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1. If the margin is greater than the average, what can we say about average and margin?
a.average is at its max
b.average is at its min
c.average is rising
d. the average is falling
e. margin is at its max
f. margin is at its min
g. margin is rising
h. margin is falling

2. Diminishing marginal returns to labour
a. will happen immediately at 1st worker
b. occur only in the long run
c.are a result of variable capital inputs
d.are the cause of decreasing returns to scale
e. all of the above
f. none of the above

3.What is the general relationship between AVC, ATC, and MC?
a. All Valley shaped, but don't intersect
b.All Hill-shaped but don't intersect
c.Valley-shaped, and ATC=AVC at most input levels
d. Valley-shaped and MC intersects each of the average functions at their minimum
e.Valley shaped and there's a single intersection point where MC=AVC=ATC.

f. Valley-shaped and ATC < AVC forest levels of output

g. Answers E and F are both correct

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Nusrat Fatima
Nusrat FatimaLv10
28 Sep 2019

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Related questions

MULTIPLE CHOICE.

1) Which of the following is true of the typical relationship between marginal product (MP) and average product (AP)?

A) The AP curve intersects the MP curve at minimum MP.

B) If MP is less than AP, then AP is increasing.

C) If MP is greater than AP, then AP is falling.

D) The MP curve intersects the AP curve at maximum AP.

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

2) If, for a particular short-run production, we observe that marginal product is decreasing we can conclude that average product is decreasing as well.

MULTIPLE CHOICE.

3) An implicit cost is defined as:

A) the amount by which the money spent on an input to production exceeds its opportunity cost.

B) the difference between an input's explicit cost and its actual cost.

C) the opportunity cost of using a resource that is not explicitly paid out by the firm.

D) the amount by which economic profit exceeds accounting profit.

MULTIPLE CHOICE.

4) The amount of output a firm can produce with a given quantity of fixed and variable inputs is called:

A) total fixed product.

B) average variable product.

C) marginal product.

D) total product.

5) Which of the following statements is true of the relationship among the average cost functions?

A) AFC = ATC + AVC

B) ATC = AFC - AVC
C) AVC = AFC + ATC

D) AFC = ATC - AVC

 

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

6) A firm's production function is the relationship between the factors of production and the resulting outputs of the production process.

MULTIPLE CHOICE.

Scenario 2:
Output (Q): 0 1 2 3 4 5 6

Total Cost (TC): $24 $33 $41 $48 $54 $61 $69

7) Refer to Scenario 2. Diminishing marginal returns starts to occur between units:

A) 2 and 3.

B) 3 and 4.

C) 4 and 5.

D) 5 and 6.

8) Which of the following would be classified as a short-run decision?

A) trucking firm's decision to move to a smaller facility.

B) A firm's decision to decrease the amount of electricity used in day-to-day operations by encouraging employees to adopt conservation strategies, e.g., shut off lights when leaving a room.

C) A university's decision to add a new residence hall.

D) A restaurant's decision to increase the number of patrons it can accommodate by adding on a new dining room.

9) Economic profit is equal to the difference between: 9)

1.

2.

3.

4.

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

10) At the point where a firm incurs diminishing marginal returns, total product will begin to decline.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

11) In the context of a production function, the remote order takers in the fast food industry would be classified as:

A) a fixed input.

B) a marginal input.

C) an inframarginal input.

D) a variable input.

Scenario 3:
Total Product (Q): 0 1 2 3 4 5 6

Total Cost (TC): $50 $80 $105 $125 $155 $195 $250

12.

13.

increase; lower

decrease; lower

increase; higher

decrease; higher

 

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

14.

15.

 

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

16) A labor-intensive method of production is one that:
A) combines a small but sophisticated labor force with a large amount of capital.

B) requires employees to work harder than they would in other occupations.
C) relies on large quantities of labor and smaller quantities of capital equipment. D) relies exclusively on labor.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

17) Assume a firm produces 500 units of a good by using two inputs, capital and labor, whose per unit prices are $10 and $4. Assume also that the marginal physical product of the last unit of capital is 30 and the marginal physical product of the last unit of labor is 10. To minimize costs this firm should employ:

A) more labor and less capital. B) more capital and less labor.
C) the existing combination of resources. D) both more labor and more capital.

