Deck 6: Perfectly Competitive Supply

Question 1

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours Per } \\\text { Day Cleaning } \\\text { Windows }\end{array} & \begin{array} { c } \text { Total Number } \\\text { of Windows } \\\text { Cleaned }\end{array} \\\hline 0 & 0 \\\hline 1 & 7 \\\hline 2 & 11 \\\hline 3 & 14 \\\hline 4 & 16 \\\hline 5 & 17 \\\hline\end{array}$$ What is the lowest price per window that would induce John to spend at least one hour per day cleaning windows?

A)$7
B)$1
C)$3
D)$2

Answer 1

$1

Question 2

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours Per } \\\text { Day Cleaning } \\\text { Windows }\end{array} & \begin{array} { c } \text { Total Number } \\\text { of Windows } \\\text { Cleaned }\end{array} \\\hline 0 & 0 \\\hline 1 & 7 \\\hline 2 & 11 \\\hline 3 & 14 \\\hline 4 & 16 \\\hline 5 & 17 \\\hline\end{array}$$ How many hours a day should John spend cleaning windows?

A)1
B)2
C)3
D)4

Answer 2

2

Question 3

Individual supply curves generally slope ______ because ______.

A)downward; sellers become more efficient with practice
B)upward; profits increase with quantity
C)downward; inputs are cheaper when purchased in high volume
D)upward; of increasing opportunity costs

Answer 3

upward; of increasing opportunity costs

Question 4

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours Per } \\\text { Day Cleaning } \\\text { Windows }\end{array} & \begin{array} { c } \text { Total Number } \\\text { of Windows } \\\text { Cleaned }\end{array} \\\hline 0 & 0 \\\hline 1 & 7 \\\hline 2 & 11 \\\hline 3 & 14 \\\hline 4 & 16 \\\hline 5 & 17 \\\hline\end{array}$$ If we plot John's opportunity cost per window on the vertical axis and the number of windows cleaned each day on the horizontal axis, we will have John's ______ curve for window-cleaning services.

A)production possibilities
B)supply
C)benefit
D)demand

Question 5

For a given seller, the figure below shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. What is this seller's reservation price for the 250^th unit?

A)$2
B)$4
C)$8
D)$14

Question 6

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours Per } \\\text { Day Cleaning } \\\text { Windows }\end{array} & \begin{array} { c } \text { Total Number } \\\text { of Windows } \\\text { Cleaned }\end{array} \\\hline 0 & 0 \\\hline 1 & 7 \\\hline 2 & 11 \\\hline 3 & 14 \\\hline 4 & 16 \\\hline 5 & 17 \\\hline\end{array}$$ A second hour cleaning windows will yield additional earnings of ______.

A)$2
B)$14
C)$8
D)$7

Question 7

Which of the following best explains why you are more likely to see a poor person than a wealthy person picking up aluminum cans to sell?

A)Wealthy people do not care about the environment.
B)The opportunity cost of picking up cans is higher for wealthy people than for poor people.
C)Wealthy people are more concerned about their public image than are poor people.
D)Wealthy people are more aware of diseases transmitted through litter than are poor people.

Question 8

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours Per } \\\text { Day Cleaning } \\\text { Windows }\end{array} & \begin{array} { c } \text { Total Number } \\\text { of Windows } \\\text { Cleaned }\end{array} \\\hline 0 & 0 \\\hline 1 & 7 \\\hline 2 & 11 \\\hline 3 & 14 \\\hline 4 & 16 \\\hline 5 & 17 \\\hline\end{array}$$ Should John spend a third hour cleaning windows?

A)Yes, because he would earn $28.
B)Yes, because the additional amount he would earn is $14, which is greater than his opportunity cost of $7.
C)No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7.
D)Yes, because the additional amount he would earn is $6, which is better than earning nothing.

Question 9

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours Per } \\\text { Day Cleaning } \\\text { Windows }\end{array} & \begin{array} { c } \text { Total Number } \\\text { of Windows } \\\text { Cleaned }\end{array} \\\hline 0 & 0 \\\hline 1 & 7 \\\hline 2 & 11 \\\hline 3 & 14 \\\hline 4 & 16 \\\hline 5 & 17 \\\hline\end{array}$$ What is John's opportunity cost of cleaning windows for an hour?

