Principles of Microeconomics, 8e (Case/Fair) Chapter 5: Elasticity Elasticity Multiple Choice Refer to the information information provided provided in Figure 5.1 below to answer answer the questions that follow.
Figure 5.
1) Refer to Figure 5.1. The demand for tickets is A) perfectly elastic. B) perfectly inelastic. C) unitarily elastic. D) income elastic. Anser! B Diff! 1 Type! F
") #rice is determined entirely $y demand hen A) demand is donard sloping. B) demand is perfectly inelastic. C) supply is perfectly inelastic. D) 1
supply is perfectly elastic. Anser! C Diff! " Type! D
%) &hen supply is perfectly inelastic' A) price is determined solely $y supply. B) price is determined solely $y demand. C) only the go(ernment can set the price. D) the price may $e set $y either supply or demand. Anser! B Diff! " Type! D
"
) A ******** line is a perfectly price elastic demand cur(e. A) hori+ontal B) (ertical C) positi(ely sloped D) negati(ely sloped Anser! A Diff! 1 Type! F
5) A ******** line is a perfectly price inelastic demand cur(e. A) hori+ontal B) (ertical C) positi(ely sloped D) negati(ely sloped Anser! B Diff! 1 Type! F
,) &hen the price of radios increases 5-' uantity demanded decreases 5-. The price elasticity of demand for radios is A) perfectly inelastic. B) elastic. C) inelastic. D) %
unitary elastic. Anser! D Diff! " Type! D
/) &hen the price of fresh fish increases 5-' uantity demanded decreases 10-. The price elasticity of demand for fresh fish is A) perfectly inelastic. B) elastic. C) inelastic. D) unitary elastic. Anser! B Diff! " Type! D
) &hen the price of coffee increases 5-' uantity demanded decreases %-. The elasticity for coffee is A) perfectly price inelastic. B) price elastic. C) price inelastic. D) price unitary. Anser! C Diff! " Type! D
2) The ABC Computer Company ants to increase the uantity of computers it sells $y 5-. 3f the price elasticity of demand is 4".5' the company must ******** price $y *******. A) increase ".0B) decrease ".0C) increase 0.5D) decrease 0.5Anser! B Diff! " Type! A
10) The go(ernment ants to reduce the consumption of electricity $y 5-. The price elasticity of demand for electricity is . The go(ernment should ******* the price of electricity $y ******. A) raise ".0B) raise 0.0C) raise 1."5D) loer 0.Anser! C Diff! " Type! A
11) The go(ernment ants to reduce the consumption of electricity $y 10-. The price elasticity of demand for electricity is 4.. The go(ernment should ******** the price of electricity $y *****. A) raise ".0B) raise "5.0C) 5
raise 0.0D) loer 0.Anser! B Diff! " Type! A
1") The price elasticity of demand for $ottled ater in Te6as is 4"' and the price elasticity of demand for $ottled ater in 7issouri is 40.. 3n other ords' demand in Te6as is ********** and demand in 7issouri is **********. A) elastic inelastic B) inelastic elastic C) elastic unitarily elastic D) inelastic unitarily inelastic Anser! A Diff! % Type! C
,
1%) An increase in supply caused no change in euili$rium uantity $ought and sold. Thus' demand must $e A) perfectly inelastic. B) inelastic. C) elastic. D) unitarily elastic. Anser! A Diff! " Type! D
1) 3f the demand for oranges is unitarily elastic' the price elasticity of demand for oranges is A) 0.0. B) 1.0. C) 41.0. D) 4100.0. Anser! C Diff! " Type! A
Refer to the information provided in Figure 5.2 below to answer the questions that follow.
/
Figure 5.!
15) Refer to Figure 5.". 8sing the midpoint formula' if the price of a ham$urger is increased from 9 to 910' the price elasticity of demand euals A) 0.%,. B) %%%. C) 4".5. D) 4%.0. Anser! D Diff! " Type! A
1,) Refer to Figure 5.". 8sing the midpoint formula' if the price of a ham$urger is increased from 9, to 9' the price elasticity of demand euals A) 0.". B) /1.0. C) 41.. D) 4".0. Anser! C Diff! " Type! A
1/) Refer to Figure 5.". 8sing the midpoint formula' if the price of a ham$urger is increased from 9" to 9' the price elasticity of demand euals A) 40.%%. B) 4".0. C) 4%.0. D) 45.0. Anser! A Diff! " Type! A
1) Refer to Figure 5.". At #oint C the price elasticity of demand is 41. Along line segment BC of the demand cur(e' the demand is A) elastic. B) unitarily elastic. C) 2
inelastic. D) either elastic or inelastic' depending on hether price increases or decreases. Anser! A Diff! " Type! D
Refer to the information provided in Figure 5.3 below to answer the questions that follow.
Figure 5."
