question
As you hire more workers as a manager, you would expect the marginal product of labor to
answer
first increase, then decrease, & then become negative
question
"A firm will never find it optimal to employ so much of an input that its marginal product is negative."
This given statement is ___________ b/c ________________________________.
This given statement is ___________ b/c ________________________________.
answer
true
total output falls in this case
total output falls in this case
question
A technological change increases the amount of output that a firm can produce from a given quantity of inputs. It increases the Marginal Product of labor for each quantity of labor.
This will shift the MP of labor curve __________________.
How does this technological change affect the MP of capital?
This will shift the MP of labor curve __________________.
How does this technological change affect the MP of capital?
answer
upward
The effect will be an increase in the MP of capital, the same as the effect on the MP of labor. The MP of capital curve will shift upwards.
The effect will be an increase in the MP of capital, the same as the effect on the MP of labor. The MP of capital curve will shift upwards.
question
In the short run, labor is a _____________ input & capital is a _________________ input.
answer
variable
fixed
fixed
question
2 of your managers complain that "We wish we had another factory to meet the demand for our product!"
These managers mean that:
These managers mean that:
answer
They wish that enough time had passed so that the company reached the long-run.
question
When a company employs 6 workers, it produces 42 units of output & when it employs 7 workers, it produces 56 units of output. The MP of the 7th worker is
answer
14 units of output
question
The production of ABC, INC.'s output requires only 2 inputs. Its manager says, "B/C the 2 input prices are equal, to minimize cost, I employ equal quantities of the 2 inputs." The manager is _____________ b/c _________________________________ & _______________________
answer
incorrect
cost minimization is only achieved when the ratios of MP to price are equal for all inputs &
the MP of these inputs may not equal
cost minimization is only achieved when the ratios of MP to price are equal for all inputs &
the MP of these inputs may not equal
question
Suppose that your manufacturing firm has the following production function with 3 inputs: Q = F (X1, X2, X3) where X1, X2, & X3 are the 3 inputs. Let MPx1 be the MP of X1, P1 the cost of X1, MPx2 the MP of X2, Px2 the cost of X2, & so on.
As a manager which of the following equations will you use to determine the cost-minimizing quantities of X1 & X2 if the quantity of X3 is fixed?
As a manager which of the following equations will you use to determine the cost-minimizing quantities of X1 & X2 if the quantity of X3 is fixed?
answer
MPx1 / Px1 = MPx2 / PX2
question
A firm produces output using only labor & capital. MPl is the MP of labor, W is the cost of a unit of labor, MPk is the MP of capital, & R is the cost of a unit of capital.
If MPl / W > MPk / R to minimize the cost of producing the desired quantity of output, the firm should ______________________________________.
If MPl / W > MPk / R to minimize the cost of producing the desired quantity of output, the firm should ______________________________________.
answer
use more labor & less capital
question
Clerical workers form a union that successfully raises its members' wages. The short-run average total-cost curve of a firm that hires clerical workers will _______________. The long-run average total cost curve of the firm will _________________. The marginal cost curve of the firm will ____________________.
answer
Shift Upward
Shift Upward
Shift Upward
Shift Upward
Shift Upward
question
Quick-service restaurants like Burger King typically employ many minimum wage workers. Suppose the government raises the minimum wage. What will happen to Burger King's cost curves?
answer
Average Variable Cost Curve- Upward Shift
Average Fixed Cost Curve- No Change
Average Total Cost Curve- Upward Shift
Marginal Cost Curve- Upward Shift
Average Fixed Cost Curve- No Change
Average Total Cost Curve- Upward Shift
Marginal Cost Curve- Upward Shift
question
Labor is a variable input, so its cost is included in the firms:
i: fixed costs
ii: variable costs
iii: total costs
i: fixed costs
ii: variable costs
iii: total costs
answer
only ii & iii are correct
question
If the marginal product of labor (MPl) increases when more labor is employed, then
answer
the marginal cost (MC) decreases when output increases
question
The long-run average cost (LAC) curve
answer
first falls & eventually rises as the quantity is increased
question
The wage rate is $20, & the price of raw materials is $8. The marginal product of labor is 15, & the marginal product of raw materials is 4.
