ECO practice 3 - Custom Scholars
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# ECO practice 3

question
Production is organized within firms in order to
minimize transaction costs
question
An explicit cost for a business that manufactures bicycles would be the
wages paid to employees
question
Say you own a steel mill and notice that as you hire more workers, each one is able to specialize. What happens to the marginal product of labor?
it increases at first, then decreases
question
A firm's production function is similar to a recipe used to make a cake in the sense that the production function shows us the combination of ________ used to produce _______.
inputs; outputs
question
Why should a firm never hire a worker with a negative MP?
doing so would decrease output
question
In the short run, ATC decrease and then increase as more output is produced because
MC is at first less than ATC, then rises above it
question
The LR ATC for a firm are equal to SR ATC when
the firm has the optimal plant size for the level of output produced
question
Liina owns a sports complex with 9 courts for basketball and volleyball tournaments. If she doubles the size of her facility so she has 18 courts and her long-run average total cost per tournament decreases, we know that Liina is experiencing
economies of scale
question
The perfectly competitive firm cannot influence the market price because the firm
produces a tiny share of market output
question
Whenever we go to NYC, my son's fiance loves to get a hotdog from one of the many street vendors. Some would say the market for hotdogs there is a good example of a perfectly competitive market. Because there are so many buyers and sellers of hot dogs
supply and demand set the price
question
Regardless of the number of firms in the industry, all firms
will attempt to maximize profits
question
Imagine you are a consultant and have a client firm producing an output with this data: P = MR = \$20, MC = \$6, AVC = \$10, ATC = \$13
increase output
question
The market for watches is perfectly competitive and is currently in equilibrium. What will happen if watches become more popular among college students?
in the short run, firms will experience economic profits, but in the long run, firms will enter the market, bringing economic profits back down to zero
question
We recently spent a little over \$70,000 on a remodel of our new home. To get the remainder of the renovations completed, it will cost another \$23,000. When we are making decisions about the remaining renovations, we should ignore the \$70,000 because
the \$70,000 is a sunk cost
question
In the soda industry, production costs per unit continue to fall as the firm expands. In cases like this, smaller rivals trying to enter the industry
will have much higher average costs
question
The demand cost for the product of a firm in a competitive market is ______, and the demand curve for the product of a monopolist is
perfectly elastic; downward sloping
question
Because the demand curve for a monopolist is downward sloping,
the monopolist chooses a price and quantity combination to maximize profit
1 of 17
question
Production is organized within firms in order to
minimize transaction costs
question
An explicit cost for a business that manufactures bicycles would be the
wages paid to employees
question
Say you own a steel mill and notice that as you hire more workers, each one is able to specialize. What happens to the marginal product of labor?
it increases at first, then decreases
question
A firm's production function is similar to a recipe used to make a cake in the sense that the production function shows us the combination of ________ used to produce _______.
inputs; outputs
question
Why should a firm never hire a worker with a negative MP?
doing so would decrease output
question
In the short run, ATC decrease and then increase as more output is produced because
MC is at first less than ATC, then rises above it
question
The LR ATC for a firm are equal to SR ATC when
the firm has the optimal plant size for the level of output produced
question
Liina owns a sports complex with 9 courts for basketball and volleyball tournaments. If she doubles the size of her facility so she has 18 courts and her long-run average total cost per tournament decreases, we know that Liina is experiencing
economies of scale
question
The perfectly competitive firm cannot influence the market price because the firm
produces a tiny share of market output
question
Whenever we go to NYC, my son's fiance loves to get a hotdog from one of the many street vendors. Some would say the market for hotdogs there is a good example of a perfectly competitive market. Because there are so many buyers and sellers of hot dogs
supply and demand set the price
question
Regardless of the number of firms in the industry, all firms
will attempt to maximize profits
question
Imagine you are a consultant and have a client firm producing an output with this data: P = MR = \$20, MC = \$6, AVC = \$10, ATC = \$13
increase output
question
The market for watches is perfectly competitive and is currently in equilibrium. What will happen if watches become more popular among college students?
in the short run, firms will experience economic profits, but in the long run, firms will enter the market, bringing economic profits back down to zero
question
We recently spent a little over \$70,000 on a remodel of our new home. To get the remainder of the renovations completed, it will cost another \$23,000. When we are making decisions about the remaining renovations, we should ignore the \$70,000 because
the \$70,000 is a sunk cost
question
In the soda industry, production costs per unit continue to fall as the firm expands. In cases like this, smaller rivals trying to enter the industry
will have much higher average costs
question
The demand cost for the product of a firm in a competitive market is ______, and the demand curve for the product of a monopolist is
perfectly elastic; downward sloping
question
Because the demand curve for a monopolist is downward sloping,
the monopolist chooses a price and quantity combination to maximize profit

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