Question 1

For perfectly competitive firms,

Accepted Answer

A)  marginal revenue equals total revenue. 
B)  marginal revenue equals price. 
C)  total revenue equals price. 
D)  all of the above 
A)  marginal revenue equals total revenue. 
B)  marginal revenue equals price. 
C)  total revenue equals price. 
D)  all of the above

Question 2

The rising part of a perfectly competitive firm's ________ cost curve is the firm's short run ________ curve.

Accepted Answer

A)  average total; supply 
B)  average variable; demand 
C)  average fixed; demand 
D)  marginal; supply 
A)  average total; supply 
B)  average variable; demand 
C)  average fixed; demand 
D)  marginal; supply

Question 3

In perfect competition, a firm's ________ curve is horizontal.

Accepted Answer

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

Question 4

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.   Figure 8.6
-Refer to Figure 8.6. Marginal cost is represented by

Accepted Answer

A)  curve 1. 
B)  curve 2. 
C)  curve 3. 
D)  line segment AB. 
A)  curve 1. 
B)  curve 2. 
C)  curve 3. 
D)  line segment AB.

Question 5

At an output ________ of a firm's short run average total cost curve, a firm can use its fixed capital input at a lower average cost but only by using its variable input at a higher average cost.

Accepted Answer

A)  beyond the minimum point 
B)  beyond the maximum point 
C)  prior to the minimum point 
D)  equal to the highest level 
A)  beyond the minimum point 
B)  beyond the maximum point 
C)  prior to the minimum point 
D)  equal to the highest level

Question 6

In the short run a firm's lowest cost level of output is the minimum point on its ________ cost curve.

Accepted Answer

A)  average total 
B)  total variable 
C)  average fixed 
D)  marginal 
A)  average total 
B)  total variable 
C)  average fixed 
D)  marginal

Question 7

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. If this farmer is producing the profit-maximizing level of output, her marginal cost is

Accepted Answer

A)  $2. 
B)  $8. 
C)  $9. 
D)  $12. 
A)  $2. 
B)  $8. 
C)  $9. 
D)  $12.

Question 8

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

Accepted Answer

A)  variable; short 
B)  fixed; short 
C)  fixed; long 
D)  variable; short and long 
A)  variable; short 
B)  fixed; short 
C)  fixed; long 
D)  variable; short and long

Question 9

Marginal costs reflect changes in variable costs.

Accepted Answer

A) True 
 B)False

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 the market price of hay falls to $18, then to maximize profits this farmer should produce

Accepted Answer

A)  350 bales of hay. 
B)  500 bales of hay. 
C)  750 bales of hay. 
D)  a level of output that is indeterminate from this information. 
A)  350 bales of hay. 
B)  500 bales of hay. 
C)  750 bales of hay. 
D)  a level of output that is indeterminate from this information.

Question 11

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. This farmer's ________ level of output is 500 units of output.

Accepted Answer

A)  profit-maximizing 
B)  loss-minimizing 
C)  break-even 
D)  shut-down 
A)  profit-maximizing 
B)  loss-minimizing 
C)  break-even 
D)  shut-down

Question 12

Amy spends $5,000 on remodeling a storefront that she then opens as a take-out deli. Business has not been very successful, and she needs an additional $1,000 to keep the deli open. Which of the following is true?

Accepted Answer

A)  The $5,000 Amy spent on remodeling represents a part of the total variable cost of her business. 
B)  The $5,000 Amy spent is a fixed cost of her business. 
C)  The $1,000 represents her marginal costs of production. 
D)  The $1,000 Amy needs to keep the deli open represents her total fixed costs. 
A)  The $5,000 Amy spent on remodeling represents a part of the total variable cost of her business. 
B)  The $5,000 Amy spent is a fixed cost of her business. 
C)  The $1,000 represents her marginal costs of production. 
D)  The $1,000 Amy needs to keep the deli open represents her total fixed costs.

Question 13

Strawberries are produced in a perfectly competitive market. Average consumer incomes decrease. This will cause the individual strawberry farmer's marginal revenue to ________ and their profit-maximizing level of output to ________.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 14

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 15

Assume Robbie's Robots operates in a perfectly competitive market producing 3,000 robots per day. At this output level, the selling price is $800 per robot and the marginal cost is $825 per robot. To maximize profits, Robbie's Robots 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 16

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow.   Figure 8.6
-Refer to Figure 8.6. The vertical distance AB is Outdoor Equipment's

Accepted Answer

A)  marginal cost. 
B)  average fixed cost. 
C)  total fixed cost. 
D)  total cost. 
A)  marginal cost. 
B)  average fixed cost. 
C)  total fixed cost. 
D)  total cost.

