econ study3 – Flashcards
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To the economist, total cost includes:
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A. explicit and implicit costs.
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Accounting profits equal total revenue minus:
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A. total explicit costs.
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Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were:
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B. $200,000 and its economic profits were zero
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To economists, the main difference between the short run and the long run is that:
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B. in the long run all resources are variable, while in the short run at least one resource is fixed.
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Which of the following best expresses the law of diminishing returns?
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C. As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra or marginal output will decline.
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Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.
Refer to the data. Diminishing marginal returns become evident with the addition of the:
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C. third worker.
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Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.
Refer to the data. The marginal product of the sixth worker is:
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C. 15 units of output.
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Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed.
Refer to the data. Average product is at a maximum when:
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D. two workers are hired.
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Fixed cost is:
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B. any cost that does not change when the firm changes its output.
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Refer to the diagram. At output level Q total variable cost is:
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A. 0BEQ.
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Refer to the diagram. At output level Q total cost is:
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C. 0BEQ + BCDE.
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Answer the question on the basis of the following cost data:
Refer to the data. The total variable cost of producing 5 units is:
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C. $37.
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Answer the question on the basis of the following cost data:
Refer to the data. The average fixed cost of producing 3 units of output is:
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A. $8.
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In the long run:
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A. all costs are variable costs.
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As the firm in the diagram expands from plant size #1 to plant size #3, it experiences:
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B. economies of scale.
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For a purely competitive seller, price equals:
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D. all of these.
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In the short run, a purely competitive firm that seeks to maximize profit will produce:
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B. where total revenue exceeds total cost by the maximum amount.
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The MR = MC rule applies:
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A. to firms in all types of industries.
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A purely competitive firm's short-run supply curve is:
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B. upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.
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Suppose you find that the price of your product is less than minimum AVC. You should:
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C. close down because, by producing, your losses will exceed your total fixed costs.
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Refer to the diagram. To maximize profit or minimize losses, this firm will produce:
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C. E units at price A.
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Refer to the diagram. At the profit-maximizing output, the firm will realize:
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D. an economic profit of ABGH.
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Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market:
Refer to the data. If the market price for the firm's product is $32, the competitive firm will produce:
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A. 8 units at an economic profit of $16.
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Refer to the diagram. At P2, this firm will:
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B. produce 44 units and earn only a normal profit.
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Refer to the diagram. At P4, this firm will:
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A. shut down in the short run.
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Answer the question on the basis of the following cost data for a purely competitive seller:
Refer to the data. If product price is $60, the firm will:
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C. produce 6 units and realize a $100 economic profit.
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Which of the following distinguishes the short run from the long run in pure competition?
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A. Firms can enter and exit the market in the long run but not in the short run.
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In a purely competitive industry:
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C. there may be economic profits in the short run but not in the long run.
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Which of the following will not hold true for a competitive firm in long-run equilibrium?
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A. P equals AFC.
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Allocative efficiency is achieved when the production of a good occurs where:
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B. P = MC.
