Question 1

The term diminishing returns to labor means that

Accepted Answer

A)  the wage rate falls as a person takes on more jobs. 
B)  total output decreases as one more unit of labor is applied to production. 
C)  the market value of labor decreases as more labor is supplied. 
D)  increases in output decline as additional units of labor are used in production. 
E)  the production of labor is becoming less profitable with decreasing real wages. 
A)  the wage rate falls as a person takes on more jobs. 
B)  total output decreases as one more unit of labor is applied to production. 
C)  the market value of labor decreases as more labor is supplied. 
D)  increases in output decline as additional units of labor are used in production. 
E)  the production of labor is becoming less profitable with decreasing real wages.

Question 2

In a market diagram, producer surplus is shaped like a triangle bounded by the vertical axis, the demand curve, and the supply curve.

Accepted Answer

A) True 
 B)False

Question 3

How much a firm changes its output in response to a price change is captured by the firm's

Accepted Answer

A)  production function. 
B)  cost function. 
C)  function of diminishing returns. 
D)  supply curve. 
E)  demand curve. 
A)  production function. 
B)  cost function. 
C)  function of diminishing returns. 
D)  supply curve. 
E)  demand curve.

Question 4

A competitive market is one in which many firms compete for customers and end up charging a common market price.

Accepted Answer

A) True 
 B)False

Question 5

The market supply curve tends to get steeper as output increases.

Accepted Answer

A) True 
 B)False

Question 6

An increase in market demand has no effect on producer surplus because producer surplus is related to supply.

Accepted Answer

A) True 
 B)False

Question 7

For a single competitive firm, marginal revenue is equivalent to

Accepted Answer

A)  marginal product. 
B)  marginal cost. 
C)  total revenue. 
D)  output price. 
E)  the sum of all input prices. 
A)  marginal product. 
B)  marginal cost. 
C)  total revenue. 
D)  output price. 
E)  the sum of all input prices.

Question 8

What is the major characteristic of a competitive market?

Accepted Answer

A market is competit

Question 9

The firm's supply curve is its marginal cost curve.

Accepted Answer

A) True 
 B)False

Question 10

Name one industry in which firms are price-takers. Name one industry in which firms are not price-takers. Suppose you set up a business where you sell lemonade on a street. Would you be a price-taker or a price-maker?

Accepted Answer

One industry in which firms are price-ta

Question 11

Which of the following statements is true for any profit-maximizing firm?

Accepted Answer

A)  The firm will produce at the level of output where price equals marginal revenue. 
B)  The firm will produce at the level of output where price equals marginal cost. 
C)  The firm will produce at the level of output where marginal revenue equals marginal cost. 
D)  The firm will produce at the level of output where marginal revenue is maximized. 
E)  The firm will produce at the level of output where marginal cost is minimized. 
A)  The firm will produce at the level of output where price equals marginal revenue. 
B)  The firm will produce at the level of output where price equals marginal cost. 
C)  The firm will produce at the level of output where marginal revenue equals marginal cost. 
D)  The firm will produce at the level of output where marginal revenue is maximized. 
E)  The firm will produce at the level of output where marginal cost is minimized.

Question 12

Total revenue always increases if price increases.

Accepted Answer

A) True 
 B)False

Question 13

Refer to Exhibit 6-1. Diminishing returns to labor is illustrated by

Accepted Answer

A)  increasing output. 
B)  decreasing output. 
C)  output increasing at a decreasing rate. 
D)  output increasing at an increasing rate. 
E)  increasing input. 
A)  increasing output. 
B)  decreasing output. 
C)  output increasing at a decreasing rate. 
D)  output increasing at an increasing rate. 
E)  increasing input.

Question 14

Profit maximization is the basic assumption for all types of corporations, but not for sole proprietorships.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 6-3  
-Refer to Exhibit 6-3. What is the profit-maximizing output level if output price is $16?

Accepted Answer

5 units
Calculate total revenue at each

Question 16

The added revenue that comes from producing and selling another unit of a good is called

Accepted Answer

A)  marginal cost. 
B)  price. 
C)  marginal product. 
D)  average revenue. 
E)  marginal revenue. 
A)  marginal cost. 
B)  price. 
C)  marginal product. 
D)  average revenue. 
E)  marginal revenue.

