Liberty University ECON 213 quiz 8 complete solutions correct answers A+ work

Liberty University ECON 213 quiz 8 complete solutions correct answers A+ work

More than 10 different versions

Question 1

Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes. If Steve sells 1,250 bikes this year (50 more than last year) and his average total cost increases to $1.28 million, we know that the:

Question 2

Steve owns a bike store. His total costs are $1.2 million per year, and his fixed costs are $450,000 per year. This means that his variable costs are:

Question 3

Explicit costs are:

Question 4

Refer to the following graph to answer the questions that follow.

The average total cost (ATC) and average variable cost (AVC) converge as the level of output produced Selected Answer: d. average fixed cost decreases as output increases.

Question 5

The change in total output divided by the change in input is known as:

Question 6

When output is 100 units, the firm’s total fixed cost is $500. What will this firm’s total fixed cost be if output doubles to 200 units?

Question 7

Darrell is the owner of a furniture store. Last year, his total revenue was $525,000 and his total labor costs were $200,000. His overhead expenses, including insurance and legal fees, were $175,000. The rent on his building was $45,000. Darrell could earn $105,000 per year working at a nearby furniture distributor. From this information, we know that his accounting profit was:

Question 8

Darrell owns a furniture store. His total costs are $225,000 per year, and his variable costs are $75,000 per year. This means that his fixed costs are:

Question 9

The full set of shortrun cost curves for a firm tells us:

Question 10

Every year the U.S. sugar industry, which is dominated by only a few firms, spends millions of dollars lobbying members of Congress and contributing to their reelection campaigns. It does so for both Democrats and Republicans. One goal of these contributions is the preservation of the U.S. sugar quota, which limits the importation of less expensive sugar from other countries. Ultimately, all of these activities are motivated by a desire among U.S. sugar producers to:

Question 11

Accountants consider only explicit costs when measuring accounting profit. The reason that they ignore implicit costs is that:

Question 12

Use the following graph to answer the questions that follow.

If the firm expanded its scale of production and found that its average costs decreased, which of the curves would reflect this situation?

Question 13

If the marginal product of labor is increasing, the marginal cost of output must be:

Question 14

Which is the best example of diseconomies of scale?

Question 15

Should a firm always produce the level of output where marginal cost is lowest?

Question 16

Madison owns a boxing gym. She recently expanded the size of her gym by adding another boxing ring and moving into a larger building so that she can serve more clients. How would Madison know if she is experiencing economies of scale from increasing the size of her boxing gym?

Question 17

Refer to the following graph to answer the questions that follow.

The firm is experiencing diminishing marginal product beyond what level of output along the marginal cost curve?

Question 18

Lauren owns a bakery that produces, among other things, wedding cakes. She currently has 7 employees; with 7 employees, her bakery can produce 12 wedding cakes per day. If she hired an eighth employee, she’d be able to produce 16 wedding cakes per day. Therefore, the marginal product of the eighth employee is __________ wedding cake(s).

Question 19

Lauren is the owner of a bakery. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her accounting profit was:

Question 20

If a firm experiences gains from specialization as it increases its scale of production, we would expect its longrun average cost curve to be:

The production function for bookshelves includes:

If a firm hires another worker and her marginal product of labor is positive, we know that the firm’s total output is:

Steve owns a bike store. Last year, his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost remain the same, his long-run average total cost curve should be:

Which of the following is an example of a long-run cost for a manufacturing firm?

When firms grow larger, they sometimes add many additional layers of managers between the top executives and the entry-level employees. Because these managers do not actually produce any output themselves, we expect more layers of management to lead to:

The out-of-pocket expenses incurred in producing a good are also known as:

The change in total cost given a change in output is also known as:

A firm’s inputs are also known as its:

Accounting profit ignores which of the following costs?

The three primary factors of production are:

Steve owns a bike store. Last year, his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost increase to $1,050, his long-run average total cost curve should be:

Nathan owns a coffee-roasting company. If he increases the size of his company and experiences constant returns to scale as a result, his long-run average total cost curve should be:

When output is 100 units, the firm’s total fixed cost is $500. What will this firm’s total fixed cost be if output doubles to 200 units?

In the short run, average total costs and average variable costs converge as output increases because:

If a firm has total costs of $535,000 and its implicit costs are $165,000, how much are its explicit costs?

