question

Marginal utility can be:

answer

positive, negative, or zero.

question

Refer to the data. The value for W is:

answer

20.

question

The data illustrate the:

answer

law of diminishing marginal utility.

question

If the price of product X rises, then the resulting decline in the amount purchased will:

answer

increase the marginal utility of the last unit consumed of this good.

question

Marginal utility is the:

answer

change in total utility obtained by consuming one more unit of a good.

question

Utility refers to the:

answer

satisfaction that a consumer derives from a good or service.

question

The law of diminishing marginal utility explains why:

answer

demand curves slope downward.

question

The theory of consumer behavior assumes that:

answer

consumers behave rationally, attempting to maximize their satisfaction.

question

To maximize utility, a consumer should allocate money income so that the:

answer

marginal utility obtained from the last dollar spent on each product is the same.

question

The marginal utility of the last unit of apples consumed is 12 and the marginal utility of the last unit of bananas consumed is 8. What set of prices for apples and bananas, respectively, would be consistent with consumer equilibrium?

answer

$6 and $4

question

Suppose you have a limited money income and you are purchasing products A and B, whose prices happen to be the same. To maximize your utility, you should purchase A and B in such amounts that:

answer

their marginal utilities are the same.

question

A consumer is maximizing her utility with a particular money income when:

answer

MUa/Pa = MUb/Pb = MUc/Pc = . . . = MUn/Pn.

question

If a rational consumer is in equilibrium, which of the following conditions will hold true?

answer

The marginal utility of the last dollar spent on each good purchased will be the same.

question

A consumer who has a limited budget will maximize utility or satisfaction when the:

answer

ratios of the marginal utility of each product purchased divided by its price are equal.

question

Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play. We can conclude that Prashanth:

answer

has a higher "marginal utility-to-price ratio" for the hockey game than for the play.

question

Why do people tend to eat more at all-you-can-eat buffet restaurants than at restaurants where each item is purchased separately?

answer

Once the all-you-can-eat meal is purchased, consumers view additional trips back to the buffet as having a price of zero.

question

Which of the following statements is correct?

answer

Noncash gift-giving creates a value loss, but cash gifts do not.

question

(Last Word) All of the following would reduce property crime by increasing its "price," except:

answer

cutting out the middlemen ("fences") by selling stolen goods via Internet auction sites.

question

Refer to the budget line shown in the diagram. If the consumer's money income is $20, the:

answer

price of C is $4 and the price of D is $2.

question

Refer to the budget line shown in the diagram. The absolute value of the slope of the budget line is:

answer

PC/PD.

question

Increases in product prices shift the consumer's:

answer

budget line to the left.

question

Suppose you have money income of $10, all of which you spend on Coke and popcorn. In the diagram, the prices of Coke and popcorn respectively are:

answer

$.50 and $1.00.

question

The slope of a budget line reflects the:

answer

price ratio of the two products.

question

Edith is buying products X and Y with her money income. Suppose her budget line shifts rightward (outward). This might be the result of:

answer

her money income increasing more than proportionately to increases in the prices of X and Y.

question

Which of the following is correct?

answer

Budget lines are linear and downsloping; indifference curves are downsloping and convex to the origin.

question

Refer to the diagram where xy is the relevant budget line and I1, I2, and I3 are indifference curves. If the consumer is initially at point L, he or she should:

answer

purchase more of Y and less of X.

question

Refer to the diagram in which the downsloping lines are budget lines and I1, I2, and I3 comprise an indifference map. The combinations of products M and N indicated by points 1, 2, and 5 are such that:

answer

points 1, 2, and 5 yield equal amounts of utility.

question

Refer to the diagram. If the budget line shifts from ab to ac, the:

answer

price of K has increased.

question

Refer to the diagram. If the budget line shifts from ab to ac, the:

answer

consumer will purchase more of J and less of K.

question

A rational consumer will try to achieve the highest indifference curve that his or her income will allow.

answer

True

question

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

answer

Use of savings to pay operating expenses instead of generating interest income.

question

Which of the following is most likely to be an implicit cost for Company X?

answer

Forgone rent from the building owned and used by Company X.

question

An explicit cost is:

answer

a money payment made for resources not owned by the firm itself.