A firm operating under these conditions __________ minimizing its costs.
The firm should use ________________ labor & _____________ raw materials to lower its costs.
A firm operating under these conditions __________ minimizing its costs.
The firm should use ________________ labor & _____________ raw materials to lower its costs.
answer
is not
more
less
more
less
question
TC =
answer
FC + VC
question
AFC =
answer
FC/Q
question
AVC =
answer
VC/Q
question
ATC =
answer
TC/Q
question
Firms typically experience decreasing marginal returns to labor at ____________ levels of employment due to ___________________.
answer
high
congestion
congestion
question
If the cost of using an additional unit of capital equipment is $1500 & the marginal product of a unit of capital is 7,500 units of output, this means that for each additional dollar spent on capital, there is a gain of _________ units of output.
answer
5
7500/1500 = 5
7500/1500 = 5
question
All of the following are true regarding variable costs except which one?
answer
variable costs are the sum of the costs paid for all inputs.
question
When a firm produces zero output, its total cost is equal to its __________________.
answer
fixed costs
question
At its current output level, pretty flowers florist has average fixed costs equal to $4.40 & average variable costs equal to $2.20.
What is Pretty flowers florist's average total cost?
What is Pretty flowers florist's average total cost?
answer
$6.60
4.40 + 2.20 = 6.60
4.40 + 2.20 = 6.60
question
At a particular output level, if a firm's long-run marginal cost is $8 & its long-run average cost is $10, the firm is likely to be experiencing __________________.
answer
economies of scale
question
__________________________ become(s) constantly smaller as output increases.
answer
Only the average fixed cost (AFC)
question
If labor is the only variable input, W is the cost of a worker, & WPl is the marginal product of labor, then the cost of producing one more unit of output - the marginal cost (MC) - is equal to
answer
W / MPl
question
If the marginal product of labor (MPl) increases when more labor is employed, then
answer
the marginal cost (MC) decreases when output increases
question
Taco Bell recently introduced breakfast at its restaurants. If the increase in the # of products taco bell sells decreases the average total cost & marginal cost of its products, Taco Bell has experienced _____________________
answer
economies of slope
question
You are managing a perfectly competitive landscaping firm. You have carefully calculated that the cost of mowing & tending one additional yard is $35 & the price of that work is $30. To increase your profit, you should ______________ your outputs so as you produce the quantity where __________
answer
decrease
MR = MC
MR = MC
question
The equilibrium market price for a good is $50 per unit, & a firm has a marginal cost curve given by : MC = 10 + 0.59
The firm's profit-maximizing price is ________
The firm's profit-maximizing quantity is _________ units
The firm's profit-maximizing price is ________
The firm's profit-maximizing quantity is _________ units
answer
$50
80
80
question
The market for paper is perfectly competitive. Suppose that there is now an increase in the market demand for paper by 300 tons at each price. In the long-run, the ___________________________________________ in the short run.
Which of the following statements describe the short-run effects of an increase in the market demand for paper?
In the long-run, a typical firm will _____________________________________________.
Which of the following statements describe the short-run effects of an increase in the market demand for paper?
In the long-run, a typical firm will _____________________________________________.
answer
the supply curve will shift rightward from its position
the firms demand curve shifts up from d0 = MR to d1 = MR1, where P = $600 per ton.
A typical firm will now make an economic profit
Make only a competitive return
the firms demand curve shifts up from d0 = MR to d1 = MR1, where P = $600 per ton.
A typical firm will now make an economic profit
Make only a competitive return
question
"It makes no sense for the managers of a perfectly competitive firm to spend money on advertising". This statement is ______________.
Which of the following statements help explain this?