Question 17

A production function is a straight line because of diminishing returns to labor.

Accepted Answer

A) True 
 B)False

Question 18

The market supply curve is obtained by summing the total costs of all firms in the market.

Accepted Answer

A) True 
 B)False

Question 19

The slope of the production function turns from positive to negative when the marginal product of labor turns from positive to negative.

Accepted Answer

A) True 
 B)False

Question 20

Marginal cost increases with output because

Accepted Answer

A)  capital becomes increasingly difficult to work with as more units of labor utilize it. 
B)  marginal product increases with output. 
C)  increasing amounts of input must be used to produce one more unit of output. 
D)  total costs increase with output. 
E)  more input must be used to produce more output. 
A)  capital becomes increasingly difficult to work with as more units of labor utilize it. 
B)  marginal product increases with output. 
C)  increasing amounts of input must be used to produce one more unit of output. 
D)  total costs increase with output. 
E)  more input must be used to produce more output.

The term diminishing returns to labor means that

In a market diagram, producer surplus is shaped like a triangle bounded by the vertical axis, the demand curve, and the supply curve.

How much a firm changes its output in response to a price change is captured by the firm's

A competitive market is one in which many firms compete for customers and end up charging a common market price.

The market supply curve tends to get steeper as output increases.

An increase in market demand has no effect on producer surplus because producer surplus is related to supply.

For a single competitive firm, marginal revenue is equivalent to

What is the major characteristic of a competitive market?

The firm's supply curve is its marginal cost curve.

Name one industry in which firms are price-takers. Name one industry in which firms are not price-takers. Suppose you set up a business where you sell lemonade on a street. Would you be a price-taker or a price-maker?

Which of the following statements is true for any profit-maximizing firm?

Total revenue always increases if price increases.

Refer to Exhibit 6-1. Diminishing returns to labor is illustrated by

Profit maximization is the basic assumption for all types of corporations, but not for sole proprietorships.

Exhibit 6-3 -Refer to Exhibit 6-3. What is the profit-maximizing output level if output price is $16?

The added revenue that comes from producing and selling another unit of a good is called

A production function is a straight line because of diminishing returns to labor.

The market supply curve is obtained by summing the total costs of all firms in the market.

The slope of the production function turns from positive to negative when the marginal product of labor turns from positive to negative.

Marginal cost increases with output because

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Demand Curve and the Behavior of Consumers

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

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Exam 6: The Supply Curve and the Behavior of Firms

The term diminishing returns to labor means that

In a market diagram, producer surplus is shaped like a triangle bounded by the vertical axis, the demand curve, and the supply curve.

How much a firm changes its output in response to a price change is captured by the firm's

A competitive market is one in which many firms compete for customers and end up charging a common market price.

The market supply curve tends to get steeper as output increases.

An increase in market demand has no effect on producer surplus because producer surplus is related to supply.

For a single competitive firm, marginal revenue is equivalent to

What is the major characteristic of a competitive market?

The firm's supply curve is its marginal cost curve.

Name one industry in which firms are price-takers. Name one industry in which firms are not price-takers. Suppose you set up a business where you sell lemonade on a street. Would you be a price-taker or a price-maker?

Which of the following statements is true for any profit-maximizing firm?

Total revenue always increases if price increases.

Refer to Exhibit 6-1. Diminishing returns to labor is illustrated by

Profit maximization is the basic assumption for all types of corporations, but not for sole proprietorships.

Exhibit 6-3 -Refer to Exhibit 6-3. What is the profit-maximizing output level if output price is $16?

The added revenue that comes from producing and selling another unit of a good is called

A production function is a straight line because of diminishing returns to labor.

The market supply curve is obtained by summing the total costs of all firms in the market.

The slope of the production function turns from positive to negative when the marginal product of labor turns from positive to negative.

Marginal cost increases with output because

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Demand Curve and the Behavior of Consumers

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters