Ch. 9 - Custom Scholars
Home » Flash Cards » Ch. 9

# Ch. 9

question
Explain why it is possible that a firm with a production function that exhibits increasing returns to scale can run into diminishing returns at the same time.
Increasing returns is a reduction in​ _______ costs in the​ ______, while diminishing returns is an increase in​ _______ costs in the​ _____.
average; long run;marginal; short run
question
Suppose demand for wheat is initially D2. If consumer incomes​ increase, then demand for wheat will shift to​ _____. This will​ _____ the equilibrium price of wheat and individual profit maximizing firms will produce​ _____ bushels of wheat.
d3; increase; 15
question
For this farmer to maximize profits he should produce​ _____ bushels of wheat.
12
question
In the short​ run, a firm in a perfectly competitive industry will minimize its losses by shutting down​ if:
A and B only.
question
Refer to the scenario below to answer the following question.
Tom borrowed​ \$40,000 from his parents to open a donut stand. He agrees to pay his parents a​ 5% yearly return on the money they lent him. His other yearly fixed costs equal​ \$10,000. His variable costs equal​ \$25,000. He sold​ 40,000 dozen donuts during the year at a price of​ \$2.00 per dozen.
​Tom's profit is
\$43,000
question
When P​ = SRMC​ = SRAC​ = LRAC​, an industry is considered to​ be:
A and D only
question
Two college students share an apartment and split the cost of​ heating, electricity, and rent. They decide to include one more roommate and divide​ heat, electricity, and rent costs three ways instead of two ways.
If adding the third roommate reduces the amount of money they each pay for utilities and rent each​ month, this can be described​ as:
increasing returns to scale.
question
Tom borrowed​ \$40,000 from his parents to open a donut stand. He agrees to pay his parents a​ 5% yearly return on the money they lent him. His other yearly fixed costs equal​ \$10,000. His variable costs equal​ \$25,000. He sold​ 40,000 dozen donuts during the year at a price of​ \$2.00 per dozen.
​Tom's total fixed costs equal
​\$12,000.
question
A perfectly competitive firm sells pineapples for​ \$4 each. MR​ = MC at a quantity of 600 units. Average total cost at the​ profit-maximizing quantity is​ \$2.75. This firm is earning a profit of
\$750
question
A firm that is earning a positive profit in the short run and expects to continue doing so has an incentive to expand its scale of operation in the long run.
True
question
Suppose a competitive industry experiences external economies. If​ so, then:
a​ firm's long-run average cost curve shifts down when industry output expands.
question
Furthermore, with external economies​, the​ long-run industry supply curve _____________ with output.
decreases
question
In a perfectly competitive market in the long​ run, profits are driven to zero due to which of the following​ relationships?
​P*​ = SRMC​ = SRAC​ = LRAC.
question
This​ farmer's fixed costs are
\$24
question
If this farmer is maximizing​ profits, his total costs will be
\$132
question
When an increase in a​ firm's scale of production leads to lower average​ costs, we say that there​ are:
economies of scale.
question
For each of the​ following, decide whether you agree or disagree and explain your​ answer:
A firm earning positive profits in the short run always has an incentive to increase its scale of operation in the long run.
Disagree. It has an incentive to expand its scale of operation only if it expects to continue to earn profits.
question
A firm suffering losses in the short run will continue to operate as long as total revenue at least covers fixed cost.
Disagree: It should continue to operate as long as price is greater than average variable cost.
question
Observe the​ firm's long-run average cost curve shown to the right. Between points B and C​, there​ are:
constant returns to scale.
question
A firm in a perfectly competitive industry in​ long-run equilibrium will earn normal returns and zero economic profit.
True
question
The​ firm's shut down point is at a price of
\$6
question
This farmer would earn a zero economic profit if price was
\$10
question
If total revenue is less than total variable cost in a perfectly competitive industry in the short​ run, firms will tend to exit that industry in the long run.
