question
Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Together, Eldin and Murphy can paint five houses per week. What is Murphy's marginal product?
Select one:
a. 2 houses Correct
b. 3 houses
c. 5 houses
d. 8 houses
Select one:
a. 2 houses Correct
b. 3 houses
c. 5 houses
d. 8 houses
answer
a. 2 houses
question
Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Atul to help her. Together, Riva and Atul can bottle and sell seven cases per week. What is Atul's marginal product?
Select one:
a. 2 cases
b. 3 cases
c. 5 cases
d. 7 cases
Select one:
a. 2 cases
b. 3 cases
c. 5 cases
d. 7 cases
answer
b. 3 cases
question
Which of these assumptions is often realistic for a firm in the short run?
Select one:
a. The firm can vary both the size of its factory and the number of workers it employs.
b. The firm can vary the size of its factory but not the number of workers it employs.
c. The firm can vary the number of workers it employs but not the size of its factory.
d. The firm can vary neither the size of its factory nor the number of workers it employs.
Select one:
a. The firm can vary both the size of its factory and the number of workers it employs.
b. The firm can vary the size of its factory but not the number of workers it employs.
c. The firm can vary the number of workers it employs but not the size of its factory.
d. The firm can vary neither the size of its factory nor the number of workers it employs.
answer
c. The firm can vary the number of workers it employs but not the size of its factory.
question
Average total cost is very high when a small amount of output is produced because
Select one:
a. average variable cost is high.
b. average fixed cost is high.
c. marginal cost is high.
d. marginal product is high.
Select one:
a. average variable cost is high.
b. average fixed cost is high.
c. marginal cost is high.
d. marginal product is high.
answer
b. average fixed cost is high.
question
Refer to Figure 13-8. Quantity B represents the output level where the firm
Select one:
a. maximizes profits.
b. minimizes average variable costs.
c. produces at the efficient scale.
d. minimizes marginal costs.
Select one:
a. maximizes profits.
b. minimizes average variable costs.
c. produces at the efficient scale.
d. minimizes marginal costs.
answer
b. minimizes average variable costs.
question
Refer to Figure 13-8. Quantity C represents the output level where the firm
Select one:
a. maximizes profits.
b. minimizes total costs.
c. produces at the efficient scale.
d. minimizes marginal costs.
Select one:
a. maximizes profits.
b. minimizes total costs.
c. produces at the efficient scale.
d. minimizes marginal costs.
answer
c. produces at the efficient scale.
question
Larry's Lunchcart is a small street vendor business. If Larry makes 15 pretzels in his first hour of business and incurs a total cost of $16.50, his average total cost per pretzel is
Select one:
a. $1.10.
b. $6.50.
c. $15.00.
d. $16.50.
Select one:
a. $1.10.
b. $6.50.
c. $15.00.
d. $16.50.
answer
a. $1.10.
question
Sonia opened a yoga studio where she teaches classes and sells yoga clothing. Fixed costs for Sonia's yoga studio include the cost of the
(i)tank tops.
(ii)wages paid to the other yoga instructors.
(iii)lease on the studio space.
(iv)insurance that the landlord requires Sonia to carry for the studio.
Select one:
a. (i) only
b. (i) and (ii) only
c. (iii) and (iv) only
d. (i), (ii), (iii), and (iv)
(i)tank tops.
(ii)wages paid to the other yoga instructors.
(iii)lease on the studio space.
(iv)insurance that the landlord requires Sonia to carry for the studio.
Select one:
a. (i) only
b. (i) and (ii) only
c. (iii) and (iv) only
d. (i), (ii), (iii), and (iv)
answer
c. (iii) and (iv) only
question
Suppose Jan started up a small lemonade stand business last month. Variable costs for Jan's lemonade stand now include the cost of
Select one:
a. lemons and sugar.
b. paper cups.
c. the wages paid to her hourly workers.
d. All of the above are correct.
Select one:
a. lemons and sugar.
b. paper cups.
c. the wages paid to her hourly workers.
d. All of the above are correct.
answer
d. all of the above are correct.
question
Eileen's Elegant Earrings produces pairs of earrings for its mail order catalogue business. Each pair is shipped in a separate box. She rents a small room for $150 a week in the downtown business district that serves as her factory. She can hire workers for $275 a week. There are no implicit costs.
Refer to Table 13-12. What is the total cost associated with making 890 boxes of earrings per week?
Select one:
a. $1,250
b. $1,325
c. $1,400
d. $1,575
Refer to Table 13-12. What is the total cost associated with making 890 boxes of earrings per week?
Select one:
a. $1,250
b. $1,325
c. $1,400
d. $1,575
answer
a. $1,250
question
The average-fixed-cost curve
Select one:
a. is constant.
b. is always decreasing.
c. intersects marginal cost at the minimum of average fixed cost.
d. intersects marginal cost at the minimum of marginal cost.
Select one:
a. is constant.
b. is always decreasing.
c. intersects marginal cost at the minimum of average fixed cost.
d. intersects marginal cost at the minimum of marginal cost.
answer
b. is always decreasing.
question
Diseconomies of scale occur when
Select one:
a. average fixed costs are falling.
b. average fixed costs are constant.
c. long-run average total costs rise as output increases.
d. long-run average total costs fall as output increases.