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

18) All else constant, a decrease in the per unit price of labor would create an incentive for a firm manager to substitute labor for capital in the firm's production process.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

19) All else constant, as the price of petroleum increases relative to the prices of other inputs to the production process, in their effort to minimize their total costs of production, we can expect to see firms employ:

A) the same amount of petroleum since there are no substitutes for petroleum. B) less petroleum and more of the other inputs to production.
C) less of each of the inputs of production.

D) more petroleum and less of the other inputs to production.

Q5. Table 5.5

Total Output Total Costs

0 10

1 18

2 21

3 23

4 24

5 26

6 29

7 33

8 38

9 44

10 51

In Table 5.5, the marginal cost of the third unit is

a. 2.

b. 4.

c. 3.

d. 1.

Q6. When marginal physical product begins to decline, marginal cost begins to increase.

a. true

b. false

Q7. It is possible for a firm to have positive fixed cost and zero total cost.

a. true

b. false

Q8. Which one of the following is TRUE?

a. Marginal cost increases as marginal physical product decreases.

b. Marginal cost decreases as marginal product decreases.

c. Total cost is the difference between marginal cost and total variable cost.

d. Total cost is the sum of marginal cost plus total variable cost.

Q9. The slope of the production function becomes negative when diminishing returns set in.

a. true

b. false

Q10. Table 5.7

Q Total Variable Cost Average Variable Cost Total Cost Average Total Cost

1 10 50

2 50 90

3 40

Refer to Table 5.7. What is the firm's total fixed cost?

a. 20

b. 40

c. 10

d. 30

Q11. When there are economic profits in a perfectly competitive industry

a. firms have no incentive to exit or enter the industry.

b. firms exit the industry.

c. firms enter the industry.

d. the high barriers to entry prevent further competition.

Q12. The market structure of perfect competition is defined by hundreds of firms producing an essential product, with barriers to the entry of new firms.

a. true

b. false

Q13. A single supplier of a good or service for which there is no close substitute is referred to as a(n)

a. monopolistic competitor.

b. strategic competitor.

c. monopoly.

d. oligopoly.

Q14. For the perfectly competitive firm the selling price of its product is determined by

a. the length of time it has been in business.

b. the amount it chooses to spend on marketing.

c. the interaction of market supply and demand.

d. the number of competing firms.

Q15. A company finds that at the MR = MC output level, its total cost is $500, total variable cost is $400, and total revenue is $450. Your advice to the firm is to

a. reduce output to reduce the cost of production.

b. continue to produce, as total revenue covers total variable cost.

c. increase output to reduce the per unit cost of production.

d. shut down immediately.

Q16. For a monopolist

a. P > MR.

b. P = MC.

c. P = ATC.

d. P = MR.

Q17. The perfect competitor

a. chooses the profit-maximizing quantity.

b. chooses the profit-maximizing price.

c. chooses a quantity that will make the most efficient use of his labor and capital resources.

d. produces what he thinks can be sold, regardless of cost.

Q18. In perfect competition, the larger firms will be able to charge a higher price than the smaller firms.

a. true

b. false

Q19. For the perfectly competitive firm, price equals marginal revenue.

a. true

b. false

Q20. For a monopolist, selling more units requires

a. allowing more firms to enter the industry.

b. hiring a more productive labor force.

c. forming a cartel.

d. lowering the selling price.

Q21. Monopolistic competition means

a. monopolies from several countries compete in the global market.

b. a large number of firms producing differentiated products.

c. a large number of firms producing homogeneous products.

d. few firms producing differentiated products.

Q22. Opportunistic behavior is discouraged by the desire to have repeat transactions.

a. true

b. false

Q23. By saying that firms in an oligopoly are interdependent, we mean that

a. actions by one will prompt reactions by others.

b. if one increases its profits, all others will increase profits as well.

c. all firms sell identical products.

d. if one increases its profits, all others will lose profits.

Q24. Price leadership is a form of

a. barrier to entry.

b. tacit collusion.

c. opportunistic behavior.

d. noncooperative behavior.

Q25. A monopolistically competitive firm in the long run

a. earns positive economic profits.

b. earns negative economic profits.

c. earns zero economic profits.

d. suffers economic losses.

Q26. Monopolistically competitive firms produce a product that is homogeneous.

a. true

b. false

Q27. Which of the following is a characteristic of both perfect competition and monopolistic competition?

a. In the long run, the firm will produce the output which minimizes average total cost.

b. Firms sell a homogeneous product.

c. In the long run, the firm will earn zero economic profit.

d. The firm seeks to differentiate its product from those of its competitors.

Q28. A monopolistically competitive firm uses advertising to

a. lower its costs.

b. differentiate its product.

c. signal its competitors that it is serious about staying in business.

d. motivate its work force.

Q29. For the monopolistic competitor, which is INCORRECT?

a. The profit maximizing rate of output is where the marginal cost curve intersects the marginal revenue curve.

b. The marginal revenue curve is downward sloping and lies below the demand curve.

c. Because the firm has some control over price, its demand curve slopes downward.

d. If the firm in a monopolistically competitive industry were making economic losses, firms would enter the industry.

Q30. Which of the following is TRUE?

a. In the model of price leadership, the dominant firm consistently charges the lowest price.

b. Opportunistic behavior is discouraged by the desire to have repeat transactions.

c. The strategic dependence that characterizes oligopoly means that no firms can earn positive accounting profits.

d. Price wars are most common in perfect competition.

Q31. Antitrust legislation seeks to correct market failure by ensuring that all firms in the industry earn an economic profit.

a. true

b. false

Q32. Market failures arise when

a. people look out for their own best interests.

b. there is a gap between the social and private costs of producing or consuming a good.

c. firms look out for their own best interests.

d. society seeks to operate at a point on the production possibilities curve.

Q33. Cases prosecuted under the Sherman Antitrust Act are intended to correct market failure arising from negative externalities.

a. true

b. false

Q34.

Figure 8.2

Refer to Figure 8.2. The market equilibrium is Q1. Point Q2 represents the optimal point of production. To reach Q2,

a. consumption of the good could be taxed.

b. a subsidy could be given to consumers.

c. production of the good could be taxed.

d. the industry producing the good should operate as a cartel.

Q35. What would happen in a free market system when production of a good generates negative externalities?

a. There would be a shortage of the good.

b. The equilibrium quantity of the good would be more than the efficient amount.

c. The equilibrium quantity of the good would be less than the efficient amount.

d. There would be a surplus of the good.

Q36. If providing a service results in negative external costs, then

a. the market price is below the true opportunity cost of resources used to provide the service.

b. the market price is above the true opportunity cost of resources used to provide the service.

c. the market quantity is too low.

d. market forces will always correct the problem.

Q37. The problem of positive externalities can be addressed by having some firms exit the industry.

a. true

b. false

Q38. The first case prosecuted under the Sherman Act was the antitrust case against Microsoft.

a. true

b. false

Q39. If your marginal tax rate is always higher than your average tax rate, then the tax system is a

a. proportional tax system.

b. regressive tax system.

c. fair tax system.

d. progressive tax system.

Q40. Private goods are characterized by the principle of rival consumption.

a. true

b. false

Q41. Collective bargaining is the process by which unions and employers negotiate the conditions of employment and wages.

a. true

b. false

Q42. The marginal physical product of labor is the addition to total revenue a firm experiences when it hires one additional worker.

a. true

b. false

Q43. A firm's marginal revenue product of labor curve is also

a. its labor demand curve.

b. its total revenue line.

c. its long-run input cost function.

d. its marginal cost curve.

Q44. An increase in the selling price of a product

a. increases the supply of labor to the industry.

b. increases the productivity of labor.

c. raises the firm's demand for labor.

d. decreases the supply of labor to the industry.

Q45. If unions succeed at restricting the supply of labor in any one area of the economy, wages in that sector will increase.

a. true

b. false

Q46. The fact that the labor supply curve slopes upward indicates that

a. workers seek to work more hours when the wage rises.

b. the income effect of a wage increases outweighs the substitution effect.

c. workers seek to work more hours when the wage decreases.

d. firms want to hire more workers when the wage rises.

Q47. The upward slope of the labor supply curve suggests that the income effect of a wage increase outweighs the substitution effect.

a. true

b. false

Q48. The number of strikes occurring in U. S. firms has steadily increased over the past 25 years.

a. true

b. false

Q49. Suppose a perfectly competitive firm faces a labor market in which the going wage rate is $480 per week. If the last worker hired has a marginal physical product of 12 units of output per week, what is the selling price of the firm's output?

a. $40 per unit

b. $480 per unit

c. $240 per unit

d. $12 per unit

Q50. If workers in an industry become less productive due to low employee morale, we would expect the

a. demand for workers to decrease.

b. wages in the industry to increase.

c. supply of workers to increase.

d. demand for workers to increase.

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