question
A _____ is an organization that produces goods or services for sale.
A. Fixed input
B. Firm
C. Production Function
D. Variable Input
A. Fixed input
B. Firm
C. Production Function
D. Variable Input
answer
B
question
Lauren has 11 people working in her tangerine grove. The marginal product of the eleventh worker is 13 bushels of tangerines. If she hires a twelfth worker, the marginal product of that worker will be _____ bushels
A. 15
B. 12
C. The answer cannot be determined with the information available
D. 14
A. 15
B. 12
C. The answer cannot be determined with the information available
D. 14
answer
C
question
In the short run:
A. Some inputs are fixed and some inputs are variable
B. All inputs are variable
C. All inputs are fixed
D. All costs are variable
A. Some inputs are fixed and some inputs are variable
B. All inputs are variable
C. All inputs are fixed
D. All costs are variable
answer
A
question
The _____ is the increase in output that is produced when a firm hires an additional worker
A. Marginal Cost
B. Average Cost
C. Marginal product
D. Total Product
A. Marginal Cost
B. Average Cost
C. Marginal product
D. Total Product
answer
C
question
The total product:
A. Will be downward sloping if there are diminishing returns to the variable input
B. Will become flatter as output increases if there are diminishing returns to the variable input
C. Shows the relation between output and the quantity of a variable input for varying levels of the fixed input
D. Will become horizontal when the marginal product of the variable input is constant
A. Will be downward sloping if there are diminishing returns to the variable input
B. Will become flatter as output increases if there are diminishing returns to the variable input
C. Shows the relation between output and the quantity of a variable input for varying levels of the fixed input
D. Will become horizontal when the marginal product of the variable input is constant
answer
B
question
Diminishing returns to an input occur:
A. Only when there are no fixed inputs
B. When all inputs are fixed
C. When all inputs are variable
D. When some inputs are fixed and some are variable
A. Only when there are no fixed inputs
B. When all inputs are fixed
C. When all inputs are variable
D. When some inputs are fixed and some are variable
answer
D
question
In general, if marginal cost is EQUAL to average total cost:
A. Average total cost is at its minimum
B. Average total cost is increasing
C. Marginal cost is decreasing
D. Average total cost is at its maximum
A. Average total cost is at its minimum
B. Average total cost is increasing
C. Marginal cost is decreasing
D. Average total cost is at its maximum
answer
A
question
Where the long-run average total cost curve is at its lowest point, it is tangent to the _____ of the corresponding short-run average total cost curve
A. Minimum
B. Right of the minimum
C. Maximum
D. Left of the minimum
A. Minimum
B. Right of the minimum
C. Maximum
D. Left of the minimum
answer
A
question
In the long run, all costs are:
A. Fixed
B. Variable
C. Marginal
D. Constant
A. Fixed
B. Variable
C. Marginal
D. Constant
answer
Variable
question
Buffalo Aircraft doubles the amount of all of the inputs it uses—the factory doubles in size and twice as many workers are hired. After this expansion, the number of aircraft produced triples. If the price of inputs is unchanged, this means that Buffalo Aircraft is operating with:
A. Decreasing average variable cost
B. Economies of scale
C. Increasing marginal cost
D. Increasing average total cost
A. Decreasing average variable cost
B. Economies of scale
C. Increasing marginal cost
D. Increasing average total cost
answer
B
question
If all firms in an industry are price takers:
A. Each firm takes the market price as given for its output level, recognizing that the price will change if it alters its output significantly
B. Each firm can sell at the price it wants to charge, provided it is not too different from the prices other firms are charging
C. An individual firm cannot alter the market price even if it doubles its output
D. The market sets the price, and each firm can take it or leave it by setting a different price
A. Each firm takes the market price as given for its output level, recognizing that the price will change if it alters its output significantly
B. Each firm can sell at the price it wants to charge, provided it is not too different from the prices other firms are charging
C. An individual firm cannot alter the market price even if it doubles its output
D. The market sets the price, and each firm can take it or leave it by setting a different price
answer
C
question
If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a _____ share of the market, and consumers will consider her strawberries and her competitors' strawberries to be _____. Therefore, _____ advertising will take place in this market.
A. large; standardized; no
B. small; differentiated; no
C. large; differentiated; extensive
D. small; standardized; little or no
A. large; standardized; no
B. small; differentiated; no
C. large; differentiated; extensive
D. small; standardized; little or no
answer
D
question
Total revenue is a firm's:
A. Difference between revenue and cost
B. Total output times the price of that output
C. Ratio of revenue to quantity
D. Change in revenue resulting from a unit change in output
A. Difference between revenue and cost
B. Total output times the price of that output
C. Ratio of revenue to quantity
D. Change in revenue resulting from a unit change in output
answer
B
question
If a perfectly competitive firm decreases production from 11 units to 10 units and the market price is $20 per unit, total revenue for 10 units is:
A. $200
B. $20
C. -$20
D. $210
A. $200
B. $20
C. -$20
D. $210
answer
A
question
In a perfectly competitive industry, the market demand curve is usually:
A. Perfectly elastic
B. Perfectly inelastic
C. Relatively elastic
D. Downward-sloping
A. Perfectly elastic
B. Perfectly inelastic
C. Relatively elastic
D. Downward-sloping
answer
D
question
If a perfectly competitive firm is producing a quantity where P < MC, then profit:
A. Can be increased by decreasing the price
B. Is maximized
C. Can be increased by increasing production
D. Can be increased by decreasing production
A. Can be increased by decreasing the price
B. Is maximized
C. Can be increased by increasing production
D. Can be increased by decreasing production
answer
D
question
Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits. If the price of memory cards is $9, Mikail's output is 3,000 cards a month, and his monthly average total cost is $7, what are his monthly profits?
