question
In the long run, a firm can vary
answer
both its labor and capital
Why: the definition of the long-run is the period of time which the firm can change ALL of its inputs
Why: the definition of the long-run is the period of time which the firm can change ALL of its inputs
question
The marginal product of labor is the change in total product from one-unit increase in
answer
The quantity of labor employed, holding the quantity of labor constant.
Why: The marginal product of labor is the increase in total product that results from a one-unit increase in the quantity of labor employed with all other inputs remaining the same.
Why: The marginal product of labor is the increase in total product that results from a one-unit increase in the quantity of labor employed with all other inputs remaining the same.
question
If the marginal product of labor exceeds the average product of labor, the average product of labor rises when more workers are hired.
answer
true
Why: the result is a reflection of the relationship between marginals and averages
Why: the result is a reflection of the relationship between marginals and averages
question
the marginal product of labor equals equals the average product of labor when
answer
the average product of labor is at its maximum
why: when MP>AP, the average product rises when employment increases; when MP<AP, the average product falls; and when MP=AP, the average product is at its maximum
why: when MP>AP, the average product rises when employment increases; when MP<AP, the average product falls; and when MP=AP, the average product is at its maximum
question
if the marginal product of another worker exceeds the marginal product of the previous worker hired, the firm is experiencing economies of scale
answer
false
why: the firm increasing marginal returns because only one input has been changed
why: the firm increasing marginal returns because only one input has been changed
question
If the marginal cost is less than average variable cost and output increases, average total cost ________ and average variable cost __________.
answer
decreases; decreases
why: if MC<AVC when we know that ATC is falling with an increase in Q. AVC is also falling
why: if MC<AVC when we know that ATC is falling with an increase in Q. AVC is also falling
question
The average variable cost curve shifts downward if
answer
there is a technological advance
why: the AVC curves shift with changed in technology or changes in prices of variable factors of production. An increase in technology or decrease in price of a variable factor will shift the AVC curve down
why: the AVC curves shift with changed in technology or changes in prices of variable factors of production. An increase in technology or decrease in price of a variable factor will shift the AVC curve down
question
The average total cost curve, like the average product of labor curve, has an upside-down U-shape
answer
false
why: the average total cost curve gas a "right-side-up" U shape
why: the average total cost curve gas a "right-side-up" U shape
question
Constant returns to scale means that as all inputs are increased,
answer
total output increases in the same proportion as do the inputs
why: constant returns to scale are features of a firm's technology that lead to constant long-run average cost as output increases. with given factor prices, economies of scale occur if the percentage increase in output equals the percentage increase in all factors of production
why: constant returns to scale are features of a firm's technology that lead to constant long-run average cost as output increases. with given factor prices, economies of scale occur if the percentage increase in output equals the percentage increase in all factors of production
question
Marginal cost is the increase in total _______ that results from a one-unit increase in __________.
answer
cost; output
question
"diminishing marginal returns" refer to a situation in which the
answer
marginal product of the last worker hired is less than the marginal product of the previous worker hired
question
the vertical distance between a firm's cost (TC) and its total variable cost (TVC) curves
answer
is equal to the total fixed cost, TFC
question
If as output increases marginal cost exceeds average variable cost but is less than average total cost, average total cost ________ and average variable cost __________.
answer
decrease; increses
question
For a perfectly competitive firm, MR always equals
answer
P
why: because a perfectly competitive firm can always sell another unit of output at the going market price, the market price is the firm's marginal revenue
why: because a perfectly competitive firm can always sell another unit of output at the going market price, the market price is the firm's marginal revenue
question
Quantity Price ($)
100 5.00
101 5.00
What is the marginal revenue from selling 101 units of output rather than 100?
100 5.00
101 5.00
What is the marginal revenue from selling 101 units of output rather than 100?
answer
$5
why: MR= (∆TR)/∆q, so in this case MR= ($505-500)/(101-100)= $5. more directly, for a perfectly competitive firm, marginal revenue = price.
why: MR= (∆TR)/∆q, so in this case MR= ($505-500)/(101-100)= $5. more directly, for a perfectly competitive firm, marginal revenue = price.
question
of the following, which is a perfect competitor
- a tomato grower living in florida
- AT&T, one of the 3 major providers of long distance telephone service in the us.