If the marginal product of labor for a firm decreases as more workers are hired, we know that:

If a firm experiences economies of scale, its longrun average cost curve is:

Darrell owns a furniture store. If he moves into a larger store but finds that his average costs have increased in the long run, we know that Darrell is experiencing:

Refer to the accompanying graph to answer the questions that follow.
If the firm depicted in the graph had to pay higher rent to its landlord, we would expect its __________ curve to shift __________.

In the short run, the cost of __________ is variable, whereas the cost of __________ is fixed.

Question 1 The three primary inputs are:

Question 2 By looking at the full set of short­run cost curves for a firm, we can determine:

Question 3 Audrey owns a horse ranch. Her total costs are $550,000 per year, and her fixed costs are $205,000 per year. This means that her variable costs are:

Question 4 An explicit cost for a business that manufactures bicycles would be the:

Question 5 In economics, we assume that firms make decisions in order to:

Question 6 In the short run, average total costs and average variable costs converge as output increases because:

Question 7 If the marginal product of labor for a firm decreases as more workers are hired, we know that:

Question 8 The full set of short­run cost curves for a firm tells us:

Question 9 A firm is considering changing its plant size. It calculates the amount of output it would be able to produce and the total cost for various plant sizes, as shown in the accompanying table. If the firm is currently using plant size C, the firm is experiencing which of the following?

Question 10 Economic profit is equal to:

Question 11 Every year the U.S. sugar industry, which is dominated by only a few firms, spends millions of dollars lobbying members of Congress and contributing to their reelection campaigns. It does so for both Democrats and Republicans. One goal of these contributions is the preservation of the U.S. sugar quota, which limits the importation of less expensive sugar from other countries. Ultimately, all of these activities are motivated by a desire among U.S. sugar producers to:

Question 12 Steve owns a bike store. His total costs are $1.2 million per year, and his variable costs are $750,000 per year. This means that his fixed costs are:

Question 13 In the accompanying table, diminishing marginal product begins after the:

Question 14 As a firm hires more labor and each worker is able to specialize, what happens to each additional worker’s marginal productivity?

Question 15 Use the following scenario to answer the questions that follow. Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes. Steve’s average total cost was __________ per bike.

Question 16 It is important for a firm to know its minimum efficient scale of production because that is where:

Question 17 A firm’s short­run cost curves show us:

Question 18 If a firm experiences gains from specialization as it increases its scale of production, we would expect its long­run average cost curve to be:

Question 19 The production function for bookshelves includes:

Question 20 Should a firm always produce the level of output where marginal cost is lowest?

Question 1 Total revenue minus total cost is equal to:

Question 2 In the short run, the cost of __________ is variable, whereas the cost of __________ is fixed.

Question 3 Which of the following is a question that a firm must answer in the long run but not in the short run?

Question 4 If all workers are able to specialize and become more productive as more labor is hired, the amount of total output produced:

Question 5 It is important for a firm to know its minimum efficient scale of production because that is where:

Question 6 The production function of a restaurant includes items such as labor (i.e., cooks, waiters, a manager), capital (i.e., ovens, counters, tables, chairs, and a building), and land. In the short run, the owner of the restaurant will optimize production by employing a variable amount of __________ given a fixed amount of __________.

Question 7 Which is the best example of diseconomies of scale?

Question 8 Refer to the accompanying graph to answer the questions that follow. If the firm depicted in the graph had to pay higher rent to its landlord, we would expect its __________ curve to shift __________.

Question 9 Refer to the following graph to answer the questions that follow. The firm is experiencing diminishing marginal product beyond what level of output along the marginal cost curve?

Question 10 Use the following graph to answer the questions that follow. If the firm expanded its scale of production and found that its average costs increased, which of the curves would reflect this situation?

Question 11 Which is the best example of economies of scale?

Question 12 Economists consider both explicit and implicit costs when measuring economic profit. The reason they consider implicit costs is that:

Question 13 When firms grow larger, they sometimes add many additional layers of managers between the top executives and the entry­level employees. Because these managers do not actually produce any output themselves, we expect more layers of management to lead to:

Question 14 The change in total output divided by the change in input is known as:

Question 15 If a firm’s long­run average total costs increase as it increases its scale of production, the firm is experiencing:

Question 16 If the marginal product of labor for a firm decreases as more workers are hired, we know that:

Question 17 In the accompanying table, diminishing marginal product begins after the:

Question 18 If a firm hires another worker and her marginal product of labor is positive, we know that the firm’s total output is:

Question 19 Nathan owns a coffee­roasting company. If he increases the size of his company and experiences constant returns to scale as a result, his long­run average total cost curve should be:

Question 20 In the accompanying table, diminishing marginal product begins after the:

Question 1 Lauren is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total implicit costs were:

Question 2 Use the following scenario to answer the questions that follow. Steve owns a bike store. His total costs are $1.2 million per year, his variable costs are $750,000, and his fixed costs are $450,000 per year. Last year, Steve sold 1,200 bikes. Steve’s average total cost was __________ per bike.

