Question 1

Related to the Economics in Practice on page 196. The search engine business is subject to ________, which means that as the use of the search engine increases, the long-run cost to provide additional searches on that search engine will likely fall.

Accepted Answer

A)   diminishing returns
B)   economies of scale
C)   diseconomies of scale
D)   significant government regulationE) A) and D)
F) B) and C)

Question 2

Refer to the information provided in Figure 9.2 below to answer the question(s)  that follow.  Figure 9.2
-Refer to Figure 9.2. The firm's ________ point is at a price of $6.

Accepted Answer

A)   profit maximizing
B)   break even
C)   shut down
D)   loss maximizingE) A) and B)
F) None of the above

Question 3

In efficient markets, profit opportunities are quickly eliminated as they develop.

Accepted Answer

A) True 
 B)False

Question 4

Industries in which firms ________ are likely to expand in the long-run.

Accepted Answer

A)   have positive profits
B)   suffer losses
C)   break even
D)   shut down in the short runE) C) and D)
F) None of the above

Question 5

In the short run, firms earning a profit will want to ________ their profits while firms suffering losses will want to ________ their losses.

Accepted Answer

A)   maximize; maximize
B)   maximize; minimize
C)   minimize; maximize
D)   minimize; minimizeE) A) and D)
F) C) and D)

Question 6

If total revenue exceeds the total cost of production, a firm

Accepted Answer

A)   earns a profit.
B)   suffers a loss.
C)   breaks even.
D)   shuts down.E) C) and D)
F) All of the above

Question 7

Every point on a ________ represents the minimum cost at which the associated output level can be produced when the scale of plant can be changed.

Accepted Answer

A)   U-shaped long-run average cost curve
B)   marginal cost curve
C)   long-run variable cost curve
D)   long-run demand curveE) A) and D)
F) B) and C)

Question 8

If, at the output where marginal revenue equals marginal cost, price is below average variable cost, a firm will shut down in the short run.

Accepted Answer

A) True 
 B)False

Question 9

The smallest size plant size at which the long-run average cost curve is at its minimum is called the

Accepted Answer

A)   envelope.
B)   profit-maximizing scale of production.
C)   minimum efficient scale.
D)   shut down point.E) All of the above
F) B) and C)

Question 10

Refer to the data provided in Table 9.3 below to answer the following question(s) .
Table 9.3
   q  TFC  TVC  TC  MC  AVC  ATC 0$100$0$100−−−−−−1100401404040140210060160203080310090190303063.33410012422434315651001802805636566100264364844460.67710037247210867.43\begin{array} { c c c c c c c } 	ext { q } & 	ext { TFC } & 	ext { TVC } & 	ext { TC } & 	ext { MC } & 	ext { AVC } & 	ext { ATC } \\hline 0 & \$ 100 & \$ 0 & \$ 100 & - - & - - & - - \\hline 1 & 100 & 40 & 140 & 40 & 40 & 140 \\hline 2 & 100 & 60 & 160 & 20 & 30 & 80 \\hline 3 & 100 & 90 & 190 & 30 & 30 & 63.33 \\hline 4 & 100 & 124 & 224 & 34 & 31 & 56 \\hline 5 & 100 & 180 & 280 & 56 & 36 & 56 \\hline 6 & 100 & 264 & 364 & 84 & 44 & 60.67 \\hline 7 & 100 & 372 & 472 & 108 & & 67.43 \\hline\end{array} q 01234567​ TFC $100100100100100100100100​ TVC $0406090124180264372​ TC $100140160190224280364472​ MC −−402030345684108​ AVC −−403030313644​ ATC −−1408063.33565660.6767.43​​ 
-Refer to Table 9.3. If the market price is $34, then in the short run the firm will

Accepted Answer

A)   operate and expand.
B)   operate but not expand.
C)   shut down, but not go out of business.
D)   go out of business. E) B) and C)
F) C) and D)

Question 11

Marginal revenue equals marginal cost at an output of 20 units. At this output, marginal revenue equals $20, average variable cost equals $15, and average total cost equals $25. In the short run, a profit-maximizing firm will earn a profit of

Accepted Answer

A)   -$200.
B)   -$100.
C)   $200.
D)   $400.E) C) and D)
F) A) and B)