A)$14
B)$8
C)$7
D)$2

Question 10

For a single seller, the figure below shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. If the market consists of 50 identical sellers, how much would be supplied in the market at a price of $14 per unit?

A)350
B)1,750
C)17,500
D)175,000

Question 11

Your neighbors have offered to pay you to look after their dog while they are on vacation. It will take you one hour per day to feed, walk, and care for the dog, which you can do either before or after you go to work. Your regular job pays $10 per hour, and you can work up to eight hours per day. The smallest amount of money you would accept to look after your neighbor's dog is equal to:

A)$10 per day, because that is your opportunity cost of one hour of work.
B)$15 per day, because overtime wages are generally 1.5 times your regular wage when you work more than eight hours a day.
C)zero, because your regular job is not available for more than eight hours per day.
D)the value of one hour of leisure, which is greater than zero.

Question 12

A seller's supply curve shows the seller's:

A)willingness to pay for an additional unit of output at each quantity.
B)opportunity cost of producing an additional unit of output at each quantity.
C)hourly wage for producing an additional unit of output at each quantity.
D)profit from producing an additional unit of output at each quantity.

Question 13

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours Per } \\\text { Day Cleaning } \\\text { Windows }\end{array} & \begin{array} { c } \text { Total Number } \\\text { of Windows } \\\text { Cleaned }\end{array} \\\hline 0 & 0 \\\hline 1 & 7 \\\hline 2 & 11 \\\hline 3 & 14 \\\hline 4 & 16 \\\hline 5 & 17 \\\hline\end{array}$$ The first hour John spends cleaning windows costs him ______ that he could have earned in the grocery store.

A)$2
B)$7
C)$14
D)$18

Question 14

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours Per } \\\text { Day Cleaning } \\\text { Windows }\end{array} & \begin{array} { c } \text { Total Number } \\\text { of Windows } \\\text { Cleaned }\end{array} \\\hline 0 & 0 \\\hline 1 & 7 \\\hline 2 & 11 \\\hline 3 & 14 \\\hline 4 & 16 \\\hline 5 & 17 \\\hline\end{array}$$ What is the lowest price per window that John would be willing to accept to spend 4 hours per day cleaning windows?

A)$7
B)$2
C)$3.50
D)$11

Question 15

For a given seller, the figure below shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. If the market price of this good is $6, how many units would this seller produce?

A)50
B)150
C)250
D)300

Question 16

As the market price of a service increases, more potential sellers will decide to perform that service because:

A)higher prices result in higher revenue.
B)more potential sellers will find that the market price exceeds their reservation price.
C)it's more prestigious to produce high-priced services.
D)higher prices lead to lower opportunity costs.

Question 17

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours Per } \\\text { Day Cleaning } \\\text { Windows }\end{array} & \begin{array} { c } \text { Total Number } \\\text { of Windows } \\\text { Cleaned }\end{array} \\\hline 0 & 0 \\\hline 1 & 7 \\\hline 2 & 11 \\\hline 3 & 14 \\\hline 4 & 16 \\\hline 5 & 17 \\\hline\end{array}$$ John's benefit from his first hour cleaning windows is:

A)$14
B)$18
C)$7
D)$2

Question 18

A rational seller will sell another unit of output:

A)whenever the seller is earning a profit.
B)if the cost of making another unit is less than the revenue gained from selling another unit.
C)as long as the quantity demanded is greater than zero.
D)if the seller can charge more than the equilibrium price.

Question 19

For a given seller, the below above shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. As the market price of this good increases, the quantity produced by this seller will ______.

A)increase
B)decrease
C)stay the same
D)stay the same until the price rises above $6 per unit, and then it will increase

Question 20

The primary objective of most private firms is to:

A)maximize revenue.
B)maximize profit.
C)minimize cost.
D)maximize output.

