question
It is possible for a firm to continue to operate even at a loss in the short run
answer
as long as the total revenue can cover its variable costs
question
Long-run diseconomies of scale in a firm occur mainly because
answer
of the inherent difficulties involved in managing and coordinating a large business enterprise.
question
If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then
answer
new firms will enter this market
question
Price Quantity Demanded
$7 1
6 2
5 3
4 4
3 5
Answer the question on the basis of the firm facing the above demand schedule.
The marginal revenue obtained from selling the third unit of output is
$7 1
6 2
5 3
4 4
3 5
Answer the question on the basis of the firm facing the above demand schedule.
The marginal revenue obtained from selling the third unit of output is
answer
$3
question
Output Total Cost
0 $10
1 20
2 28
3 38
4 53
5 73
6 98
Refer to the provided table. The total fixed cost of production is
0 $10
1 20
2 28
3 38
4 53
5 73
6 98
Refer to the provided table. The total fixed cost of production is
answer
$10
question
In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if the market price of its product is below
answer
Average Variable Cost (AVC)
question
The long run is a period of time, or a time frame, in which
answer
the amount of all resources can be varied
question
Suppose that a firm sells its products for a price of $25. When the firm produces 100 units of output, its ATC=$15, AVC=$5, and AFC=$10. The total revenue generated by the firm is
answer
$2,500
question
Suppose that a firm sells its products for a price of $25. When the firm produces 100 units of output, its ATC=$15, AVC=$5, and AFC=$10. The total cost incurred by the firm is
answer
$1,500
question
If total fixed cost is $200, total variable cost is $600, and total output produced is 4 units, then average total cost must be
answer
$200
question
Output Total Cost
0 $50
1 90
2 120
3 140
4 170
5 210
6 260
7 330
The accompanying table gives cost data for a firm that is selling in a purely competitive market. If product price is $45, the firm will
0 $50
1 90
2 120
3 140
4 170
5 210
6 260
7 330
The accompanying table gives cost data for a firm that is selling in a purely competitive market. If product price is $45, the firm will
answer
produce 5 units and make $15 economic profit.
question
Compared to the purely competitive industry, a pure monopoly firm
answer
is able to create barriers to entry of new firms into the industry, and maintain positive economic profits in the long run.
question
The above graph shows the demand and the cost curves for a firm operating in a perfectly competitive market. According to the accompanying diagram, at the profit-maximizing output, the firm will realize
answer
an economic profit of ABGH.
question
Output Marginal Revenue Marginal Cost
0 -- --
1 $16 $10
2 16 9
3 16 13
4 16 17
5 16 21
Refer to the data in the accompanying table. If the firm's minimum average variable cost is $10, the firm's profit-maximizing level of output would be
0 -- --
1 $16 $10
2 16 9
3 16 13
4 16 17
5 16 21
Refer to the data in the accompanying table. If the firm's minimum average variable cost is $10, the firm's profit-maximizing level of output would be
answer
3
question
The above graph shows the demand and the cost curves for a firm operating in a perfectly competitive market. According to the accompanying diagram, to maximize profit or minimize losses, this firm will produce
answer
E units at price A.
question
The question is based on the following table, which provides information on the production of a product that requires one variable input.
Input Total Product
0 0
1 5
2 20
3 32
4 42
5 50
6 55
7 58
8 58
9 56
Diminishing marginal returns sets in with the addition of the
Input Total Product
0 0
1 5
2 20
3 32
4 42
5 50
6 55
7 58
8 58
9 56
Diminishing marginal returns sets in with the addition of the
answer
Third unit of input
question
If a regulatory commission wants to provide an electricity company with a fair return on its investment, it should establish a price that is equal to
answer
Average total cost (ATC)
question
The question is based on the following table, which provides information on the production of a product that requires one variable input.
