Question 1

Marginal revenue is the

Accepted Answer

A)  ratio of total revenue to quantity. 
B)  difference between total revenue and total costs. 
C)  added revenue that a firm takes in when it increases output by one additional unit. 
D)  additional profit the firm earns when it sells an additional unit of output. 
A)  ratio of total revenue to quantity. 
B)  difference between total revenue and total costs. 
C)  added revenue that a firm takes in when it increases output by one additional unit. 
D)  additional profit the firm earns when it sells an additional unit of output.

Question 2

Refer to the information provided in Table 8.2 below to answer the question(s) that follow.
Table 8.2  
-Refer to Table 8.2. If Sherry produces two pairs of earrings, her marginal cost is

Accepted Answer

A)  $40. 
B)  $45. 
C)  $72.50. 
D)  $122.50. 
A)  $40. 
B)  $45. 
C)  $72.50. 
D)  $122.50.

Question 3

Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price equals this firmʹs marginal cost. Assuming price exceeds average variable cost, to maximize profits Cathy's should

Accepted Answer

A)  make no adjustments as they are already maximizing their profits. 
B)  increase their output. 
C)  decrease their output. 
D)  stop producing since it is earning a loss. 
A)  make no adjustments as they are already maximizing their profits. 
B)  increase their output. 
C)  decrease their output. 
D)  stop producing since it is earning a loss.

Question 4

Any firmʹs ________ equals P × q.

Accepted Answer

A)  total cost 
B)  total revenue 
C)  marginal revenue 
D)  marginal cost 
A)  total cost 
B)  total revenue 
C)  marginal revenue 
D)  marginal cost

Question 5

Fixed costs

Accepted Answer

A)  do not exist in the long run. 
B)  depend on a firm's level of output. 
C)  are zero if a firm produces no output. 
D)  are total costs minus average variable costs. 
A)  do not exist in the long run. 
B)  depend on a firm's level of output. 
C)  are zero if a firm produces no output. 
D)  are total costs minus average variable costs.

Question 6

In the short run when the marginal product of labor ________, the marginal cost of an additional unit of output ________.

Accepted Answer

A)  rises; rises 
B)  falls; falls 
C)  rises; falls 
D)  falls; doesn't change 
A)  rises; rises 
B)  falls; falls 
C)  rises; falls 
D)  falls; doesn't change

Question 7

Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price exceeds the firm's marginal and average variable costs. It follows that producing one more cupcake will cause this firm's

Accepted Answer

A)  total cost to decrease. 
B)  profits to increase. 
C)  profits to decrease. 
D)  profits to remain unchanged. 
A)  total cost to decrease. 
B)  profits to increase. 
C)  profits to decrease. 
D)  profits to remain unchanged.

Question 8

Assume the wool industry is perfectly competitive. The market demand curve for wool is ________ and each individual wool producer's demand curve is ________.

Accepted Answer

A)  downward sloping; horizontal 
B)  horizontal; downward sloping 
C)  horizontal; horizontal 
D)  downward sloping; downward sloping 
A)  downward sloping; horizontal 
B)  horizontal; downward sloping 
C)  horizontal; horizontal 
D)  downward sloping; downward sloping

Question 9

Refer to the information provided in Figure 8.4 below to answer the question(s) that follow.   Figure 8.4
-Refer to Figure 8.4. If two microwave ovens are produced, Micro Oven's total variable costs are

Accepted Answer

A)  $150. 
B)  $300. 
C)  $450. 
D)  indeterminate from this information. 
A)  $150. 
B)  $300. 
C)  $450. 
D)  indeterminate from this information.

Question 10

Refer to the information provided in Figure 8.9 below to answer the question(s) that follow.   Figure 8.9
-Refer to Figure 8.9. If this farmer produces the profit-maximizing quantity when the market price is ________, her profit is $0.

Accepted Answer

A)  $24 
B)  $20 
C)  $18 
D)  $4 
A)  $24 
B)  $20 
C)  $18 
D)  $4

Question 11

A perfectly competitive firm breaks even at the level of output where

Accepted Answer

A) P > ATC. B) P < ATC. C) P = ATC. D) P = MC. A) P > ATC. B) P < ATC. C) P = ATC. D) P = MC.

Question 12

Firms maximize their profits by producing the output level where MR = MC.

Accepted Answer

A) True 
 B)False

Question 13

A firm in a perfectly competitive industry can raise its price above the market price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 14

Marginal cost

Accepted Answer

A)  is the increase in total cost resulting from producing one more unit. 
B)  is the average cost of production divided by output. 
C)  equals the increase in AVC resulting from producing one more unit. 
D)  always equals average cost. 
A)  is the increase in total cost resulting from producing one more unit. 
B)  is the average cost of production divided by output. 
C)  equals the increase in AVC resulting from producing one more unit. 
D)  always equals average cost.

