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If a firm is producing a quantity along the upward sloping portion of its marginal cost curve at which marginal cost exceeds price and is earning positive economic profits, it should
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decrease the quantity produced because doing so will increase profit.
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If consumers view the output of any firm in a market to be identical to the output of any other firm in the market the demand curve for the output of any given firm
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will be horizontal
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Which of the following will result in a firm increasing its level of production?
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An increase in the price of its product.
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The amount of output that a firm decides to sell has no effect on the market price in a competitive industry because
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the firm's output is a small fraction of the entire industry's output
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If a competitive firm is in short-run equilibrium, then
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profits equal zero.
economic profits will be positive.
economic profits will be negative.
economic profits will be positive.
economic profits will be negative.
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A firm will shut down in the short run if its revenues fail to cover its
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fixed costs.
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The long-run supply curve in a constant-cost industry is linear and
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horizontal
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Use the following statements to answer this question:I. The long-run average cost (LAC) curve is the envelope of the short-run average cost(SAC) curves.II. The long-run marginal cost (LMC) curve is the envelope of the short-run marginal cost(SMC) curves.
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I is true and II is false.
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An isocost line reveals the
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input combinations that can be purchased with a given outlay of funds.
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The marginal cost curve crosses
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both the average cost curve and the average variable cost curve at their minimums.
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Diminishing marginal returns to labor imply that
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the firm's short-run marginal cost curve will be upward sloping.
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When input prices are fixed, decreasing returns to scale implies that the long-run average cost curve is
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upward sloping
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Which of the following is true of cost curves?
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The MC curve goes through the minimum of both the AVC curve and the ATC curve.
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Economists proclaim that competitive firms make zero economic profit in the long run. This shows how
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firms cover all their cost, both monetary and non-monetary.
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Which of the following statements is true regarding the differences between economic and accounting costs?
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Accounting costs include only explicit costs.
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The isoquants of a fixed-proportions production function are:
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L- shaped
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According to the law of diminishing returns
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the marginal product of an input will eventually decline.
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Which of the following statements best describes a production function?
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the maximum level of output generated from given levels of inputs
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At any given point on the curve, the slope of the total product curve always equals
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the marginal product of the input.
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What describes the graphical relationship between average product and marginal product?
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Marginal product cuts average product from above, at the maximum point of average product.
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The steeper an isoquant is (labor measured on the horizontal axis):
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the greater is the marginal productivity of labor relative to that of capital
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A production function defines the output that can be produced
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if the firm is technically efficient.
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The slope of an isoquant tells us
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the decrease in capital necessary to keep output constant when labor increases by one unit
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variable costs are
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a production expense that changes with the quantity of output produced.
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A small business owner earns $50,000 in revenue annually. The explicit annual costs equal $30,000. The owner could work for someone else and earn $25,000 annually. The owner's business profit is ________ and the economic profit is ________.
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D. $20,000, − $5,000
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The competitive firm's supply curve is equal to
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the portion of its marginal cost curve that lies above AVC
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