question

Economic profits are calculated by subtracting:

answer

explicit and implicit costs from total revenue.

question

Normal profit is:

answer

the return to the entrepreneur when economic profits are zero.

question

The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the data. Creamy Crisp's total economic costs are:

answer

$286,000.

question

The following is cost information for the Creamy Crisp Donut Company: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the data. If, other things equal, Creamy Crisp's revenue fell to $286,000:

answer

it would earn a normal profit but not an economic profit.

question

To economists, the main difference between the short run and the long run is that:

answer

in the long run all resources are variable, while in the short run at least one resource is fixed.

question

The long run is characterized by:

answer

the ability of the firm to change its plant size.

question

Which of the following best expresses the law of diminishing returns?

answer

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.

question

The law of diminishing returns results in:

answer

a total product curve that eventually increases at a decreasing rate.

question

Which of the following is not correct?

answer

Where total product is at a maximum, average product is also at a maximum.

question

Use the following data to answer the question: Refer to the data. Marginal product becomes negative with the hiring of the __________ unit of labor.

answer

seventh

question

If you owned a small farm, which of the following would most likely be a fixed cost?

answer

Hail insurance.

question

Which of the following is most likely to be a variable cost?

answer

Fuel and power payments.

question

For most producing firms:

answer

average total costs decline as output is carried to a certain level, and then begin to rise.

question

Average fixed cost:

answer

declines continually as output increases.

question

Which of the following is correct as it relates to cost curves?

answer

Marginal cost intersects average total cost at the latter's minimum point.

question

Other things equal, if the prices of a firm's variable inputs were to fall:

answer

marginal cost, average variable cost, and average total cost would all fall.

question

Answer the question on the basis of the following cost data: Refer to the data. The profit-maximizing output for this firm:

answer

cannot be determined from the information given.

question

Answer the question on the basis of the following information: Refer to the information. Average fixed cost is:

answer

MC/Q

question

Refer to the diagram, where variable inputs of labor are being added to a constant amount of property resources. The total output of this firm will cease to expand:

answer

if a labor force in excess of Q3 is employed.

question

In the short run, which of the following statements is correct?

answer

Total cost will exceed variable cost.

question

Which of the following holds true?

answer

When AP is rising AVC is falling, and when AP is falling AVC is rising.

question

Refer to the short-run production and cost data. In Figure A curve (1) is:

answer

average product and curve (2) is marginal product.

question

Answer the question on the basis of the following cost data: Refer to the data. If the firm closed down in the short run and produced zero units of output, its total cost would be:

answer

$50.

question

If a technological advance increases a firm's labor productivity, we would expect its:

answer

average total cost curve to fall.

question

The Sunshine Corporation finds that its costs are $40 when it produces no output. Its total variable costs (TVC) change with output as shown in the accompanying table. Use this information to answer the following question. Refer to the information. The average fixed cost of 3 units of output is:

answer

$13.33.

question

Refer to the diagram. The profit-maximizing level of output for this firm:

answer

cannot be determined from the information given.

question

Refer to the graph. Which one of the following would cause a move from point b to point c along short-run average total cost curve ATC1?

answer

Diminishing marginal returns.

question

Refer to the graph. Which one of the following would cause a move from point d to point e along short-run average total cost curve ATC2?

answer

Increasing marginal returns.

question

When diseconomies of scale occur:

answer

the long-run average total cost curve rises.

question

Refer to the diagram. For output level Q, per unit costs of C are:

answer

attainable, but imply the inefficient use of resources.

question

A natural monopoly exists when:

answer

unit costs are minimized by having one firm produce an industry's entire output.

question

In the diagram it is assumed that:

answer

all costs are variable.

question

(Consider This) If the law of diminishing returns applies to study time:

answer

the tenth hour of study will likely be less productive than the third.

question

(Last Word) Which of the following is predicted to deliver a Third Industrial Revolution characterized by low production and transportation costs?

answer

New technology in additive manufacturing.

question

Diseconomies of scale stem primarily from the difficulties in managing and coordinating a large-scale business enterprise.

answer

True

question

Average fixed costs diminish continuously as output increases.

answer

True

question

A firm's economic profit is usually higher than its accounting profit.

answer

False

question

In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?

answer

Oligopoly.

question

A purely competitive seller is:

answer

a "price taker."

