question
Scenario 13-3
Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce.
Refer to Scenario 13-3. What is the total opportunity cost of the day that Farmer Ziva spent in the field planting lettuce?
Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce.
Refer to Scenario 13-3. What is the total opportunity cost of the day that Farmer Ziva spent in the field planting lettuce?
answer
$380
question
Table 13-7The following table shows the production costs for The Flying Elvis Copter Rides.
Refer to Table 13-7. What is the value of D?
Refer to Table 13-7. What is the value of D?
answer
$50
question
Figure 13-6
The following figure depicts average total cost functions for a firm that produces automobiles.
Refer to Figure 13-6. At levels of output between M and N, the firm experiences
The following figure depicts average total cost functions for a firm that produces automobiles.
Refer to Figure 13-6. At levels of output between M and N, the firm experiences
answer
constant returns to scale
question
Jacqui decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business, she withdrew $20,000 from her savings, which earned 5 percent interest. She also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Jacqui's economic profit from running her own business?
answer
$4,000
question
Table 13-7The following table shows the production costs for The Flying Elvis Copter Rides.
Refer to Table 13-7. What is the value of E?
Refer to Table 13-7. What is the value of E?
answer
$100
question
Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal product?
answer
15 bouquets
question
Refer to Table 13-9. For the firm whose production function and costs are specified in the table, its average-variable-cost curve is
answer
increasing
question
Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 130). Then the marginal product of the 13th worker is
answer
8 units of output
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Figure 14-4
In the following figure, graph (a) depicts the linear marginal cost (MC) of a firm in a competitive market, and graph (b) depicts the linear market supply curve for a market with a fixed number of identical firms.
Graph (a): FirmGraph (b): Market
Refer to Figure 14-4. When 100 identical firms participate in this market, at what price will 15,000 units be supplied to this market?
In the following figure, graph (a) depicts the linear marginal cost (MC) of a firm in a competitive market, and graph (b) depicts the linear market supply curve for a market with a fixed number of identical firms.
Graph (a): FirmGraph (b): Market
Refer to Figure 14-4. When 100 identical firms participate in this market, at what price will 15,000 units be supplied to this market?
answer
$1.50
question
The accountants hired by Forever Fitness have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000. Because of this information, in the short run, Forever Fitness should
answer
shut down because staying open would be more expensive.
question
Which of the following represents the firm's short-run condition for shutting down?
answer
shut down is TR < VC
question
Which of the following statements regarding a competitive firm is correct?
- Because each firm faces a downward sloping demand, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output.
- If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units.
- By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price.
- For all firms, average revenue equals the price of the good.
- Because each firm faces a downward sloping demand, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output.
- If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units.
- By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price.
- For all firms, average revenue equals the price of the good.
answer
For all firms, average revenue equals the price of the good
question
If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then
answer
its average total cost is less than $10
question
Scenario 14-1
Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
Refer to Scenario 14-1. To maximize its profit, the firm should
Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
Refer to Scenario 14-1. To maximize its profit, the firm should
answer
decrease its output but continue to produce
question
Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue
answer
does not change
question
Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:
Refer to Figure 14-2. The firm will earn zero economic profit if the market price is
Suppose a firm operating in a competitive market has the following cost curves:
Refer to Figure 14-2. The firm will earn zero economic profit if the market price is
answer
$6
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Figure 15-7
Refer to Figure 15-7. To maximize total surplus, a benevolent social planner would choose which of the following outcomes?
Refer to Figure 15-7. To maximize total surplus, a benevolent social planner would choose which of the following outcomes?
answer
Q = 45 and P = 45
question
If a profit-maximizing monopolist faces a downward-sloping market demand curve, its
answer
marginal revenue is less than the price of the product.
question
Which of the following is not an example of price discrimination?
answer
An ice cream parlor charges a higher price for ice cream than for sherbet.
question
The social cost of a monopoly is equal to its
answer
deadweight loss
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Monopoly firms face
answer
downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.
question
Figure 15-2
Refer to Figure 15-2. The demand curve for a monopoly firm is depicted by curve
Refer to Figure 15-2. The demand curve for a monopoly firm is depicted by curve
answer
B
question
For a firm to price discriminate,
answer
it must have some market power.
question
A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it
answer
can prevent children from buying the lower-priced tickets and selling them to adults.
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