- the company that provides your local cable TV service
-DeBeers, the provider of more than 80 percent of the rough diamonds in the world
- a tomato grower living in florida
- AT&T, one of the 3 major providers of long distance telephone service in the us.
- the company that provides your local cable TV service
-DeBeers, the provider of more than 80 percent of the rough diamonds in the world
answer
a tomato grower living in Florida
why: The other possibilities describe industries with only a few firms, so they cannot be perfectly competitive firms.
why: The other possibilities describe industries with only a few firms, so they cannot be perfectly competitive firms.
question
A perfectly competitive firm must decide what price to charge for its goods. True or False
answer
False
Why: a perfectly competitive firm is a price taker, for instance, a wheat farmer who can charge only the going price for the wheat grown.
Why: a perfectly competitive firm is a price taker, for instance, a wheat farmer who can charge only the going price for the wheat grown.
question
In the short run a perfectly competitive firm will
- shut down if p < AVC
- Never shut down
- Shut down if P > AFC
- Shut down if p < ATC
- shut down if p < AVC
- Never shut down
- Shut down if P > AFC
- Shut down if p < ATC
answer
Shut down if P < AVC
why: the firm will continue operating in the short run even if it incurs an economic loss as long as the price exceeds the minimum AVC.
why: the firm will continue operating in the short run even if it incurs an economic loss as long as the price exceeds the minimum AVC.
question
In perfect competition, a firm that maximizes its economic profit will sell its good
- at the market price
- below the market price if its supply curve is inelastic and above the market price if its supply curve is elastic
- above the market price
- at the market price
- at the market price
- below the market price if its supply curve is inelastic and above the market price if its supply curve is elastic
- above the market price
- at the market price
answer
- at the market price
why: firms in a perfect competition are price takers, meaning that a firm that cannot influence the market price and so its own price equal to the market price
why: firms in a perfect competition are price takers, meaning that a firm that cannot influence the market price and so its own price equal to the market price
question
Output Total cost
(tons of rice per ($ per ton)
year)
0. $1,000
1. $1,200
2. $1,600
3. $2,200
4. $3,000
5. $4,000
Based on the table above which shows Chip's costs, if chip shuts down in the short run, his total cost will be
- $4,000
- $1,000
- $0
- $1,200
(tons of rice per ($ per ton)
year)
0. $1,000
1. $1,200
2. $1,600
3. $2,200
4. $3,000
5. $4,000
Based on the table above which shows Chip's costs, if chip shuts down in the short run, his total cost will be
- $4,000
- $1,000
- $0
- $1,200
answer
$1,000
why: If you shut down (Q= 0) the total cost which is made up of only fixed costs is $1,000
why: If you shut down (Q= 0) the total cost which is made up of only fixed costs is $1,000
question
A firm will expand the amount of output it produces as long as its
- marginal revenue exceeds its marginal costs
- average total revenue exceeds its average variable cost
- marginal cost exceeds its marginal revenue
- average total revenue exceeds its average total cost
- marginal revenue exceeds its marginal costs
- average total revenue exceeds its average variable cost
- marginal cost exceeds its marginal revenue
- average total revenue exceeds its average total cost
answer
Marginal revenue exceeds its marginal cost
why: when MR > MC, then the extra revenue from selling one more unit exceeds the extra cost of producing one more unit, so the firm increases its output to increase its profit
why: when MR > MC, then the extra revenue from selling one more unit exceeds the extra cost of producing one more unit, so the firm increases its output to increase its profit
question
economic profit is __________.
- equal to its total revenue minus total cost
- equal to normal profit minus total cost
-equal to total revenue minus marginal cost
- included in the firm's total cost
- equal to its total revenue minus total cost
- equal to normal profit minus total cost
-equal to total revenue minus marginal cost
- included in the firm's total cost
answer
equal to total revenue minus total cost
why: economic profit is the difference between total revenue )the price of the firm's output multiplied by the quantity sold) and its total opportunity cost of production (total cost).
why: economic profit is the difference between total revenue )the price of the firm's output multiplied by the quantity sold) and its total opportunity cost of production (total cost).
