ECON 9 quizzes

Which of the following statements best describes the economic short run? It is a period of one year or less. It is a period during which at least one of the firm's inputs is fixed. It is a period during which firms are free to vary all of their inputs. It is a period during which fixed inputs become variable inputs because of depreciation.

Which of the following statements is false? Economic costs include both accounting costs and implicit costs. Economists consider all costs to be implicit costs. An implicit cost is a nonmonetary opportunity cost. An explicit cost is a cost that involves spending money.

Which of the following would be categorized as an opportunity cost? a. not being able to spend your $10,000 savings if you sink the money in your business b. the cost of purchasing supplies for your house-cleaning business c. the cost of purchasing auto insurance for your dry-cleaning delivery business

Which of the following is an example of a long-run adjustment? A soybean farmer turns on the irrigation system after a month long dry spell. Walmart builds another Supercenter. Ford Motor Company lays off 2,000 assembly line workers. Your university offers Saturday morning classes next fall.

In the long run which of the following is true? The firm can vary its explicit costs but not its implicit costs. Total cost = fixed cost + variable cost. There are no fixed costs. The size of a firm's physical plant can be changed but the firm cannot adopt new technology.

Economic costs of production differ from accounting costs in that economic costs add the opportunity costs of a firm using its own resources while accounting costs do not. accounting costs include expenditures for hired resources while economic costs do not. economic costs include expenditures for hired resources while accounting costs do not. accounting costs are always larger than economic cost.

The rules of accounting generally require that ________ costs be used for purposes of keeping a company's financial records and for paying taxes. These costs are sometimes called ________ costs. economic; legal real; explicit total; economic explicit; accounting

The long run refers to a time period long enough for a firm to vary all of its inputs, to adopt new technology, and change the size of its physical plant. long enough for a firm to change the use of its variable inputs. long enough for a firm to pay all of its creditors in full. during which a firm is able to purchase all of its inputs, including its plant and equipment.

Which of the following is the best example of a short-run adjustment? Smith University completed negotiations to acquire a large piece of land to build its new library. A local bakery purchases another commercial oven as part of its capacity expansion. Toyota builds a new assembly plant in Texas. Your local Walmart hires two more associates.

The processes a firm uses to turn inputs into outputs of goods and services is called technological change. positive economic analysis. technology. marginal analysis.

If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output? $65 $50 $15 It is impossible to determine without additional information.

If the marginal cost curve is below the average variable cost curve, then average variable cost is increasing. average variable cost could either be increasing or decreasing. average variable cost is decreasing. marginal cost must be decreasing.

If fixed costs do not change, then marginal cost equals the change in average variable cost divided by the change in output. equals the change in variable cost divided by the change in output. also remains constant. equals the change in average fixed cost divided by the change in output.

If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is $1,000. $700. $300. impossible to determine without additional information.

In the long run, all of the firm's costs are explicit costs; there are no implicit costs of production. the firm is more profitable than it is in the short run. the firm's fixed costs are greater than its fixed costs in the short run. all of the firm's costs are variable costs.

Marginal cost is calculated for a particular increase in output by multiplying the total cost by the change in output. dividing the change in total cost by the change in output. multiplying the change in total cost by the change in output. dividing the total cost by the change in output.

Which of the following statements is true? Average fixed cost does not change as output increases. The marginal cost curve intersects the average fixed cost curve at its minimum point. When marginal cost is greater than average fixed cost, average fixed cost increases. As output increases, average fixed cost becomes smaller and smaller.

Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open. Which of the following is true? The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost. The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost. The variable cost of running the studio is $22,000. The fixed cost of running the studio is $22,000

If marginal cost is above the average variable cost, then average variable cost is decreasing. T/F

Which of the following statements is false? Marginal cost will equal average total cost when average total cost is at its lowest point. When marginal cost is less than average total cost, average total cost will fall. Marginal cost will equal average total cost when marginal cost is at its lowest point. When marginal cost is greater than average total cost, average total cost will rise.