question

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. Refer to the information. For a purely competitive firm, total revenue graphs as a:

answer

straight, upsloping line.

question

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. Refer to the information. For a purely competitive firm:

answer

the demand and marginal revenue curves will coincide.

question

Refer to the diagram, which pertains to a purely competitive firm. Curve A represents:

answer

total revenue only.

question

Marginal revenue is the:

answer

change in total revenue associated with the sale of one more unit of output.

question

Refer to the short-run data. The profit-maximizing output for this firm is:

answer

320 units.

question

Curve (1) in the diagram is a purely competitive firm's:

answer

total economic profit curve.

question

Curve (3) in the diagram is a purely competitive firm's:

answer

total revenue curve.

question

When a firm is maximizing profit, it will necessarily be:

answer

maximizing the difference between total revenue and total cost.

question

Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation:

answer

is realizing an economic profit of $40.

question

A purely competitive firm's short-run supply curve is:

answer

upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.

question

Answer the question on the basis of the following data confronting a firm: Refer to the data. At the profit-maximizing output, the firm's total revenue is:

answer

$48.

question

Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices:

answer

between P2 and P3.

question

Refer to the diagram. At the profit-maximizing output, total variable cost is equal to:

answer

0CFE

question

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:

answer

8 units at an economic profit of $16.

question

Refer to the diagram. At the profit-maximizing output, total profit is:

answer

efbc

question

Refer to the diagram. The short-run supply curve for this firm is the:

answer

segment of the MC curve lying to the right of output level h.

question

Refer to the diagram. This firm is selling its product in a(n):

answer

purely competitive market.

question

In the short run, a purely competitive seller will shut down if product price:

answer

is less than AVC.

question

The short-run supply curve for a purely competitive industry can be found by:

answer

summing horizontally the segments of the MC curves lying above the AVC curve for all firms.

question

In contrast to American firms, Japanese firms frequently make lifetime employment commitments to their workers and agree not to lay them off when product demand is weak. Other things being equal, we would expect Japanese firms to:

answer

continue to produce in the short run at lower prices than would American firms.

question

Answer the question on the basis of the following cost data for a purely competitive seller: Refer to the data. If product price is $25, the firm will:

answer

shut down and incur a $50 loss.

question

Refer to the diagram. The firm will realize an economic profit if price is:

answer

P4

question

Refer to the diagram. The firm will shut down at any price less than:

answer

P1.

question

Refer to the diagram. The firm's supply curve is the segment of the:

answer

MC curve above its intersection with the AVC curve.

question

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. At 3 units of output, total variable cost is ____ and total cost is ____.

answer

$60; $210

question

Answer the question on the basis of the following cost data for a purely competitive seller: The data are for:

answer

the short run.

question

Answer the question on the basis of the following cost data for a purely competitive seller: Refer to the data. At 5 units of output, average fixed cost, average variable cost, and average total cost are:

answer

$10, $60, and $70 respectively.

question

Answer the question on the basis of the following cost data for a purely competitive seller: Refer to the data. The marginal cost of the fifth unit of output is:

answer

$80.

question

Answer the question on the basis of the following cost data for a purely competitive seller: Refer to the data. If product price is $75, the firm will produce:

answer

4 units of output.

question

Answer the question on the basis of the following cost data for a purely competitive seller: Refer to the data. Given the $75 product price, at its optimal output the firm will:

answer

realize a $30 economic profit.

question

(Last Word) Temporary shutdowns of firms are most widespread when:

answer

the economy experiences recession.

question

The term imperfect competition refers to every market structure besides pure competition.

answer

True

question

In a purely competitive industry competition centers more on advertising and sales promotion than on price.

answer

False

question

Price and marginal revenue are identical for an individual purely competitive seller.

answer

True

question

In maximizing profit, a firm will always produce that output where total revenues are at a maximum.

answer

False

question

A competitive firm will produce in the short run so long as its price exceeds its average fixed cost.

answer

False

question

Refer to the diagram. If demand fell to the level of FNJ, there would be no output at which the firm could realize an economic profit.

answer

False

question

The ability of a good or service to satisfy wants is called:

answer

utility

question

Refer to the data. The value for Z is:

answer

-5

question

Refer to the diagram. Marginal utility:

answer

becomes negative after consuming 4 units of output.

