Econ Chapter 13, 14, 15 Practice Questions – Flashcards

Raj opens up a lemonade stand for two hours. He spends $10 for ingredients and sells $60 worth of lemonade. In the same two hours, he could have mowed his neighbor's lawn for $40. Raj has an accounting profit of _____ and an economic profit of ____. a. $50, $10 b. $90, $50 c. $10, $50 d. $50, $90

Diminishing marginal product explains why, as a firm's output increases, a. the production function and total cost curve both get steeper. b. the production function and total cost curve both get flatter. c. the production function gets steeper, while the total cost curve gets flatter. d. the production function gets flatter, while the total cost curve gets steeper.

A firm is producing 1,000 units at a total cost of $5,000. If it were to increase production to 1,001 units, its total cost would rise to $5,008. What does this information tell you about the firm? a. Marginal cost is $5, and average variable cost is $8. b. Marginal cost is $8, and average variable cost is $5. c. Marginal cost is $5, and average total cost is $8. d. Marginal cost is $8, and average total cost is $5.

A firm is producing 20 units with an average total cost of $25 and marginal cost of $15. If the firm were to increase production to 21 units, which of the following must occur? a. Marginal cost would decrease. b. Marginal cost would increase. c. Average total cost would decrease. d. Average total cost would increase.

If a higher level of production allows workers to specialize in particular tasks, a firm will likely exhibit ________ of scale and ________ average total cost. a. economies, falling b. economies, rising c. diseconomies, falling d. diseconomies, rising

What you give up for taking some action is called the __________.

____________ is falling when marginal cost is below it and rising when marginal cost is above it.

A cost that does not depend on the quantity produced is a(n) ____________.

In the ice-cream industry in the short run, ____________ includes the cost of cream and sugar but not the cost of the factory.

Profits equal total revenue minus _____________.

The cost of producing an extra unit of output is the___________.

Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. What is the opportunity cost of something? a. What must be given up to acquire it b. The time it takes to do something c. What you pay for it d. The cost to produce it

Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. Your aunt's opportunity cost of running a hardware store for a year is __________.

Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. Your aunt's opportunity cost of running a hardware store for a year is $550,000. Suppose your aunt thought she could sell $510,000 worth of merchandise in a year. True or False: Your aunt should open the store. a. True b. False

A perfectly competitive firm a. chooses its price to maximize profits. b. sets its price to undercut other firms selling similar products. c. takes its price as given by market conditions. d. picks the price that yields the largest market share.

A competitive firm maximizes profit by choosing the quantity at which a. average total cost is at its minimum. b. marginal cost equals the price. c. average total cost equals the price. d. marginal cost equals average total cost.

A competitive firm's short-run supply curve is its ________ cost curve above its ________ cost curve. a. average total, marginal b. average variable, marginal c. marginal, average total d. marginal, average variable

If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will a. keep producing in the short run but exit the market in the long run. b. shut down in the short run but return to production in the long run. c. shut down in the short run and exit the market in the long run. d. keep producing both in the short run and in the long run.

In the long-run equilibrium of a competitive market with identical firms, what is the relationship between price (P), marginal cost (MC), and average total cost (ATC)? a. P>MC and P>ATC. b. P>MC and P=ATC. c. P=MC and P>ATC. d. P=MC and P=ATC.

A firm is a natural monopoly if it exhibits the following as its output increases: a. decreasing marginal revenue. b. increasing marginal cost. c. decreasing average revenue. d. decreasing average total cost.

For a profit-maximizing monopoly that charges the same price to all consumers, what is the relationship between price (P), marginal revenue (MR), and marginal cost (MC)? a. P=MR and MR=MC. b.P>MR and MR=MC. c. P=MR and MR>MC. d. P>MR and MR>MC.

If a monopoly's fixed costs increase, its price will _____, and its profit will _____. a. increase, decrease b. decrease, increase c. increase, stay the same d. stay the same, decrease

Compared to the social optimum, a monopoly firm chooses a. a quantity that is too low and a price that is too high. b. a quantity that is too high and a price that is too low. c. a quantity and a price that are both too high. d. a quantity and a price that are both too low.

The deadweight loss from monopoly arises because a. the monopoly firm makes higher profits than a competitive firm would. b. some potential consumers who forgo buying the good value it more than its marginal cost. c. consumers who buy the good have to pay more than marginal cost, reducing their consumer surplus. d. the monopoly firm chooses a quantity that fails to equate price and average revenue.

When a monopolist switches from charging a single price to perfect price discrimination, it reduces a. the quantity produced. b. the firm's profit. c. consumer surplus. d. total surplus.