10
12) Refer to Figure 5.%. 8sing the midpoint formula' if the price of a garden$urger is increased from 9 to 910' the price elasticity of demand euals A) 40.0%,. B) 40.5. C) 4.5. D) 42.0. Anser! C Diff! " Type! A
"0) Refer to Figure 5.%. 8sing the midpoint formula' if the price of a garden$urger is increased from 9, to 9' the price elasticity of demand euals A) 40.0". B) 41./5. C) 41.2. D) 4".0. Anser! B Diff! " Type! A
"1) Refer to Figure 5.%. 8sing the midpoint formula' if the price of a garden$urger is increased from 9, to 9/' the price elasticity of demand euals A) 4.1%. B) 4.%%. C) 11
41.. D) 41%. Anser! C Diff! " Type! A
"") The oner of a local hot dog stand has estimated that if he loers the price of hot dogs from 9".00 to 91.50' he ill increase sales from 00 to 500 hot dogs per day. 8sing the midpoint formula' the demand for hot dogs is A) elastic. B) inelastic. C) unitarily elastic. D) perfectly elastic. Anser! B Diff! " Type! D
1"
"%) At a price of 911' uantity demanded is 20 and at a price of 92' uantity demanded is 110. 8sing the midpoint formula' the price elasticity of demand is A) 0.0. B) ". C) 41.0. D) 41."". Anser! C Diff! " Type! A
") At a price of 9"0' a store can sell " picture frames a day. At a price of 91 the store can sell %% picture frames a day. 8sing the midpoint formula' the price elasticity of demand is A) 0.%%. B) 2.02. C) 4%.0. D) %./5. Anser! C Diff! " Type! A
"5) #rice and total re(enue are in(ersely related hen demand is A) elastic. B) inelastic. C) unitarily elastic. 1%
D) perfectly inelastic. Anser! A Diff! 1 Type! F
",) 3f price ******* and demand is ********' tot al re(enue ill increase. A) falls inelastic. B) falls elastic C) rises elastic D) rises unitarily elastic Anser! B Diff! 1 Type! F
1
Refer to the information provided in Figure 5.4 below to answer the questions that follow.
Figure 5.#
"/) Refer to Figure 5.. The demand for milkshakes is unitarily elastic at #oint C . 3f the price of a milkshake is reduced from P % to P ' total re(enue A) ill increase. B) ill decrease. C) ill remain constant. D) could either increase or decrease. Anser! B Diff! 1 Type! F
") Refer to Figure 5.. The demand for milkshakes is unitarily elastic at #oint C . 3f the milkshake price falls from P 1 to P "' total re(enue ill A) increase. B) decrease. C) remain constant. D) either increase or decrease. Anser! 15
A Diff! 1 Type! F
"2) A firm is currently producing in the inelastic portion of its demand cur(e. &hat course of action should you recommend to this firm assuming it ants to raise re(enue: A) Continue producing at the current output le(el' $ecause the firm ill ma6imi+e its total re(enue $y producing in the inelastic portion of its demand cur(e. B) Reduce price' $ecause if demand is inelastic and price is reduced' total re(enue il l increase. C) 3ncrease price' $ecause if demand is inelastic and price is increased' total re(enue ill increase. D) Continue selling at the same price' $ut increase the num$er of units it produces. Anser! C Diff! % Type! C
1,
%0) Assume you earn 90'000 a year and your fa(orite sports maga+ine costs you 95 a year. ;our demand for the sports maga+ine is likely to $e A) elastic. B) inelastic. C) perfectly elastic. D) perfectly inelastic. Anser! B Diff! 1 Type! F
%1) Assume you earn 9/5'000 a year and your fa(orite entertainment maga+ine costs you 9"5 a year. ;our demand for the entertainment maga+ine is likely to $e A) inelastic. B) elastic. C) perfectly elastic. D) perfectly inelastic. Anser! A Diff! 1 Type! F
%") The ABC Computer Company spends a lot of money for ad(ertising designed to con(ince you that their personal computers are superior to all other personal computers. 3f the ABC Company is successful' the demand for ABC personal computers A) and the demand for other firms< personal computers i ll $ecome less price elastic. B) and the demand for other firms< personal computers i ll $ecome more price elastic. C) 1/
ill $ecome more price elastic $ut the demand for other firms< personal computers ill $ecome less price elastic. D) ill $ecome less price elastic $ut the demand for other firms< personal computers ill $ecome more price elastic. Anser! D Diff! % Type! C
%%) The go(ernment is considering placing a ta6 on cigarettes to raise re(enue to finance health care $enefits. =ne of the arguments for this ta6 is that the demand for cigarettes is price inelastic. &hich of the folloing statements is TR8>: A) The ta6 on cigarettes may not raise as much re(enue as anticipated in the years to come $ecause the demand for cigarettes is likely to $ecome more elastic o(er time. B) This is a (ery good ay to raise re(enue $oth in the short term and in the long term $ecause there are no su$stitutes for cigarettes. C) This ta6 ill not raise much re(enue either in the short term or the long term $ecause demand is price inelastic. D) ?o ta6 re(enue can $e raised in this ay $ecause sellers of cigarettes ill @ust loer their price $y the amount of the ta6 and therefore the price of cigarettes to consumers ill not change. Anser! A Diff! % Type! C
%) The more su$stitutes there are for a product' the A) less price elastic the demand for the product is. B) more price elastic the demand for the product is. C) greater the income elasticity for the product. D) smaller the income elasticity for the product. Anser! B Diff! 1 Type! F 1
%5) The determinants of elasticity include A) a(aila$ility of su$stitutes. B) price relati(e to income. C) time. D) All of the a$o(e Anser! D Diff! " Type! D
%,) uppose an increase of 10- in the price of steak reduces the consumption of steak $y %0-. uch a price rise ill induce households to spend A) less of their income on steak. B) more of their income on steak. C) the same amount on steak as $efore. D) more on products that are complementary ith steak. Anser! A Diff! " Type! D
%/) Cross4price elasticity of demand measures the response in the A) price of a good to a change in the uantity of another good demanded. B) income of consumers to the change in the price of goods. C) uantity of one good demanded hen the uantity demanded of another good changes. D) 12
uantity of one good demanded to a change in the price of another good. Anser! D Diff! " Type! D
%) 3f the uantity demanded of tea increases $y "- hen the price of coffee increases $y -' the cross4price elasticity of demand $eteen tea and coffee is A) 4"5. B) 0."5. C) 4. D) . Anser! B Diff! " Type! A
"0
%2) 3f the uantity demanded of tea decreases $y - hen the price of coffee decreases $y 1,-' the cross4price elasticity of demand $eteen tea and coffee is A) 0.5. B) 45. C) 4". D) ". Anser! A Diff! " Type! A
0) 3f the cross4price elasticity of demand $eteen fish and chicken is "' then a "- increase in the price of fish ill result in a ******** in the uantity of chicken demanded. A) 1- increase B) - increase C) 10- increase D) "0- decrease Anser! B Diff! " Type! A
Refer to the information provided in Figure 5.5 below to answer the questions that follow.