Question 17

Refer to the information provided in Table 8.4 below to answer the question(s) that follow.
Table 8.4
 $$\begin{array} { c c c c } 
\hline \text { Produce } & \text { Using Techniques } & \text { Units of Variable K } & \text { Inputs L } \
\hline 1 \text { unit of output } & \text { A } & 4 & 4 \
\hline & \text { B } & 2 & 6 \
\hline 2 \text { units of output } & & & \
\hline & \text { A } & 7 & 6 \
\hline& \text { B } & 4 & 10 \
\hline 3 \text { units of output } &\text { A }  &8 & 6 \
\hline &\text { B } & 6& 11 \
\hline
\end{array}$$
-Refer to Table 8.4. Assume that the relevant time period is the short run. Assuming the price of capital (K) is $10 per unit and the price of labor (L) is $5 per unit, this firm's total cost of producing one unit of output is

Accepted Answer

A)  $50. 
B)  $60. 
C)  $110. 
D)  indeterminate from this information. 
A)  $50. 
B)  $60. 
C)  $110. 
D)  indeterminate from this information.

Question 18

As output rises, ________ will continue to fall.

Accepted Answer

A)  average variable costs 
B)  average total costs 
C)  average fixed costs 
D)  marginal costs 
A)  average variable costs 
B)  average total costs 
C)  average fixed costs 
D)  marginal costs

Question 19

If the average variable cost of the fifth hat is $30, then the total variable cost of five hats is

Accepted Answer

A)  $6. 
B)  $150. 
C)  $1,800. 
D)  indeterminate from this information. 
A)  $6. 
B)  $150. 
C)  $1,800. 
D)  indeterminate from this information.

Question 20

A firm facing a ________ demand curve, ceteris paribus, will have zero quantity demanded if it raises its price above the market price.

Accepted Answer

A)  perfectly inelastic 
B)  relatively elastic 
C)  relatively inelastic 
D)  perfectly elastic 
A)  perfectly inelastic 
B)  relatively elastic 
C)  relatively inelastic 
D)  perfectly elastic

Exam 8: Short-Run Costs and Output Decisions

For perfectly competitive firms,

The rising part of a perfectly competitive firm's ________ cost curve is the firm's short run ________ curve.

In perfect competition, a firm's ________ curve is horizontal.

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. Marginal cost is represented by

At an output ________ of a firm's short run average total cost curve, a firm can use its fixed capital input at a lower average cost but only by using its variable input at a higher average cost.

In the short run a firm's lowest cost level of output is the minimum point on its ________ cost curve.

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. If this farmer is producing the profit-maximizing level of output, her marginal cost is

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

Marginal costs reflect changes in variable costs.

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 the market price of hay falls to $18, then to maximize profits this farmer should produce

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. This farmer's ________ level of output is 500 units of output.

Amy spends $5,000 on remodeling a storefront that she then opens as a take-out deli. Business has not been very successful, and she needs an additional $1,000 to keep the deli open. Which of the following is true?

Strawberries are produced in a perfectly competitive market. Average consumer incomes decrease. This will cause the individual strawberry farmer's marginal revenue to ________ and their profit-maximizing level of output to ________.

Marginal revenue is the

Assume Robbie's Robots operates in a perfectly competitive market producing 3,000 robots per day. At this output level, the selling price is $800 per robot and the marginal cost is $825 per robot. To maximize profits, Robbie's Robots should

Refer to the information provided in Figure 8.6 below to answer the question(s) that follow. Figure 8.6 -Refer to Figure 8.6. The vertical distance AB is Outdoor Equipment's

As output rises, ________ will continue to fall.

If the average variable cost of the fifth hat is $30, then the total variable cost of five hats is

A firm facing a ________ demand curve, ceteris paribus, will have zero quantity demanded if it raises its price above the market price.

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

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

The rising part of a perfectly competitive firm's cost curve is the firm's short run curve.

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

Strawberries are produced in a perfectly competitive market. Average consumer incomes decrease. This will cause the individual strawberry farmer's marginal revenue to and their profit-maximizing level of output to .