Question 12

Refer to the data provided in Table 9.1 below to answer the question(s)  that follow.
Table 9.1   q  TFC  TVC  TC  MC  AVC  ATC 0$50$0$50−−−−−−150207020207025030801015403504595151531.67450621121715.502855090140281828650132182422230.337501862365426.5733.71\begin{array} { l l l l l l l } 	ext { q } & 	ext { TFC } & 	ext { TVC } & 	ext { TC } & 	ext { MC } & 	ext { AVC } & 	ext { ATC } \\hline 0 & \$ 50 & \$ 0 & \$ 50 & - - & - - & - - \1 & 50 & 20 & 70 & 20 & 20 & 70 \2 & 50 & 30 & 80 & 10 & 15 & 40 \3 & 50 & 45 & 95 & 15 & 15 & 31.67 \4 & 50 & 62 & 112 & 17 & 15.50 & 28 \5 & 50 & 90 & 140 & 28 & 18 & 28 \6 & 50 & 132 & 182 & 42 & 22 & 30.33 \7 & 50 & 186 & 236 & 54 & 26.57 & 33.71 \\hline\end{array} q 01234567​ TFC $5050505050505050​ TVC $02030456290132186​ TC $50708095112140182236​ MC −−20101517284254​ AVC −−20151515.50182226.57​ ATC −−704031.67282830.3333.71​​ 
-Refer to Table 9.1. If the market price is $42, then for this firm to maximize profits it should produce ________ units of output and its profits will be ________.

Accepted Answer

A)   five; $70
B)   six; $70
C)   six; $120
D)   seven; $58 E) None of the above
F) A) and D)

Question 13

Refer to the information provided in Figure 9.2 below to answer the question(s)  that follow. 1, then a profit-maximizing firm will produce ________ units and earn ________. A)  0; negative profits B)  5; zero profits C)  10; negative profits D)  12; positive profits" class="answers-bank-image d-inline" rel="preload" > Figure 9.2
-Refer to Figure 9.2. If demand for wheat is D1, then a profit-maximizing firm will produce ________ units and earn ________.

Accepted Answer

A)   0; negative profits
B)   5; zero profits
C)   10; negative profits
D)   12; positive profitsE) None of the above
F) All of the above

Question 14

If a perfectly competitive firm operates in the short run and expands in the long run, then the firm's short run condition is

Accepted Answer

A)   TR > TC.
B)   TR >TVC and TR 
C)   TR 
D)   TR < TFC.E) B) and C)
F) A) and C)

Question 15

Refer to Scenario 9.8 below to answer the question(s)  that follow.
SCENARIO 9.8: Investors put up $1,040,000 to construct a building and purchase all equipment for a new gourmet cupcake bakery. The investors expect to earn a minimum return of 10 per cent on their investment. The bakery is open 52 weeks per year and sells 900 cupcakes per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly) . Included in the fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc. The bakery charges $8 on average per cupcake.
-Refer to Scenario 9.8. Total variable costs per week are

Accepted Answer

A)   $600.
B)   $1,000.
C)   $2,600.
D)   $4,000.E) B) and C)
F) C) and D)

Question 16

The short-run industry supply curve for a perfectly competitive industry is the

Accepted Answer

A)   horizontal sum of the individual firms' marginal cost curves above AVC.
B)   vertical sum of the individual firms' marginal cost curves above AVC.
C)   horizontal sum of the individual firms' marginal cost curves above ATC.
D)   vertical sum of the individual firms' marginal cost curves above ATC.E) A) and B)
F) None of the above

Question 17

Related to the Economics in Practice on page 198: If firms have long-run average cost curves with a long, flat section

Accepted Answer

A)   their long run supply curves are downward sloping.
B)   the optimal number of firms in the industry is one.
C)   larger firms have a cost advantage over smaller firms.
D)   it is impossible to predict the size of the firm.E) A) and B)
F) A) and C)

Question 18

Which of the following is the correct way to calculate total cost?

Accepted Answer

A)   ATC ÷ q
B)   TR - TFC
C)   TR - TVC
D)   TVC +TFCE) A) and B)
F) A) and C)

Question 19

Refer to the information provided in Figure 9.7 below to answer the question(s)  that follow.  Figure 9.7
-Refer to Figure 9.7. Industry demand is initially D1 and industry supply is initially S1 in this increasing cost industry. If demand increases to D2, then in the long run the industry will

Accepted Answer

A)   stay at Point B.
B)   move to Point C.
C)   move to Point E.
D)   move to Point F.E) All of the above
F) A) and D)

Question 20

The ________ supply curve(s)  of a perfectly competitive firm is the portion of its marginal cost curve that lies above its average variable cost curve.

Accepted Answer

A)   long-run
B)   short-run
C)   short-run and long-run
D)   A perfectly competitive firm faces no supply curve.E) B) and C)
F) None of the above

Exam 9: Long-Run Costs and Output Decisions

Correct Answer
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If total revenue exceeds the total cost of production, a firm

Correct Answer
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Refer to the information provided in Figure 9.7 below to answer the question(s) that follow. Figure 9.7 -Refer to Figure 9.7. Industry demand is initially D1 and industry supply is initially S1 in this increasing cost industry. If demand increases to D2, then in the long run the industry will

Correct Answer
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Related to the Economics in Practice on page 198: If firms have long-run average cost curves with a long, flat section

Correct Answer
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If a perfectly competitive firm operates in the short run and expands in the long run, then the firm's short run condition is

Correct Answer
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Industries in which firms ________ are likely to expand in the long-run.