Question 21

A profit-maximizing perfectly competitive firm must decide:

A)only on what price to charge, taking output as fixed.
B)both what price to charge and how much to produce.
C)only on how much to produce, taking price as fixed.
D)only on which industry to join, taking price and output as fixed.

Question 22

Last year, Casey grew fresh vegetables, which she sold at her local farmers market, but this year, Casey did not plant any vegetables and went to work at a bank instead. If Casey's decision to change careers did not affect the price of vegetables at the farmers market, then this suggests that:

A)the demand for vegetables did not change.
B)the market for vegetables is perfectly competitive.
C)the demand for vegetables increased this year.
D)the market demand for vegetables is perfectly inelastic.

Question 23

Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. If the lemonade market is perfectly competitive and price is already at the equilibrium level, Jenny can increase her revenue if she:

A)decreases the price of her lemonade and doesn't change her output.
B)increases the price of her lemonade and decreases her output.
C)increases the price of her lemonade and doesn't change her output.
D)keeps the price of her lemonade the same and increases the output.

Question 24

Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. The lemonade market in Jenny's neighborhood is more likely to be perfectly competitive if:

A)all of the kids advertise heavily.
B)each stand tries to get more customers by offering different varieties of lemonade and snacks.
C)each lemonade stand sells the same kind of lemonade.
D)some of the neighborhood parents build elaborate booths for their kids' stands while some kids sell from makeshift tables.

Question 25

The most important challenge facing a firm in a perfectly competitive market is deciding:

A)whether to maximize its profits.
B)how much to produce.
C)what price to charge.
D)whether to advertise.

Question 26

In which of the following markets do firms sell the same standardized product?

A)Four-door cars
B)2% milk
C)Desktop computers
D)Sandwiches

Question 27

Which of the following would be considered a factor of production in the provision of bus service?

A)The revenue from the sale of bus tickets.
B)The amount it costs to provide bus service between two locations.
C)Bus drivers.
D)The hourly wage paid to bus drivers.

Question 28

Which of the following is NOT true of a perfectly competitive firm?

A)It faces a perfectly elastic demand curve.
B)It is unable to influence the price of the good it sells.
C)It seeks to maximize revenue.
D)It sells only a small fraction of the total quantity exchanged in the market.

Question 29

One implication of the shape of the demand curve facing a perfectly competitive firm is that:

A)if the firm increases its price above the market price, it will earn higher revenue.
B)if the firm decreases its price below the market price, it will earn higher revenue.
C)if the firm increases its price above the market price, it will earn zero revenue.
D)the market would be unable to reach a new equilibrium if demand changed.

Question 30

Which of the following is NOT a characteristic of a perfectly competitive market? rev: 08_28_2015_QC_CS-20886

A)Each firm in the market sells a somewhat different variant of the good.
B)There are many sellers, each of which sells only a small fraction of the total quantity exchanged.
C)Buyers and sellers are well-informed.
D)Sellers can easily buy and sell the productive resources needed to enter the market.

Question 31

An imperfectly competitive firm is one that:

A)has at least some influence over the market price.
B)charges any price it wants.
C)seeks to maximize revenue.
D)faces a perfectly inelastic demand curve.

Question 32

Which of the following is a defining characteristic of all perfectly competitive markets?

A)Each firm in the market faces a perfectly inelastic demand curve.
B)The market demand curve is perfectly elastic.
C)All firms sell the same standardized product.
D)Consumers display strong brand loyalty.

Question 33

Last year, Casey grew fresh vegetables, which she sold at her local farmers market, but this year, Casey did not plant any vegetables and went to work at a bank instead. Which of the following best explains Casey's career change?

A)Casey's opportunity costs of gardening exceeded Casey's benefits from working at the bank.
B)Casey's opportunity costs of working at the bank exceeded Casey's benefits from gardening.
C)Casey's opportunity costs of working at the bank exceeded Casey's opportunity costs of gardening.
D)Casey's opportunity costs of gardening exceeded Casey's opportunity costs of working at the bank.

