Question 1

A perfectly elastic demand curve implies that, ceteris paribus,

Accepted Answer

A)  a firm can sell more by lowering its price. 
B)  if a firm raises its price above the market price, quantity demanded will equal zero. 
C)  the price a firm charges is irrelevant, as it will sell the same amount regardless of the price charged. 
D)  a firm can raise its price and not lose all its customers. 
A)  a firm can sell more by lowering its price. 
B)  if a firm raises its price above the market price, quantity demanded will equal zero. 
C)  the price a firm charges is irrelevant, as it will sell the same amount regardless of the price charged. 
D)  a firm can raise its price and not lose all its customers.

Question 2

In the short run, ________ costs exceed ________ costs.

Accepted Answer

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

Question 3

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 4

The production decision is a short-run decision.

Accepted Answer

A) True 
 B)False

Question 5

The formula for MC is

Accepted Answer

A)  TVC/q. 
B)  q/TVC. 
C)  ΔTVC/q. 
D)  ΔTVC/Δq. 
A)  TVC/q. 
B)  q/TVC. 
C)  ΔTVC/q. 
D)  ΔTVC/Δq.

Question 6

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 7

The Lawn Ranger, a landscaping company, has total costs of $4,000 and total variable costs of $1,000. The Lawn Ranger's total fixed costs are

Accepted Answer

A)  $0. 
B)  $3,000. 
C)  $5,000. 
D)  indeterminate because the firm's output level is not known. 
A)  $0. 
B)  $3,000. 
C)  $5,000. 
D)  indeterminate because the firm's output level is not known.

Question 8

Refer to the information provided in Table 8.5 below to answer the following questions.
Table 8.5 $$\begin{array} { c l l l l } 
\begin{array} { c } 
\text { Number of } \
\text { Fruit Baskets }
\end{array} & \text { TFC } & \text { TVC } & \text { TC } & \text { MC } \
\hline 0 & \$ 50 & \$ 0 & \$ 50 & - - \
1 & 50 & 10 & 60 & 10 \
2 & 50 & 15 & 65 & 5 \
3 & 50 & 21 & 71 & 6 \
4 & 50 & 31 & 81 & 10 \
5 & 50 & 46 & 96 & 15 \
6 & 50 & 68 & 118 & 22
\end{array}$$
-Refer to Table 8.5. Assume that fruit baskets are sold in a perfectly competitive market. The market price of a fruit basket is $22. To maximize profits, Exotic Fruit should sell ________ fruit baskets and their profit is ________.

Accepted Answer

A)  three; $5 
B)  four; $7 
C)  five; $14 
D)  six; $14 
A)  three; $5 
B)  four; $7 
C)  five; $14 
D)  six; $14

Question 9

Refer to the information provided in Figure 8.4 below to answer the questions that follow.   Figure 8.4
-Refer to Figure 8.4. If six microwave ovens are produced, Micro Oven's average fixed costs are

Accepted Answer

A)  $33.33. 
B)  $83.33. 
C)  $116.67. 
D)  indeterminate from this information. 
A)  $33.33. 
B)  $83.33. 
C)  $116.67. 
D)  indeterminate from this information.

Question 10

A firm will begin to experience diminishing returns at the point where

Accepted Answer

A)  marginal cost increases. 
B)  marginal cost decreases. 
C)  marginal product increases. 
D)  Both B and C are correct. 
A)  marginal cost increases. 
B)  marginal cost decreases. 
C)  marginal product increases. 
D)  Both B and C are correct.

Question 11

Refer to the information provided in Figure 8.2 below to answer the questions that follow.   Figure 8.2
-Refer to Figure 8.2 above. The total fixed costs for The Barber Shop are $3,000. If The Barber Shop produces 300 haircuts, the average fixed costs are

Accepted Answer

A)  $0.20. 
B)  $5. 
C)  $10. 
D)  $100. 
A)  $0.20. 
B)  $5. 
C)  $10. 
D)  $100.

Question 12

If the marginal cost curve is below the average variable cost curve, then

Accepted Answer

A)  average variable costs are increasing. 
B)  average variable costs are decreasing. 
C)  marginal cost must be decreasing. 
D)  average variable costs could either be increasing or decreasing. 
A)  average variable costs are increasing. 
B)  average variable costs are decreasing. 
C)  marginal cost must be decreasing. 
D)  average variable costs could either be increasing or decreasing.