"1
Figure 5.5
1) Refer to Figure 5.5. As the price of W increased' the demand for Y shifted from D1 to D". The cross4price elasticity of demand $eteen W and Y is A) positi(e. B) negati(e. C) +ero. D) indeterminate from this information. Anser! A Diff! " Type! D
""
") 3n output markets' the elasticity of supply tends to $e A) negati(e. B) +ero. C) positi(e. D) decreasing at an increasing rate. Anser! C Diff! 1 Type! F
%) 3f the elasticity of la$or supply is positi(e' the la$or4supply cur(e ould $e A) hori+ontal. B) (ertical. C) donard sloping. D) upard sloping. Anser! D Diff! 1 Type! F
Refer to the information provided in Figure 5.6 below to answer the questions that follow.
"%
Figure 5.$
) Refer to Figure 5.,. The market is initially in euili$rium at #oint A here price 9/ and uantity 1" thousand pi++as) and supply shifts from S 1 to S ". &hich of the folloing statements is TR8>: A) #rice ill still ser(e as a rationing de(ice causing uantity supplied to rise from 10 to 1 thousand pi++as. B) There is no need for price to ser(e as a rationing de(ice in this case $ecause the ne euili$rium uantit y is higher than the original euili$rium uantity. C) #rice ill still ser(e as a rationing de(ice causing uantity demanded to fall from 1" to 10 thousand pi++as. D) The market cannot mo(e to a ne euili$rium until there is also a change in supply. Anser! C Diff! 1 Type! F
"
5) A mass transit authority charges $us fares of 91."5 during morning rush hours $ut only 91.00 during late morning non4rush hours. >conomists e6plain the fare difference $y the fact t hat the demand for $us rides during the morning rush hours is ********** $ut during the late morning it is **********. A) more elastic more inelastic B) perfectly elastic perfectly inelastic C) more inelastic more elastic D) unitarily elastic relati(ely inelastic Anser! C Diff! % Type! C
%rue/False 1)
&hen the slope of a demand cur(e is constant' price elasticity of demand is constant as ell. Anser! FA> Diff! 1 Type! F
") A demand cur(e ith continuously changing slope o(er all uantity (alues can ha(e a constant price elasticity of demand. Anser! TR8> Diff! " Type! F
%) A demand cur(e ith constant slope o(er all uantity (alues can ha(e a continuously changing price elasticity of demand. Anser! TR8> Diff! " Type! F
) "5
#rice elasticity of demand is calculated using the change in uantity demanded and the change in price. Anser! FA> Diff! " Type! D
5) #erfectly inelastic demand is graphed as a hori+ontal line. Anser! FA> Diff! 1 Type! F
,) #erfectly elastic demand is graphed as a hori+ontal line. Anser! TR8> Diff! 1 Type! F
",
/) Eo total re(enue changes hen a price changes can $e predicted using price elasticity of demand. Anser! TR8> Diff! " Type! D
) &hen demand is elastic' an increase in price ill result in an increase in total re(enue. Anser! FA> Diff! 1 Type! F
2) &hen demand is elastic' a decrease in price ill result in an increase in total re(enue. Anser! TR8> Diff! 1 Type! F
10) &hen demand is inelastic' an increase in price ill result in an increase in total re(enue. Anser! TR8> Diff! 1 Type! F
11) &hen demand is inelastic' a decrease in price ill result in an increase in total re(enue. Anser! FA> Diff! 1 Type! F
1") &hen demand is unit elastic' an increase in price ill result in an increase in total re(enue. Anser! FA> Diff! 1 Type! F "/
1%) &hen demand is unit elastic' a decrease in price ill result in an increase in total re(enue. Anser! FA> Diff! 1 Type! F
1) A positi(e cross4price elasticity $eteen to goods implies that the to goods are su$stitutes. Anser! TR8> Diff! " Type! D
15) A positi(e cross4price elasticity $eteen to goods implies that the to goods are compliments. Anser! FA> Diff! " Type! D
"
Principles of Microeconomics, 8e (Case/Fair) Chapter $: &ousehol' ehaior an' Consumer Choice &ousehol' Choice in *utput Mar+ets Multiple Choice 1)
ane has 9500 a eek to spend on clothing and food. The price of clothing is 9"5 and the price of food is 910. The pairs of clothing and food that are in the ane
") Ted has 9,00 a eek to spend on clothing and food. The price of clothing is 9%0 and the price of food is 95. The pairs of clothing and food that are in the Ted
%) ane has 9500 a eek to spend on food f ) and clothing c). The price of food is 910 and the price of clothing is 9"5. &hat is the euation for ane
11/
Food G Clothing H 9500 B) $10 I Food G $25 I Clothing J 9500 C) $10 I FoodK$25 I Clothing 9500 D) $10 I Food G $25 I Clothing 9500 Anser!