Question 34

Total revenue minus both explicit and implicit costs defines a firm's:

A)gross earnings.
B)profit.
C)marginal earnings.
D)net worth.

Question 35

A firm's profit equals:

A)P - MC [price minus marginal cost]
B)(P - ATC) × Q [(price minus average total cost) times the quantity sold]
C)P × Q [price times the quantity sold]
D)(P - ATC) ÷ Q [(price minus average total cost) divided by the quantity sold]

Question 36

Which of the following statements is true for both Microsoft and a locally owned restaurant?

A)Both are perfect competitors.
B)Both confront perfectly elastic demand for their products.
C)Neither firm is able to influence the price of their products.
D)Both seek to maximize profits.

Question 37

The short run is best defined as:

A)one year or less.
B)a period of time sufficiently short that all factors of production are variable.
C)the period of time between quarterly accounting reports.
D)a period of time sufficiently short that at least one factor of production is fixed.

Question 38

A fixed factor of production:

A)is fixed in the long run but variable in the short run.
B)is fixed only in the short run.
C)is fixed in both the short run and the long run.
D)is common in large firms but rare in small firms.

Question 39

A price-taker faces a demand curve that is:

A)vertical at the market price.
B)upward sloping.
C)downward sloping.
D)horizontal at the market price.

Question 40

Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. Suppose that the first week of summer, Jenny charged 25 cents for an 8-ounce cup of lemonade, her next-door neighbor Sam charged 50 cents for an 8-ounce cup of lemonade, and Alex across the street charged 15 cents for an 8-ounce cup of lemonade. Assuming the market for lemonade is perfectly competitive, what is most likely to happen?

A)Everyone will start to charge 50 cents to maximize revenue.
B)A price war will break out, and all of the kids will lower their prices.
C)Each kid will keep his or her price at the original amount.
D)Eventually prices will equalize across all three lemonade stands.

Question 41

Which of the following is the most likely to be a variable factor of production at an university?

A)The number of librarians.
B)The size of the football stadium.
C)The size of the student union.
D)The location of the university.

Question 42

Refer to the figure below. The law of diminishing marginal returns becomes evident after ______ units of output are produced. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Output } \\\text { Per Day }\end{array} & \begin{array} { c } \text { Number of } \\\text { Employee } \\\text { Hours Per Day }\end{array} \\\hline 0 & 0 \\\hline 33 & 1 \\\hline 66 & 2 \\\hline 99 & 4 \\\hline 132 & 7 \\\hline 165 & 11 \\\hline\end{array}$$

A)33
B)66
C)99
D)132

Question 43

According to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively:

A)smaller and smaller quantities of the variable factors of production.
B)constant quantities of the variable factors of production.
C)larger and larger quantities of the variable factors of production.
D)larger and larger quantities of the fixed factor of production.

Question 44

One reason that variable factors of production tend to show diminishing returns in the short run is that:

A)capital equipment is often idle in the short run.
B)there is only so much that can be produced using additional variable inputs when some factors of production are fixed.
C)large firms cannot effectively manage their resources.
D)the cost of employing additional resources increases as firms employ more of those resources.

Question 45

Refer to the figure below. To increase output from 33 to 66 units requires ______ extra employee-hours; to increase output from 66 to 99 units requires ______ extra employee-hours. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Output } \\\text { Per Day }\end{array} & \begin{array} { c } \text { Number of } \\\text { Employee } \\\text { Hours Per Day }\end{array} \\\hline 0 & 0 \\\hline 33 & 1 \\\hline 66 & 2 \\\hline 99 & 4 \\\hline 132 & 7 \\\hline 165 & 11 \\\hline\end{array}$$

A)1; 1
B)1; 2
C)2; 1
D)2; 4

Question 46

Suppose 30 employee-hours can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output would require:

A)an additional 30 employee-hours.
B)more than 30 additional employee-hours.
C)a total of 60 or fewer employee-hours.
D)fewer than 30 additional employee-hours.

Question 47

Marginal cost is calculated as:

A)total revenue minus total costs.
B)the change in output divided by the change in total costs.
C)the percentage change in total costs divided by the percentage change in output.
D)the change in total costs divided by the change in output.