Question 13

If there is a decrease in industry supply while the industry demand curve remains the same, then an individual firm in a perfectly competitive industry currently earning losses will see its losses ________.

Accepted Answer

A)  increase 
B)  not change 
C)  decrease 
D)  impossible to determine 
A)  increase 
B)  not change 
C)  decrease 
D)  impossible to determine

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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 16

________ are likely a fixed cost of a firm.

Accepted Answer

A)  Wages paid to employees 
B)  The payments for supplies 
C)  Lease payments for office space 
D)  Travel expenses to meet with clients 
A)  Wages paid to employees 
B)  The payments for supplies 
C)  Lease payments for office space 
D)  Travel expenses to meet with clients

Question 17

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 18

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 19

Which statement is true? Fixed costs

Accepted Answer

A)  do NOT exist in the long run. 
B)  depend on the firm's level of output. 
C)  are zero if the firm is producing nothing. 
D)  are the difference between total costs and average variable costs. 
A)  do NOT exist in the long run. 
B)  depend on the firm's level of output. 
C)  are zero if the firm is producing nothing. 
D)  are the difference between total costs and average variable costs.

Question 20

Refer to the information provided in Figure 8.7 below to answer the questions that follow.   Figure 8.7
-Refer to Figure 8.7. If Buffy gives 17 perms per day, her daily profit is

Accepted Answer

A)  $3. 
B)  $51. 
C)  $153. 
D)  $204. 
A)  $3. 
B)  $51. 
C)  $153. 
D)  $204.

A perfectly elastic demand curve implies that, ceteris paribus,

In the short run, costs exceed costs.

In the short run, as output increases,

The production decision is a short-run decision.

The formula for MC is

Marginal revenue is the

The Lawn Ranger, a landscaping company, has total costs of $4,000 and total variable costs of $1,000. The Lawn Ranger's total fixed costs are

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4 -Refer to Figure 8.4. If six microwave ovens are produced, Micro Oven's average fixed costs are

A firm will begin to experience diminishing returns at the point where

Refer to the information provided in Figure 8.2 below to answer the questions that follow. Figure 8.2 -Refer to Figure 8.2 above. The total fixed costs for The Barber Shop are $3,000. If The Barber Shop produces 300 haircuts, the average fixed costs are

If the marginal cost curve is below the average variable cost curve, then

If there is a decrease in industry supply while the industry demand curve remains the same, then an individual firm in a perfectly competitive industry currently earning losses will see its losses ________.

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

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

________ are likely a fixed cost of a firm.

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

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?

Which statement is true? Fixed costs

Refer to the information provided in Figure 8.7 below to answer the questions that follow. Figure 8.7 -Refer to Figure 8.7. If Buffy gives 17 perms per day, her daily profit is

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 Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters

Exam 8: Short-Run Costs and Output Decisions

A perfectly elastic demand curve implies that, ceteris paribus,

In the short run, ________ costs exceed ________ costs.

In the short run, as output increases,

The production decision is a short-run decision.

The formula for MC is

Marginal revenue is the

The Lawn Ranger, a landscaping company, has total costs of $4,000 and total variable costs of $1,000. The Lawn Ranger's total fixed costs are

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4 -Refer to Figure 8.4. If six microwave ovens are produced, Micro Oven's average fixed costs are

A firm will begin to experience diminishing returns at the point where

Refer to the information provided in Figure 8.2 below to answer the questions that follow. Figure 8.2 -Refer to Figure 8.2 above. The total fixed costs for The Barber Shop are $3,000. If The Barber Shop produces 300 haircuts, the average fixed costs are

If the marginal cost curve is below the average variable cost curve, then

If there is a decrease in industry supply while the industry demand curve remains the same, then an individual firm in a perfectly competitive industry currently earning losses will see its losses ________.

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

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

________ are likely a fixed cost of a firm.

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

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?

Which statement is true? Fixed costs

Refer to the information provided in Figure 8.7 below to answer the questions that follow. Figure 8.7 -Refer to Figure 8.7. If Buffy gives 17 perms per day, her daily profit is

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 Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters

In the short run, costs exceed costs.

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

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