Input Total Product
0 0
1 5
2 20
3 32
4 42
5 50
6 55
7 58
8 58
9 56
With the addition of the second unit of input, the marginal product is
Input Total Product
0 0
1 5
2 20
3 32
4 42
5 50
6 55
7 58
8 58
9 56
With the addition of the second unit of input, the marginal product is
answer
15
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 making an economic profit of $40.
question
Utility companies like electricity or water supply operate as natural monopolies because of
answer
economies of scale.
question
Which of the following is an example of a sunk cost (or fixed cost), as it relates to a firm?
answer
office decoration expenses
question
Round Things, Inc.'s production process exhibits economies of scale. Currently their long-run average cost is $12/unit. If Round Things doubles its use of all inputs, its new long-run average total cost will be
answer
less than $12/unit.
question
Can an average perfectly-competitive firm charge a higher price than rival companies?
answer
No, the firm is a price taker (has to accept the market price)
question
Creative destruction is
answer
the process by which new firms and new products replace existing dominant firms and products.
question
Output Total Cost
0 $10
1 20
2 30
3 40
4 50
5 60
6 70
Refer to the provided table. The average variable cost of producing 3 units of output is
0 $10
1 20
2 30
3 40
4 50
5 60
6 70
Refer to the provided table. The average variable cost of producing 3 units of output is
answer
$10
question
Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork will be exactly
answer
$3
question
When the value of a product to each user, including existing users, increases due to an increase in the total number of users—as in the case of Facebook—we refer to this as
answer
Network effects
question
Suppose that a firm produces 200 units a year and sells them all for $10 each. The explicit costs of production are $1500 and the implicit costs of production are $300. The firm earns an accounting profit of
answer
$500 and an economic profit of $200.
question
What is the profit-maximizing rule in any industry? A business should produce the quantity where its ________.
answer
marginal revenue = marginal cost
question
With nonrivalrous consumption, such as in the case of online music and movies, as more consumers buy the product,
answer
the average cost of the output declines because the marginal cost of producing such goods is very small.
question
What do economists mean by "marginal" revenue?
answer
Extra revenue received from selling one more unit of a product
question
Suppose that a monopolist calculates that at its present output level, marginal revenue is $1.00 and marginal cost is $2.00. It could maximize profits or minimize losses by
answer
decreasing output and increasing price.
question
The MR = MC rule applies
answer
to firms in all types of industries in both the short run and in the long run.
question
Suppose that a firm sells its products for a price of $25. When the firm produces 100 units of output, its ATC=$15, AVC=$5, and AFC=$10. The profit/loss incurred by the firm is
answer
$1,000
question
Refer to the graph for a profit-maximizing monopolist. At equilibrium, the firm will be earning
answer
positive profits.
question
In a market economy, "allocative efficiency" is said to be achieved when the production of a good occurs where
answer
P = MC
question
Long-run competitive equilibrium
answer
results in zero economic profits for all existing firms in the industry.
question
Output Total Cost
0 $10
1 20
2 28
3 38
4 53
5 73
6 98
Refer to the provided table. The marginal cost of producing the sixth unit of output is
0 $10
1 20
2 28
3 38
4 53
5 73
6 98
Refer to the provided table. The marginal cost of producing the sixth unit of output is
answer
$25
question
A patent gives a firm the power to charge a price that
answer
is higher than marginal cost of production.
question
Which of the following is a barrier to entry of new firms in an industry?
answer
patents and licenses
question
Suppose that in the imaginary land of OZ, all doctors are exactly identical to each other and there are stringent regulations that prohibit entry of new doctors from other countries. If each medical business makes positive profit in the short run, then
answer
the businesses will continue to make positive profits in the long run as well
question
Assume that the market for soybeans is purely competitive. Currently, firms growing soybeans are earning positive economic profits. In the long run, we can expect
answer
new firms to enter, causing the market price of soybeans to fall.
question
The reason that average total cost of production eventually increases as output increases for the typical firm is because of
answer
diminishing marginal returns.
question
If the industry depicted in the graph is a pure monopoly firm, the profit-maximizing price and quantity will be
answer
P3 and Q3
question
Which of the following will be an example of implicit cost for a firm?
answer
Wages from previous job forgone by the owner of the firm.
question
A firm that experiences economies of scale over its range of production will have a
answer
falling long-run average cost curve.
question
If a monopoly firm engages in price discrimination, it will
answer
charge a higher price where individual demand is price inelastic and a lower price where individual demand is price elastic.
question
The economic theory of the firm assumes that managers' primary goal is to ________.
answer
maximize economic profit
question
Marginal costs of production for a producer may be very small due to its product's ability to satisfy a large number of consumers at the same time (as for Microsoft with its Windows Operating System). This characteristic of a product is called
answer
simultaneous consumption.
question
In a market economy, the term productive efficiency refers to
answer
the production of a good at the lowest average total cost.
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