Chap 6 and 7 Econ Homework

question

Cassie produces and sells 400 jars of homemade jelly each month for $3 each. Each month, she pays $200 for jars, $150 for ingredients, and uses her own time, with an opportunity cost of $300. Her economic profits each month are

answer

$550

question

Assume Brad worked as a contractor for a year and had revenues of $120,000 and explicit cost of $70,000. If he could have been paid $80,000 working for a computer company, his:

answer

economic profit equaled -$30,000 and he would be rational to stop working as a contractor.

question

An economic profit of zero implies

answer

-normal profit.
-the firm is covering both explicit and implicit costs.
- the firm's revenues are sufficient to compensate the money and time that the owners put into the business.

question

A firm can produce 840 gallons of paint per day with 6 workers, or 910 gallons per day with 7 workers. The marginal product of labor over this range of output, stated in gallons per worker per day, is

answer

question

In the table below, diminishing marginal product is first evident with the addition of the ____ worker.

answer

question

Don Keene promotes boxing matches. He makes $6,500 per fight. Which cost is most relevant to a decision as to whether to promote one more fight?

answer

the marginal cost of promoting one additional boxing match

question

f average total cost equals $15 at 20 units of output and average total cost equals $15 at 21 units of output, then the marginal cost of the 21st unit is ____

answer

$15

question

A firm's total fixed cost equals $2,500. The firm's average fixed cost at 1, 5, and 10 units of output, respectively, will be:

answer

$2,500, $500, and $250

question

Which of the following must be true if the short-run average total cost curve is declining?

answer

Marginal cost is less than average total cost.

question

Luke realizes that his space taxi service is operating in the region of diminishing marginal product. As he provides more taxi service in the short run, what will happen to the marginal cost of providing the additional service?

answer

Marginal cost will increase

question

If the total cost of producing 10 units equals $90, and the average total cost of producing 11 units equals $8.75, then the marginal cost of the eleventh unit produced

answer

is less than the average total cost of producing ten units

question

When economies of scale exist, a decrease in the level of output will lead to

answer

an increase in cost per unit

question

What will pull up/down the average total cost and average variable cost curve?

answer

Marginal cost curve

question

Which of the following is true about perfect competition?

answer

-Since a perfectly competitive seller can sell all he wants at the market price, her demand curve is horizontal at the market price over the entire range of output that she could possibly produce.
-Because perfectly competitive markets have many buyers and sellers, each firm is so small in relation to the industry that its production decisions have no impact on the market.
- Because consumers believe that all firms in a perfectly competitive market sell identical (homogeneous) products, the products of all the firms are perfect substitutes.
- Perfectly competitive markets have easy entry and exit.
-All of the above are true about perfect competition.

question

A profit-maximizing firm in a perfectly competitive market will always produce a quantity of output that:

answer

maximizes the amount by which total revenue exceeds total cost

question

A firm sells grapefruit in a perfectly competitive market at a price of $1.50 per pound. The firm's marginal revenue

answer

equals $1.50

question

If a perfectly competitive firm's marginal revenue was less than its marginal cost

answer

it would contract its output but not raise its price in order to increase its profits

question

Which of the following is true of perfectly competitive firms?

answer

For a perfectly competitive firm, as long as the price derived from expanded output exceeds the marginal cost of that output, the expansion of output creates additional economic profits

question

At the level of output where marginal revenue equals marginal cost, price is less than average total cost but greater than average variable cost. In this instance, a profit-maximizing firm should:

answer

continue operating at that output level in the short term, since total revenue will cover all of the firm's variable costs and some of its fixed costs.

question

When the demand curve is horizontal (straight line) the firm can be classified as

answer

-A price taker
-very small relative to market output as a whole
-producing a homogeneous product

question

When market price falls below AVC (average variable cost) the firm should:

answer

Shut down. Because they cannot cover their variable costs or fixed costs.

question

To maximize profits, a firm should produce the output at the point where:

answer

MC(Marginal Cost)=MR(Marginal Revenue)

question

When price is more than average variable cost, but less then average total cost, the firm should:

answer

keep operating in the short run in order to minimize losses, since price exceeds average variable cost

1 of 23

question

answer

$550

question

Assume Brad worked as a contractor for a year and had revenues of $120,000 and explicit cost of $70,000. If he could have been paid $80,000 working for a computer company, his:

answer

economic profit equaled -$30,000 and he would be rational to stop working as a contractor.

question

An economic profit of zero implies

answer

-normal profit.
-the firm is covering both explicit and implicit costs.
- the firm's revenues are sufficient to compensate the money and time that the owners put into the business.

question

answer

question

In the table below, diminishing marginal product is first evident with the addition of the ____ worker.

answer

question

Don Keene promotes boxing matches. He makes $6,500 per fight. Which cost is most relevant to a decision as to whether to promote one more fight?

answer

the marginal cost of promoting one additional boxing match

question

f average total cost equals $15 at 20 units of output and average total cost equals $15 at 21 units of output, then the marginal cost of the 21st unit is ____

answer

$15

question

A firm's total fixed cost equals $2,500. The firm's average fixed cost at 1, 5, and 10 units of output, respectively, will be:

answer

$2,500, $500, and $250

question

Which of the following must be true if the short-run average total cost curve is declining?

answer

Marginal cost is less than average total cost.

question

answer

Marginal cost will increase

question

If the total cost of producing 10 units equals $90, and the average total cost of producing 11 units equals $8.75, then the marginal cost of the eleventh unit produced

answer

is less than the average total cost of producing ten units

question

When economies of scale exist, a decrease in the level of output will lead to

answer

an increase in cost per unit

question

What will pull up/down the average total cost and average variable cost curve?

answer

Marginal cost curve

question

Which of the following is true about perfect competition?

answer

question

A profit-maximizing firm in a perfectly competitive market will always produce a quantity of output that:

answer

maximizes the amount by which total revenue exceeds total cost

question

A firm sells grapefruit in a perfectly competitive market at a price of $1.50 per pound. The firm's marginal revenue

answer

equals $1.50

question

If a perfectly competitive firm's marginal revenue was less than its marginal cost

answer

it would contract its output but not raise its price in order to increase its profits

question

Which of the following is true of perfectly competitive firms?

answer

For a perfectly competitive firm, as long as the price derived from expanded output exceeds the marginal cost of that output, the expansion of output creates additional economic profits

question

At the level of output where marginal revenue equals marginal cost, price is less than average total cost but greater than average variable cost. In this instance, a profit-maximizing firm should:

answer

continue operating at that output level in the short term, since total revenue will cover all of the firm's variable costs and some of its fixed costs.

question

When the demand curve is horizontal (straight line) the firm can be classified as

answer

-A price taker
-very small relative to market output as a whole
-producing a homogeneous product

question

When market price falls below AVC (average variable cost) the firm should:

answer

Shut down. Because they cannot cover their variable costs or fixed costs.

question

To maximize profits, a firm should produce the output at the point where:

answer

MC(Marginal Cost)=MR(Marginal Revenue)

question

When price is more than average variable cost, but less then average total cost, the firm should:

answer

keep operating in the short run in order to minimize losses, since price exceeds average variable cost

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Chap 6 and 7 Econ Homework

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