True
question
If this farmer is maximizing his​ profits, his TVC is
\$108
question
Tom borrowed​ \$40,000 from his parents to open a donut stand. He agrees to pay his parents a​ 5% yearly return on the money they lent him. His other yearly fixed costs equal​ \$10,000. His variable costs equal​ \$25,000. He sold​ 40,000 dozen donuts during the year at a price of​ \$2.00 per dozen.
​Tom's total costs equal:
\$37,000
question
A firm that is breaking even​ is:
All of the above.
question
If this farmer is maximizing​ profits, his total revenue will be
\$180
question
A perfectly competitive market is in​ long-run equilibrium. If demand in this market suddenly​ increases, price will​ ________ and firms will​ ________.
increase, earn a profit
question
A perfectly competitive market is in​ long-run equilibrium and demand in this market suddenly increases. In this​ situation, firms will eventually​ ________ the industry and will ultimately earn​ ________ economic profits.
enter; zero
question
When an industry enjoys external​ economies, its​ long-run supply curve slopes​ ________ and the industry is called​ a(n) ________ industry.
down; decreasing-cost
question
Constant-cost industries are industries in which there are no external economies or diseconomies of scale.
True
question
In the short run,
firms act to minimize losses or maximize profits
question
Tom borrowed​ \$40,000 from his parents to open a donut stand. He agrees to pay his parents a​ 5% yearly return on the money they lent him. His other yearly fixed costs equal​ \$10,000. His variable costs equal​ \$25,000. He sold​ 40,000 dozen donuts during the year at a price of​ \$2.00 per dozen.
​Tom's total revenue was
\$80,000
question
This​ farmer's shutdown point is at a price of
\$7
question
Firms that are​ "breaking even" are
earning zero economic profits
question
If this farmer is maximizing​ profits, his profit will be
\$48
question
If a​ firm's economic profit is​ \$0, then it must be true that
TR equals TC.
question
The​ short-run supply curve of a perfectly competitive firm​ is:
The portion of the marginal cost curve that lies above minimum average variable cost.
1 of 38
question
Explain why it is possible that a firm with a production function that exhibits increasing returns to scale can run into diminishing returns at the same time.
Increasing returns is a reduction in​ _______ costs in the​ ______, while diminishing returns is an increase in​ _______ costs in the​ _____.
average; long run;marginal; short run
question
Suppose demand for wheat is initially D2. If consumer incomes​ increase, then demand for wheat will shift to​ _____. This will​ _____ the equilibrium price of wheat and individual profit maximizing firms will produce​ _____ bushels of wheat.
d3; increase; 15
question
For this farmer to maximize profits he should produce​ _____ bushels of wheat.
12
question
In the short​ run, a firm in a perfectly competitive industry will minimize its losses by shutting down​ if:
A and B only.
question
Refer to the scenario below to answer the following question.
Tom borrowed​ \$40,000 from his parents to open a donut stand. He agrees to pay his parents a​ 5% yearly return on the money they lent him. His other yearly fixed costs equal​ \$10,000. His variable costs equal​ \$25,000. He sold​ 40,000 dozen donuts during the year at a price of​ \$2.00 per dozen.
​Tom's profit is
\$43,000
question
When P​ = SRMC​ = SRAC​ = LRAC​, an industry is considered to​ be:
A and D only
question
Two college students share an apartment and split the cost of​ heating, electricity, and rent. They decide to include one more roommate and divide​ heat, electricity, and rent costs three ways instead of two ways.
If adding the third roommate reduces the amount of money they each pay for utilities and rent each​ month, this can be described​ as:
increasing returns to scale.
question
Tom borrowed​ \$40,000 from his parents to open a donut stand. He agrees to pay his parents a​ 5% yearly return on the money they lent him. His other yearly fixed costs equal​ \$10,000. His variable costs equal​ \$25,000. He sold​ 40,000 dozen donuts during the year at a price of​ \$2.00 per dozen.
