Microeconomics Practice Test 2

question

*1* Refer to the above data. The firm's:

answer

economic profit is $16.

question

*1* Refer to the above data. At the profit-maximizing output the firms total cost is:

answer

$32.

question

*1* Refer to the above data. At the profit-maximizing output the firms total revenue is:

answer

$48.

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Which of the following is correct?

answer

When MP is rising MC is falling, and when MP is falling MC is rising.

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*2* Refer to the above data. If the firm decided to increase its output from 6 to 7 units, its total costs would rise by:

answer

$120.

question

If a firm increases all of its inputs by 10 percent and its output increases by 15 percent, we can say that:

answer

it is encountering economies of scale.

question

Which of the following statements is correct?

answer

The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping.

question

In the short run a purely competitive seller will shut down if:

answer

price is less than average variable cost at all outputs.

question

An increasing-cost industry is the result of:

answer

higher resource prices which occur as the industry expands.

question

Suppose a firm is in a range of production where it is experiencing economies of scale. Knowing this, we can predict that:

answer

a 10 percent increase in all inputs will increase output by more than 10 percent.

question

Diseconomies of scale arise primarily because:

answer

of the difficulties involved in managing and coordinating a large business enterprise.

question

*3* Refer to the above data. The total variable cost of producing 5 units:

answer

is $37.

question

*3* Refer to the above data. The profit maximizing output for this firm:

answer

cannot be determined from the information given.

question

*3*Refer to the above data. The marginal cost of producing the sixth unit of output:

answer

is $8.

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*3* Refer to the above data. The average total cost of producing 3 units of output:

answer

is $16.

question

The basic difference between the "short-run" and the "long-run" is that:

answer

at least one resource is fixed in the short run, while all resources are variable in the long run.

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*4* Refer to the above short-run data. The profit-maximizing output for this firm is:

answer

320 units.

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*4* Refer to the above short-run data. Total fixed cost for this firm:

answer

is $200.

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*5* Refer to the above diagram showing the average total cost curve for a purely competitve firm. At the long-run equilibrium of output, this firm's economic profit:

answer

is zero.

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*6* Refer to the above data. If product price is $60, the firm will:

answer

produce 6 units and realize a $100 economic profit

question

Which of the following statements concerning the relationships between total product (TP), average product (AP), and marginal product (MP) is not correct?

answer

AP continues to rise so long as TP is rising.

question

The amount of calendar time associated with the long run:

answer

varies from industry to industry.

question

DASH Airlines is considering the addition of a flight from Red Cloud to David City. The total cost of the flight would be $1100 of which fixed costs are $800. Expected revenues from the flight are $600. DASH should:

answer

add this flight because marginal revenue exceeds marginal costs.

question

Economies of scale are indicated by:

answer

the declining segment of the long-run average total cost curve.

question

In the short run the individual competitive firm's supply curve is that segment of the:

answer

marginal cost curve lying above the average variable cost curve.

question

*7* Refer to the above data. If product price is $75, the firm will:

answer

produce 4 units of output.

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*7* Refer to the above data. Given the $75 product price, at its optimal output the firm will:

answer

realize a $30 economic profit.

question

The basic characteristic of the short run is that:

answer

the firm does not have sufficient time to change the size of its plant.

question

Assume the XYZ Corporation is producing 20 units of output. it is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation:

answer

is realizing an economic profit of $40.

question

The law of diminishing returns indicates that:

answer

as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.

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A fixed cost is:

answer

any cost which a firm would incur even if output was zero.

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*8* Refer to the above diagram. At p3, this firm will:

answer

produce 40 units and realize a loss.

question

Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and average variable costs of $150. the firm's total fixed costs are:

answer

$5,000.

question

Suppose you find that the price of your product is less that minimum average variable costs. You should:

answer

close down because, by producing, your losses will exceed your total fixed costs.

question

An increasing-cost industry is associated with:

answer

an upsloping long-run supply curve

question

If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that:

answer

economies of scale are being realized.

question

Assume for a competitive firm that MC=AVC at $12, MC=ATC at $20, and MC=MR at $16. This firm will:

answer

minimize its losses by producing in the short run.

question

A constant-cost industry is one in which:

answer

resource prices remain unchanged as output is increased.

question

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:

answer

will also be $5.

question

*9* Refer to the above data. The marginal product of the fourth worker:

answer

is 5.

