ECO practice 3

question

Production is organized within firms in order to

answer

minimize transaction costs

question

An explicit cost for a business that manufactures bicycles would be the

answer

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?

answer

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 _______.

answer

inputs; outputs

question

Why should a firm never hire a worker with a negative MP?

answer

doing so would decrease output

question

In the short run, ATC decrease and then increase as more output is produced because

answer

MC is at first less than ATC, then rises above it

question

The LR ATC for a firm are equal to SR ATC when

answer

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

answer

economies of scale

question

The perfectly competitive firm cannot influence the market price because the firm

answer

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

answer

supply and demand set the price

question

Regardless of the number of firms in the industry, all firms

answer

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

answer

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?

answer

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

answer

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

answer

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

answer

perfectly elastic; downward sloping

question

Because the demand curve for a monopolist is downward sloping,

answer

the monopolist chooses a price and quantity combination to maximize profit

1 of 17

question

Production is organized within firms in order to

answer

minimize transaction costs

question

An explicit cost for a business that manufactures bicycles would be the

answer

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?

answer

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 _______.

answer

inputs; outputs

question

Why should a firm never hire a worker with a negative MP?

answer

doing so would decrease output

question

In the short run, ATC decrease and then increase as more output is produced because

answer

MC is at first less than ATC, then rises above it

question

The LR ATC for a firm are equal to SR ATC when

answer

the firm has the optimal plant size for the level of output produced

question

answer

economies of scale

question

The perfectly competitive firm cannot influence the market price because the firm

answer

produces a tiny share of market output

question

answer

supply and demand set the price

question

Regardless of the number of firms in the industry, all firms

answer

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

answer

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?

answer

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

answer

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

answer

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

answer

perfectly elastic; downward sloping

question

Because the demand curve for a monopolist is downward sloping,

answer

the monopolist chooses a price and quantity combination to maximize profit

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ECO practice 3

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