D Diff! " Type! A
) Ted has 9,00 a eek to spend on food f ) and clothing c). The price of food is 95 and the price of clothing is 9%0. &hat is the euation for Ted
D Diff! " Type! A
11
Refer to the information provided in Figure 6.1 below to answer the questions that follow.
Figure $.
5) Refer to Figure ,.1. Assume Tom is on $udget constraint AC . 3f the price of a ham$urger is 95' Tom
,) Refer to Figure ,.1. Assume Tom is on $udget constraint AC . 3f the price of a hot dog is 9".50' Tom
112
D Diff! " Type! A
/) Refer to Figure ,.1. The slope of $udget constraint AC is A) 45.0. B) 4".0. C) 40.5. D) indeterminate from this information $ecause prices are not gi(en. Anser! B Diff! " Type! A
1"0
) Refer to Figure ,.1. Assume Tom
B) B.
C) D.
D) E .
Anser! D Diff! " Type! A
2) Refer to Figure ,.1. Assume Tom
B) B.
C) E .
D) D.
Anser! D Diff! " Type! A
10) Refer to Figure ,.1. Along $udget constraint AC ' the opportunity cost of one ham$urger A) is 1K of a hot dog. B) is 1K" of a hot dog. C) is " hot dogs. D)
1"1
changes as you mo(e don the $udget constraint. Anser! C Diff! " Type! A
11) Refer to Figure ,.1. Tom
1") Refer to Figure ,.1. AC represents Tom
1""
Refer to the information information provided provided in Figure 6.2 below to answer answer the questions that follow.
Figure $.!
1%) Refer to Figure ,.". Assume 7r. ingle is on $udget constraint AC . 3f the price of a garden$urger is 95' 7r. ingle
1) Refer to Figure ,.". Assume 7r. ingle is on $udget constraint AC . 3f the price of a $eer is 95' 7r. ingle
1"%
D Diff! " Type! A
15) Refer to Figure ,.". The slope of $udget constraint AC is is A) 41. B) 4". C) 45. D) indeterminate from this information $ecause prices are not gi(en. Anser! A Diff! " Type! A
1"
1,) Refer to Figure ,.". Assume 7r. ingle Anser! D Diff! " Type! A
1/) Refer to Figure ,.". Assume 7r. ingle
B) B
C) D
D) E
Anser! C Diff! " Type! A
1) Refer to Figure ,.". Along $udget constraint AC ' the opportunity cost of one garden$urger is A) 1K of a $eer. B) a $eer. C) " $eers.
1"5
D) changing as 7r. ingle mo(es don his $udget constraint. Anser! B Diff! " Type! A
12) Refer to Figure ,.". 7r. ingle
"0) Refer to Figure ,.". 7r. ingle
1",
Refer to the information provided in the Figure below to answer the questions that follow.
Figure $."
"1) Refer to Figure ,.%. 7olly
"") Refer to Figure ,.%. 7olly
1"/
Type! A
1"
Refer to the information provided in Figure 6.4 below to answer the questions that follow.
Figure $.#
"%) Refer to Figure ,.. Bill
B) AB.
C) AC .
D) AD.
Anser! D Diff! " Type! A
") Refer to Figure ,.. Bill
1"2
Diff! " Type! A
"5) 3f a household
1%0
Refer to the information provided in Figure 6.5 below to answer the questions that follow.
Figure $.5
",) Refer to Figure ,.5. 7olly
B) AO.
C) CD.
D) EF .
Anser! C Diff! " Type! A
"/) Refer to Figure ,.5. 7ollyF D) not shon on this graph. Anser! C
1%1
Diff! " Type! A
") Refer to Figure ,.5. 7olly
1%"
Refer to the information provided in Figure 6.6 below to answer the questions that follow.
Figure $.$
"2) Refer to Figure ,.,. Bill
%0) Refer to Figure ,.,. Bill
B) AO.
C) CD.
D) EF .
Anser! A
1%%
Diff! " Type! A
%1) Refer to Figure ,.,. Bill
1%
%") 7ichael can $uy either pi++as or su$marine sandiches. 3f the prices of pi++a and su$marine sandiches dou$le and so does 7ichael
%%) #rice decreases ill ******** a householdOs choice set. A) increase B) decrease C) not change D) sometimes increase and other times decrease Anser! A Diff! 1 Type! F
%) The real cost of a car is its opportunity cost. =pportunity cost is determined $y A) the price of the car. B) relati(e prices. C) ealth. D)
1%5
the prices of the goods that are compliments to a car. Anser! B Diff! % Type! C
Refer to the information provided in Figure 6.7 below to answer the questions that follow.
Figure $.
