff
The cost of electricity used in the production process
answer
The cost of electricity used in the production process
question
Which of the following always increases when output increases?
Average fixed costs
Variable costs
Marginal costs
Average total costs
Average fixed costs
Variable costs
Marginal costs
Average total costs
answer
Variable costs
question
Suppose a car manufacturer discovers that the marginal cost of the last car produced was $15,000, while the marginal revenue was $14,000. In order to increase profits, the car manufacturer should __________ the quantity of cars produced.
increase
stay the same
increase or decrease
decrease
increase
stay the same
increase or decrease
decrease
answer
decrease
question
Suppose a Mexican restaurant maximizes profits when it sells each meal at a price of $10. For the restaurant to remain open in the short run, its average variable costs should be _______ $10.
higher or equal to
equal to
either higher or lower than
lower or equal to
higher or equal to
equal to
either higher or lower than
lower or equal to
answer
...
question
A perfectly competitive firm is a price taker because:
it has no control over the selling price of its product.
it has market power.
market demand is downward sloping.
its products are differentiated.
it has no control over the selling price of its product.
it has market power.
market demand is downward sloping.
its products are differentiated.
answer
...
question
For the perfectly competitive firm:
price always equals average cost
price always equals marginal cost
price always equals average variable cost
price always equals marginal revenue
price always equals average cost
price always equals marginal cost
price always equals average variable cost
price always equals marginal revenue
answer
...
question
If the equilibrium price in a perfectly competitive market for apples is $1 per pound, then an individual firm in this market could:
not sell additional apples unless the firm lowers its price.
not sell additional apples at any price because the market is at equilibrium.
sell an additional pound at $1.
sell an additional pound at a price slightly higher than $1.
not sell additional apples unless the firm lowers its price.
not sell additional apples at any price because the market is at equilibrium.
sell an additional pound at $1.
sell an additional pound at a price slightly higher than $1.
answer
sell an additional pound at $1.
question
If you decide to grow a mango tree in your backyard and sell the mangos at the farmer's market at the same price as all other mango vendors, your business would be considered a(n):
perfectly competitive firm
monopoly
monopolistically competitive firm
oligopoly
perfectly competitive firm
monopoly
monopolistically competitive firm
oligopoly
answer
perfectly competitive firm
question
In perfect competition, the industry's demand curve is ____ while the individual firm's demand curve is ____.
downward-sloping; downward-sloping
downward-sloping; horizontal
horizontal; downward-sloping
horizontal; horizontal
downward-sloping; downward-sloping
downward-sloping; horizontal
horizontal; downward-sloping
horizontal; horizontal
answer
...
question
Suppose that producers in the market for pizza around Campustown are earning economic profits. In the long run then, we can expect the price of pizza to:
increase
stay the same
increase or decrease.
decrease
increase
stay the same
increase or decrease.
decrease
answer
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question
The average total cost of manufacturing smartphones tends to decrease as more sellers enter the industry. Therefore, the long run supply curve for this industry will be:
downward sloping
horizontal
relatively steep
upward slopping
downward sloping
horizontal
relatively steep
upward slopping
answer
...
question
)If businesses are experiencing losses in a competitive market, some firms will exit the industry, causing prices to _____ and profits to _____ for the remaining firms.
fall; fall
fall; rise
rise; fall
rise; rise
fall; fall
fall; rise
rise; fall
rise; rise
answer
...
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