ECON 111 Module 3

question

The short run is a period of time in which

answer

the quantities of some resources the firm uses are fixed

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Economists define the short run as a period of time so short that

answer

at least one factor of production cannot be varied

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An example of a variable resource in the short run is

answer

an employee

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An example of a short−run fixed factor of production is

answer

capital equipment

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The long run is a time frame in which

answer

the quantities of all factors of production can be varied.

question

A period of time in which the quantity of all factors of production used by a firm can be varied is called the

answer

long run

question

The marginal product of labor is equal to the

answer

increase in the total product that results from hiring one more worker.

question

The marginal product of labor is the increase in total product from a

answer

one unit increase in the quantity of labor, while holding the quantity of capital constant.

question

At that amount of output where diminishing marginal returns first sets in,

answer

marginal product will begin to decline

question

"Diminishing marginal returns" refer to a situation in which the

answer

marginal product of the last worker hired is less than the marginal product of the previous worker hired.

question

The law of diminishing returns states that as

answer

a firm uses more of a variable input, given the quantity of fixed inputs, the marginal product of the variable input eventually diminishes.

question

A firm's total cost (TC) equals the sum of its fixed cost plus its

answer

variable cost

question

Total fixed cost is the sum of all

answer

costs of the firm's fixed inputs.

question

A firm's total fixed cost (TFC) is defined as a cost

answer

that does not change as output changes

question

Marginal cost is equal to

answer

the change in total cost divided by the change in quantity

question

Marginal cost is the increase in total ________ that results from a one−unit increase in ________.

answer

cost, output

question

As output increases, average fixed cost

answer

always decreases

question

Average total costs are total costs divided by

answer

total output

question

Which of the following is a correct formula for determining accounting profit?

answer

Total Revenue - Fixed Cost - Variable Cost

question

Which type of cost is factored into economic profit but is not factored into accounting profit?

answer

opportunity cost

question

Total cost is the sum of

answer

fixed costs and variable costs

question

Which of the following is a fixed cost?

answer

rent

question

What should a business do in the short run if its total revenue is less than its total costs?

answer

Shut down only if its total revenue is less than its variable costs.

question

Holly made $4000 a month in her previous career. She recently opened a boutique. The boutique generates $4000 more per month in revenue than the total of her fixed and variables costs. What can we say about Holly's business?

answer

Holly's business is earning a normal profit.

question

What can we learn from the story of the Luddites?

answer

While there are benefits from technological progress, it takes time before they take effect.

question

Who were the original Luddites?

answer

cloth workers

question

The Luddites would likely be in support of the current technological push of computers.

answer

False

question

What was the response to the Luddites?

answer

Destroying machines became punishable by death.

question

What is the typical argument in favor of technological change?

answer

Technology makes everybody better off in the long run.

question

What was the aim of the Luddites?

answer

To ban the machines that threatened their jobs

question

By the 1990s, a day's wages got you _____ of light.

answer

20,000 hours

question

What enabled Thomas Edison to invent the electric lamp?

answer

Thomas Edison had a financial support system of patents, corporations, and banks.

question

How does the economy grow?

answer

The economy grows as there are better, faster, and cheaper ways of doing things.

question

In Ancient Babylonian times, a day's wages got you _____ of light. After kerosene was invented, this amount changed to _______.

answer

10 minutes; 5 hours

question

Why does Bill Nordhaus want to understand the prices of light over time?

answer

He believes light is a way to track human and economic progress in a wide variety of forms.

question

What invention in the 1850s revolutionized the light industry?

answer

kerosene

question

Why is having a cheaper source of light important to economic progress?

answer

It allows people to spend their wages on other things, such as food, clothing, travel, and entertainment.

question

A firm's long−run average cost curve

answer

-shows the lowest attainable average total cost of producing any level of output when capital and labor are variable.
-is U−shaped.
-tells the firm which plant size to use and which quantity of labor to use to minimize the cost of producing any level of output.

question

Economies to scale refer to

answer

the range of output over which the
long−run average cost falls as output increases.

question

In the short run

answer

no firm experiences economies of scale

question

When long−run average costs decrease as output increases, there are

answer

economies of scale

question

When a firm experiences economies of scale, its ________ cost curve slopes ________.

answer

long-run average, downward

question

A firm experiences ________ when its ________ downward at larger outputs.

answer

economies of scale; long−run average cost curve slopes

question

Economies of scale refer to the range of output over which

answer

the long−run average cost falls as output increases.