Which of the following statements help explain this?
answer
true
Buyers have perfect information about the price & the product
The products are homogeneous
Buyers have perfect information about the price & the product
The products are homogeneous
question
No matter how many soft drinks you buy, you have no effect on the price of soft drinks. The soft drink industry includes 2 very large producers & several smaller ones. This industry ___________ perfectly competitive b/c the producers are ______________.
answer
is not
price setters
price setters
question
In a perfectly competitive market, no individual producer can affect the price of the product. The price of the product is determined by the equilibrium b/t the ________________ & the ____________________.
answer
market demand
market supply
market supply
question
Which of the following is a perfectly competitive firm?
answer
Newton sheep company, one of about 80,000 sheep producers in the U.S.
question
In a perfectly competitive market, the market demand curve is, _________________, while the demand curve faced by a firm is __________________ at the equilibrium price.
answer
downward sloping
horizontal
horizontal
question
You are managing a perfectly competitive dairy farm, & sadly you have determined that your firm is incurring an economic loss. You do not foresee any future changes in your costs or the price of milk. You should keep the dairy farm open if ___________, & you should close the farm if _____________-
answer
P > AVC
P < AVC
P < AVC
question
For a perfectly competitive firm, the market price is _____________ marginal revenue.
answer
is equal to
question
If the marginal revenue of a unit of output exceeds its marginal cost, then to maximize profit a manager ________________________________________.
answer
definitely should produce the unit
question
A firm makes an economic profit whenever
answer
P > ATC
question
You are the owner of a medium-sized business. Your total revenue is $40 million per year, your fixed costs are $20 million & your variable costs are $30 million. As time passes, neither your revenue nor your total cost will change. You are ___________________, & to maximize profit (or minimize loss) you should _________________________________.
answer
incurring an economic loss
stay open for the short run
stay open for the short run
question
What sort of profit does a perfectly competitive firm make in the long run?
answer
A competitive return & zero economic profit
question
Consider a wild rice producer in a competitive wild rice industry. Suppose that the demand for wild rice increases. What will be the adjustment made by the firm & the industry?
The firm will make ___________ economic profit in the long run.
Now suppose that demand increases again but that the gov. forbids entry by new wild rice producers. What are the adjustments made by the firm & the industry?
The firm will make a ____________ economic profit
The firm's economic profit is higher when entry is _____________.
What is the managerial lesson illustrated in your answer to the scenarios described above?
The firm will make ___________ economic profit in the long run.
Now suppose that demand increases again but that the gov. forbids entry by new wild rice producers. What are the adjustments made by the firm & the industry?
The firm will make a ____________ economic profit
The firm's economic profit is higher when entry is _____________.
What is the managerial lesson illustrated in your answer to the scenarios described above?
answer
In the long run, the market supply curve shifts rightward, further increasing industry output but lowering the market price
In the short run, the market demand curve shifts to the right, raising the market price & increasing the equilibrium quantity.
Zero
In the short run, the market demand curve shifts to the right, raising the market price & increasing the equilibrium quantity of wild rice
In the long run, the existing firms int he industry will expand capacity
Positive
Forbidden
In a perfectly competitive industry, economic profits cannot last b/c firms will enter the market, increasing output & lowering price
In the short run, the market demand curve shifts to the right, raising the market price & increasing the equilibrium quantity.
Zero
In the short run, the market demand curve shifts to the right, raising the market price & increasing the equilibrium quantity of wild rice
In the long run, the existing firms int he industry will expand capacity
Positive
Forbidden
In a perfectly competitive industry, economic profits cannot last b/c firms will enter the market, increasing output & lowering price
question
In a perfectly competitive market, an increase in the market demand will shift the perfectly competitive firm's ______________ curve ___________.
answer
demand
upward
upward
question
Over-expansions can cause a perfectly competitive firm to ______________________.
answer
incur economic losses
question
All of the following are homogenous goods except which one?
answer
toothpaste
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