ADM 3318 Lecture Notes - Lecture 4: Economic Surplus, Value Chain

please answere all mutiple quistions

3- In short run production
a. all factors are variable.
b. two factors are variable.
c. two factor is fixed.
d. At least one factor is fixed.
4. When average product is at its maximum
a. Marginal cost is also at its maximum.
b. Marginal revenue product is also at its maximum.
c. Marginal cost is at its minimum.
d. Average variable cost is at its minimum.
e. None of the above.

5. If a firm has total revenues of ten million, explicit costs of eight million and implicit
costs of one million, then:
a. It is generating an accounting profit and incurring an economic loss.
b. It is generating an economic profit and incurring an accounting loss.
c. It is generating both an accounting and economic profit.
d. It is incurring both an accounting and economic loss.
e. Can’t determine from the information available.
6. Economics usually assumes that individuals:
a. Incur dissatisfaction from working.
b. Enjoy working more than leisure.
c. Want to do a good job while at work.
d. Are encouraged to enjoy themselves while at work.
e. None of the above.
7. Decreasing returns to a variable factor implies
a. Decreasing average variable cost.
b. Increasing average variable cost.
c. Increasing average fixed cost.
d. Constant average total cost.
e. Constant average variable cost.
8. All production for a profit-minded firm should occur in
a. Stage 1 of production
b. Stage 2 of production
c. Stage 3 of production
d. Stage 4 of production.
9. In Stage 2 of production
a. Average total cost is declining.
b. Average fixed cost is increasing.
c. Average variable cost is declining.
d. Marginal cost is increasing.
e. Marginal cost is decreasing.
10. L shaped isoquants imply
a. A perfect substitute production relationship between inputs.
b. A perfect substitute production relationship between outputs.
c. A perfect complementary production relationship between inputs.
d. A quasi substitute production relationship between inputs.
e. Output must be increasing faster than inputs.
11. In oligopolistic industries firms typically
a. attempt to avoid competing with each other.
b. are not concerned with their competitors.
c. choose a strategy based on creative destruction.
d. operate in the inelastic range of their demand curve.
e. all of the above.

12. The optimal input mix implies
a. That all output is increasing at an increasing rate.
b. That the marginal product of the inputs divided by their prices are equal.
c. That the marginal cost of the inputs is declining at a declining rate.
d. That increasing returns to scale is inevitable.
e. That decreasing returns to scale is inevitable.
13. If an industry’s MES is 5 percent
a. Then there is a 10 percent inefficiency in the industry.
b. Then there is room for twenty efficiently functioning firms in the industry.
c. Then there is an economies of scope issue in production.
d. Then there is an opportunity for increasing output at no additional cost.
14. Economies of scope imply
a. That all costs increase as the firm’s scope increases.
b. That all costs decrease as the firm’s scope decreases.
c. That average total costs may decrease as a firm’s scope increases.
d. That average fixed costs are not relevant to production decisions.
e. None of the above.
15. If a firm is on a learning curve this implies
a. That the firm’ s variable resources are not efficiently employed.
b. That the firm is enjoying a comparative advantage in the industry.
c. That the firm is enjoying economies of scale.
d. That the firm’s cumulative average total costs are declining.
e. That the firm’s cumulative average fixed costs are increasing.
16. The Law of Diminishing Marginal Returns suggests
a. That average total costs will go up and then down.
b. That average total costs will continually decline as more output is produced.
c. That marginal product will beyond some point begin to decline.
d. That marginal product is subject to an increasing cost situation.
e. That marginal cost and average variable cost are continually declining.
17. A key feature of oligopoly is
a. Lots of product promotion.
b. Mutual interdependence.
c. Mutual independence.
d. Excess capacity.
e. None of the above.
18. A key feature of monopolistic competition is
a. Mutual interdependence.
b. Formidable barriers to entry.
c. Only a few firms in the industry.
d. Traditionally large firms in the market.
e. Lots of product promotion.

19. In long run production
a. All costs are fixed.
b. Average fixed costs are declining.
c. Total variable costs are usually declining.
d. a firm’s planning period is represented.
e. Total Fixed costs are not usually very high.
20. In short run pure competition
a. A firm should not produce anything if P>AFC.
b. A firm should produce only if P>AFC.
c. A firm should produce only if P<ATC.
d. Both A and C.
e. None of the above.
21. In long run pure competition
a. A firm should produce as long as P > AVC.
b. A firm should produce as long as P < MC
c. A firm should produce as long as P > AFC.
d. A firm not produce as long as P < ATC.
e. A firm should produce as long as P > ATC.
22. Allocative efficiency occurs when
a. P equals ATC.
b. P equals AVC.
c. P equals MC.
d. P equals AFC.
e. P equals TVC.
23. Productive efficiency occurs when
a. P equals the minimum of ATC.
b. P equals the minimum of AVC.
c. P equals MC.
d. P equals AFC at its maximum.
e. P equals TC, but only in the long run.
24. Barriers to entry into an industry
a. Will prevent exit out of the industry.
b. Will prevent allocative efficiency from being realized in the long run.
c. Will prevent productive efficiency from being realized in the short run.
d. Will prevent all firms from using the newest technologies in their industry.
e. Will usually not harm competition in the industry.
25. Which of the following is considered an economically justified barrier to entry?
a. Government sanctioned barriers.
b. Pioneering brand name advantages.
c. Various pricing policies.
d. Reputation effects.
e. Economies of scale.

