Question 1

If marginal costs equal average total costs,

Accepted Answer

A)   average total costs are falling.
B)   average total costs are rising.
C)   average total costs are maximized.
D)   average total costs are minimized.E) B) and C)
F) A) and D)

Question 2

Which of the following statements is true?

Accepted Answer

A)   All costs are fixed in the short run.
B)   All costs are variable in the long run.
C)   All costs are variable in the short run.
D)   All costs are fixed in the long run.E) All of the above
F) A) and B)

Question 3

If a competitive firm doubles its output, its total revenue

Accepted Answer

A)   doubles.
B)   more than doubles.
C)   less than doubles.
D)   cannot be determined because the price of the good may rise or fall.E) All of the above
F) C) and D)

Question 4

Give two reasons why the long-run industry supply curve may slope upward. Use an example to demonstrate your reasons.

Accepted Answer

1) Some resource used in production may ...

Question 5

Average total costs are total costs divided by marginal costs.

Accepted Answer

A) True 
 B)False

Question 6

The marginal product of labour as production moves from employing one worker to employing two workers is ?
Refer to data below.
?
  Number of Workers  Output 00123240350\begin{array}{cc}	ext { Number of Workers }&	ext { Output } \0&0 \1&23 \2&40 \3&50\end{array} Number of Workers 0123​ Output 0234050​

Accepted Answer

A)   0
B)   10
C)   17
D)   23
E)   50 F) B) and D)
G) A) and B)

Question 7

If a production function exhibits diminishing marginal product, the slope of the corresponding total-cost curve

Accepted Answer

A)   is linear (a straight line) .
B)   is negative throughout its length
C)   becomes steeper as the quantity of output increases.
D)   becomes flatter as the quantity of output increases.E) A) and C)
F) All of the above

Question 8

A corporation has been steadily losing money on one of its product lines. The factory used to produce that brand cost €20 million to build 10 years ago. The firm now is considering an offer to buy that factory for €15 million. Which of the following statements about the decision to sell or not to sell is correct?

Accepted Answer

A)   The firm should turn down the purchase offer because the factory cost more than €15 million to build.
B)   The €20 million spent on the factory is a sunk cost that should not affect the decision.
C)   The €20 million spent on the factory is an implicit cost, which should be included in the decision.
D)   The firm should sell the factory only if it can reduce its costs elsewhere by €5 million.E) B) and C)
F) A) and B)

Question 9

Which of the following is not a characteristic of a competitive market?

Accepted Answer

A)   All of these answers are characteristics of a competitive market.
B)   There are many buyers and sellers in the market.
C)   The goods offered for sale are largely the same.
D)   Firms generate small but positive economic profits in the long run.
E)   Firms can freely enter or exit the market.F) C) and D)
G) None of the above

Question 10

When marginal costs are below average total costs,

Accepted Answer

A)   average fixed costs are rising.
B)   average total costs are falling.
C)   average total costs are rising.
D)   average total costs are minimized.E) A) and B)
F) C) and D)

Question 11

The competitive firm maximizes profit when it produces output up to the point where

Accepted Answer

A)   price equals average variable cost.
B)   marginal revenue equals average revenue.
C)   marginal cost equals total revenue.
D)   marginal cost equals marginal revenue.E) A) and B)
F) B) and D)

Question 12

The long-run market supply curve

Accepted Answer

A)   is always more elastic than the short-run market supply curve.
B)   is always perfectly elastic.
C)   has the same elasticity as the short-run market supply curve.
D)   is always less elastic than the short-run market supply curve.E) A) and D)
F) All of the above

Question 13

If a firm continues to employ more workers within the same size factory, it will eventually experience diminishing marginal product

Accepted Answer

A) True 
 B)False

Question 14

If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal cost curve will be U-shaped.