question

Electric utility companies have built larger and larger electric generating stations and, as a result, the long−run average cost of producing each kilowatt hour decreased. This is an example of

answer

economies of scale

question

"Diseconomies of scale" occur in

answer

in the long run, not the short run

question

When long−run average cost increases as output increases there are

answer

diseconomies of scale

question

When long−run average costs increase as output increases, there are

answer

diseconomies of scale

question

Diseconomies of scale definitely means that as the firm increases its output, its

answer

long−run average total cost increases.

question

One reason for diseconomies of scale is that, at very large scales, management systems can become

answer

increasingly complex and inefficient.

question

A common source of diseconomies of scale is the

answer

growing complexity of management and organizational structure.

question

When long−run average cost remains constant as output increases there are constant

answer

returns to scale

question

Farmer Seth has a perfectly flat long−run average total cost curve over the range of output from 10,000 bushels of wheat to 100,000 bushels of wheat. Hence, over this range of output, Farmer Seth definitely experiences

answer

constant returns to scale

question

The LRAC curve generally is

answer

U-shaped

question

When a firm is experiencing economies of scale,

answer

the LRAC curve slopes downward.

question

A market structure in which many firms are selling an identical product is called

answer

perfect competition

question

A market with the characteristics of many firms selling an identical product, many buyers, and no restrictions on entry or exit to the market is

answer

a perfectly competitive market

question

The market for wheat is an example of

answer

perfectly competitive market

question

Under ________, there are many firms selling slightly different products.

answer

monopolistic competition

question

Which market type has characteristics as follows: large number of firms, differentiated product?

answer

monopolistic

question

A market structure in which a small number of firms compete is called

answer

oligopoly

question

Under oligopoly, there are ________ firms selling products that are ________.

answer

a few, either identical or different

question

The air travel market, which is dominated by a few large firms, is an example of

answer

an oligopolistic market.

question

A market structure in which one firm produces a good or service that has no close substitutes is called

answer

monopoly

question

Which market type has characteristics as follows: one firm, good or service produced has no close substitutes, barriers to entry prevent new firms from entering into the industry?

answer

monopoly

question

The largest share of the U.S. private economy is

answer

competitive or monopolistically competitive.

question

In perfect competition, there are _______.

answer

many firms, each selling an identical product

question

Firms in perfectly competitive industries have a ________ individual demand curve when the price is on the vertical axis and the quantity is on the horizontal axis. The shape of the curve is result of the firm being a ________.

answer

horizontal, price taker

question

In perfect competition, each individual firm faces ________ demand curve.

answer

a perfectly elastic

question

In perfect competition, the price of the product is determined where the market

answer

supply curve and market demand curve intersect.

question

Tammy sells woolen hats in a perfectly competitive market. The marginal cost of producing 1 hat is $24. The marginal cost of producing a second hat is $26 and the marginal cost of producing a third hat is $28. The market price of a hat is $26. To maximize profit, Tammy produces ________ a day.

answer

2 hats

question

A perfectly competitive firm shuts down if the price of its product is

answer

less than its minimum average variable cost.

1 of 72

question

The short run is a period of time in which

answer

the quantities of some resources the firm uses are fixed

question

Economists define the short run as a period of time so short that

answer

at least one factor of production cannot be varied

question

An example of a variable resource in the short run is

answer

an employee

question

An example of a short−run fixed factor of production is

answer

capital equipment

question

The long run is a time frame in which

answer

the quantities of all factors of production can be varied.

question

A period of time in which the quantity of all factors of production used by a firm can be varied is called the

answer

long run

question

The marginal product of labor is equal to the

answer

increase in the total product that results from hiring one more worker.

question

The marginal product of labor is the increase in total product from a

answer

one unit increase in the quantity of labor, while holding the quantity of capital constant.

question

At that amount of output where diminishing marginal returns first sets in,

answer

marginal product will begin to decline

question

"Diminishing marginal returns" refer to a situation in which the

answer

marginal product of the last worker hired is less than the marginal product of the previous worker hired.

question

The law of diminishing returns states that as

answer

a firm uses more of a variable input, given the quantity of fixed inputs, the marginal product of the variable input eventually diminishes.

question

A firm's total cost (TC) equals the sum of its fixed cost plus its

answer

variable cost

question

Total fixed cost is the sum of all

answer

costs of the firm's fixed inputs.

question

A firm's total fixed cost (TFC) is defined as a cost

answer

that does not change as output changes

question

Marginal cost is equal to

answer

the change in total cost divided by the change in quantity

question

Marginal cost is the increase in total ________ that results from a one−unit increase in ________.

answer

cost, output

question

As output increases, average fixed cost

answer

always decreases

question

Average total costs are total costs divided by

answer

total output

question

Which of the following is a correct formula for determining accounting profit?

answer

Total Revenue - Fixed Cost - Variable Cost

question

Which type of cost is factored into economic profit but is not factored into accounting profit?