1%,
%5) Refer to Figure ,./. Along $udget constraint AB' the price of good X is 910 and the price of good Y is 91". 3f the price of P increases to 915' the $udget constraint ill A) pi(ot in at #oint B. B) pi(ot out at #oint A. C) shift in parallel to AB. D) pi(ot in at #oint A. Anser! A Diff! " Type! A
%,) Refer to Figure ,./. Along $udget constraint AB' the price of good X is 91" and the price of good Y is 910. 3f the price of Y decreases to 9' the $udget constraint ill A) pi(ot in at #oint B. B) pi(ot out at #oint A. C) shift in parallel to AB. D) pi(ot in at #oint A. Anser! B Diff! " Type! A
%rue/False 1)
&hen the price of a good increases' the $udget constraint does not change. Anser! FA> Diff! 1 Type! F
")
1%/
Assuming a perfectly competiti(e market implies that households ha(e perfect knoledge of ualiti es and prices of e(erything a(aila$le in the market. Anser! TR8> Diff! 1 Type! F
%) Eomogeneous products are distinguisha$le from each other. Anser! FA> Diff! " Type! D
) #rice increases cause a decrease in a householdOs choice set. Anser! TR8> Diff! " Type! F
1%
%he asis of Choice: -tility Multiple Choice 1)
7arginal utility is the A) total satisfaction gained $y consuming all units of a good. B) total satisfaction gained $y consuming the last unit of the good. C) additional satisfaction gained $y the consumption of one more unit of a good. D) additional consumption di(ided $y the additional satisfaction gained $y the additional consumption. Anser! C Diff! " Type! D
") Qathy eats fi(e slices of pi++a on a aturday night $ut admits each slice of pi++a doesn
Refer to the information provided in Figure 6. below to answer the questions that follow.
1%2
Figure $.8
%) Refer to Figure ,.. The marginal utility of the second mo(ie rental is A) 10. B) 1".5. C) "5. D) 0. Anser! A Diff! " Type! A
10
) Refer to Figure ,.. The marginal utility of the third mo(ie rental is A) 1. B) %. C) 2.%%. D) ". Anser! B Diff! " Type! A
5) Refer to Figure ,.. The ********** mo(ie rental has a marginal utility of +ero. A) first B) second C) third D) fourth Anser! D Diff! " Type! A
,) The la of diminishing marginal utility is effecti(e hen marginal utility is **********. A) positi(e and increasing B) positi(e and decreasing C) initially +ero and then increasing D)
11
initially +ero and then decreasing Anser! B Diff! % Type! A
Refer to the information provided in Figure 6.! below to answer the questions that follow.
Figure $.
1"
/) Refer to Figure ,.2. The marginal utility of the second (ideo game rental is A) 10. B) . C) "5. D) 0. Anser! B Diff! " Type! A
) Refer to Figure ,.2. The marginal utility of the third (ideo game rental is A) 1. B) %. C) . D) "". Anser! C Diff! " Type! A
2) Refer to Figure ,.2. The ********** (ideo game rental has a marginal utility of +ero. A) first B) second C) third D)
1%
fourth Anser! D Diff! " Type! A
Refer to the information information provided provided in "able 6.1 below to answer answer the questions that that follow. %ale $. 0umer of &amurgers per 1ay 1 " % 5 0umer of 2o'as per 1ay 1 " % 5
%otal -tility
Marginal -tility
%0 5" ,/ /, %otal -tility
Marginal -tility
"0 %5 / 5/ /
1
10) Refer to Ta$le ,.1. The marginal utility of the second soda per day is A) 10. B) 15. C) %5. D) 55. Anser! B Diff! " Type! A
11) Refer to Ta$le ,.1. The marginal utility of the third ham$urger per day is A) 5. B) 15. C) "".%%. D) 112. Anser! B Diff! " Type! A
1") Refer to Ta$le ,.1. Diminishing marginal utility sets in after the ********** soda per day. A) first B) second C) third D)
15
fourth Anser! A Diff! " Type! A
1%) Refer to Ta$le ,.1. The total utility of fi(e ham$urgers per day is A) 0. B) 1. C) 2,. D) indeterminate from this information. Anser! A Diff! " Type! A
1) Refer to Ta$le ,.1. The total utility of fi(e sodas per day is A) %5. B) ,. C) 2". D) indeterminate from this information. Anser! B Diff! " Type! A
1,
15) Refer to Ta$le ,.1. 3f the price of a soda is 9"' the price of a ham$urger is 9,' and Neorge has 91 of income' Neorge
1,) Refer to Ta$le ,.1. Assume that a store is gi(ing ham$urgers and sodas aay for free. Consumers can ha(e as many sodas and ham$urgers as they ant' $ut the food has to $e consumed one unit at a time. 3f Neorge has already had one soda and to ham$urgers' then Neorge A) should ne6t consume a soda to ma6imi+e his utility. B) should ne6t consume a ham$urger to ma6imi+e his utility. C) is indifferent $eteen consuming the second soda or the third ham$urger. D) should consume neither another soda nor another ham$urger to ma6imi+ e his utility. Anser! C Diff! % Type! C
Refer to the information provided in "able 6.2 below to answer the questions that follow. %ale $.! 0umer of Can'y ars per 1ay 1 " % 5
%otal -tility
Marginal -tility
0 /5 100 115 5
1/
0umer of &ot 1ogs per 1ay 1 " % 5
%otal -tility
Marginal -tility
%0 5 /" ,
1/) Refer to Ta$le ,.". The marginal utility of the second candy $ar per day is A) 10. B) 15. C) %5. D) 55. Anser! C Diff! " Type! A
1
1) Refer to Ta$le ,.". Diminishing marginal utility sets in after the ********** candy $ar per day. A) first B) second C) third D) fourth Anser! A Diff! " Type! A
12) Refer to Ta$le ,.". The total utility of fi(e candy $ars per day is A) 115. B) 1"0. C) 1%0. D) indeterminate from this information. Anser! B Diff! " Type! A
"0) Refer to Ta$le ,.". 3f the price of a candy $ar is 91' the price of a hot dog is 9"' and Aaron has 9, of income' Aaron
12
indeterminate from this information. Anser! B Diff! % Type! A
"1) Richard is consuming X and Y so that MU 6K P 6 , and MU yK P y 10. To ma6imi+e utility' Richard should A) continue to consume the same amount of X and Y ' as the consumer is already ma6imi+ing utility. B) consume less of $oth X and Y . C) consume more X and less Y . D) consume less X and more Y . Anser! D Diff! " Type! A
"") on is consuming X and Y so that MU 6K P 6 and MU yK P y . To ma6imi+e utility' he should consume A) the same amount of X and Y since he is already ma6imi+ing utility. B) less of $oth X and Y . C) more X and less Y . D) less X and more Y . Anser! C Diff! " Type! A
"%) 3f MU 6K P 6 H MU yK P y' then A)
150
spending a dollar less on Y and spending a dollar more on X increases utility. B) spending a dollar less on X ' and spending a dollar more on Y increases utility. C) X is more e6pensi(e than Y . D) Y is more e6pensi(e than X . Anser!