Correct Answer
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Refer to the information provided in Figure 9.2 below to answer the question(s) that follow. Figure 9.2 -Refer to Figure 9.2. The firm's ________ point is at a price of $6.

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Refer to the information provided in Figure 9.2 below to answer the question(s) that follow. Figure 9.2 -Refer to Figure 9.2. If demand for wheat is D₁, then a profit-maximizing firm will produce units and earn .

Correct Answer
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Which of the following is the correct way to calculate total cost?

Correct Answer
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Related to the Economics in Practice on page 196. The search engine business is subject to ________, which means that as the use of the search engine increases, the long-run cost to provide additional searches on that search engine will likely fall.

Correct Answer
verified

Marginal revenue equals marginal cost at an output of 20 units. At this output, marginal revenue equals $20, average variable cost equals $15, and average total cost equals $25. In the short run, a profit-maximizing firm will earn a profit of

Correct Answer
verified

The smallest size plant size at which the long-run average cost curve is at its minimum is called the

Correct Answer
verified

In efficient markets, profit opportunities are quickly eliminated as they develop.

Correct Answer
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If, at the output where marginal revenue equals marginal cost, price is below average variable cost, a firm will shut down in the short run.

Correct Answer
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Correct Answer
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In the short run, firms earning a profit will want to their profits while firms suffering losses will want to their losses.

Correct Answer
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The ________ supply curve(s) of a perfectly competitive firm is the portion of its marginal cost curve that lies above its average variable cost curve.

Correct Answer
verified

Every point on a ________ represents the minimum cost at which the associated output level can be produced when the scale of plant can be changed.

Correct Answer
verified

The short-run industry supply curve for a perfectly competitive industry is the

Correct Answer
verified

Exam 9: Long-Run Costs and Output Decisions

Correct AnswerverifiedShow Answer

If total revenue exceeds the total cost of production, a firm

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 9.7 below to answer the question(s) that follow. Figure 9.7 -Refer to Figure 9.7. Industry demand is initially D1 and industry supply is initially S1 in this increasing cost industry. If demand increases to D2, then in the long run the industry will

Correct AnswerverifiedShow Answer

Related to the Economics in Practice on page 198: If firms have long-run average cost curves with a long, flat section

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a perfectly competitive firm operates in the short run and expands in the long run, then the firm's short run condition is

Correct AnswerverifiedShow Answer

Industries in which firms ________ are likely to expand in the long-run.

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Refer to the information provided in Figure 9.2 below to answer the question(s) that follow. Figure 9.2 -Refer to Figure 9.2. The firm's ________ point is at a price of $6.

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Refer to the information provided in Figure 9.2 below to answer the question(s) that follow. Figure 9.2 -Refer to Figure 9.2. If demand for wheat is D1, then a profit-maximizing firm will produce ________ units and earn ________.

Correct AnswerverifiedShow Answer

Which of the following is the correct way to calculate total cost?

Correct AnswerverifiedShow Answer

Related to the Economics in Practice on page 196. The search engine business is subject to ________, which means that as the use of the search engine increases, the long-run cost to provide additional searches on that search engine will likely fall.

Correct AnswerverifiedShow Answer

Marginal revenue equals marginal cost at an output of 20 units. At this output, marginal revenue equals $20, average variable cost equals $15, and average total cost equals $25. In the short run, a profit-maximizing firm will earn a profit of

Correct AnswerverifiedShow Answer

The smallest size plant size at which the long-run average cost curve is at its minimum is called the

Correct AnswerverifiedShow Answer

In efficient markets, profit opportunities are quickly eliminated as they develop.

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If, at the output where marginal revenue equals marginal cost, price is below average variable cost, a firm will shut down in the short run.

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Correct AnswerverifiedShow Answer

In the short run, firms earning a profit will want to ________ their profits while firms suffering losses will want to ________ their losses.

Correct AnswerverifiedShow Answer

The ________ supply curve(s) of a perfectly competitive firm is the portion of its marginal cost curve that lies above its average variable cost curve.

Correct AnswerverifiedShow Answer

Every point on a ________ represents the minimum cost at which the associated output level can be produced when the scale of plant can be changed.

Correct AnswerverifiedShow Answer

The short-run industry supply curve for a perfectly competitive industry is the

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Refer to the information provided in Figure 9.2 below to answer the question(s) that follow. Figure 9.2 -Refer to Figure 9.2. If demand for wheat is D₁, then a profit-maximizing firm will produce units and earn .

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In the short run, firms earning a profit will want to their profits while firms suffering losses will want to their losses.

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