1 of 40

question

*1* Refer to the above data. The firm's:

answer

economic profit is $16.

question

*1* Refer to the above data. At the profit-maximizing output the firms total cost is:

answer

$32.

question

*1* Refer to the above data. At the profit-maximizing output the firms total revenue is:

answer

$48.

question

Which of the following is correct?

answer

When MP is rising MC is falling, and when MP is falling MC is rising.

question

*2* Refer to the above data. If the firm decided to increase its output from 6 to 7 units, its total costs would rise by:

answer

$120.

question

If a firm increases all of its inputs by 10 percent and its output increases by 15 percent, we can say that:

answer

it is encountering economies of scale.

question

Which of the following statements is correct?

answer

The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping.

question

In the short run a purely competitive seller will shut down if:

answer

price is less than average variable cost at all outputs.

question

An increasing-cost industry is the result of:

answer

higher resource prices which occur as the industry expands.

question

Suppose a firm is in a range of production where it is experiencing economies of scale. Knowing this, we can predict that:

answer

a 10 percent increase in all inputs will increase output by more than 10 percent.

question

Diseconomies of scale arise primarily because:

answer

of the difficulties involved in managing and coordinating a large business enterprise.

question

*3* Refer to the above data. The total variable cost of producing 5 units:

answer

is $37.

question

*3* Refer to the above data. The profit maximizing output for this firm:

answer

cannot be determined from the information given.

question

*3*Refer to the above data. The marginal cost of producing the sixth unit of output:

answer

is $8.

question

*3* Refer to the above data. The average total cost of producing 3 units of output:

answer

is $16.

question

The basic difference between the "short-run" and the "long-run" is that:

answer

at least one resource is fixed in the short run, while all resources are variable in the long run.

question

*4* Refer to the above short-run data. The profit-maximizing output for this firm is:

answer

320 units.

question

*4* Refer to the above short-run data. Total fixed cost for this firm:

answer

is $200.

question

*5* Refer to the above diagram showing the average total cost curve for a purely competitve firm. At the long-run equilibrium of output, this firm's economic profit:

answer

is zero.

question

*6* Refer to the above data. If product price is $60, the firm will:

answer

produce 6 units and realize a $100 economic profit

question

Which of the following statements concerning the relationships between total product (TP), average product (AP), and marginal product (MP) is not correct?

answer

AP continues to rise so long as TP is rising.

question

The amount of calendar time associated with the long run:

answer

varies from industry to industry.

question

answer

add this flight because marginal revenue exceeds marginal costs.

question

Economies of scale are indicated by:

answer

the declining segment of the long-run average total cost curve.

question

In the short run the individual competitive firm's supply curve is that segment of the:

answer

marginal cost curve lying above the average variable cost curve.

question

*7* Refer to the above data. If product price is $75, the firm will:

answer

produce 4 units of output.

question

*7* Refer to the above data. Given the $75 product price, at its optimal output the firm will:

answer

realize a $30 economic profit.

question

The basic characteristic of the short run is that:

answer

the firm does not have sufficient time to change the size of its plant.

question

answer

is realizing an economic profit of $40.

question

The law of diminishing returns indicates that:

answer

as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.

question

A fixed cost is:

answer

any cost which a firm would incur even if output was zero.

question

*8* Refer to the above diagram. At p3, this firm will:

answer

produce 40 units and realize a loss.

question

Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and average variable costs of $150. the firm's total fixed costs are:

answer

$5,000.

question

Suppose you find that the price of your product is less that minimum average variable costs. You should:

answer

close down because, by producing, your losses will exceed your total fixed costs.

question

An increasing-cost industry is associated with:

answer

an upsloping long-run supply curve

question

If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that:

answer

economies of scale are being realized.

question

Assume for a competitive firm that MC=AVC at $12, MC=ATC at $20, and MC=MR at $16. This firm will:

answer

minimize its losses by producing in the short run.

question

A constant-cost industry is one in which:

answer

resource prices remain unchanged as output is increased.

question

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:

answer

will also be $5.

question

*9* Refer to the above data. The marginal product of the fourth worker:

answer

is 5.

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