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18 Cards in this Set

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An example of an explicit cost of production would be the..


A) cost of forgone labor earnings for an entrepreneur




B) lost opportunity to invest in capital markets when the money is invested in one's business




C) lease payments for the land on which a firm's factory stands




D) both A and C are correct

C) lease payments for the land on which a firm's factory stands

The difference between accounting profit and economic profit is..


A) explicit costs




B) implicit costs




C) total revenue




D) marginal product

B) implicit costs

Joan grows pumpkins. If Joan plants no seeds on her farm, she gets no harvest. If she plants 1 bag of seeds, she gets 500 pumpkins. If she plants 2 bags, she gets 800 pumpkins. If she plants 3 bags, she gets 900 pumpkins. A bag of seeds costs $100, and seeds are her only cost.




Joan's production function exhibits..




A) increasing marginal product




B) decreasing marginal product




C) constant marginal product




D) any of the above could be correct

B) decreasing marginal product

The average-fixed-cost curve..




A) is constant




B) is always decreasing




C) intersects marginal cost at the minimum of average fixed cost




D) intersects marginal cost at the minimum of marginal cost

B) is always decreasing

Which of the following statements regarding a competitive market is NOT correct?




A) there are many buyers and many sellers in the market




B) firms can freely enter or exit the market




C) price equals average revenue




D) price exceeds marginal revenue

D) price exceeds marginal revenue

If a competitive firm is currently producing a level of output at which profit is not maximized, then it must be true that..




A) marginal revenue exceeds marginal cost




B) marginal cost exceeds marginal revenue




C) total cost exceeds total revenue




D) none of the above is correct

D) none of the above is correct

Which of the following statements best reflects the production decision of a profit-maximizing firm in a competitive market when price falls below the minimum of average variable cost?




A) the firm will continue to produce to attempt to pay fixed cost




B) the firm will immediately stop production to minimize its losses




C) the firm will stop production as soon as it is able to pay its sunk costs




D) the firm will continue to produce in the short run but will likely exit the market in the long run

B) the firm will immediately stop production to minimize its losses

Suppose that some firms in a competitive industry are earning zero economic profits, while others are experiencing losses. All else equal, in the long run, we would expect the number of firms in the industry to..




A) increase




B) decrease




C) remain the same




D) we do not have enough information with which to answer this question

B) decrease

Which of the following is NOT an example of a barrier to entry?




A) a soybean farmer is the first in her county to use a new brand of fertilizer




B) Microsoft obtains a copyright for its Windows operating system




C) a pharmaceutical company obtains a patent for a new medication to treat migraine headaches




D) a taxi cab driver in NYC obtains a license to legally provide transportation in NYC

A) a soybean farmer is the first in her county to use a new brand of fertilizer

A firm that is a natural monopoly..




A) is not likely to be concerned about new entrants eroding its monopoly power




B) is taking advantage of economies of scale




C) would experience a higher average total cost if more firms entered the market




D) all of the above are correct

D) all of the above are correct

Which of the following statements is NOT correct?




A) the government may use antitrust laws to break up an existing company to improve competition




B) the government may break up a natural monopoly to lower the price charged to customers




C) private ownership is typically preferred to public ownership




D) sometimes the best strategy is for the government to do nothing about monopoly inefficiency because the fix may be worse than the problem

B) the government may break up a natural monopoly to lower the price charged to customers

When the loss from a business-stealing externality exceeds the gain from a product-variety externality..




A) firms are more likely to operate at efficient scale




B) there are likely to be too many firms in a monopolistically competitive market




C) market efficiency is likely to be enhanced by entry of new firms




D) all firms are earning zero economic profit

B) there are likely to be too many firms in a monopolistically competitive market

Assume that a local bank sells two services, checking accounts and ATM card service. The bank's only two customers are Mr. Donethat and Ms. Beenthere. Mr Donethat is willing to pay $8 a month for the bank to service his checking account and $2 a month for unlimited use of his ATM card. Ms. Beenthere is willing to pay only $5 for a checking account, but is willing to pay $9 for unlimited use of her ATM card. Assume that the bank can provide each of these services at zero marginal cost.




If the bank is unable to use tying, what is the profit-maximizing price to charge for unlimited use of an ATM card?




A) $14




B) $11




C) $9




D) $2

C) $9

Suppose that the market for labor is initially in equilibrium. An increase in immigration will cause the equilibrium wage..




A) and the equilibrium quantity of labor to rise




B) and the equilibrium quantity of labor to fall




C) to rise and the equilibrium quantity of labor to fall




D) to fall and the equilibrium quantity of labor to rise

D) to fall and the equilibrium quantity of labor to rise

Suppose that an economics department is offering a student exchange program with a university in Giessen, Germany. If the department requires students to submit an essay to be considered for the program, the essay may be an example of a(n)..




A) signal




B) screen




C) efficiency wage




D) principal

B) screen

When a firm is experiencing diseconomies of scale, long-run..




A) average total cost is minimized




B) average total cost is greater than long-run marginal cost




C) average total cost is less than long-run marginal cost




D) marginal cost is minimized

C) average total cost is less than long-run marginal cost

Suppose a certain competitive firm is producing Q= 500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20.




At Q=499, the firm's total costs equal..




A) $5,983




B) $5,988




C) $5,995




D) $5,999

A) $5,983

If a monopolist has zero marginal costs, it will produce..




A) the output at which total revenue is maximized




B) in the range in which marginal revenue is still increasing




C) at the point at which marginal revenue is at a maximum




D) in the range in which marginal revenue is negative



A) the output at which total revenue is maximized