Question 48

The table below describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Calls Per } \\\text { Hour }\end{array} & \begin{array} { c } \text { Number of } \\\text { Telephones } \\\text { Per Hour }\end{array} & \begin{array} { c } \text { Number of } \\\text { Workers } \\\text { Per Hour }\end{array} \\\hline 1 & 1 & 2 \\\hline 2 & 1 & 4 \\\hline 6 & 1 & 6 \\\hline 16 & 1 & 8 \\\hline 22 & 1 & 10 \\\hline 24 & 1 & 12 \\\hline\end{array}$$ Average variable cost is minimized when output is approximately:

A)6 units.
B)16 units.
C)22 units.
D)24 units.

Question 49

The table below describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Calls Per } \\\text { Hour }\end{array} & \begin{array} { c } \text { Number of } \\\text { Telephones } \\\text { Per Hour }\end{array} & \begin{array} { c } \text { Number of } \\\text { Workers } \\\text { Per Hour }\end{array} \\\hline 1 & 1 & 2 \\\hline 2 & 1 & 4 \\\hline 6 & 1 & 6 \\\hline 16 & 1 & 8 \\\hline 22 & 1 & 10 \\\hline 24 & 1 & 12 \\\hline\end{array}$$ What is the total cost of making 6 calls an hour?

A)$30
B)$40
C)$60
D)$65

Question 50

Refer to the figure below. To increase output from 99 to 132 units requires ______ extra employee-hours; to increase output from 132 to 165 units requires ______ extra employee-hours. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Output } \\\text { Per Day }\end{array} & \begin{array} { c } \text { Number of } \\\text { Employee } \\\text { Hours Per Day }\end{array} \\\hline 0 & 0 \\\hline 33 & 1 \\\hline 66 & 2 \\\hline 99 & 4 \\\hline 132 & 7 \\\hline 165 & 11 \\\hline\end{array}$$

A)11; 18
B)7; 11
C)4; 3
D)3; 4

Question 51

The table below describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Calls Per } \\\text { Hour }\end{array} & \begin{array} { c } \text { Number of } \\\text { Telephones } \\\text { Per Hour }\end{array} & \begin{array} { c } \text { Number of } \\\text { Workers } \\\text { Per Hour }\end{array} \\\hline 1 & 1 & 2 \\\hline 2 & 1 & 4 \\\hline 6 & 1 & 6 \\\hline 16 & 1 & 8 \\\hline 22 & 1 & 10 \\\hline 24 & 1 & 12 \\\hline\end{array}$$ If the price of a telephone increases to from $5 to $10 an hour and nothing else changes, then:

A)total cost would not change.
B)marginal cost would increase by $5 at every level of output.
C)marginal cost would not change.
D)average total cost would increase by $5 at every level of output.

Question 52

If a production process exhibits diminishing returns, then as output rises:

A)average total cost will eventually decrease.
B)marginal cost will eventually increase.
C)total fixed cost will eventually increase.
D)total revenue will eventually decrease.

Question 53

The table below describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Calls Per } \\\text { Hour }\end{array} & \begin{array} { c } \text { Number of } \\\text { Telephones } \\\text { Per Hour }\end{array} & \begin{array} { c } \text { Number of } \\\text { Workers } \\\text { Per Hour }\end{array} \\\hline 1 & 1 & 2 \\\hline 2 & 1 & 4 \\\hline 6 & 1 & 6 \\\hline 16 & 1 & 8 \\\hline 22 & 1 & 10 \\\hline 24 & 1 & 12 \\\hline\end{array}$$ Given the information in the table above, what is the call center's marginal cost when it goes from making 6 to 16 calls an hour?

A)50 cents
B)$2
C)$10
D)$20

Question 54

Refer to the figure below. As the firm increases the number of employee-hours each day from 1 to 2, output increases by: $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Output } \\\text { Per Day }\end{array} & \begin{array} { c } \text { Number of } \\\text { Employee } \\\text { Hours Per Day }\end{array} \\\hline 0 & 0 \\\hline 33 & 1 \\\hline 66 & 2 \\\hline 99 & 4 \\\hline 132 & 7 \\\hline 165 & 11 \\\hline\end{array}$$

A)33 units.
B)66 units.
C)99 units.
D)132 units.

