Econ Exam 3 - Custom Scholars
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# Econ Exam 3

question
The solution to the consumer maximum problem given in class is to find the point in which the budget line is just tangent to one indifference curve
True
question
If you were to graph typical cost curves, the marginal cost curve would cross the average variable cost curve at the lowest point of the average variable cost curve
True
question
If you were to graph typical cost curves, the marginal cost curve would cross the average fixed cost curve at the lowest point of the average fixed cost curve
False
question
A good example of economies of scale is when the farms merge, reducing their need for expensive capital equipment
True
question
For a graph showing a perfectly competitive firm earning a loss but should stay open, at the profit maximizing quantity, the marginal cost will be: (Drawing the graph might be helpful)
greater than average variable cost
question
For a graph showing a firm in perfect competition earning a loss but should shut down, at the profit maximum quantity, the marginal cost will be:(Drawing the graph might be helpful)
none of the above
question
A consumer with a fixed income will maximize utility when each good is purchased in amounts such that the:
Marginal utility per dollar spent is the same for all goods
question
For a perfectly competitive firm the demand curve facing the firm will be
a horizontal line on the graph
question
The reason the marginal cost curve eventually increases as output increases for the typical firm is because
the law of diminishing return
question
In the real world which industry comes closest to perfect competition
agriculture
question
In perfect competition
new firms are free to enter
question
A consumer is making purchases of products (j) and (k) such that the marginal utility of product (j) is 40 and the marginal utility of product (k) is 100. The price of product (j) is \$1 and the price of (k) is \$10. The equal marginal rule suggest that this consumer shoulf
Increase consumption of product (k) and decrease the consumption of product (j)
question
For a perfectly competitive business, price equals
average revenue
marginal revenue
total revenue divided by output
question
If the average variable cost of production for a firm is decreasing, then it follows that
marginal cost must be below average variable cost
question
the number of units of the product in which the marginal cost of producing is equal to the marginal revenue
question
A business is earning profits if, at the profit maximum quantity :
price > average total cost
question
If a business is earning losses at the profit maximizing quantity, it should still stay open if:
price > average variable cost
question
if production is occurring where marginal cost exceeds price, the perfectly competitive firm will:
fail to maximize profit and resources will be over allocated to the product
question
if production is occurring where marginal cost is less than the price, the perfectly competitive firm will:
fail to maximize profits and resources will be under allocated to the product
question
The following situation occurs for a firm: marginal cost equals average total cost at 120 units, marginal revenue at 100 units, and average variable cost at 80 units. At the profit maximizing quantity average total cost is \$25, average variable cost is \$15, average fixed cost is \$10, and the price is \$30. Calculate profit
\$600
question
In the previous question would the firm stay open or shut down?
stay open because price > average variable cost
question
For a perfectly competitive business, total revenue:
is price multiplied times quantity sold.
increase by a constant absolute amount as output expands.
graphs as a straight up sloping line from the origin.
1 of 22
question
The solution to the consumer maximum problem given in class is to find the point in which the budget line is just tangent to one indifference curve
True
question
If you were to graph typical cost curves, the marginal cost curve would cross the average variable cost curve at the lowest point of the average variable cost curve
True
question
If you were to graph typical cost curves, the marginal cost curve would cross the average fixed cost curve at the lowest point of the average fixed cost curve
False
question
A good example of economies of scale is when the farms merge, reducing their need for expensive capital equipment
True
question
For a graph showing a perfectly competitive firm earning a loss but should stay open, at the profit maximizing quantity, the marginal cost will be: (Drawing the graph might be helpful)
greater than average variable cost
question
For a graph showing a firm in perfect competition earning a loss but should shut down, at the profit maximum quantity, the marginal cost will be:(Drawing the graph might be helpful)
none of the above
question
A consumer with a fixed income will maximize utility when each good is purchased in amounts such that the:
Marginal utility per dollar spent is the same for all goods
question
For a perfectly competitive firm the demand curve facing the firm will be
a horizontal line on the graph
question
The reason the marginal cost curve eventually increases as output increases for the typical firm is because
the law of diminishing return
question
In the real world which industry comes closest to perfect competition
agriculture
question
In perfect competition
new firms are free to enter
question
A consumer is making purchases of products (j) and (k) such that the marginal utility of product (j) is 40 and the marginal utility of product (k) is 100. The price of product (j) is \$1 and the price of (k) is \$10. The equal marginal rule suggest that this consumer shoulf
Increase consumption of product (k) and decrease the consumption of product (j)
question
For a perfectly competitive business, price equals
average revenue
marginal revenue
total revenue divided by output
question
If the average variable cost of production for a firm is decreasing, then it follows that
marginal cost must be below average variable cost
question
the number of units of the product in which the marginal cost of producing is equal to the marginal revenue
question
A business is earning profits if, at the profit maximum quantity :
price > average total cost
question
If a business is earning losses at the profit maximizing quantity, it should still stay open if:
price > average variable cost
question
if production is occurring where marginal cost exceeds price, the perfectly competitive firm will:
fail to maximize profit and resources will be over allocated to the product
question
if production is occurring where marginal cost is less than the price, the perfectly competitive firm will:
fail to maximize profits and resources will be under allocated to the product
question
The following situation occurs for a firm: marginal cost equals average total cost at 120 units, marginal revenue at 100 units, and average variable cost at 80 units. At the profit maximizing quantity average total cost is \$25, average variable cost is \$15, average fixed cost is \$10, and the price is \$30. Calculate profit
\$600
question
In the previous question would the firm stay open or shut down?
stay open because price > average variable cost
question
For a perfectly competitive business, total revenue:
is price multiplied times quantity sold.
increase by a constant absolute amount as output expands.
graphs as a straight up sloping line from the origin.

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