B Diff! " Type! D
Refer to the information provided in Figure 6.1# below to answer the questions that follow.
Figure $.3
") Refer to Figure ,.10. The current price of a turkey sandich is 9,. 3f Qyle is currently $uying fi(e turkey sandiches a eek' he ***** ma6imi+ing utility $ecause the marginal utility ********than its price. A) is from the fifth sandich is greater B) is from the fifth sandich is less C) is not gained from the fifth sandich is less D) is not gained from the fifth sandich is greater Anser! D Diff! % Type! C
151
15"
"5) Refer to Figure ,.10. The current price of a turkey sandich is 9,. 3f Qyle is currently $uying nine turkey sandiches a eek' hich of the folloing statements is TR8>: A) Qyle is ma6imi+ing utility $ecause the marginal utility from the ninth sandich is greater than its price. B) Qyle is ma6imi+ing utility $ecause the marginal utility from the ninth sandich is less than its price. C) Qyle is not ma6imi+ing utility $ecause the marginal utility gained from the ninth sandich is less than its price. D) Qyle is not ma6imi+ing utility $ecause the marginal utility gained from the ninth sandich is greater than its price. Anser! C Diff! % Type! C
",) Refer to Figure ,.10. Qyle ould increase his consumption of turkey sandiches from / to 2 per eek if their price fell from 9, to 9. This illustrates the idea of A) consumer surplus. B) technical efficiency. C) cross4price elasticity of demand. D) the la of diminishing marginal utility. Anser! D Diff! % Type! C
"/) The marginal utility of the first cup of coffee that Tom drinks in the morning is orth 9".00. The marginal utility of the 2th cup of coffee he drinks is positi(e hile the marginal utility of the 10th cup of coffee he drinks in the morning is orth 90. This implies that at a price of 90' Tom ould drink A) an infinite num$er of cups of coffee each morning. B) at most 10 cups of coffee per morning. C)
15%
more than 10 cups of coffee per morning' $ut the actual num$er is indeterminate from this information. D) +ero cups of coffee per morning. Anser! B Diff! % Type! C
") For 7atthe' the marginal utility of the 2th soda in a day is positi(e and the marginal utility of the 10th soda in a day is +ero. This A) implies that 7atthe
"2) 8tility A) is the satisfaction yielded $y the consumption of a good or ser(ice. B) can $e measured. C) can $e used to compare different people
%0)
15
The la of diminishing marginal utility A) refers to the decrease in total satisfaction as more units of a good are consumed. B) refers to the decrease in additional satisfaction created $ y consumption of more and more units of a good. C) refers to the idea that total utility is negati(e. D) All of the a$o(e Anser! B Diff! " Type! D
%1) The utility4ma6imi+ing rule can $e stated in ords in the folloing ay! A person ill ma6imi+e utility hen the ********* is euali+ed across products. A) total utility per dollar spent B) marginal utility C) total utility D) marginal utility per dollar spent Anser! D Diff! % Type! C
%") A utility4ma6imi+ing consumer com$ines purchases in a ay that makes A) P 6 MU 6) P y MU () for all pairs of goods. B) TU 6K P 6 TU yK P y for all pairs of goods. C) MU 6K MU y P 6K P y for all pairs of goods. D)
155
MU 6 MU y for all pairs of goods. Anser!