Which of the following is the best example of a perfectly competitive firm? the Ford Motor Company United Parcel Service (UPS) a corn farmer in Illinois a Taco Bell restaurant

A perfectly competitive firm's marginal revenue is equal to its price. may be either greater or less than its price, depending on the quantity sold. is less than price because a firm must lower its price to sell more. is greater than its price.

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms? Restaurants do not sell identical products. Restaurants usually have entry barriers in the form of zoning restrictions and health regulations. Restaurants have significant liability costs that perfectly competitive firms do not have; for example, customers may sue if they suffer from food poisoning. Restaurants compete in small market areas—neighborhoods and cities—rather than in regional or national markets. Therefore, restaurants are not small relative to their market size.

Which of the following is not true for a firm in perfect competition? Marginal revenue equals the change in total revenue from selling one more unit. Profit equals total revenue minus total cost. Price equals average revenue. Average revenue is greater than marginal revenue

If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should keep output constant and enjoy the above normal profit. reduce its output. increase its output. lower the price.

Both buyers and sellers are price takers in a perfectly competitive market because both buyers and sellers in a perfectly competitive market are concerned for the welfare of others. each buyer and seller knows it is illegal to conspire to affect price. the price is determined by government intervention and dictated to buyers and sellers. each buyer and seller is too small relative to others to independently affect the market price.

An increase in a firm's fixed cost will not change the firm's profit-maximizing output in the short run. T/F

The price of a seller's product in perfect competition is determined by market demand and market supply. the individual demander. the individual seller. a few of the sellers.

For a perfectly competitive firm, which of the following is not true at profit maximization? Market price is greater than marginal cost. Price equals marginal cost. Marginal revenue equals marginal cost. Total revenue minus total cost is maximized.

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen? The firm will not sell any output. The firm's revenue will increase. The firm's profits will increase. The firm will sell more output than its competitors.

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm is breaking even. is incurring a loss. should shut down. is earning a profi

What is always true at the quantity where a firm's average total cost equals average revenue? The firm breaks even. The firm's profit is maximized. Marginal cost equals marginal revenue.

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are capital costs. sunk costs. nonmonetary opportunity costs. implicit costs.

When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell nothing at all; the firm shuts down. any positive output the entrepreneur decides upon because all of it can be sold. the output where marginal revenue equals marginal cost. the output where average total cost equals price.

If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, then the firm should increase output. is earning a profit. should shut down. should increase price

If a firm shuts down in the short run, its loss equals its fixed cost. is makes zero economic profit. its total revenue is not large enough to cover its fixed cost. its loss equals zero.

The minimum point on the average variable cost curve is called the break-even point. the point of diminishing returns. the shutdown point. the loss-minimizing point.

If a perfectly competitive firm's price is above its average total cost, the firm is earning a profit. should shut down. is breaking even. is incurring a loss.

Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC) and average total cost (ATC). Which of the following equations is equal to a firm's profit? P - TC (P × Q) - (P × ATC) P - ATC (P × Q) - TC

If price is equal to average variable cost, then a perfectly competitive firm breaks even. T/F

If a typical firm in a perfectly competitive industry is earning profits, then new firms will enter in the long run causing market supply to decrease, market price to rise, and profits to increase. the number of firms in the industry will remain constant in the long run. all firms will continue to earn profits. new firms will enter in the long run causing market supply to increase, market price to fall, and profits to decrease.

Which of the following statements is correct? Economic profit always exceeds accounting profit. Economic profit takes into account all costs involved in producing a product. Accounting profit is not relevant in preparing the firm's financial statement. Accounting profit is the same as economic profit.

In long-run perfectly competitive equilibrium, which of the following is false? Economic surplus is maximized. There is efficient, low-cost production at the minimum efficient scale. Firms earn economic profit. Economies of scale are exhausted.