Question 3 It is important for a firm to know its minimum efficient scale of production because that is where:

Question 4 Use the following graph to answer the questions that follow. Which of the curves depicts economies of scale?

Question 5 In the accompanying table, diminishing marginal product begins after the:

Question 6 Darrell owns a furniture store. If he decided to expand the size of his store in order to sell more furniture, how would he know if he is experiencing diseconomies of scale?

Question 7 Ralph owns a small pizza restaurant, where he works full­time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total accounting profit for the year was:

Question 8 Steve owns a bike store. Last year, his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost remain the same, his long­run average total cost curve should be:

Question 9 Chief executive officers (CEOs) of major corporations are often paid mostly with stock options, as opposed to salaries and cash payments. These stock options often cannot be converted into stock and sold until years after they were issued. All this is ultimately intended to create incentives for the CEO to:

Question 10 Refer to the following table. What is the total cost of producing five (5) units of the good?

Question 11 In the accompanying table, diminishing marginal product begins after the:

Question 12 When a firm hires another employee and, as a result, total output increases, this change in total output is also known as:

Question 13 Which of the following is a question that a firm must answer in the long run but not in the short run?

Question 14 Ralph owns a small pizza restaurant, where he works full­time in the kitchen. His total revenue last year was $100,000, and his rent was $3,000 per month. He pays his one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Ralph could earn $35,000 per year as the manager of a competing pizza restaurant nearby. His total implicit costs for the year were:

Question 15 Steve owns a bike store. Last year his average cost of selling a bike was $1,000. If he expands the size of his store this year and sees his average cost decrease to $950, his long­run average total cost curve should be:

Question 16 In the short run, the cost of __________ is variable, whereas the cost of __________ is fixed.

Question 17 Which of the following is the best example of a variable cost in the short run?

Question 18 Darrell owns a furniture store. If he increases the size of his furniture store and experiences diseconomies of scale as a result, his long­run average total cost curve should be:

Question 19 Nathan owns a coffee­roasting company. If he increases the size of his company and experiences constant returns to scale as a result, his long­run average total cost curve should be:

Question 20 Madison owns a boxing gym. She recently expanded the size of her gym by adding another boxing ring and moving into a larger building so that she can serve more clients. How would Madison know if she is experiencing economies of scale from increasing the size of her boxing gym?

1. Opportunity cost is the ______________ alternative forfeited when a choice is made.

a.         least-valued

b.        highest-valued

c.         most recently considered

d.        most convenient

e.         first

2. You decide whether to eat one more slice of pizza based on how hungry you feel. This statement best represents this economic concept:

 A) resources are scarce.

 B) the real cost of something is what you must give up to get it.

 C) “How much” is a decision at the margin.

 D) there are gains from trade.

3. Positive economics:

 A) describes opinions and perspectives on how the world should work.

 B) is based on opinion polls.

 C) describes how the world does work

 D) is the same as normative economics.

4. Economists use models to explain real-life situations because:

 A) such models tend to be exactly what is occurring in each situation.

 B) assumptions found in such models tend to make the problem more difficult.

 C) simplifications and assumptions often yield answers that can help to explain the more difficult real-life situations

 D) they do not; real-life situations are not relevant to the building of models.

5. Bob can hire someone to paint his house for $2,000, or he can do it himself at no out-of-pocket cost.  It will take him 5 days.  Bob earns $500 a day when he works outside the home.  Which option has the greater economic cost?

a.       hiring a painter

b.       painting the house himself

c.        they are the same cost

d.       not enough information to decide—one needs to know the marginal cost

6. When one producer has a comparative advantage in production,

a.         she can produce more output than someone else using the same quantity of resources.

b.        she can produce a good at a lower opportunity cost than someone else.

c.         she will not benefit from trade with other producers.

d.        she is unable to reach her production possibilities frontier (PPF).

e.         she will only trade with others who have the same comparative advantage.

7. The slope of a production possibilities frontier

a.  has no economic relevance or meaning.

b.  is always constant.

c.  is always varying.   

d.  measures the opportunity cost of producing one more unit of a good

8. Increases in resources or improvements in technology will tend to cause a society's production possibility frontier to:

 A) shift inward to the left.

