question
. (T / F) Economic profit is found by subtracting accounting costs from total revenue.
answer
False
question
. (T / F) Marginal product (MP) diminishes because successive workers are inferior.
answer
False
question
. (T / F) At zero units of output a firm's variable costs are zero.
answer
True
question
(T / F) The short run is a period of time during which all costs are fixed costs.
answer
False
question
(T / F) Average fixed costs are fixed all levels of output.
answer
False
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(T / F) Total fixed costs are fixed all levels of output, even at zero level of output.
answer
True
question
(T / F) Constant returns to scale can be found where long-run average cost declines constantly over the period of expanding the size of a firm in the long-run.
answer
False
question
(T / F) Under the purely competitive market structure, the profit maximizing firm will either increase or decrease the price of its product based on the market demand.
answer
False
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(T / F) In maximizing profit a firm will always produce that output where total revenues are at a maximum.
answer
False
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(T / F) From Consider This... in Ch.10, p.207) An unprofitable motel will stay open in the short-run if price (average nightly room rate) exceeds average variable cost.
answer
True
question
(T / F) The demand curve for a purely competitive industry is perfectly elastic, but the demand curves faced by individual firms in such an industry are downsloping.
answer
False
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Implicit costs are:
answer
"payments" for self-employed resources.
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Normal profit is:
answer
the return to the entrepreneur when economic profits are zero.
question
Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its economic profits and its accounting profits were___________ and _____________, respectively.
answer
- $500,000; zero
question
Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $60 per unit, its economic profits and its accounting profits were___________ and _____________, respectively.
answer
. $500,000; $1 million
question
. In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs:
answer
are $1,250.
question
In which of the following industry structures is the entry of new firms the most difficult?
answer
Pure monopoly
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An industry comprised of 40 firms, none of which has more than 3 percent of the total market for a differentiated product, is an example of:
answer
monopolistic competition
question
Which of the following is not a basic characteristic of pure competition?
answer
Considerable nonprice competition.
question
A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating:
answer
marginal revenue and marginal cost
question
The MR = MC rule can be restated for a purely competitive seller as P = MC because:
answer
each additional unit of output adds exactly its price to total revenue
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Which of the following is not a valid generalization concerning the relationship between price and costs for a purely competitive seller in the short run?
answer
Price must be at least equal to average total cost.
question
If a purely competitive firm shuts down in the short run:
answer
it will realize a loss equal to its total fixed costs
question
A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should:
answer
produce because the resulting loss is less than its TFC.
question
In the short run, a purely competitive seller will shut down if product price:
answer
is less than AVC.
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