question
A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, He also needs take over a store building that he owns and currently rents out. So he would be losing $6,000 of rent a year. His expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity. What are his implicit costs?
A.)$52,000
B.)$78,000
C.)$66,000
D.)$26,000
E.)$72,000
A.)$52,000
B.)$78,000
C.)$66,000
D.)$26,000
E.)$72,000
answer
D.)
question
Which of the following would be shown on IBM's accounting statement?
A.) revenue, implicit costs, explicit costs, and accounting profit
B,)revenue, explicit costs, and economic profit
C.)revenue, explicit costs, and accounting profit
D.)revenue, implicit costs, and accounting profit
A.) revenue, implicit costs, explicit costs, and accounting profit
B,)revenue, explicit costs, and economic profit
C.)revenue, explicit costs, and accounting profit
D.)revenue, implicit costs, and accounting profit
answer
C.)
question
The short run is a period of time
A.) equal to or less than six months
B.) during which at least one resource may be varied
C.) during which all resources may be varied
D.) during which all resources are fixed
E.) during which at least one resource is fixed
A.) equal to or less than six months
B.) during which at least one resource may be varied
C.) during which all resources may be varied
D.) during which all resources are fixed
E.) during which at least one resource is fixed
answer
E.)
question
Use the same information about workers and their total product of shoes given in the questions above.
At what point do diminishing marginal returns set in?
A.)first worker
B.)second worker
C.)third worker
D.)fourth worker
E.)fifth worker
At what point do diminishing marginal returns set in?
A.)first worker
B.)second worker
C.)third worker
D.)fourth worker
E.)fifth worker
answer
C.)
question
A variable cost is one that changes
A.)in the long run only
B.)in the short run only
C.)year to year
D.)month to month
E.)as output changes
A.)in the long run only
B.)in the short run only
C.)year to year
D.)month to month
E.)as output changes
answer
E.)
question
Jerry's ice-cream parlor is hosting Andrew's birthday party in one week. Overall, 25 to 30 people will attend the party and Andrew's costs are as follows: $200 for rent, $150 for the cake, $3 per person for customized invitations, $15 per person for the meal, $50 for decorations, and $8 per person for party favors. For simplicity, assume that Andrew is considered one of the guests and he receives an invitation too. Assuming that 25 people attend the party, the total fixed cost of the party is:
A.)$400
B.)$1,050
C.)$650
D.)$350
E.)$250
A.)$400
B.)$1,050
C.)$650
D.)$350
E.)$250
answer
A.)
question
If fixed cost at Q = 100 is $130, then
A.)fixed cost at Q = 0 is $0
B.)fixed cost at Q = 0 is less than $130
C.)fixed cost at Q = 200 is $260
D.)fixed cost at Q = 200 is $130
E.)it is impossible to calculate fixed costs at any other quantity
A.)fixed cost at Q = 0 is $0
B.)fixed cost at Q = 0 is less than $130
C.)fixed cost at Q = 200 is $260
D.)fixed cost at Q = 200 is $130
E.)it is impossible to calculate fixed costs at any other quantity
answer
D.)
question
What is true of marginal cost when marginal produt is increasing?
A.)It is positive and increasing.
B.)It is positive and decreasing.
C.)It is negative and decreasing.
D.)It is negative and increasing.
A.)It is positive and increasing.
B.)It is positive and decreasing.
C.)It is negative and decreasing.
D.)It is negative and increasing.
answer
B.)
question
If variable cost rises from $60 to $100 as output increases from 15 to 20 units, what is the marginal cost of the twentieth unit?