In the long run, a perfectly competitive market will supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. generate a long-run equilibrium where the typical firm operates at a loss. produce only the quantity of output that yields a long-run profit for the typical firm. supply whatever amount consumers will buy at a price which earns the market an economic profit.

If, in a perfectly competitive industry, the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost, then new firms are attracted to the industry. market supply will remain constant. existing firms will exit the industry. firms are breaking even

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it? profit maximization marginal efficiency productive efficiency allocative efficiency

The perfectly competitive market structure benefits consumers because firms add a much smaller markup over average cost than firms in any other type of market structure. firms are forced by competitive pressure to be as efficient as possible. firms do not produce goods at the lowest possible price in the long run. firms produce high-quality goods at low prices.

Which of the following describes a situation in which a good or service is produced at the lowest possible cost? marginal efficiency productive efficiency profit maximization allocative efficiency

A perfectly competitive industry achieves allocative efficiency when firms carry production surpluses. goods and services are produced at the lowest possible cost. goods and services are produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it. it produces where market price equals marginal production cost.

A teenaged babysitter is similar to a firm in a perfectly competitive industry in that, for both the implicit costs of production exceed the explicit costs of production. fixed costs are lower than variable costs. there are many other suppliers of similar goods or services. average costs of production do not change when their industry expands.

The De Beers Company, one of the longest-lived monopolies, is facing increasing competition. One source of competition comes from people who might resell their previously owned diamonds. Why is De Beers worried that people might resell their previously owned diamonds? because De Beers will not be able to guarantee the quality of previously owned diamonds and fears that its reputation might be harmed because the availability of previously owned diamonds would increase the market demand for diamonds and dilute De Beers' monopoly because the availability of previously owned diamonds would make the market demand curve for diamonds more inelastic and force De Beers to lower its price because previously owned diamonds would be a close substitute to newly mined diamonds and would therefore reduce De Beers' market power

To maintain a monopoly, a firm must have marginal revenue equal to demand. few competitors. an insurmountable barrier to entry. a perfectly inelastic demand

For a natural monopoly, the marginal cost of producing an additional unit of its product is relatively small. T/F

A monopoly is the only seller of a product without a well-defined demand curve. with many substitutes. with a perfectly inelastic demand. without a close substitute.

Peet's Coffee and Teas produces some flavorful varieties of Peet's brand coffee. Is Peet's a monopoly? No, Peet's is not a monopoly because there are many branches of Peet's. Yes, there are no substitutes to Peet's coffee. Yes, Peet's is the only supplier of Peet's coffee in a market where there are high barriers to entry. No, although Peet's coffee is a unique product, there are many different brands of coffee that are very close substitutes.

Diet Coke ________ considered a product in a monopoly market, because ________.

A public franchise is a corporation that is owned by stockholders. results from ownership of a key raw material. is an unregulated monopoly necessary for the public good. is a government designation that a private firm is the only legal producer of a good or service.

A monopoly is characterized by all of the following except the firm has market power. entry barriers are high. there are only a few sellers, each selling a unique product. there are no close substitutes to the firm's product.

A patent or copyright is a barrier to entry based on ownership of a key necessary raw material. widespread network externalities. large economies of scale as output increases. government action to protect a producer

Which one of the following about a monopoly is false? A monopoly must have some kind of government privilege or government imposed barrier to maintain its monopoly. A monopoly could make profits in the long run. A monopoly status could be temporary. A monopoly could break even in the long run.

A monopoly firm's demand curve is inelastic at high prices and elastic at lower prices. is the same as the market demand curve. is more inelastic than the demand curve for the product. is perfectly inelastic.

A monopolist's profit-maximizing price and output correspond to the point on a graph where average total cost is minimized. where price is as high as possible. where marginal revenue equals marginal cost and charging the price on the market demand curve for that output. where total costs are the smallest relative to price.

Relative to a perfectly competitive market, a monopoly results in a gain in producer surplus less than the loss in consumer surplus. a gain in producer surplus equal to the gain in consumer surplus. greater economic efficiency. a gain in producer surplus equal to the loss in consumer surplus.