C Diff! " Type! A
%%) For a utility ma6imi+ing indi(idual the ratio of the marginal utility of coffee to the marginal utility of donuts is four. This implies that A) a donut is four times more (alua$le than a cup of coffee. B) a cup of coffee is four times less (alua$le than a donut. C) this person alays eats donuts ith coffee. D) the coffee to donuts price ratio is four to one. Anser! D Diff! % Type! C
%) Qathleen likes a(ocado and cra$ dip. After eating four crackers ith a(ocado and cra$ dip' she sitches to cheese and crackers. &e can conclude that A) the a(ocado and cra$ dip cannot ha(e tasted that good. B) the a(ocado and cra$ dip no has a marginal utility of +ero. C) at this point cheese and crackers ha(e a higher marginal utility per doll ar spent than a(ocado and cra$ dip. D) Qathleen is no longer ma6imi+ing her utility. Anser! C Diff! % Type! C
%5) The la of diminishing marginal utility implies A)
15,
supply cur(es alays slope upard. B) total utility ill alays increase $y an increasing amount as consumption increases. C) a consumer ill alays $uy positi(e amounts of all goods. D) demand cur(es alays slope donard and to the right. Anser! D Diff! " Type! D
%rue/False 1)
The la of diminishing marginal utility implies that as a household consumes more of a product' its total utility ill increase $y smaller amounts 4 assuming marginal utility remains positi(e. Anser! TR8> Diff! 1 Type! F
") &hen consumers ma6imi+e utility' they are euating the ratio of marginal utility to price across all goods consumed. Anser! TR8> Diff! 1 Type! F
%) A negati(e marginal utility implies negati(e total utility. Anser! FA> Diff! 1 Type! F
) 3f MU 6K P 6 e6ceeds MU yK P y' then a household can increase its utility $y spending more on X and less on Y . Anser! TR8> Diff! 1 Type! F
15/
5) &hen marginal utility is +ero' total utility is at a ma6imum. Anser! TR8> Diff! " Type! F
4ncome an' 2ustitution Effects Multiple Choice 1)
A fall in the price of #epsi that causes a household to shift its purchasing pattern aay from su$stitutes and toard #epsi is the A) income effect of a price change. B) su$stitution effect of a price change. C) complementary effect of a price change. D) diminishing marginal utility effect of a price change. Anser! B Diff! 1 Type! F
") =n hich of the folloing folloi ng goods ould a price change ha(e the largest income effect: A) A maga+ine B) A desktop computer C) Clothing D) A car Anser! D Diff! % Type! C
15
%) Assuming that charita$le gi(ing is a normal good' the i ncome effect of a decrease in personal ta6 rates should l ead to A) less gi(ing $ecause gi(ing to charity ould $ecome more e6pensi(e relati(e to other goods. B) more gi(ing $ecause gi(ing to charity ould $ecome less e6pensi(e relati(e to ot her goods. C) more gi(ing $ecause households ould ha(e more disposa$le income. D) less gi(ing $ecause households ould spend that money on lu6ury goods. Anser! C Diff! % Type! C
%rue/False 1)
3gnoring income effects' an increase in the age rate ill cause an increase in la$or supply. Anser! TR8> Diff! 1 Type! F
152
Consumer 2urplus Multiple Choice 1)
The loer the market price of ater' the ******** the ********* surplus. A) higher consumer B) loer consumer C) higher producer D) loer go(ernment Anser! A Diff! " Type! F
") The diamondKater parado6 states that the things ith the ****** (alue in use freuently ha(e ******* (alue in e6change. A) least the least B) least little or no C) greatest little or no D) greatest the greatest Anser! C Diff! 1 Type! D
%rue/False 1)
The diamondKater parado6 helps to illustrate the concept of marginal (alue. Anser! TR8> Diff! 1 Type! F
1,0
&ousehol' Choice in 4nput Mar+ets Multiple Choice Refer to the information provided in Figure 6.11 below to answer the questions that follow.
Figure $.
1,1
1) Refer to Figure ,.11. Nordon
Refer to the information provided in Figure 6.12 below to answer the questions that follow.
Figure $.!
") Refer to Figure ,.1". Art
1,"
Type! A
%) Assume leisure is a normal good. The su$stitution effect of a age decrease implies a ********** demand for leisure and a ********** la$or supply. A) loer higher B) higher loer C) higher higher D) loer loer Anser! B Diff! % Type! C
1,%
) 3f the su$stitution effect of a age change outeighs the income effect of a age change' the la$or4supply cur(e is A) upard sloping. B) hori+ontal. C) (ertical. D) $ackard $ending. Anser! A Diff! % Type! C
5) Assume leisure is an inferior good instead of a normal good. The income effect of a age increase ill l ead to a ********** demand for leisure and a ********** la$or supply. A) higher higher B) higher loer C) loer higher D) loer loer Anser! C Diff! % Type! C
,) Assuming that leisure is a normal good' if an indi(idual
1,
income effect is +ero. Anser! A Diff! " Type! F
ppen'i6 Multiple Choice 1)
Earry tells you that he prefers #epsi to Coke' Coke to /48#' and /48# to #epsi. This (iolates hat assumption made hen analy+ing consumer preferences: A) That more is $etter. B) That there is a diminishing marginal rate of su$stitution. C) That consumers are rational. D) That consumers are a$le to choose among all the com$inations of goods and ser(ices a(aila$le. Anser! C Diff! % Type! C
1,5
") &hen the consumer
B) TU 6 TU y
C) MU 6K P 6 MU yK P y D) TU 6K P 6 TU yK P y Anser!
C Diff! 1 Type! F
%) Assume ally is initially in euili$rium and that P and ; are normal goods for her. Then the price of X falls. For ally to mo(e to a ne euili$rium point her consumption of A) X must remain constant' $ut her consumption of Y must increase. B) X must decrease. C) X must increase. D)
$oth X and Y must increase. Anser! C Diff! " Type! A
) An assumption underlying indifference cur(e analysis is that MU 6K MU y A) increases as more of X and less of Y is consumed. B) decreases as more of X and less of Y is consumed. C)
1,,
remains constant as more of X and less of Y is consumed. D) alays euals one. Anser! B Diff! " Type! A
Refer to the information provided in the Figure 6.13 below to answer the questions that follow.