A.)$40
B.)$4
C.)$5
D.)$8
A.)$40
B.)$4
C.)$5
D.)$8
answer
D.)
question
Jerry's ice-cream parlor is hosting Andrew's birthday party in one week. Overall, 25 people will attend the party and Andrew's costs are as follows: $200 for rent, $150 for the cake, $3 per person for customized invitations, $15 per person for the meal, $50 for decorations, and $8 per person for party favors. For simplicity, assume that Andrew is considered one of the guests and he receives an invitation too. Assuming that 25 people attend the party, the average variable cost of the party is:
A.)$16
B.)$1,050
C.)$42
D.)$350
E.)$26
A.)$16
B.)$1,050
C.)$42
D.)$350
E.)$26
answer
E.)
question
As a firm expands its operations into overseas markets, information problems and the complexity of operating within many varied cultures and economies may result in
A.)constant returns to scale
B.)declining long-run marginal cost
C.)diminishing marginal returns
D.)economies of scale
E.)diseconomies of scale
A.)constant returns to scale
B.)declining long-run marginal cost
C.)diminishing marginal returns
D.)economies of scale
E.)diseconomies of scale
answer
E.)
question
Economies of scale occur where
A.)long-run average cost falls as new firms enter the industry
B.)short-run average cost falls as new firms enter the industry
C.)long-run average cost falls as one firm expands plant size
D.)short-run average cost falls as one firm expands plant size
E.)long-run average cost rises as one firm expands plant size
A.)long-run average cost falls as new firms enter the industry
B.)short-run average cost falls as new firms enter the industry
C.)long-run average cost falls as one firm expands plant size
D.)short-run average cost falls as one firm expands plant size
E.)long-run average cost rises as one firm expands plant size
answer
C.)
question
Which of the following is a short-run adjustment?
A.)People's Bank hires two new tellers to meet increased demand for customer services.
B.)Toyota builds an automobile plant in Kentucky.
C.)Because of staggering losses, three insurance companies exit the industry.
D.)Faced with increasing enrollment, a private college builds a new School of Business building.
E.)Shaveco enters the razor blade market with a new product, produced in the United States.
A.)People's Bank hires two new tellers to meet increased demand for customer services.
B.)Toyota builds an automobile plant in Kentucky.
C.)Because of staggering losses, three insurance companies exit the industry.
D.)Faced with increasing enrollment, a private college builds a new School of Business building.
E.)Shaveco enters the razor blade market with a new product, produced in the United States.
answer
A.)
question
If a firm is experiencing diminishing marginal returns to labor, which of the following must be true?
A.)The first workers the firm hired were better than the workers hired later on.
B.)The firm is experiencing decreasing returns to scale.
C.)The positive effect of specialization in production is being offset by the negative effect of crowding of inputs.
D.)Output is decreasing.
E.)The firm should buy more nonlabor inputs.
A.)The first workers the firm hired were better than the workers hired later on.
B.)The firm is experiencing decreasing returns to scale.
C.)The positive effect of specialization in production is being offset by the negative effect of crowding of inputs.
D.)Output is decreasing.
E.)The firm should buy more nonlabor inputs.
answer
C.)
question
A perfectly competitive firm has no control over the
A.)quantity of output produced
B.)price of the product
C.)quantities of inputs used
D.)type of good produced
E.)types of inputs used
A.)quantity of output produced
B.)price of the product
C.)quantities of inputs used
D.)type of good produced
E.)types of inputs used
answer
B.)
question
Perfectly competitive firms are price takers because
A.)all small firms must take the price set by the largest firm in the market
B.)firms take the price that government determines is a "fair" price
C.)high barriers to entry force firms to compete by charging lower prices than other firms in the industry
D.)each firm is small and goods are identical
A.)all small firms must take the price set by the largest firm in the market
B.)firms take the price that government determines is a "fair" price
C.)high barriers to entry force firms to compete by charging lower prices than other firms in the industry
D.)each firm is small and goods are identical
answer
D.)
question
In the graph shown in the question above, a perfectly competitive firm producing profit maximizing or loss minimizing output, would make
A.)profit because price exceeds average total cost.
B.)profit because price is lower than average total cost.
C.)profit because price equals marginal cost cost.
D.)loss because price is lower than marginal cost.
E.)loss because price is lower than average total cost.
A.)profit because price exceeds average total cost.
B.)profit because price is lower than average total cost.
