Mock Exam – ECON 494

question

Marginal cost is calculated as:

answer

the change in total cost divided by the change in output.

question

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each.

#/Day F.C. V.C
0 ----- 500 ---0
25 -----500 ---150
50 ---- 500 --- 250
75 -----500 --- 450
100 ----500 ---- 850
125 ----500 ----1,650

When the pizzeria makes 50 pizzas a day, its average total cost is ______.

answer

$15

50 * 20 = 1,000
1,000 - 500 (fixed cost) = 500
500 + 250 (variable cost) = 750
750 / 50 = 15

question

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each.

#/Day F.C. V.C
0 ----- 500 ---0
25 -----500 ---150
50 ---- 500 --- 250
75 -----500 --- 450
100 ----500 ---- 850
125 ----500 ----1,650

Between 25 and 50 pizzas per day, the pizzeria's marginal cost is ______.

answer

question

answer

profit, $650

question

#5
Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 25 cents, then at this firm's profit maximizing level of output, the firm will earn an economic ______ of ______ per day.

answer

profit, $8

question

Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it's clear that this firm:

answer

should not shut down if its total variable cost is less than $750.

question

Average variable cost is defined as:

answer

variable cost divided by total output.

question

#8
Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the accompanying table.

# Mugs/Day - T.Cost/Day
0 ----------------$10
1-----------------$14
2-----------------$19
3----------------$25
4----------------$32
5----------------$40
6----------------$49

If the market for mugs is perfectly competitive, and mugs sell for $7.50 each, then Chris should make ______ mugs per day.

answer

question

#9

Suppose Sarah owns a small company that makes wedding cakes. The accompanying table shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day.

# Cake/Day - T. Cost/Day
0---------------$100
1----------------$180
2---------------$220
3---------------$300
4---------------$400
5---------------$520
6---------------$660

If the market for wedding cakes is perfectly competitive, and wedding cakes sell for $125 each, then Sarah should produce ______ cakes per day.

answer

question

If a perfectly competitive firm produces an output level at which price is greater than marginal cost, then the firm should:

answer

expand output to earn greater profits or smaller losses.

question

When plotting marginal and average cost curves, the ______ cost curve always crosses the ______ cost curve at its ______.

answer

marginal; average total; minimum

question

#12
Refer to the accompanying figure. Total producer surplus in this market is:

answer

$125

question

Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will:

answer

shift into producing good Y.

question

A perfectly competitive firm's supply curve is the portion of its ______ cost curve that lies above its ______ cost curve.

answer

marginal; average variable

question

Which of the following will cause a decrease in the supply of jeans?

answer

An increase in the wages paid to workers who make jeans.

question

If crude oil is a variable factor of production for a firm, then an increase in the price of crude oil will lead to:

answer

a decrease in the firm's supply.

question

Cross-price elasticity of demand between cheese and turkey is estimated to be -1. This implies cheese and turkey are

answer

inferior good

question

"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because:

answer

fall price of personal computers increase the quantity demanded, not demand

question

Suppose we observe a decrease in the equilibrium price of tuna and an increase equilibrium quantity of tuna. This is best explained by

answer

decrease in cost of fuel used by boats

question

To increase total revenue, firms with _____ demand should lower price, and firms with _____ demand should increase price

answer

elastic, inelastic

question

Which of the following is true about Microsoft and a locally owned restaurant?

answer

Both seek to maximize profit

question

Which statement is true about implicit cost?

answer

they measure the forgone opportunities of the firm's owners

question

Natural monopoly is a monopoly that arises from:

answer

economies of scale

question

Suppose the most you would be willing to pay for a plane ticket home is $250. If you buy one for $175, then your economic surplus is:

answer

$75

250 - 175 = 75

question

According to the Principle of Increasing Opportunity cost in expanding the production of any good, we should start by utilizing the resources that:

answer

have the lowest opportunity cost

1 of 25

question

Marginal cost is calculated as:

answer

the change in total cost divided by the change in output.

question

answer

$15

50 * 20 = 1,000
1,000 - 500 (fixed cost) = 500
500 + 250 (variable cost) = 750
750 / 50 = 15

question

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each.

#/Day F.C. V.C
0 ----- 500 ---0
25 -----500 ---150
50 ---- 500 --- 250
75 -----500 --- 450
100 ----500 ---- 850
125 ----500 ----1,650

Between 25 and 50 pizzas per day, the pizzeria's marginal cost is ______.

answer

question

answer

profit, $650

question

answer

profit, $8

question

answer

should not shut down if its total variable cost is less than $750.

question

Average variable cost is defined as:

answer

variable cost divided by total output.

question

answer

question

answer

question

If a perfectly competitive firm produces an output level at which price is greater than marginal cost, then the firm should:

answer

expand output to earn greater profits or smaller losses.

question

When plotting marginal and average cost curves, the ______ cost curve always crosses the ______ cost curve at its ______.

answer

marginal; average total; minimum

question

#12
Refer to the accompanying figure. Total producer surplus in this market is:

answer

$125

question

Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will:

answer

shift into producing good Y.

question

A perfectly competitive firm's supply curve is the portion of its ______ cost curve that lies above its ______ cost curve.

answer

marginal; average variable

question

Which of the following will cause a decrease in the supply of jeans?

answer

An increase in the wages paid to workers who make jeans.

question

If crude oil is a variable factor of production for a firm, then an increase in the price of crude oil will lead to:

answer

a decrease in the firm's supply.

question

Cross-price elasticity of demand between cheese and turkey is estimated to be -1. This implies cheese and turkey are

answer

inferior good

question

"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because:

answer

fall price of personal computers increase the quantity demanded, not demand

question

Suppose we observe a decrease in the equilibrium price of tuna and an increase equilibrium quantity of tuna. This is best explained by

answer

decrease in cost of fuel used by boats

question

To increase total revenue, firms with _____ demand should lower price, and firms with _____ demand should increase price

answer

elastic, inelastic

question

Which of the following is true about Microsoft and a locally owned restaurant?

answer

Both seek to maximize profit

question

Which statement is true about implicit cost?

answer

they measure the forgone opportunities of the firm's owners

question

Natural monopoly is a monopoly that arises from:

answer

economies of scale

question

Suppose the most you would be willing to pay for a plane ticket home is $250. If you buy one for $175, then your economic surplus is:

answer

$75

250 - 175 = 75

question

According to the Principle of Increasing Opportunity cost in expanding the production of any good, we should start by utilizing the resources that:

answer

have the lowest opportunity cost

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Mock Exam – ECON 494

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