 B) shift outward to the right

 C) remain unchanged.

 D) become vertical.

9. Which point(s) in the PPF above are unattainable?

a)       Point A because it is outside the production possibilities frontier

b)       All the points because the production of each has an opportunity cost.

c)       None of the points because they all are feasible.

d)       Points B, C, and D because they are on the production possibilities frontier.

e)       Point E because it is inside the production possibilities frontier.

10. Michael and Angelo are both artists who can create sculptures or paint paintings each day. The following table describes their maximum outputs per day. Does either person have an absolute advantage?

Sculptures

Paintings

Michael

10

5

Angelo

6

2

a.       Yes, Michael has an absolute advantage in both sculptures and paintings

b.       Yes, Angelo has an absolute advantage in both sculptures and paintings.

c.        Yes, Michael has an absolute advantage in paintings, and Angelo has an absolute advantage in sculptures.

d.       Yes, Michael has an absolute advantage in sculptures, and Angelo has an absolute advantage in paintings.

e.        No, neither has an absolute advantage.

11. Michael and Angelo are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. What is Angelo’s opportunity cost of a sculpture?

Sculptures

Paintings

Michael

10

5

Angelo

6

2

1. 1/2 painting
2. 1/3 painting
3. 3 paintings
4. 1/3 sculpture
5. 6/10 sculpture

12. The accompanying figure depicts the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between making pizzas and making stromboli. If Jim and Pam were to specialize and trade, at what exchange rate would they find some quantity of trade to be mutually beneficial?

a.       3 pizzas for 1 stromboli

b.       1 pizza for 1 stromboli

c.        10 pizzas for 2 stromboli

d.       1 pizza for 1/2 stromboli

e.        1 pizza for 1/4 of a stromboli

Figure: Production Possibility Frontier Curve for Tealand

13. (Figure: Production Possibility Frontier for Tealand) In the figure, Tealand is producing at point C on its production possibility frontier. What is the opportunity cost in Tealand of increasing the production of tea from 20 million cups to 30 million cups?

 A. 10 million cups of tea

 B. 5 million scones

 C. 10 million scones

 D. The answer is impossible to determine from the information given.

14. Consider the production possibilities frontier below.  Which line(s) represents a change in technology for producing good A?

a.         1

b.        2

c.         both

d.        neither

15. Consider the production possibilities frontier below. Which line(s) represents a change in the economy’s resources?

a.       1

b.       2

c.        both

d.       neither

16. Use the accompanying diagram to answer the question.

An increase in the number of buyers would cause the demand curve to:

a. shift from D to D2.

b. remain at D.

c. shift from D to D1.

d. shift from D1 to D.

e. shift from D1 to D2.

Figure: Demand and Supply of Gasoline

17. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. The initial equilibrium price and quantity (at intersection of S1 and D) of gasoline are:

 A.$2.00 and 450 gallons.

 B. $1.50 and 400 gallons.

 C. $2.00 and 200 gallons.

 D. $2.50 and 300 gallons

18. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. Given the initial equilibrium of S1 and D, any price lower than ________ will create pressure for the price to ________.

 A. $2.00; fall

 B. $2.50; rise

 C. $3.00; rise

 D. $2.50; fall

19. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. A factor that may have changed supply from S1 to S2 is:

 A. better technology in the production of gasoline

 B. increased demand.

 C. lower labor productivity in gasoline production.

 D. increased prices of substitutes for gasoline.

20.       “In 2008, air travel decreased substantially despite significant reductions in ticket prices.” If this information is correct, it indicates that the law of demand did not apply to air travel in 2008.

 A. True

 B. False

21. A supply curve is:

a.       downward sloping because suppliers prefer lower costs

b.       upward sloping because suppliers prefer lower costs

c.        upward sloping because suppliers will offer for sale more at a higher price

d.       downward sloping because suppliers will offer more for sale at a higher price

22. The demand curve shift shown in the figure above was caused by a(n):

a.         increase in the input cost of the good.

b.        increase in the price of a substitute of the good.

c.         decrease in the number of firms selling the good.

d.        decrease in the number of buyers in the market for the good.

e.         expectation that the future price of this good will be higher than it currently is.

23. According to the diagram above, if the price is at $10, there is a:

a. shortage of 15 units.

b. surplus of 15 units

c. shortage of 30 units.

d. surplus of 30 units.

e. surplus of 22 units.