question
suppose that firms in a perfectly competitive industry are earning economic profits. over time,
- other firms enter the industry so that the price rises and economic profits fall
- some firms leave the industry so that both the price and economic profits rise
- other firms enter the industry so that both price and economic profits fall
- nothing happens because there are no incentives for change
- other firms enter the industry so that the price rises and economic profits fall
- some firms leave the industry so that both the price and economic profits rise
- other firms enter the industry so that both price and economic profits fall
- nothing happens because there are no incentives for change
answer
other firms enter the industry so that both price and economic profits fall
why:the entry of new firms lowers the price and economic profits, thereby driving the industry toward its long-run equilibrium
why:the entry of new firms lowers the price and economic profits, thereby driving the industry toward its long-run equilibrium
question
the demand for a product produced in a perfectly competitive market permanently increases. In the short-run the price
- does not change as new firms enter the industry
- does not change because each firm produces more output
-rises and each firm produces less output
- rises and each firm produces more output
- does not change as new firms enter the industry
- does not change because each firm produces more output
-rises and each firm produces less output
- rises and each firm produces more output
answer
rises and each firm produces more output
why: an increase in market demand shifts the market demand curve rightward and raises the market price. Each firm in the industry responds by increasing its quantity supplied
why: an increase in market demand shifts the market demand curve rightward and raises the market price. Each firm in the industry responds by increasing its quantity supplied
question
a perfectly competitive firm's supply curve is its ATC curve. True or False
answer
False
why: the firm's supply curve is its MC curve above its AVC curve
why: the firm's supply curve is its MC curve above its AVC curve
question
at a firm's break-even point, definitely its
answer
total revenue equals its total opportunity cost
question
in a perfect competition, at all levels of output the market price is the same as the firm's ________.
answer
marginal revenue
question
A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its revenue will
answer
rise and its total variable cost will rise even more
question
Initially, a competitive industry that has 1,000 firms is in long-run equilibrium. Then 100 firms in the industry adopt a new technology that reduces the average cost of producing the good. In the short run, the price _______, firms with the new technology make ___________ profits, and firms with the old technology _________.
answer
falls; positive economic; incur economic losses
question
Barriers to entry are essential to a monopoly. true or false
answer
True
why: without barriers to entry, other firms will enter the industry so that it no longer is a monopoly
why: without barriers to entry, other firms will enter the industry so that it no longer is a monopoly
question
a monopolist finds that when it produces 20 units of output, its demand is elastic. At this level of output.
- its marginal revenue necessarily is positive
- its marginal revenue necessarily is negative
- its marginal review necessarily is negative
- none of the above is correct because the marginal revenue does not depend upon the elasticity of demand
- its marginal revenue necessarily is positive
- its marginal revenue necessarily is negative
- its marginal review necessarily is negative
- none of the above is correct because the marginal revenue does not depend upon the elasticity of demand
answer
the marginal revenue necessarily is positive
why: when demand is elastic, MR is positive; when demand is inelastic, MR is negative
why: when demand is elastic, MR is positive; when demand is inelastic, MR is negative
question
Price. Quantity demanded
(dollars per bottle). (bottles per day)
16 0
15 1
14 2
13 3
12 4
11 5
10 6
9 7
8 8
The table above gives the demand schedule for water bottled by Wanda's Healthy Waters. If the marginal cost is a constant $4 a bottle, Wanda's will produce ________ a day and charge ________ a bottle.
- 1 bottle; $15
- 8 bottles; $8
- 4 bottles; $12
- 6 bottles; $10
(dollars per bottle). (bottles per day)
16 0
15 1
14 2
13 3
12 4
11 5
10 6
9 7
8 8
The table above gives the demand schedule for water bottled by Wanda's Healthy Waters. If the marginal cost is a constant $4 a bottle, Wanda's will produce ________ a day and charge ________ a bottle.
- 1 bottle; $15
- 8 bottles; $8
- 4 bottles; $12
- 6 bottles; $10
answer
6 bottles; $10
why: Q* is where MR = MC. Note the MR were calculated using the midpoint, so the MR at Q = 1 uses TR at Q = 2 and at Q = 0. MR = MC at Q = 6, From the demand curve this corresponds to P = 10.
why: Q* is where MR = MC. Note the MR were calculated using the midpoint, so the MR at Q = 1 uses TR at Q = 2 and at Q = 0. MR = MC at Q = 6, From the demand curve this corresponds to P = 10.
question
in a small town, Marilyn's christmas tree lot has a monopoly on sales of christmas trees. in order to increase her sales from 100 trees to 101 trees, she must drop the price of all of her trees from $20 to $19. What is the marginal revenue?