Question 55

Which of the following is the most likely to be a fixed factor of production at a pizza restaurant?

A)The number of waiters.
B)The size of the seating area.
C)The amount of pizza dough.
D)The amount of electricity.

Question 56

A variable factor of production:

A)is fixed in the long run but variable in the short run.
B)plays no role in the law of diminishing marginal returns.
C)is variable in both the short run and the long run.
D)is variable only in the short run.

Question 57

If a firm spends $400 to produce 20 units of output and spends $880 to produce 40 units, then between 20 and 40 units of output, the marginal cost of production is:

A)$20.
B)$24.
C)$22.
D)$480.

Question 58

To produce 150 units of output, a firm must use 3 employee-hours. To produce 300 units of output, the firm must use 8 employee-hours. Apparently, the firm is:

A)producing in the long run.
B)experiencing diminishing returns.
C)not using any fixed factors of production.
D)experiencing negative returns.

Question 59

The long run is best defined as:

A)one year or more.
B)a period of time sufficiently long that all factors of production are variable.
C)the period of time between annual accounting reports.
D)a period of time sufficiently long that at least one factor of production is fixed.

Question 60

Which of the following is the most likely to be a fixed factor of production at a farm?

A)The land on which the farm is located.
B)The number of workers hired to harvest the crops.
C)The amount of fertilizer used each week.
D)The amount of water used each day.

Question 61

Refer to the figure below. At quantities less than 50 doughnuts per day:

A)marginal cost is declining.
B)the return to the firm's variable factors of production must be increasing.
C)average cost is declining because marginal cost is increasing.
D)average cost is declining because marginal cost is less than average cost.

Question 62

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. This firm's fixed cost each day is: $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Employee-Hours } \\\text { Per Day }\end{array} & \begin{array} { c } \text { Output } \\\text { Per Day }\end{array} \\\hline 0 & 0 \\\hline 1 & 40 \\\hline 4 & 80 \\\hline 9 & 120 \\\hline 15 & 160 \\\hline 23 & 200 \\\hline\end{array}$$

A)$66
B)$64
C)$50
D)$14

Question 63

The table below shows a pizzeria's fixed cost and variable cost at different levels of output. Pizza's sell for $20 each. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Number of } \\\text { Pizzas Per Day }\end{array} & \begin{array} { c } \text { Fixed Cost } \\\text { (\$/Day) }\end{array} & \begin{array} { c } \text { Variable Cost } \\\text { (\$/Day) }\end{array} \\\hline 0 & 500 & 0 \\\hline 25 & 500 & 150 \\\hline 50 & 500 & 250 \\\hline 75 & 500 & 450 \\\hline 100 & 500 & 850 \\\hline 125 & 500 & 1,650 \\\hline\end{array}$$ When the pizzeria makes 100 pizzas a day, its fixed cost is ______ and its total cost is ______.

A)$350; $850
B)$500; $850
C)$500; $1,350
D)$850; $1,650

Question 64

The table below shows a pizzeria's fixed cost and variable cost at different levels of output. Pizza's sell for $20 each. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Number of } \\\text { Pizzas Per Day }\end{array} & \begin{array} { c } \text { Fixed Cost } \\\text { (\$/Day) }\end{array} & \begin{array} { c } \text { Variable Cost } \\\text { (\$/Day) }\end{array} \\\hline 0 & 500 & 0 \\\hline 25 & 500 & 150 \\\hline 50 & 500 & 250 \\\hline 75 & 500 & 450 \\\hline 100 & 500 & 850 \\\hline 125 & 500 & 1,650 \\\hline\end{array}$$ When the pizzeria makes 50 pizzas a day, its average variable cost is ______.