24. When both supply and demand shift to the left,

a. the equilibrium price will always rise.

b. the equilibrium price will always fall.

c. the equilibrium quantity will always fall.

d. the equilibrium quantity will always rise.

e. the equilibrium quantity is indeterminate.

25. According to the figure below, at the price of $5:

a. the equilibrium quantity is 500.

b. the quantity demanded is 500.

c. the demand is 500.

d. there is a surplus.

e. there is a shortage.

26. When the price increases by 30% and the quantity demanded drops by 30%, the price elasticity of demand is:

a.         perfectly inelastic.

b.        inelastic.

c.         unitary elastic.

d.        elastic.

e.         perfectly inelastic.

27. What good is most likely to have an income elasticity of demand equal to 0.3?

a.         medication

b.        take-out dinner

c.         used clothing

d.        laptop

e.         a download on iTunes

28. Demand for Coca-Cola is _____ price elastic than cola products in general.

a.       More

b.       less

c.        equally

29. Peanut butter and jelly are complements. If a tax is imposed on peanut butter, how will that affect the market for jelly?

a. Demand for jelly will increase along with the price.

b. Demand for jelly will decrease along with the price

c. The supply of jelly will increase and the price will decrease.

d. Both the supply and demand for jelly will increase along with the price.

e. The supply of jelly will decrease and the price will increase.

30. Pepsi and Coke are considered substitute goods. Because of this, one would predict that, holding all else constant, if the price of Pepsi increases,

a. we would see the demand curve for Coke shift to the right.

b. we would see the demand curve for Coke shift to the left.

c. we would see no change in the demand for Coke.

d. we would see the demand curve for Pepsi shift to the right.

e. we would see the demand curve for Pepsi shift to the left.

31. Technological advances have resulted in lower prices for digital cameras.  What is the impact of this on the market for traditional (non-digital) cameras?

a.  The demand curve for traditional cameras shifts to the right.

b.  The supply curve for traditional cameras shifts to the right.

c.  The demand curve for traditional cameras shifts to the left.

d.  The supply curve for traditional cameras shifts to the left.

32. A recent news story reported that ice cream producers will increase the supply of ice cream during the summer. Summer is traditionally a time of increased demand for ice cream. How would an economist expect the price and quantity of ice cream to change from the spring to the summer given knowledge of these two changes in the market for ice cream?

A.        An increase in the price and quantity.

B.        An increase in the price and an unpredictable change in the quantity.

C.        An unknown change in both the price and quantity.

D.        An unknown change in the price and an increase in the quantity.

33. Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a unit tax is imposed in the market for this product,

A) sellers bear the entire burden of the tax.

B) buyers bear the entire burden of the tax.

C) the tax burden will be shared equally between buyers and sellers.

D) buyers share the burden of the tax with government.

34. If demand is more elastic than supply then:

A) sellers bear more of the burden of the tax.

B) buyers bear more of the burden of the tax.

C) the tax burden will be shared equally between buyers and sellers.

D) buyers share the burden of the tax with government.

35. In 1990 the U.S. government imposed a special sales tax on yachts with a price of at least $100,000. The tax was repealed in 1993 since it generated far less revenue than expected and led to significant job losses in the yacht building industry. The sales tax was unsuccessful because:

a)        the supply and the demand for yachts were relatively elastic.

b)        the supply and the demand for yachts were relatively inelastic.

c)         the tax rate was too low.

d)        yachts are a necessity.

36. Each point on a ________ curve shows the willingness of consumers to purchase a product at different prices.

A) demand

B) supply

C) production possibilities

D) marginal cost

Use this information for questions 36.1-36.3. Alfred has a willingness to pay for one car of $35,000.  The second car offers him a marginal benefit of $25,000.  A third car is worth $10,000, and his willingness to pay for a fourth is 0.  The market price for the car is $24,999.

36.1 Alfred’s willingness to pay for the marginal car is falling.  This pattern is called

a. opportunity cost

b. diminishing marginal utility

c. price effect

d. consumer surplus

36.2. At the market price, Alfred would buy ___ cars.

a. 0

b. 1

c. 2

d. 3

e. 4

36.3 At this market price, his consumer surplus is

a. 35,000

b. 24,999

c. 1

d. 10,002

Figure 4-6 above shows the demand and supply curves for the almond market.  The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf.

37.  Refer to Figure 4-6. What area represents consumer surplus prior to the imposition of the price floor?

A) A + B + E

B) A + B + C

C) A + B + C + D + E

D) E + F

38. Refer to Figure 4-6. What area represents consumer surplus after the imposition of the price floor?

A) A + B + E

B) A + B

C) A + B + E + F

D) A

39. The costs of a market activity paid for by an individual NOT engaged in the market activity are:

a.         external costs.

b.        internal costs.

c.         free-rider costs.

d.        social costs.

e.         common costs.