- $20
- $19
- negative $81
$2000
- $20
- $19
- negative $81
$2000
answer
negative $81
why:
Q= 100 P = 20: TR = $2000
Q = 101 P = 19: TR = $1919 MR = (1919-2000)/(101-100) = - $81 per tree
why:
Q= 100 P = 20: TR = $2000
Q = 101 P = 19: TR = $1919 MR = (1919-2000)/(101-100) = - $81 per tree
question
Monopolies decrease the deadweight loss from perfectly competitive industries. True or False
answer
False
why: A monopoly creates deadweight loss; it does not reduce it.
why: A monopoly creates deadweight loss; it does not reduce it.
question
To maximize their profits, both monopolies and perfectly competitive firms produce the level of output that sets MR = MC. True or False
answer
true
why: No matter its industry type, a firm producing so that MR = MC earns the maximum profit.
why: No matter its industry type, a firm producing so that MR = MC earns the maximum profit.
question
Which of the following is true for BOTH monopoly and perfect competition?
- profits are maximized by producing at the level of output where marginal revenue is equal to marginal cost.
- Marginal revenue is horizontal at the industry equilibrium price.
- Economic profits can be sustained indefinitely over time.
- The demand for the individual firm's product is perfectly elastic.
- profits are maximized by producing at the level of output where marginal revenue is equal to marginal cost.
- Marginal revenue is horizontal at the industry equilibrium price.
- Economic profits can be sustained indefinitely over time.
- The demand for the individual firm's product is perfectly elastic.
answer
Profits are maximized by producing at the level of output where marginal revenue is equal to marginal cost.
Why: To maximize its profit, a monopoly produces the level of output where MR = MC. This is the same for a perfectly competitive firm. Note for the monopoly their MR < P, whereas for perfect competition MR = P.
Why: To maximize its profit, a monopoly produces the level of output where MR = MC. This is the same for a perfectly competitive firm. Note for the monopoly their MR < P, whereas for perfect competition MR = P.
question
If a monopoly can successfully price discriminate, it can increase its profit. True or False.
answer
true
why: This motivation lies behind price discrimination.
why: This motivation lies behind price discrimination.
question
A natural monopoly
- is usually regulated by the government.
- earns an economic profit if it must use a marginal cost pricing rule.
- has an average total cost curve that is positively sloped until it crosses the demand curve.
- has a demand curve that is positively sloped.
- is usually regulated by the government.
- earns an economic profit if it must use a marginal cost pricing rule.
- has an average total cost curve that is positively sloped until it crosses the demand curve.
- has a demand curve that is positively sloped.
answer
is usually regulated by the government.
why: Natural monopolies, such as electric power distributors and local telephone companies, are usually regulated by the government.
why: Natural monopolies, such as electric power distributors and local telephone companies, are usually regulated by the government.
question
A natural monopoly that charges the profit-maximizing price will produce ________ output than a ________.
- the same; natural monopoly regulated by a marginal cost pricing rule
-a more efficient; perfectly competitive industry
- a smaller; natural monopoly regulated by a marginal cost pricing rule
- a larger; natural monopoly regulated by an average cost pricing rule
- the same; natural monopoly regulated by a marginal cost pricing rule
-a more efficient; perfectly competitive industry
- a smaller; natural monopoly regulated by a marginal cost pricing rule
- a larger; natural monopoly regulated by an average cost pricing rule
answer
a smaller; natural monopoly regulated by a marginal cost pricing rule
Why: An unregulated natural monopoly will produce where MR = MC and use its demand curve to set the highest price for which this quantity is demanded. The result is a deadweight loss as the firm produces where MB > MC. With a MC pricing rule the monopoly will produce a higher quantity where MB = MC and there is no deadweight loss.
Why: An unregulated natural monopoly will produce where MR = MC and use its demand curve to set the highest price for which this quantity is demanded. The result is a deadweight loss as the firm produces where MB > MC. With a MC pricing rule the monopoly will produce a higher quantity where MB = MC and there is no deadweight loss.
question
patents create monopolies by restricting
answer
entry
question
a perfect price discriminating monopoly produces the same output as _________.
answer
perfectly competitive inductry
question
In the long run, a single-priced monopolist will
answer
be able to continue to earn economic profits as long as the market remains a monopoly
question
marginal external cost
answer
difference between marginal private cost and marginal social cost
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