1- All of the following statements apply to a purely competitive market in the long run, except:

A- In the long run, all inputs are variable in quantity.

B- Firms can expand their plant capacities in the long run.

C- Total fixed costs remain constant even when output expands in the long run.

D- Firms may enter or leave the industry in the long run.

2- Which of the following is true of normal profits?

A- They are necessary to keep a firm in the industry in the long run

B- They are zero under pure competition in the long run

C- They are excluded from a firm's costs of production

D- They are what attract other firms to enter an industry

3- -The long-run supply curve would be perfectly elastic when:

A- An increase in demand does not cause a change in product price

B- An increase in demand causes an increase in product price

C- A decrease in demand causes an increase in short-run supply

D- A decrease in demand causes an increase in product price

4- What happens in a decreasing-cost industry when some firms leave and the industry's output contracts?

A- The average cost will increase

B- The average cost will decrease

D- The total cost will decrease

C- The product price will decrease

5- Which of the following statements about a competitive firm is correct?

A-To maximize profits a competitive firm should produce at that output at which total revenue is greatest

B- In long-run equilibrium a competitive firm will produce at the point of minimum average costs

C- A competitive firm will produce in the short run so long as total receipts are sufficient to cover total fixed costs

D-A competitive firm will close down in the short run whenever price is less than the minimum attainable average total cost

6- When there is allocative efficiency in a purely competitive market for a product, the minimum price producers are willing to accept is:

A- Less than marginal benefit

B- Greater than marginal cost

C- Equal to the amount of efficiency or deadweight losses

D- Equal to the maximum price consumers are willing to pay

7- A patent is the legal right granted to a firm that allows it to:

A- Make copies of other firm's products

B- Be the sole buyer of a particular product or resource

C- Sell its new product exclusively for a set number of years

D- Be the exclusive distributor of a particular imported product

1. When economists speak of "marginal," they mean
a. Opportunity.
b. Scarcity.
c. Incremental.
d. Unimportant.

2. Managers undertake an investment only if
a. Marginal benefits of the investment are greater than zero.
b. Marginal costs of the investment are greater than marginal benefits of the investment.
c. Marginal benefits are greater than marginal costs.
d. Investment decisions do not depend on marginal analysis.

3. A firm produces 500 units per week. It hires 20 full-time workers (40 hours/week) at an hourly wage of $15. Raw materials are ordered weekly, and they cost $10 for every unit produced. The weekly cost of the rent payment for the factory is $2,250. How do the overall costs break down?
a. Total variable cost is $17,000; total fixed cost is $2,250; total cost is $19,250.
b. Total variable cost is $12,000; total fixed cost is $7,250; total cost is $19,250.
c. Total variable cost is $5,000; total fixed cost is $14,250; total cost is $19,250.
d. Total variable cost is $5,000; total fixed cost is $2,250; total cost is $7,250.

4. Total costs increase from $1,500 to $1,800 when a firm increases output from 40 to 50 units. Which of the following is true if marginal cost is constant?
a. FC = $100
b. FC = $200
c. FC = $300
d. FC = $400

5. A manager of a clothing firm is deciding whether to add another factory in addition to one already in production. The manager would compare
a. The total benefits gained from the two factories to the total costs of running the two factories.
b. The incremental benefit expected from the second factory to the total costs of running the two factories.
c. The incremental benefit expected from the second factory to the cost of the second factory.
d. The total benefits gained from the two factories to the incremental costs of running the two factories.

6. A firm is thinking of hiring an additional worker to their organization who they believe can increase total productivity by 100 units a week. The cost of hiring him or her is $1,500 per week. If the price of each unit is $12,
a. The MR of hiring the worker is $1,500.
b. The MC of hiring the worker is $1,200.
c. The firm should not hire the worker since MB < MC.
d. All the above

7. A retailer has to pay $9 per hour to hire 13 workers. If the retailer only needs to hire 12 workers, a wage rate of $7 per hour is sufficient.
What is the marginal cost of the 13th worker?
a. $117
b. $9
c. $33
d. $84

8. If a firm's average cost is rising, then
a. Marginal cost is less than average cost.
b. Marginal cost is rising.
c. Marginal cost is greater than average cost.
d. The firm is making an economic profit.

9. After the first week of his MBA Managerial Economics class, one of your pharmaceutical sales representatives accuses you of committing the sunk-cost fallacy by refusing to allow him to reduce price to make what he considers to be a really tough sale. Which of the following suggests the sales representative may be right?
a. Most of the costs of drug development are sunk, not fixed.
b. Sales representatives are paid a sales commission on revenue, so they don't care about the costs of drug development.
c. Sales representatives don't worry that a low price today may make it more difficult for the company's other sales representatives to charge higher prices to their customers, tomorrow.
d. Sales representatives think only about one thing, sales.

10. A company is producing 15,000 units. At this output level, marginal revenue is $22, and the marginal cost is $18. The firm sells each unit for $48 and average total cost is $40.
What can we conclude from this information?
a. The company is making a loss.
b. The company needs to cut production.
c. The company needs to increase production.
d. Not enough information is provided.