40. The total costs of a market activity paid for by individuals in the market as well as individuals not engaged in the market activity are:

a.         external costs.

b.        internal costs.

c.         free-rider costs.

d.        social costs.

e.         common costs.

41. A firm’s willingness to supply their product in the short run is represented on a graph by:

a.         the market supply curve.

b.        the entire marginal cost (MC) curve.

c.         the marginal revenue (MR) curve.

d.        the part of the marginal cost (MC) curve above minimum average total cost (ATC).

e.         the part of the marginal cost (MC) curve above minimum average variable cost (AVC).

42. Rachel quit her job as a chef making $30,000 per year to start her own restaurant in New York City. The first year, Rachel's restaurant earned $120,000 in revenue. Rachel pays $50,000 per year in wages to the waitresses and hostess, $20,000 per year to buy food and other supplies.  She paid $10,000 for rent and utilities, instead of earning 10% on that money in a bank CD. What is Rachel's economic profit for the year?

A) $0

B) $9,000

C) $40,000

D) $80,000

43. What directly drives the entry and exit of firms?

a. Revenues

b. Costs

c. Profits and losses

d. Marginal product of labor

44.       The law of diminishing returns states that

a) dividing the tasks to be performed through division of labor will increase the marginal product of labor.

b) the long-run average cost of production falls as output increases.

c)  adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline.

d) producing more output by adding more of a variable input will eventually cause the marginal cost of production to decline.

e)  adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the fixed input to decline.

45. According to the accompanying figure, if a firm is producing a quantity of 100 and charging a price of $10,

a.         the firm should continue to produce 100 units but raise the price to $13 to maximize profits.

b.        the firm should increase production to 150 units but raise the price to $25 to maximize profits.

c.         the firm should continue to produce 100 units but raise the price to $25 to maximize profits.

d.        the firm should increase production to 100 units and raise the price to $13 to maximize profits.

e.         the firm is already maximizing profits and should not change the price or quantity produced.

46. Which of the following is not a characteristic of a perfectly competitive market structure?

A) There are a very large number of firms that are small compared to the market.

B) All firms sell identical products.

C) There are no restrictions to entry by new firms.

D) There are restrictions on exit of firms.

47. Both individual buyers and sellers in perfect competition

A) can influence the market price by their own individual actions.

B) can influence the market price by joining with a few of their competitors.

C) have to take the market price as a given.

D) have the market price dictated to them by government.

48. In economics, we assume that firms make decisions in order to:

a.  maximize revenues.

b.  minimize cost

c.  maximize profit.

d.  maximize production

e.  maximize the marginal product of labor

49. A firm reflected in the following graph expanded its scale of production and found that its average costs did not change.  Which of the curves shown would reflect this situation?

a.       LRATC1 and LRATC2

b.       LRATC3

c.        LRATC2

d.       LRATC1

e.        LRATC1 and LRATC3

50. A firm’s economic profit will always be less than its accounting profit because:

a.         accounting profit considers explicit costs, which economic profit does not.

b.        economic profit considers implicit costs, which accounting profit does not

c.         economic profit is always zero, no matter what kind of firm it is.

d.        accounting profit considers implicit costs, which economic profit does not.

e.         accounting profit is always positive, no matter what kind of firm it is.

51. Competitive markets exist when:

a. there are so many buyers and sellers that each has only a small impact on the market price and the market output

b. there are more buyers than sellers, giving the buyers market power.

c. there are more sellers than buyers, giving the sellers market power.

d. accounting profits become zero because of price wars.

e. prices are so low that everyone who wants the good or service gets the good or service.

52. According to the figure below, this firm’s short-run supply curve is represented by:

a.     the average total cost (ATC) curve above $20.

b.     the marginal cost (MC) curve above $15.

c.     the marginal cost (MC) curve above $8.

d.     the marginal cost (MC) curve above $20.

Figure: Long-Run Average Cost

53. Look at the figure Long-Run Average Cost. This firm has ________ in the output region from 0 to A.

A.        decreasing returns to scale

B.        constant returns to scale

C.        increasing returns to scale

D.        negative costs of production

54.       (Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has ________ in the output region from B to C.

A.        constant returns to scale

B.        decreasing returns to scale

C.        increasing returns to scale

D.        falling marginal cost