C.)profit because price equals marginal cost cost.
D.)loss because price is lower than marginal cost.
E.)loss because price is lower than average total cost.
answer
E.)
question
If a manufacturer shuts down in the short run, it must be true that before the shutdown, at all positive output levels,
A.)average total cost was less than average variable cost
B.)fixed cost was greater than total revenue
C.)total cost plus total revenue was less than profit
D.)profit was zero
E.)variable cost was greater than total revenue
A.)average total cost was less than average variable cost
B.)fixed cost was greater than total revenue
C.)total cost plus total revenue was less than profit
D.)profit was zero
E.)variable cost was greater than total revenue
answer
E.)
question
At its present rate of output, Barrel O' Biscuits, a perfectly competitive firm, finds that its marginal cost exceeds its marginal revenue and price exceeds average variable cost. To maximize profit, the firm should
A.)lower the price
B.)raise the price
C.)increase output
D.)reduce output
E.)maintain its current rate of output
A.)lower the price
B.)raise the price
C.)increase output
D.)reduce output
E.)maintain its current rate of output
answer
D.)
question
Peg's Kegs sells kegs in a perfectly competitive market. Because low demand forced price below average variable cost, Peg has made the short-run decision to shut down. Her current loss is
A.)zero
B.)greater than if she had kept operating
C.)the same as the losses she was incurring while operating
D.)equal to fixed cost
E.)less than her total revenue
A.)zero
B.)greater than if she had kept operating
C.)the same as the losses she was incurring while operating
D.)equal to fixed cost
E.)less than her total revenue
answer
D.)
question
A perfectly competitive firm in the short run determines its quantity supplied at various prices by using
A.)its average variable cost curve
B.)its average total cost curve
C.)the portion of its average variable cost curve rising above its average fixed cost curve
D.)the portion of its marginal cost curve rising above its average total cost curve
E.)the portion of its marginal cost curve rising above its average variable cost curve
A.)its average variable cost curve
B.)its average total cost curve
C.)the portion of its average variable cost curve rising above its average fixed cost curve
D.)the portion of its marginal cost curve rising above its average total cost curve
E.)the portion of its marginal cost curve rising above its average variable cost curve
answer
E.)
question
Which of the characteristics of perfect competition assures that economic profit will be zero in the long run?
A.)Each firm is small relative to the market.
B.)Each firm has access to perfect information.
C.)Goods produced in the market are homogeneous.
D.)Each firm is a price taker.
E.)There is easy entry and exit in the market.
A.)Each firm is small relative to the market.
B.)Each firm has access to perfect information.
C.)Goods produced in the market are homogeneous.
D.)Each firm is a price taker.
E.)There is easy entry and exit in the market.
answer
E.)
question
Productive efficiency occurs in markets when
A.)goods are produced at the lowest possible average total cost
B.)goods are produced at the lowest average variable cost
C.)goods are produced at the lowest marginal cost
D.)goods are produced at the lowest average fixed cost
E.)the economy is producing the maximum quantity of goods and services it can
A.)goods are produced at the lowest possible average total cost
B.)goods are produced at the lowest average variable cost
C.)goods are produced at the lowest marginal cost
D.)goods are produced at the lowest average fixed cost
E.)the economy is producing the maximum quantity of goods and services it can
answer
A.)
question
Which of the following prevents potential competitors from entering a monopolist's market?
A.) diseconomies of scale
B.)rising marginal cost
C.)product differentiation
D.)legal restrictions
E.)stable market demand
A.) diseconomies of scale
B.)rising marginal cost
C.)product differentiation
D.)legal restrictions
E.)stable market demand
answer
D.)
question
Natural monopolies form when
A.)one firm has control over the entire supply of a basic input required to produce the product
B.)small firms merge to form larger firms
C.)one firm's monopoly position is created and enforced by the government
D.)one firm receives patent protection for certain basic production processes
E.)long-run average cost declines as a firm expands output
A.)one firm has control over the entire supply of a basic input required to produce the product
B.)small firms merge to form larger firms
C.)one firm's monopoly position is created and enforced by the government
D.)one firm receives patent protection for certain basic production processes
E.)long-run average cost declines as a firm expands output
answer
E.)