question

If total utility is increasing, marginal utility:

answer

is positive but may be either increasing or decreasing.

question

The law of diminishing marginal utility explains why:

answer

demand curves slope downward.

question

Why do people tend to eat more at all-you-can-eat buffet restaurants than at restaurants where each item is purchased separately?

answer

Once the all-you-can-eat meal is purchased, consumers view additional trips back to the buffet as having a price of zero.

question

A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish.

answer

False

question

If the price of A is $12 and the price of B is $3, the budget line tells us that a consumer in effect can trade:

answer

1 unit of A for 4 of B.

question

Assume initially that the price of X (measured on the horizontal axis) is $9 and the price of Y (measured on the vertical axis) is $4. If the price of X now declines to $6, the budget line will:

answer

shift outward on the horizontal axis.

question

Refer to the diagram where xy is the relevant budget line and I1, I2, and I3 are indifference curves. If the consumer is initially at point L, he or she should:

answer

purchase more of Y and less of X.

question

Which of the following is true concerning purely competitive industries?

answer

In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.

question

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:

answer

new firms will enter this market.

question

Assume a purely competitive increasing-cost industry is initially in long-run equilibrium and that an increase in consumer demand occurs. After all economic adjustments have been completed, product price will be:

answer

higher and total output will be larger than originally.

question

Assume a purely competitive, increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will:

answer

leave the industry and price and output will both decline.

question

A purely competitive firm:

answer

cannot earn economic profit in the long run.

question

Refer to the diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. The predicted long-run adjustments in this industry might be offset by:

answer

a technological improvement in production methods.

question

A purely competitive firm is precluded from making economic profits in the long run because:

answer

of unimpeded entry to the industry.

question

Under what conditions would an increase in demand lead to a lower long-run equilibrium price?

answer

The firms in the market are part of a decreasing-cost industry.

question

A decreasing-cost industry is one in which:

answer

input prices fall or technology improves as the industry expands.

question

Suppose that an industry's long-run supply curve is downsloping. This suggests that:

answer

it is a decreasing-cost industry.

question

Refer to the diagram showing the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total revenue:

answer

is $400.

question

Refer to the diagram. Line (1) reflects the long-run supply curve for:

answer

an increasing-cost industry.

question

Refer to the diagram. Line (1) reflects a situation where resource prices:

answer

increase as industry output expands.

question

Refer to the diagram. Line (2) reflects a situation where resource prices:

answer

remain constant as industry output expands.

question

Resources are efficiently allocated when production occurs where:

answer

price is equal to marginal cost.

question

The term productive efficiency refers to:

answer

the production of a good at the lowest average total cost.

question

The term allocative efficiency refers to:

answer

the production of the product mix most desired by consumers.

question

Under pure competition in the long run:

answer

both allocative efficiency and productive efficiency are achieved.

question

Refer to the diagram. By producing at output level Q:

answer

both productive and allocative efficiency are achieved.

question

If production is occurring where marginal cost exceeds price, the purely competitive firm will:

answer

fail to maximize profit and resources will be overallocated to the product.

question

In long-run equilibrium, purely competitive markets:

answer

maximize the sum of consumer surplus and producer surplus.

question

Which of the following would not be expected to occur in a purely competitive market in long-run equilibrium?

answer

Consumer and producer surplus will be minimized.

question

Creative destruction is least beneficial to:

answer

workers in the "destroyed" industries.

question

(Consider This) Which of the following statements is true about U.S. firms?

answer

Over half are bankrupt within the first five years after starting up.

question

(Last Word) Patents are most likely to infringe on innovation:

answer

for products that incorporate many different technologies into a single product.

question

(Last Word) "Patent trolls:"

answer

buy up patents in order to collect royalties and sue other companies.

question

The long-run supply curve for a decreasing-cost industry is downsloping.

answer

True

question

Refer to the diagram. If this firm is producing at the profit-maximizing level of output in the short run, then it is achieving productive and allocative efficiency.

answer

False

question

When entrepreneurs in competitive industries successfully innovate to lower production costs, it usually results in long-run economic profits for the firm.

answer

False

question

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

answer

True

Econ160: Practice Questions Chapters 7, 9 10 & 11

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