A. $21,000
B. $6,000
C. $2
D. $27,000
A. $21,000
B. $6,000
C. $2
D. $27,000
answer
B
question
The LOWEST point on a perfectly competitive firm's short-run supply curve corresponds to the minimum point on the _____ curve.
A. MC
B. AVC
C. ATC
D. AFC
A. MC
B. AVC
C. ATC
D. AFC
answer
B
question
If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
A. Shut down production
B. Produce at an economic profit
C. Produce at an economic loss
D. Produce more than the profit-maximizing quantity
A. Shut down production
B. Produce at an economic profit
C. Produce at an economic loss
D. Produce more than the profit-maximizing quantity
answer
C
question
If firms are making positive economic profits in the short run, then in the long run:
A. New firms will enter the industry
B. Firms will leave the industry.
C. The short-run industry supply curve will shift leftward
D. Industry output will rise and the price will rise
A. New firms will enter the industry
B. Firms will leave the industry.
C. The short-run industry supply curve will shift leftward
D. Industry output will rise and the price will rise
answer
A
question
Suppose that some firms in a perfectly competitive industry earn negative economic profits in the short run. In the long run, the:
A. Short-run industry supply curve will not shift
B. Number of firms in the industry will not change
C. Short-run industry supply curve will shift to the left
D. Number of firms in the industry will increase
A. Short-run industry supply curve will not shift
B. Number of firms in the industry will not change
C. Short-run industry supply curve will shift to the left
D. Number of firms in the industry will increase
answer
C
question
If some firms in a perfectly competitive industry are earning positive economic profits, then in the long run, the:
A. Industry is in equilibrium
B. Short-run industry supply curve will shift to the right
C. Number of firms in the industry will not change
D. Number of firms in the industry will decrease.
A. Industry is in equilibrium
B. Short-run industry supply curve will shift to the right
C. Number of firms in the industry will not change
D. Number of firms in the industry will decrease.
answer
B
question
The short-run individual supply curve for a perfectly competitive firm is given by the marginal cost curve above minimum average fixed cost
A. True
B. False
A. True
B. False
answer
B
question
Cindy's Nails operates in the perfectly competitive pedicure industry. The city is considering requiring nail salons to be certified by a health inspector. The certification will cost $1,000 annually and is thus a fixed cost. The certification will affect Cindy's decision to operate in the long run but will not affect the number of pedicures she chooses to perform in the short run.
A. True
B. False
A. True
B. False
answer
A
question
In the long run, firms will leave an industry if the market price is consistently less than their break-even price.
A. True
B. False
A. True
B. False
answer
A
question
Suppose the beef industry is perfectly competitive and the demand for beef rises. As long as the demand does not subsequently fall, beef producers can expect to earn economic profits in both the short run and the long run.
A. True
B. False
A. True
B. False
answer
B
question
The short-run industry supply curve:
A. Is a meaningful concept only if all firms in the industry are identical
B. Is of limited usefulness since it is not relevant when markets are perfectly competitive
C. Shows the total quantity supplied by all firms in an industry for each possible price when the number of producers is fixed
D. Is drawn on the assumption that the number of firms in the industry doesn't increase, but it allows for a decrease in the number of firms due to bankrupt firms leaving the industry
A. Is a meaningful concept only if all firms in the industry are identical
B. Is of limited usefulness since it is not relevant when markets are perfectly competitive
C. Shows the total quantity supplied by all firms in an industry for each possible price when the number of producers is fixed
D. Is drawn on the assumption that the number of firms in the industry doesn't increase, but it allows for a decrease in the number of firms due to bankrupt firms leaving the industry
answer
C
question
The supply curve found by taking the horizontal summation of the short-run supply curves of all of the firms in a perfectly competitive industry is called the _____ curve.
A. Interim market supply
B. Marginal cost
C. Competitive
D. Short-run market supply
A. Interim market supply
B. Marginal cost
C. Competitive
D. Short-run market supply
answer
D
question
Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, the typical firm is likely to:
A. Have neither an economic profit nor an economic loss
B. Incur an economic loss
C. Have no change in its economic profit
D. Earn an economic profit
A. Have neither an economic profit nor an economic loss
B. Incur an economic loss
C. Have no change in its economic profit
D. Earn an economic profit
answer
D
question
Suppose that the market for haircuts in a community is a perfectly competitive constant-cost industry and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the long run, firms will _____ the market, driving the price of haircuts _____ and the profits of individual firms _____.
A. Enter; down; back to zero
B. Leave; up; up
C. Leave; up; back to zero
D. Enter; up; back to zero
A. Enter; down; back to zero
B. Leave; up; up
C. Leave; up; back to zero
D. Enter; up; back to zero
answer
A
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