question
The demand curve a monopolist uses in making an output decision is
A.)the same as the demand curve facing a perfectly competitive firm
B.)the same as the market demand curve
C.)horizontal because there are no close substitutes for its product
D.)vertical because there are no close substitutes for its product
A.)the same as the demand curve facing a perfectly competitive firm
B.)the same as the market demand curve
C.)horizontal because there are no close substitutes for its product
D.)vertical because there are no close substitutes for its product
answer
B.)
question
Which of the following is true of marginal revenue for a monopolist that charges a single price?
A.)P = MR only at the profit-maximizing quantity.
B.)P < MR because the monopolist must decrease price on all units sold in order to sell an additional unit.
C.)P > MR because the monopolist must decrease price on all units sold in order to sell an additional unit.
D.)P = MR because there are no close substitutes for the monopolist's product. b. c. d. AR = MR because there are no close substitutes for the monopolist's product. e.
A.)P = MR only at the profit-maximizing quantity.
B.)P < MR because the monopolist must decrease price on all units sold in order to sell an additional unit.
C.)P > MR because the monopolist must decrease price on all units sold in order to sell an additional unit.
D.)P = MR because there are no close substitutes for the monopolist's product. b. c. d. AR = MR because there are no close substitutes for the monopolist's product. e.
answer
C.)
question
For a monopolist, if marginal revenue is increasing, the demand for its product is
A.)elastic.
B.)unit elastic.
C.)inelastic.
D.)perfectly elastic.
E.)perfectly inelastic.
A.)elastic.
B.)unit elastic.
C.)inelastic.
D.)perfectly elastic.
E.)perfectly inelastic.
answer
A.)
question
A monopolist earning short-run economic profit determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit?
A.)Raise price and lower output.
B.)Lower price and lower output.
C.)Raise price and raise output.
D.)Lower price and raise output.
E.)Lower output but leave price unchanged.
A.)Raise price and lower output.
B.)Lower price and lower output.
C.)Raise price and raise output.
D.)Lower price and raise output.
E.)Lower output but leave price unchanged.
answer
A.)
question
One likely result of monopoly power is
A.)a wide variety of substitute products from which consumers can choose
B.)an elimination of barriers to industry entry
C.)a decline in government regulation
D.)an improvement in allocative efficiency
E.)a higher price than would exist in a competitive industry
A.)a wide variety of substitute products from which consumers can choose
B.)an elimination of barriers to industry entry
C.)a decline in government regulation
D.)an improvement in allocative efficiency
E.)a higher price than would exist in a competitive industry
answer
E.)
question
In the short run, a monopolist will shut down when
A.)average total cost is greater than price at all output levels
B.)average variable cost is greater than average fixed cost at all output levels
C.)average variable cost is greater than price at all output levels
D.)price is greater than average variable cost at all output levels
E.)average fixed cost is greater than price at all output levels
A.)average total cost is greater than price at all output levels
B.)average variable cost is greater than average fixed cost at all output levels
C.)average variable cost is greater than price at all output levels
D.)price is greater than average variable cost at all output levels
E.)average fixed cost is greater than price at all output levels
answer
C.)
question
Which of the following would not be considered price discrimination?
A.)giving lower air fares to those who buy tickets a month before departure
B.)charging higher rates on long distance calls during normal business hours
C.)charging lower prices for senior citizens at museums
D.)getting separate prices for residential and commercial users of natural gas
E.)charging more for BMWs than for Chevrolets
A.)giving lower air fares to those who buy tickets a month before departure
B.)charging higher rates on long distance calls during normal business hours
C.)charging lower prices for senior citizens at museums
D.)getting separate prices for residential and commercial users of natural gas
E.)charging more for BMWs than for Chevrolets
answer
E.)
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