​Tom's total fixed costs equal
​\$12,000.
question
A perfectly competitive firm sells pineapples for​ \$4 each. MR​ = MC at a quantity of 600 units. Average total cost at the​ profit-maximizing quantity is​ \$2.75. This firm is earning a profit of
\$750
question
A firm that is earning a positive profit in the short run and expects to continue doing so has an incentive to expand its scale of operation in the long run.
True
question
Suppose a competitive industry experiences external economies. If​ so, then:
a​ firm's long-run average cost curve shifts down when industry output expands.
question
Furthermore, with external economies​, the​ long-run industry supply curve _____________ with output.
decreases
question
In a perfectly competitive market in the long​ run, profits are driven to zero due to which of the following​ relationships?
​P*​ = SRMC​ = SRAC​ = LRAC.
question
This​ farmer's fixed costs are
\$24
question
If this farmer is maximizing​ profits, his total costs will be
\$132
question
When an increase in a​ firm's scale of production leads to lower average​ costs, we say that there​ are:
economies of scale.
question
For each of the​ following, decide whether you agree or disagree and explain your​ answer:
A firm earning positive profits in the short run always has an incentive to increase its scale of operation in the long run.
Disagree. It has an incentive to expand its scale of operation only if it expects to continue to earn profits.
question
A firm suffering losses in the short run will continue to operate as long as total revenue at least covers fixed cost.
Disagree: It should continue to operate as long as price is greater than average variable cost.
question
Observe the​ firm's long-run average cost curve shown to the right. Between points B and C​, there​ are:
constant returns to scale.
question
A firm in a perfectly competitive industry in​ long-run equilibrium will earn normal returns and zero economic profit.
True
question
The​ firm's shut down point is at a price of
\$6
question
This farmer would earn a zero economic profit if price was
\$10
question
If total revenue is less than total variable cost in a perfectly competitive industry in the short​ run, firms will tend to exit that industry in the long run.
True
question
If this farmer is maximizing his​ profits, his TVC is
\$108
question
Tom borrowed​ \$40,000 from his parents to open a donut stand. He agrees to pay his parents a​ 5% yearly return on the money they lent him. His other yearly fixed costs equal​ \$10,000. His variable costs equal​ \$25,000. He sold​ 40,000 dozen donuts during the year at a price of​ \$2.00 per dozen.
​Tom's total costs equal:
\$37,000
question
A firm that is breaking even​ is:
All of the above.
question
If this farmer is maximizing​ profits, his total revenue will be
\$180
question
A perfectly competitive market is in​ long-run equilibrium. If demand in this market suddenly​ increases, price will​ ________ and firms will​ ________.
increase, earn a profit
question
A perfectly competitive market is in​ long-run equilibrium and demand in this market suddenly increases. In this​ situation, firms will eventually​ ________ the industry and will ultimately earn​ ________ economic profits.
enter; zero
question
When an industry enjoys external​ economies, its​ long-run supply curve slopes​ ________ and the industry is called​ a(n) ________ industry.
down; decreasing-cost
question
Constant-cost industries are industries in which there are no external economies or diseconomies of scale.
True
question
In the short run,
firms act to minimize losses or maximize profits
question
Tom borrowed​ \$40,000 from his parents to open a donut stand. He agrees to pay his parents a​ 5% yearly return on the money they lent him. His other yearly fixed costs equal​ \$10,000. His variable costs equal​ \$25,000. He sold​ 40,000 dozen donuts during the year at a price of​ \$2.00 per dozen.
​Tom's total revenue was
\$80,000
question
This​ farmer's shutdown point is at a price of
\$7
question
Firms that are​ "breaking even" are
earning zero economic profits
question
If this farmer is maximizing​ profits, his profit will be
\$48
question
If a​ firm's economic profit is​ \$0, then it must be true that
TR equals TC.
question
The​ short-run supply curve of a perfectly competitive firm​ is:
The portion of the marginal cost curve that lies above minimum average variable cost.

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

## Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.