A)$5
B)$10
C)$15
D)$20

Question 65

The table below shows a pizzeria's fixed cost and variable cost at different levels of output. Pizza's sell for $20 each. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Number of } \\\text { Pizzas Per Day }\end{array} & \begin{array} { c } \text { Fixed Cost } \\\text { (\$/Day) }\end{array} & \begin{array} { c } \text { Variable Cost } \\\text { (\$/Day) }\end{array} \\\hline 0 & 500 & 0 \\\hline 25 & 500 & 150 \\\hline 50 & 500 & 250 \\\hline 75 & 500 & 450 \\\hline 100 & 500 & 850 \\\hline 125 & 500 & 1,650 \\\hline\end{array}$$ When the pizzeria makes 100 pizzas per day, it earns an economic ______ of ______.

A)loss; $650
B)profit; $650
C)loss; $500
D)profit; $1,150

Question 66

Refer to the information below. It is clear that diminishing returns sets in after ______ workers per day. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Number of } \\\text { Workers Per Day }\end{array} & \begin{array} { c } \text { Output Per } \\\text { Day }\end{array} \\\hline 0 & 0 \\\hline 1 & 3 \\\hline 2 & 8 \\\hline 3 & 15 \\\hline 4 & 24 \\\hline 5 & 32 \\\hline 6 & 49 \\\hline\end{array}$$

A)3
B)4
C)5
D)6

Question 67

The table below shows a pizzeria's fixed cost and variable cost at different levels of output. Pizza's sell for $20 each. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Number of } \\\text { Pizzas Per Day }\end{array} & \begin{array} { c } \text { Fixed Cost } \\\text { (\$/Day) }\end{array} & \begin{array} { c } \text { Variable Cost } \\\text { (\$/Day) }\end{array} \\\hline 0 & 500 & 0 \\\hline 25 & 500 & 150 \\\hline 50 & 500 & 250 \\\hline 75 & 500 & 450 \\\hline 100 & 500 & 850 \\\hline 125 & 500 & 1,650 \\\hline\end{array}$$ Between 25 and 50 pizzas per day, the pizzeria's marginal cost is ______.

A)$4
B)$6
C)$8
D)$16

Question 68

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Employee-Hours } \\\text { Per Day }\end{array} & \begin{array} { c } \text { Output } \\\text { Per Day }\end{array} \\\hline 0 & 0 \\\hline 1 & 40 \\\hline 4 & 80 \\\hline 9 & 120 \\\hline 15 & 160 \\\hline 23 & 200 \\\hline\end{array}$$ When the firm uses 9 employee-hours, it earns a daily ______ of ______.

A)loss; $64
B)profit; $64
C)loss; $114
D)profit; $114

Question 69

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Employee-Hours } \\\text { Per Day }\end{array} & \begin{array} { c } \text { Output } \\\text { Per Day }\end{array} \\\hline 0 & 0 \\\hline 1 & 40 \\\hline 4 & 80 \\\hline 9 & 120 \\\hline 15 & 160 \\\hline 23 & 200 \\\hline\end{array}$$ When the firm uses 9 employee-hours, its total cost each day is:

A)$126
B)$64
C)$56
D)$176

Question 70

Suppose a profit-maximizing firm in a perfectly competitive market is earning an economic profit of $1,345. If the firm's fixed cost increases from $200 to $300, the firm will:

A)reduce its output.
B)raise its price.
C)earn a greater profit.
D)earn a smaller profit.

Question 71

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Employee-Hours } \\\text { Per Day }\end{array} & \begin{array} { c } \text { Output } \\\text { Per Day }\end{array} \\\hline 0 & 0 \\\hline 1 & 40 \\\hline 4 & 80 \\\hline 9 & 120 \\\hline 15 & 160 \\\hline 23 & 200 \\\hline\end{array}$$ When the firm uses 9 employee-hours, it's total variable cost each day is:

A)$30
B)$56
C)$84
D)$126

Question 72

In general, when the price of a variable factor of production increases:

A)total cost falls.
B)the profit maximizing level of output rises.
C)the profit-maximizing price falls.
D)marginal cost rises.