Select one:
a. average fixed costs are falling.
b. average fixed costs are constant.
c. long-run average total costs rise as output increases.
d. long-run average total costs fall as output increases.
answer
c. long-run average total costs rise as output increases.
question
Refer to Table 13-17. Which firm has economies of scale over the entire range of output?
Select one:
a. Firm 1 only
b. Firms 1 and 2 only
c. Firm 2 only
d. Firm 3 only
Select one:
a. Firm 1 only
b. Firms 1 and 2 only
c. Firm 2 only
d. Firm 3 only
answer
a. Firm 1 only
question
Chloe's Café sells gourmet cinnamon rolls. In the long run, the café incurs a total cost of $500 to produce 1,000 cinnamon rolls. If Chloe's Café exhibits economies of scale between 1,000 and 2,000 cinnamon rolls, the long-run average total cost for 1,500 cinnamon rolls is
Select one:
a. higher than $0.50.
b. lower than $0.50.
c. equal to $0.50.
d. higher than $500.
Select one:
a. higher than $0.50.
b. lower than $0.50.
c. equal to $0.50.
d. higher than $500.
answer
b. lower than $0.50.
question
If the market price is $8, how many units of output should the firm produce to maximize profit?
Select one:
a. 5 units
b. 6 units
c. 7 units
d. 8 units
Select one:
a. 5 units
b. 6 units
c. 7 units
d. 8 units
answer
b. 6 units
question
Cold Duck Airlines flies between Tacoma and Portland. The company leases planes on a year-long contract at a cost that averages $600 per flight. Other costs (fuel, flight attendants, etc.) amount to $550 per flight. Currently, Cold Duck's revenues are $1,000 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profit, Cold Duck Airlines should
Select one:
a. drop the flight immediately.
b. continue the flight.
c. continue flying until the lease expires and then drop the run.
d. drop the flight now but renew the lease if conditions improve.
Select one:
a. drop the flight immediately.
b. continue the flight.
c. continue flying until the lease expires and then drop the run.
d. drop the flight now but renew the lease if conditions improve.
answer
c. continue flying until the lease expires and then drop the run.
question
Suppose that a firm in a competitive market has the following cost curves:
Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is
Select one:
a. above $6.30.
b. less than $6.30 but more than $4.50.
c. less than $4.50.
d. exactly $6.30.
Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is
Select one:
a. above $6.30.
b. less than $6.30 but more than $4.50.
c. less than $4.50.
d. exactly $6.30.
answer
a. above $6.30.
question
Suppose a firm operating in a competitive market has the following cost curves:
Refer to Figure 14-3. If the market price is $10, what is the firm's total cost?
Select one:
a. $15
b. $30
c. $35
d. $50
Refer to Figure 14-3. If the market price is $10, what is the firm's total cost?
Select one:
a. $15
b. $30
c. $35
d. $50
answer
c. $35
question
Suppose a firm operating in a competitive market has the following cost curves:
Refer to Figure 14-3. If the market price is $10, what is the firm's total revenue?
Select one:
a. $15
b. $30
c. $35
d. $50
Refer to Figure 14-3. If the market price is $10, what is the firm's total revenue?
Select one:
a. $15
b. $30
c. $35
d. $50
answer
d. $50
question
Suppose a firm operating in a competitive market has the following cost curves:
Refer to Figure 14-3. The firm will earn zero economic profit if the market price is
Select one:
a. $0.
b. $6. Correct
c. $7.
d. $10.
Refer to Figure 14-3. The firm will earn zero economic profit if the market price is
Select one:
a. $0.
b. $6. Correct
c. $7.
d. $10.
answer
b. $6.
question
Refer to Table 14-10. At which level of production will the firm maximize profit?
Select one:
a. 3 units
b. 4 units
c. 5 units
d. 6 units
Select one:
a. 3 units
b. 4 units
c. 5 units
d. 6 units
answer
a. 3 units
question
Refer to Table 14-10. If the firm produces the profit-maximizing level of production, how much profit will the firm earn?
Select one:
a. $2
b. $4
c. $6
d. $8
Select one:
a. $2
b. $4
c. $6
d. $8
answer
c. $6
question
Which of the following represents the firm's long-run condition for exiting a market?
Select one:
a. exit if P < MC
b. exit if P < FC
c. exit if P < ATC
d. exit if MR < MC
Select one:
a. exit if P < MC
b. exit if P < FC
c. exit if P < ATC
d. exit if MR < MC
answer
c. exit if P < ATC
question
Which of the following represents the firm's short-run condition for shutting down?
Select one:
a. shut down if TR < TC
b. shut down if TR < FC
c. shut down if P < ATC
d. shut down if TR < VC
Select one:
a. shut down if TR < TC
b. shut down if TR < FC
c. shut down if P < ATC
d. shut down if TR < VC
answer
d. shut down if TR < VC
question
Refer to Figure 14-13. If the price is $4.50 in the short run, what will happen in the long run?
Select one:
a. Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. Correct
b. Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.
c. Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.
d. Because the price is below the firm's average variable costs, the firms will shut down.
Select one:
a. Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. Correct
b. Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.
c. Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.
d. Because the price is below the firm's average variable costs, the firms will shut down.
answer
a. Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry.
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