Question 15

In the short run, as output increases

Accepted Answer

A)  the difference between average total cost and average variable cost decreases. 
B)  the difference between total cost and average variable cost decreases. 
C)  marginal cost eventually decreases. 
D)  All of the above are correct. 
A)  the difference between average total cost and average variable cost decreases. 
B)  the difference between total cost and average variable cost decreases. 
C)  marginal cost eventually decreases. 
D)  All of the above are correct.

Question 16

Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price exceeds this firmʹs marginal and average variable costs. To maximize profits, Cathy's should

Accepted Answer

A)  make no adjustments as they are already maximizing their profits. 
B)  increase their output. 
C)  decrease their output. 
D)  stop producing since it is earning a loss. 
A)  make no adjustments as they are already maximizing their profits. 
B)  increase their output. 
C)  decrease their output. 
D)  stop producing since it is earning a loss.

Question 17

Refer to the information provided in Figure 8.8 below to answer the question(s) that follow.   Figure 8.8
-Refer to Figure 8.8. This farmer's profit-maximizing level of output is ________ units of output.

Accepted Answer

A)  200 
B)  700 
C)  1,000 
D)  1,400 
A)  200 
B)  700 
C)  1,000 
D)  1,400

Question 18

The production decision is a short-run decision.

Accepted Answer

A) True 
 B)False

Question 19

The average variable cost of producing ice cream sundaes are minimized when 100 sundaes are produced. The total cost of producing 100 sundaes is $500. If fixed cost of production is $200, what is the marginal cost of producing the 100th sundae?

Accepted Answer

A)  $2 
B)  $3 
C)  $5 
D)  indeterminate from the given information 
A)  $2 
B)  $3 
C)  $5 
D)  indeterminate from the given information

Question 20

Economists usually assume that ________ is a fixed input in the ________ run.

Accepted Answer

A)  labor; short 
B)  capital; short 
C)  labor; long 
D)  capital; long 
A)  labor; short 
B)  capital; short 
C)  labor; long 
D)  capital; long

Exam 8: Short-Run Costs and Output Decisions

Marginal revenue is the

Refer to the information provided in Table 8.2 below to answer the question(s) that follow. Table 8.2 -Refer to Table 8.2. If Sherry produces two pairs of earrings, her marginal cost is

Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price equals this firmʹs marginal cost. Assuming price exceeds average variable cost, to maximize profits Cathy's should

Any firmʹs ________ equals P × q.

Fixed costs

In the short run when the marginal product of labor ________, the marginal cost of an additional unit of output ________.

Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price exceeds the firm's marginal and average variable costs. It follows that producing one more cupcake will cause this firm's

Assume the wool industry is perfectly competitive. The market demand curve for wool is ________ and each individual wool producer's demand curve is ________.

Refer to the information provided in Figure 8.4 below to answer the question(s) that follow. Figure 8.4 -Refer to Figure 8.4. If two microwave ovens are produced, Micro Oven's total variable costs are

Refer to the information provided in Figure 8.9 below to answer the question(s) that follow. Figure 8.9 -Refer to Figure 8.9. If this farmer produces the profit-maximizing quantity when the market price is ________, her profit is $0.

A perfectly competitive firm breaks even at the level of output where

Firms maximize their profits by producing the output level where MR = MC.

A firm in a perfectly competitive industry can raise its price above the market price to increase revenue.

Marginal cost

In the short run, as output increases

Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price exceeds this firmʹs marginal and average variable costs. To maximize profits, Cathy's should

Refer to the information provided in Figure 8.8 below to answer the question(s) that follow. Figure 8.8 -Refer to Figure 8.8. This farmer's profit-maximizing level of output is ________ units of output.

The production decision is a short-run decision.

The average variable cost of producing ice cream sundaes are minimized when 100 sundaes are produced. The total cost of producing 100 sundaes is $500. If fixed cost of production is $200, what is the marginal cost of producing the 100th sundae?

Economists usually assume that ________ is a fixed input in the ________ run.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Long-Run Costs and Output Decisions

Input Demand: The Labor and Land Markets

Input Demand: The Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

In the short run when the marginal product of labor , the marginal cost of an additional unit of output .

Assume the wool industry is perfectly competitive. The market demand curve for wool is and each individual wool producer's demand curve is .

Economists usually assume that is a fixed input in the run.