Midterm Exam 2 (Econ 201) - Assignment Essays

question

The reason economists and accountants have problems using cost analysis in the real world is that:

answer

although implicit costs do not show up in accounting profits, they nevertheless affect managerial decisions.

question

To maximize profits, a perfectly competitive firm should produce until:

answer

marginal cost is equal to price.

question

At very high levels of output, total cost tends to:

answer

increase at an increasing rate.

question

If the elasticity of demand for electricity is 0.13, the demand for electricity is:

answer

inelastic.

question

If elasticity of demand is less than 1:

answer

a rise in price increases total revenue.

question

If the price elasticity of demand for a good is inelastic, a price change causes:

answer

a less than proportionate change in quantity demanded.

question

The law of diminishing marginal productivity implies that the marginal product of a variable input:

answer

eventually declines.

question

Along a straight-line demand curve, elasticity:

answer

rises as price rises.

question

Since capital is relatively scarce in India, the economically efficient method of producing food would probably:

answer

not be capital-intensive.

question

Economic efficiency is achieved at a particular output level if:

answer

average total cost is as low as possible.

question

The minimum point of the average total cost curve always occurs at a larger output level than the minimum point of the average variable cost curve because:

answer

average fixed costs are falling.

question

A firm's total variable cost increases from $4,000 to $4,020 as the firm increases its output from 400 to 401 units. What is the marginal cost of producing the 401st unit?

answer

$20

question

Barriers to entry:

answer

restrict the number of firms in an industry.

question

The upward-sloping portion of the short-run average total cost curve is caused by:

answer

the presence of fixed inputs.

question

Total fixed costs:

answer

are positive even when no output is produced.

question

The difference between economic profit and accounting profit is equal to:

answer

implicit revenues minus implicit costs.

question

Which of the following most likely correctly orders goods from most to least demand elastic?

answer

Cars, motor transportation, transportation

question

Constant returns to scale means that long-run:

answer

ATC does not change as output increases.

question

If a perfectly competitive industry is in long-run equilibrium, the price of the product equals minimum:

answer

average total cost.

question

Along a straight-line supply curve:

answer

the change in elasticity depends on the supply curve in question.

question

The marginal cost curve:

answer

rises when the point of diminishing marginal productivity is reached.

question

Given that there are significant economies of scale involved in making flat screen television sets, the cost of manufacturing a flat screen television set most likely will:

answer

fall as the industry matures.

question

Which of the following is one of the necessary conditions for perfect competition?

answer

no barriers to entry

question

Refer to the graph shown. If market price is currently $7.00 per unit, this perfectly competitive firm will maximize profit by producing:

answer

850 units of output.

question

Which of the following is an accurate statement about the envelope relationship?

answer

At the planned output level, short-run average total cost equals long-run average cost, but at all other output levels, short-run average total cost is higher than long-run average cost.

question

Diseconomies of scale are associated with:

answer

an upward-sloping long-run average cost curve.

question

Short-run decisions are:

answer

constrained because some inputs are fixed and others are variable.

question

Total profit is maximized at the output level at which the:

answer

vertical distance between the total revenue curve and the total cost curve is maximized.

question

In a perfectly competitive market:

answer

price does more of the adjusting in the short run and quantity does more of the adjusting in the long run.

question

Which of the following is most likely to be an example of economies of scale?

answer

The per-unit costs on Excel Publishing Company's manuals fall because it adopted a new technology after receiving a large order from the government.

question

If demand is highly inelastic and supply shifts to the right, price:

answer

will fall significantly; quantity hardly changes at all.

question

With the long-run average cost curve above, the minimum efficient scale of production is:

answer

18 to 21.

question

Which of the following is an example of a short-run decision?

answer

An automobile manufacturing company considering whether to expand its existing workforce.

question

Can accounting profit be positive while economic profits are negative?

answer

Yes, if total revenue covers explicit costs but not opportunity costs.

question

If a firm's average fixed cost is $4 and its average total cost is $6, its average variable cost is:

answer

question

The demand for a good is inelastic. Which of the following would be an explanation for this?

answer

The good is a necessity.

question

The long-run average cost curve is typically:

answer

downward-sloping at first but then upward-sloping.

question

If the average total cost of supplying a good exceeds the price at which the good can be sold, then entrepreneurs have:

answer

no incentive to supply the good.

question

If the law of diminishing marginal productivity holds true, eventually both the marginal cost curve and the average cost curve must become:

answer

upward-sloping.

question

Which of the following statements is true?

answer

Many different production processes can be technically efficient, but only the method that involves the lowest possible cost is economically efficient.