Question 73

Suppose a profit-maximizing firm in a perfectly competitive market is collecting $1,999 in total revenues. If the total cost of its fixed factors of production falls from $500 to $400, the firm will:

A)expand its output.
B)lower its price.
C)earn greater profits or smaller losses.
D)earn smaller profits or larger losses.

Question 74

In general, when the price of a fixed factor of production increases:

A)the profit-maximizing price falls.
B)marginal cost is unchanged.
C)marginal cost increases.
D)the profit-maximizing level of output increases.

Question 75

The table below shows a pizzeria's fixed cost and variable cost at different levels of output. Pizza's sell for $20 each. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Number of } \\\text { Pizzas Per Day }\end{array} & \begin{array} { c } \text { Fixed Cost } \\\text { (\$/Day) }\end{array} & \begin{array} { c } \text { Variable Cost } \\\text { (\$/Day) }\end{array} \\\hline 0 & 500 & 0 \\\hline 25 & 500 & 150 \\\hline 50 & 500 & 250 \\\hline 75 & 500 & 450 \\\hline 100 & 500 & 850 \\\hline 125 & 500 & 1,650 \\\hline\end{array}$$ When the pizzeria makes 25 pizzas a day, its average fixed cost is ______.

A)$5
B)$6
C)$10
D)$20

Question 76

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Employee-Hours } \\\text { Per Day }\end{array} & \begin{array} { c } \text { Output } \\\text { Per Day }\end{array} \\\hline 0 & 0 \\\hline 1 & 40 \\\hline 4 & 80 \\\hline 9 & 120 \\\hline 15 & 160 \\\hline 23 & 200 \\\hline\end{array}$$ What is the marginal cost of production between 80 and 120 units of output each day?

A)$1.40
B)$1.75
C)$14
D)$70

Question 77

The table below shows a pizzeria's fixed cost and variable cost at different levels of output. Pizza's sell for $20 each. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Number of } \\\text { Pizzas Per Day }\end{array} & \begin{array} { c } \text { Fixed Cost } \\\text { (\$/Day) }\end{array} & \begin{array} { c } \text { Variable Cost } \\\text { (\$/Day) }\end{array} \\\hline 0 & 500 & 0 \\\hline 25 & 500 & 150 \\\hline 50 & 500 & 250 \\\hline 75 & 500 & 450 \\\hline 100 & 500 & 850 \\\hline 125 & 500 & 1,650 \\\hline\end{array}$$ When the pizzeria makes 125 pizzas per day, its total revenue is:

A)$2,500
B)$1,250
C)$125
D)$20

Question 78

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Employee-Hours } \\\text { Per Day }\end{array} & \begin{array} { c } \text { Output } \\\text { Per Day }\end{array} \\\hline 0 & 0 \\\hline 1 & 40 \\\hline 4 & 80 \\\hline 9 & 120 \\\hline 15 & 160 \\\hline 23 & 200 \\\hline\end{array}$$ When the firm uses 9 employee-hours, its total revenue each day is:

A)$240.
B)$160.
C)$120.
D)$18.

Question 79

Assume that each day a firm uses 13 employee-hours and an office to produce 100 units of output. The price of each unit output is $5, the hourly wage rate is $10, and rent on the office is $200 per day. Each day the firm earns a ______ of ______.

A)profit; $370
B)loss; $200
C)profit; $170
D)loss; $170

Question 80

The table below shows a pizzeria's fixed cost and variable cost at different levels of output. Pizza's sell for $20 each. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Number of } \\\text { Pizzas Per Day }\end{array} & \begin{array} { c } \text { Fixed Cost } \\\text { (\$/Day) }\end{array} & \begin{array} { c } \text { Variable Cost } \\\text { (\$/Day) }\end{array} \\\hline 0 & 500 & 0 \\\hline 25 & 500 & 150 \\\hline 50 & 500 & 250 \\\hline 75 & 500 & 450 \\\hline 100 & 500 & 850 \\\hline 125 & 500 & 1,650 \\\hline\end{array}$$ When the pizzeria makes 50 pizzas a day, its average total cost is ______.

A)$5
B)$10
C)$15
D)$20