answer

opportunity cost

question

Total cost is the sum of

answer

fixed costs and variable costs

question

Which of the following is a fixed cost?

answer

rent

question

What should a business do in the short run if its total revenue is less than its total costs?

answer

Shut down only if its total revenue is less than its variable costs.

question

answer

Holly's business is earning a normal profit.

question

What can we learn from the story of the Luddites?

answer

While there are benefits from technological progress, it takes time before they take effect.

question

Who were the original Luddites?

answer

cloth workers

question

The Luddites would likely be in support of the current technological push of computers.

answer

False

question

What was the response to the Luddites?

answer

Destroying machines became punishable by death.

question

What is the typical argument in favor of technological change?

answer

Technology makes everybody better off in the long run.

question

What was the aim of the Luddites?

answer

To ban the machines that threatened their jobs

question

By the 1990s, a day's wages got you _____ of light.

answer

20,000 hours

question

What enabled Thomas Edison to invent the electric lamp?

answer

Thomas Edison had a financial support system of patents, corporations, and banks.

question

How does the economy grow?

answer

The economy grows as there are better, faster, and cheaper ways of doing things.

question

In Ancient Babylonian times, a day's wages got you _____ of light. After kerosene was invented, this amount changed to _______.

answer

10 minutes; 5 hours

question

Why does Bill Nordhaus want to understand the prices of light over time?

answer

He believes light is a way to track human and economic progress in a wide variety of forms.

question

What invention in the 1850s revolutionized the light industry?

answer

kerosene

question

Why is having a cheaper source of light important to economic progress?

answer

It allows people to spend their wages on other things, such as food, clothing, travel, and entertainment.

question

A firm's long−run average cost curve

answer

question

Economies to scale refer to

answer

the range of output over which the
long−run average cost falls as output increases.

question

In the short run

answer

no firm experiences economies of scale

question

When long−run average costs decrease as output increases, there are

answer

economies of scale

question

When a firm experiences economies of scale, its ________ cost curve slopes ________.

answer

long-run average, downward

question

A firm experiences ________ when its ________ downward at larger outputs.

answer

economies of scale; long−run average cost curve slopes

question

Economies of scale refer to the range of output over which

answer

the long−run average cost falls as output increases.

question

Electric utility companies have built larger and larger electric generating stations and, as a result, the long−run average cost of producing each kilowatt hour decreased. This is an example of

answer

economies of scale

question

"Diseconomies of scale" occur in

answer

in the long run, not the short run

question

When long−run average cost increases as output increases there are

answer

diseconomies of scale

question

When long−run average costs increase as output increases, there are

answer

diseconomies of scale

question

Diseconomies of scale definitely means that as the firm increases its output, its

answer

long−run average total cost increases.

question

One reason for diseconomies of scale is that, at very large scales, management systems can become

answer

increasingly complex and inefficient.

question

A common source of diseconomies of scale is the

answer

growing complexity of management and organizational structure.

question

When long−run average cost remains constant as output increases there are constant

answer

returns to scale

question

answer

constant returns to scale

question

The LRAC curve generally is

answer

U-shaped

question

When a firm is experiencing economies of scale,

answer

the LRAC curve slopes downward.

question

A market structure in which many firms are selling an identical product is called

answer

perfect competition

question

A market with the characteristics of many firms selling an identical product, many buyers, and no restrictions on entry or exit to the market is

answer

a perfectly competitive market

question

The market for wheat is an example of

answer

perfectly competitive market

question

Under ________, there are many firms selling slightly different products.

answer

monopolistic competition

question

Which market type has characteristics as follows: large number of firms, differentiated product?

answer

monopolistic

question

A market structure in which a small number of firms compete is called

answer

oligopoly

question

Under oligopoly, there are ________ firms selling products that are ________.

answer

a few, either identical or different

question

The air travel market, which is dominated by a few large firms, is an example of

answer

an oligopolistic market.

question

A market structure in which one firm produces a good or service that has no close substitutes is called

answer

monopoly

question

Which market type has characteristics as follows: one firm, good or service produced has no close substitutes, barriers to entry prevent new firms from entering into the industry?

answer

monopoly

question

The largest share of the U.S. private economy is

answer

competitive or monopolistically competitive.

question

In perfect competition, there are _______.

answer

many firms, each selling an identical product

question

answer

horizontal, price taker

question

In perfect competition, each individual firm faces ________ demand curve.

answer

a perfectly elastic

question

In perfect competition, the price of the product is determined where the market

answer

supply curve and market demand curve intersect.

question

answer

2 hats

question

A perfectly competitive firm shuts down if the price of its product is

answer

less than its minimum average variable cost.

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ECON 111 Module 3

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