question
Which of the following curves are U-shaped?
answer
i. average variable cost curve
iii. average total cost curve
iii. average total cost curve
question
If Melissa owns a software company that incurs no fixed costs, then
answer
her total cost equals her total variable cost
question
Which of the following statements correctly describes a total product curve?
answer
The curve separates attainable outputs from unattainable outputs
question
Accountants calculate
answer
depreciation using Internal Revenue Service rules
question
Which of the following is an implicit cost in Jim's business venture?
answer
i. the salary Jim could have earned at another job
iii. the interest Jim lost when he used his savings to help open his business
iii. the interest Jim lost when he used his savings to help open his business
question
The long-run average cost curve is U-shaped because of which of the following?
answer
economies and diseconomies of scale
question
A firm pays $50,000 for a machine that is used in production for one year, after it is sold for $40,000 to another firm. The $10,000 difference is
answer
economic depreciation, an implicit cost of production
question
Denise owns a plant that produces watch parts in Ohio. Denise noticed that when she hired the last worker, that worker's marginal product exceeded the marginal product of the previous worker. As a result, when the last worker was hired, Denise's average product of labor
answer
increased
question
Which of the following is an explicit cost of production?
answer
A. wages paid to workers
B. the electric bill
C. purchases of raw material
B. the electric bill
C. purchases of raw material
question
Which of the following is an example of an implicit cost?
answer
the economic depreciation of capital equipment the business owns
question
Diseconomies of scale can occur as a result of which of the following?
answer
management difficulties as the firm increases its size
question
Firms exit competitive markets when they incur economic loss. In the long run, this exit means that the economic losses of the surviving firms
answer
decrease until they equal zero
question
The marginal revenue curve for a perfectly competitive firm is
answer
horizontal
question
A perfectly competitive furniture-rental firm in Phoenix incurs an economic loss if the average total cost of each rental is
answer
greater than the marginal revenue of each rental
question
If a struggling perfectly competitive furniture store in Detroit shuts down, it incurs an economic loss equal to its
answer
total fixed cost
question
A market is classified as an oligopoly when
answer
a few firms compete
question
When new firms enter the perfectly competitive Miami bagel market, the market
answer
supply curve shifts rightward
question
A requirement of perfect competition is
answer
i. many firms sell an identical product to many buyers
ii. there are no restrictions on entry into (or exit from) the market, and established firms have no advantage over new firms
iii. sellers and buyers are well informed about prices
ii. there are no restrictions on entry into (or exit from) the market, and established firms have no advantage over new firms
iii. sellers and buyers are well informed about prices
question
In perfect competition, marginal revenue
answer
is equal to the market price
question
For a perfectly competitive corn grower in Nebraska, the marginal revenue curve is
answer
the same as its demand curve
question
A perfectly competitive firm maximizes its profit by producing at the point where
answer
marginal revenue is equal to marginal cost
question
A perfectly competitive firm is earning an economic profit when total fixed costs increase. Assuming the firm does not shut down, in the short run the firm will
answer
continue producing the same quantity as before but will make less economic profit
question
For a perfectly competitive firm, profit is maximized at the output level where
answer
i. total revenue exceeds total cost by the largest amount
ii. marginal revenue equals marginal cost
iii. price equals marginal cost
ii. marginal revenue equals marginal cost
iii. price equals marginal cost
question
When demand is elastic, marginal revenue is
answer
positive
question
A single-price monopoly
answer
must lower the price for all customers if it wants to increase its sales
question
Firms that can effectively price discriminate
answer
can prevent resale of their products
question
Price discrimination occurs when a firm
answer
is able to sell different units of good at different prices
question
A natural barrier to entry is defined as a barrier that arises because of
answer
technology that allows one firm to meet the entire market demand at lower average total cost than could two or more firms
question
Which of the following is an example of a natural monopoly?
answer
the local water company
question
When marginal revenue is positive, total revenue ______ when output increases and demand is _______
answer
increase; elastic
question
For a single-price monopoly, price is
answer
greater than marginal revenue
question
Assume someone organizes all farms in the nation into a single-price monopoly. As a result, the price consumers pay for food
answer
rises
question
A single-price monopoly is producing an output level where marginal revenue is $15, marginal cost is $13, and price is $20. This monopoly is
answer
not maximizing its profit and should increase output to increase its profit
question
If a single-price monopoly is making a large economic profit, what keeps other firms from competing away the profit?
answer
There are barriers to entry
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