Question 1

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 the market price of soybeans falls to $8, then to maximize profits this farmer should produce

Accepted Answer

A)  200 bushels of soybeans. 
B)  700 bushels of soybeans. 
C)  1,000 bushels of soybeans. 
D)  a level of output that is indeterminate from this information.

Question 2

Refer to the information provided in Table 8.1 below to answer the question(s) that follow.
Table 8.1 $$\begin{array} { l c c c } 
\text { Produce } & \begin{array} { c } 
\text { Using } \
\text { Techniques }
\end{array} & \begin{array} { c } 
\text { Units of Variable } \
\text { K }
\end{array} & \begin{array} { c } 
\text { Inputs } \
\text { L }
\end{array} \
\hline \text { 1 unit of output } & & & \
& \text { A } & 8 & 8 \
& \text { B } & 4 & 12 \
\text { 2 units of output } & & & \
& \text { A } & 14 & 12 \
& \text { B } & 8 & 20 \
3 \text { units of output } & & & \
& \text { A } & 16 & 12 \
& \text { B } & 12 & 22 \
\hline
\end{array}$$
-Refer to Table 8.1. In the short run, if the price of labor (L) is $5 per unit, the price of capital (K) is $10 per unit, and firms attempt to minimize costs, then this firm's total cost of producing one unit of output is

Accepted Answer

A)  $100. 
B)  $120. 
C)  $220. 
D)  indeterminate from this information.

Question 3

The Framing Gallery frames posters. The Framing Gallery has total fixed costs of $500. The Framing Gallery's average variable cost is $20 and its average total cost is $25. The Framing Gallery is currently framing

Accepted Answer

A)  5 posters. 
B)  25 posters. 
C)  100 posters. 
D)  a number of posters that is indeterminate from this information.

Question 4

In the short run, a firm using variable labor and fixed capital inputs achieves the ________ level of output at the minimum point on its average total cost curve.

Accepted Answer

A)  efficient 
B)  highest cost 
C)  least efficient 
D)  only possible

Question 5

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 ________, then to maximize profits this farmer should produce 350 bales of hay.

Accepted Answer

A)  falls to $20 
B)  falls to $18 
C)  falls to $4 
D)  stays at $24

Question 6

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. Outdoor Equipmentʹs ________ are minimized at the output level where curves 1 and 3 intersect.

Accepted Answer

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

Question 7

A short-run total cost schedule is a total variable cost schedule shifted ________ by the amount of total fixed cost cost.

Accepted Answer

A)  downward 
B)  to the right 
C)  upward 
D)  to the left

Question 8

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. Outdoor Equipment's average variable costs are minimized at the output level

Accepted Answer

A)  where curves 1 and 2 intersect. 
B)  where curves 1 and 3 intersect. 
C)  between the intersections of curves 1 and 2 and curves 1 and 3. 
D)  indeterminate with the given information.

Question 9

________ is ΔTR/Δq.

Accepted Answer

A)  Marginal cost 
B)  Marginal revenue 
C)  Average revenue 
D)  Economic profit

Question 10

A firm in a perfectly competitive market has no control over price because

Accepted Answer

A)  the government imposes price ceilings on the products produced in perfectly competitive industries. 
B)  there is free entry and exit from the industry. 
C)  every firm's product is a perfect substitute for every other firm's product. 
D)  the market demand for products produced in perfectly competitive industries is perfectly elastic.

Question 11

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

Accepted Answer

A)  average variable cost is increasing. 
B)  average variable cost is decreasing. 
C)  average variable cost is constant. 
D)  marginal cost is decreasing.

Question 12

A farmer producing bushels of soybeans in the perfectly competitive soybean industry is currently maximizing profits. If the market price of soybeans increases and the farmer adjusts output to the new price, he will produce ________ soybeans and make ________ profit.

Accepted Answer

A)  fewer; the same 
B)  fewer; less 
C)  more; more 
D)  the same bushels of; the same

Question 13

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. At the market price of $18 per bale, if this farmer produces the profit-maximizing level of hay, the total revenue would be

Accepted Answer

A)  $1,200. 
B)  $2,800. 
C)  $5,600. 
D)  $6,300.

Question 14

The main decision for a profit-maximizing perfectly competitive firm is not what ________ but what ________.

Accepted Answer

A)  level of output to produce; price to charge 
B)  price to charge; level of output to produce 
C)  level of output to produce; total revenue to achieve 
D)  price to charge; total cost to achieve

Question 15

Perfectly competitive firms will produce as long as marginal revenue exceeds marginal cost.

Accepted Answer

A) True 
 B)False

Question 16

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. Assuming the price of capital (K) is $10 per unit and the price of labor (L) is $5 per unit, the lowest long-run total cost of producing one unit of output is

Accepted Answer

A)  $8. 
B)  $50. 
C)  $60. 
D)  $110.

Question 17

Total cost refers to

Accepted Answer

A)  the full economic costs of production. 
B)  the sum of average fixed cost and average variable cost. 
C)  the fixed costs of production. 
D)  the explicit costs of production.

Question 18

Perfectly competitive firms minimize their losses by producing the output level where P = MR = AVC.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

One formula for ________ is ΔTVC/Δq.

Accepted Answer

A)  AVC 
B)  TFC 
C)  ATC 
D)  MC

Exam 8: Short-Run Costs and Output Decisions

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 the market price of soybeans falls to $8, then to maximize profits this farmer should produce

The Framing Gallery frames posters. The Framing Gallery has total fixed costs of $500. The Framing Gallery's average variable cost is $20 and its average total cost is $25. The Framing Gallery is currently framing

In the short run, a firm using variable labor and fixed capital inputs achieves the ________ level of output at the minimum point on its average total cost curve.

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 ________, then to maximize profits this farmer should produce 350 bales of hay.

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. Outdoor Equipmentʹs ________ are minimized at the output level where curves 1 and 3 intersect.

A short-run total cost schedule is a total variable cost schedule shifted ________ by the amount of total fixed cost cost.

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. Outdoor Equipment's average variable costs are minimized at the output level

________ is ΔTR/Δq.

A firm in a perfectly competitive market has no control over price because

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

A farmer producing bushels of soybeans in the perfectly competitive soybean industry is currently maximizing profits. If the market price of soybeans increases and the farmer adjusts output to the new price, he will produce soybeans and make profit.

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. At the market price of $18 per bale, if this farmer produces the profit-maximizing level of hay, the total revenue would be

The main decision for a profit-maximizing perfectly competitive firm is not what but what .

Perfectly competitive firms will produce as long as marginal revenue exceeds marginal cost.

Total cost refers to

Perfectly competitive firms minimize their losses by producing the output level where P = MR = AVC.

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

One formula for ________ is ΔTVC/Δq.