1 of 40

question

The reason economists and accountants have problems using cost analysis in the real world is that:

answer

although implicit costs do not show up in accounting profits, they nevertheless affect managerial decisions.

question

To maximize profits, a perfectly competitive firm should produce until:

answer

marginal cost is equal to price.

question

At very high levels of output, total cost tends to:

answer

increase at an increasing rate.

question

If the elasticity of demand for electricity is 0.13, the demand for electricity is:

answer

inelastic.

question

If elasticity of demand is less than 1:

answer

a rise in price increases total revenue.

question

If the price elasticity of demand for a good is inelastic, a price change causes:

answer

a less than proportionate change in quantity demanded.

question

The law of diminishing marginal productivity implies that the marginal product of a variable input:

answer

eventually declines.

question

Along a straight-line demand curve, elasticity:

answer

rises as price rises.

question

Since capital is relatively scarce in India, the economically efficient method of producing food would probably:

answer

not be capital-intensive.

question

Economic efficiency is achieved at a particular output level if:

answer

average total cost is as low as possible.

question

The minimum point of the average total cost curve always occurs at a larger output level than the minimum point of the average variable cost curve because:

answer

average fixed costs are falling.

question

A firm's total variable cost increases from $4,000 to $4,020 as the firm increases its output from 400 to 401 units. What is the marginal cost of producing the 401st unit?

answer

$20

question

Barriers to entry:

answer

restrict the number of firms in an industry.

question

The upward-sloping portion of the short-run average total cost curve is caused by:

answer

the presence of fixed inputs.

question

Total fixed costs:

answer

are positive even when no output is produced.

question

The difference between economic profit and accounting profit is equal to:

answer

implicit revenues minus implicit costs.

question

Which of the following most likely correctly orders goods from most to least demand elastic?

answer

Cars, motor transportation, transportation

question

Constant returns to scale means that long-run:

answer

ATC does not change as output increases.

question

If a perfectly competitive industry is in long-run equilibrium, the price of the product equals minimum:

answer

average total cost.

question

Along a straight-line supply curve:

answer

the change in elasticity depends on the supply curve in question.

question

The marginal cost curve:

answer

rises when the point of diminishing marginal productivity is reached.

question

Given that there are significant economies of scale involved in making flat screen television sets, the cost of manufacturing a flat screen television set most likely will:

answer

fall as the industry matures.

question

Which of the following is one of the necessary conditions for perfect competition?

answer

no barriers to entry

question

Refer to the graph shown. If market price is currently $7.00 per unit, this perfectly competitive firm will maximize profit by producing:

answer

850 units of output.

question

Which of the following is an accurate statement about the envelope relationship?

answer

At the planned output level, short-run average total cost equals long-run average cost, but at all other output levels, short-run average total cost is higher than long-run average cost.

question

Diseconomies of scale are associated with:

answer

an upward-sloping long-run average cost curve.

question

Short-run decisions are:

answer

constrained because some inputs are fixed and others are variable.

question

Total profit is maximized at the output level at which the:

answer

vertical distance between the total revenue curve and the total cost curve is maximized.

question

In a perfectly competitive market:

answer

price does more of the adjusting in the short run and quantity does more of the adjusting in the long run.

question

Which of the following is most likely to be an example of economies of scale?

answer

The per-unit costs on Excel Publishing Company's manuals fall because it adopted a new technology after receiving a large order from the government.

question

If demand is highly inelastic and supply shifts to the right, price:

answer

will fall significantly; quantity hardly changes at all.

question

With the long-run average cost curve above, the minimum efficient scale of production is:

answer

18 to 21.

question

Which of the following is an example of a short-run decision?

answer

An automobile manufacturing company considering whether to expand its existing workforce.

question

Can accounting profit be positive while economic profits are negative?

answer

Yes, if total revenue covers explicit costs but not opportunity costs.

question

If a firm's average fixed cost is $4 and its average total cost is $6, its average variable cost is:

answer

question

The demand for a good is inelastic. Which of the following would be an explanation for this?

answer

The good is a necessity.

question

The long-run average cost curve is typically:

answer

downward-sloping at first but then upward-sloping.

question

If the average total cost of supplying a good exceeds the price at which the good can be sold, then entrepreneurs have:

answer

no incentive to supply the good.

question

If the law of diminishing marginal productivity holds true, eventually both the marginal cost curve and the average cost curve must become:

answer

upward-sloping.

question

Which of the following statements is true?

answer

Many different production processes can be technically efficient, but only the method that involves the lowest possible cost is economically efficient.

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