If a theatre company expects $250,000 in ticket revenue from five performances and $288,000 in ticket revenue if it adds a sixth performance, the marginal revenue of the sixth performance is $38,000. company will be making a loss on the sixth performance because its ticket sales will be less than the average revenue received from the previous five. marginal revenue of the sixth performance is $288,000. cost of staging the sixth performance is probably higher than the cost of staging the previous five

Why does a monopoly cause a deadweight loss? because it appropriates a portion of consumer surplus for itself because it does not produce some output for which demand exceeds supply because it increases producer surplus at the expense of consumer surplus because it stops producing output at a point where price is above marginal cost

Microsoft hires marketing and sales specialists to decide what prices it should set for its products, whereas a wealthy corn farmer in Iowa, who sells his output in the world commodity market, does not. Why is this so? because Microsoft could potentially lose sales if it sets prices indiscriminately because Microsoft is large enough to hire the best people in the field because the wealthy corn farmer is a price maker who sets his price independently of the market price, but Microsoft's optimal output depends on the price it selects because unlike Microsoft, the wealthy corn farmer is probably a monopolist

Compared to perfect competition, the consumer surplus in a monopoly is lower because price is higher and output is lower. is eliminated. is higher because price is higher and output is the same. is unchanged because price and output are the same.

Which of the following is a characteristic shared by a perfectly competitive firm and a monopoly? Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost. Each sets a price for its product that will maximize its revenue. Each must lower its price to sell more output. Each maximizes profits by producing a quantity for which price equals marginal cost.

Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit-maximizing outputs? Price equals marginal cost. Marginal revenue is less than price. Average revenue equals average cost. Marginal revenue equals marginal cost.

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Which of the following statements regarding economic surplus in each market structure is true? Under perfectly competitive conditions, economic surplus is equal to consumer surplus; there is no producer surplus because firms are price takers. Under monopoly conditions, economic surplus is equal to producer surplus. Under perfectly competitive conditions, economic surplus in this industry equals consumer surplus plus producer surplus. Under monopoly conditions, some consumer surplus is transferred to producer surplus, but economic surplus is the same as it was under perfectly competitive conditions. Under perfectly competitive conditions, economic surplus is maximized. Under monopoly conditions, economic surplus is less than under perfect competition and there is a deadweight loss. Under perfectly competitive conditions, economic surplus in this industry is maximized. Under monopoly conditions, economic surplus is minimized.

As word processing on personal computers expanded, sales of typewriters began to disappear. Which competitive force does this event demonstrate? he threat of competition from new entrants bargaining power of buyers bargaining power of suppliers competition from substitute goods or services

In 2017, the Educational Testing Service (ETS) charged $54.50 to take the Scholastic Aptitude Test (SAT) but $205 to take the Graduate Record Exam (GRE). One reason for this difference in price is an average, those who take the GRE have higher incomes than those who take the SAT. the GRE is a longer test with more questions. the ETS faces competition in the market for the SAT but no competition for the GRE. more people took the SAT than the GRE in 2015.

Which of the following is an example of a factor that a firm's owners and managers can control in making the firm successful? changing consumer tastes the ability to produce the product at a lower cost a rise in the price of a key input, for example, a rise in the price of oil leads to higher energy costs the number of competitors in the market

Suppose that a firm in a competitive market succeeds in producing a superior product and selling it at a price that generates a large demand. As a result, the firm's market share is almost 100 percent. Meanwhile, other firms are trying to regain their market shares through research and development. Is this firm a monopolist? Yes, because it has a power to dictate the price consumers must pay. No, because it does not have a power to dictate the price consumers must pay. No, because it faces potential competition from other companies. Yes, because it is virtually the only firm in the market.

A supplier of an input is unlikely to have bargaining power if many firms can supply the input. the input supplied is specialized. it is the sole supplier of the input. it has a patent on the input.