Accepted Answer

A) True 
 B)False

Question 15

A long-run supply curve is flatter than a short-run supply curve because

Accepted Answer

A)   firms can enter and exit a market more easily in the long run than in the short run.
B)   long-run supply curves are sometimes downward sloping.
C)   competitive firms have more control over demand in the long run.
D)   firms in a competitive market face identical cost structures.E) All of the above
F) B) and C)

Question 16

If there are implicit costs of production,

Accepted Answer

A)   accounting profit will exceed economic profit.
B)   economic profit will always be zero.
C)   economic profit will exceed accounting profit.
D)   accounting profit will always be zero.
E)   economic profit and accounting profit will be equalF) C) and D)
G) B) and D)

Question 17

If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will

Accepted Answer

A)   be flat (horizontal) .
B)   slope upward.
C)   slope downward.
D)   be U-shaped.E) All of the above
F) B) and C)

Question 18

When firms in a competitive market have different costs, it is likely that

Accepted Answer

A)   free entry and exit in the market will be violated.
B)   the market will no longer be considered competitive.
C)   long-run market supply will be downward sloping.
D)   some firms will earn positive economic profits in the long run.E) B) and C)
F) A) and D)

Question 19

If total revenue is €100, explicit costs are €50, and implicit costs are €30, then accounting profit equals €50.

Accepted Answer

A) True 
 B)False

Question 20

A grocery store should close at night if the

Accepted Answer

A)   variable costs of staying open are less than the total revenue due to staying open.
B)   total costs of staying open are less than the total revenue due to staying open.
C)   variable costs of staying open are greater than the total revenue due to staying open.
D)   total costs of staying open are greater than the total revenue due to staying open.E) All of the above
F) B) and C)

Exam 6: Background to Supply: Firms in Competitive Markets

A long-run supply curve is flatter than a short-run supply curve because

Correct Answer
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Which of the following is not a characteristic of a competitive market?

Correct Answer
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The long-run market supply curve

Correct Answer
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When marginal costs are below average total costs,

Correct Answer
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If there are implicit costs of production,

Correct Answer
verified

If a firm continues to employ more workers within the same size factory, it will eventually experience diminishing marginal product

Correct Answer
verified

A grocery store should close at night if the

Correct Answer
verified

If a production function exhibits diminishing marginal product, the slope of the corresponding total-cost curve

Correct Answer
verified

If marginal costs equal average total costs,

Correct Answer
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If a competitive firm doubles its output, its total revenue

Correct Answer
verified

If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal cost curve will be U-shaped.

Correct Answer
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Correct Answer
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The marginal product of labour as production moves from employing one worker to employing two workers is ? Refer to data below. ? $\begin{array}{cc}\text { Number of Workers }&\text { Output } \\0&0 \\1&23 \\2&40 \\3&50\end{array}$

Correct Answer
verified

Average total costs are total costs divided by marginal costs.

Correct Answer
verified

If total revenue is €100, explicit costs are €50, and implicit costs are €30, then accounting profit equals €50.

Correct Answer
verified

If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will

Correct Answer
verified

Which of the following statements is true?

Correct Answer
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When firms in a competitive market have different costs, it is likely that

Correct Answer
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The competitive firm maximizes profit when it produces output up to the point where

Correct Answer
verified

Give two reasons why the long-run industry supply curve may slope upward. Use an example to demonstrate your reasons.

Correct Answer
verified
1) Some resource used in production may ...
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Exam 6: Background to Supply: Firms in Competitive Markets

A long-run supply curve is flatter than a short-run supply curve because

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of a competitive market?

Correct AnswerverifiedShow Answer

The long-run market supply curve

Correct AnswerverifiedShow Answer

When marginal costs are below average total costs,

Correct AnswerverifiedShow Answer

If there are implicit costs of production,

Correct AnswerverifiedShow Answer

If a firm continues to employ more workers within the same size factory, it will eventually experience diminishing marginal product

Correct AnswerverifiedShow Answer

A grocery store should close at night if the

Correct AnswerverifiedShow Answer

If a production function exhibits diminishing marginal product, the slope of the corresponding total-cost curve

Correct AnswerverifiedShow Answer

If marginal costs equal average total costs,

Correct AnswerverifiedShow Answer

If a competitive firm doubles its output, its total revenue

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If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal cost curve will be U-shaped.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Average total costs are total costs divided by marginal costs.

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If total revenue is €100, explicit costs are €50, and implicit costs are €30, then accounting profit equals €50.

Correct AnswerverifiedShow Answer

If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

When firms in a competitive market have different costs, it is likely that

Correct AnswerverifiedShow Answer

The competitive firm maximizes profit when it produces output up to the point where

Correct AnswerverifiedShow Answer

Give two reasons why the long-run industry supply curve may slope upward. Use an example to demonstrate your reasons.

Correct Answerverified1) Some resource used in production may ...View AnswerShow Answer

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1) Some resource used in production may ...
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