Figure $."
1,/
5) Refer to Figure ,.1%. 3f Arthur mo(es from indifference cur(e 1 to indifference cur(e "' then Arthur
Refer to the information provided in the Figure below to answer the questions that follow.
Figure $.#
,) Refer to Figure ,.1. Assume >llen has to products a(aila$le' pi++a and ham$urgers. >llen is alays illing to trade one pi++a for one ham$urger regardless of ho many pi++as and ham$urgers she has. >llen
1,
B. C) C. D) D. Anser! A Diff! % Type! C
1,2
/) Refer to Figure ,.1. Assume >llen has to products a(aila$le' pi++a and ham$urgers. >llen must $e compensated ith more pi++as as she gi(es up more $urgers. >llen
) As you mo(e don an indifference cur(e' the a$solute (alue of the slope A) increases. B) decreases. C) remains constant. D) initially increases and then decreases. Anser! B Diff! 1 Type! F
Refer to the information provided in Figure 6.15 below to answer the questions that follow.
1/0
Figure $.5
2) Refer to Figure ,.15. 3f the price of an ice cream cone is 9"' ason
1/1
10) Refer to Figure ,.15. ason ma6imi+es utility at #oint A) A.
B) B.
C) C .
D) D.
Anser! A Diff! " Type! A
11) Refer to Figure ,.15. The slope of the indifference cur(e is the ratio of the A) marginal utility of ice cream cones to the marginal utility of ice cream sandiches. B) marginal utility of ice cream sandiches to the marginal utility of ice cream cones. C) total utility of ice cream cones to the total utility of ice cream sandiches. D) total utility of ice cream sandiches to the total utility of ice cream cones. Anser! A Diff! " Type! D
1") Refer to Figure ,.15. At #oint A' the slope of the indifference cur(e is A) 40.,/. B) 41.5. C) 4%.0. D)
1/"
indeterminate $ecause the marginal utilities are unknon. Anser! A Diff! " Type! A
1%) Refer to Figure ,.15. 3f the price of an ice cream cone is 9"' the price of ice cream sandiches is A) 9". B) 9%. C) 950. D) 9100. Anser! B Diff! " Type! A
1/%
Refer to the information provided in the Figure 6.16 below to answer the questions that follow.
Figure $.$
1) Refer to Figure ,.1,. 3f the price of a hot dog is 9"' ason
15) The demand cur(e for X is deri(ed from indifference cur(es and a $udget constraint $y changing A) the le(el of income. B) the price of X . C) the price of Y . D) consumers< preferences. Anser!
1/
B Diff! % Type! C
%rue/False 1)
Assuming the properties of normal indifference cur(es' a consumer il l ma6imi+e his utilit y here his indifference cur(e is @ust tangent to his $udget constraint. Anser! TR8> Diff! 1 Type! F
1/5
Principles of Microeconomics, 8e (Case/Fair) Chapter : %he Pro'uction Process: %he ehaior of Profit7Ma6imiing Firms
. %otal reenue minus total cost is e9ual to A) the rate of return. B) marginal re(enue. C) profit. D) net cost. nser: C !. 4f economic profit is ero, a firm A) earns a negati(e rate of return. B) ill lea(e the industry. C) earns a positi(e $ut $elo normal rate of return. D) earns e6actly a normal rate of return. nser: 1 Refer to the information provided in Figure 7.2 below to answer the following questions.
Figure .! ". ;efer to Figure .!. %his corn pro'ucer pro'uces 33 ushels of corn an' sells each ushel at <5. %he cost of pro'ucing each unit ushel is
#. >ou on a uil'ing that has four possile uses: a cafe, a craft store, a har'are store, an' a oo+store. %he alue of the uil'ing in each use is ou 'eci'e to open a har'are store. %he opportunity cost of using this uil'ing for a har'are store is A) 9"'000' the (alue if the $uilding is used as a cafe. B) 9%'000' the (alue if the $uilding is used as a craft store. C) 910'000' the sum of the (alues if the $uilding is used for a cafe' a craft store' or a $ookstore. D) 95'000' the (alue if the $uilding is used for a $ookstore. nser: 1
10
2CE0;4* : >ou are the oner an' only employee of a company that rites computer softare that is use' y gamlers to collect sports 'ata. @ast year you earne' a total reenue of <3,333. >our costs for e9uipment, rent, an' supplies ere <$3,333. %o start this usiness you ineste' an amount of your on capital that coul' pay you a return of <#3,333 a year. 5. ;efer to 2cenario . 1uring the year your economic costs ere A) 90'000. B) 9,0'000. C) 9100'000. D) 91%0'000. nser: C $. ;efer to 2cenario . yearly normal rate of return for your computer softare firm oul' e A) 9"0'000. B) 90'000. C) 9,0'000. D) 9100'000. nser: . ;efer to 2cenario . >our accounting profit last year as A) 910'000. B) 9%0'000. C) 950'000. D) 9,0'000. nser: 8. ;efer to 2cenario . >our economic profit last year as A) 490'000. B) 4910'000. C) 910'000. D) 9%0'000. nser: . %here are 33 'og +ennels in tlanta. n economist stu'ying the pricing ehaior of 'og +ennels tells you that she is limiting her analysis to a time perio' that 'oes not allo for any ne 'og +ennels to enter the in'ustry or for any estalishe' 'og +ennels to leae the in'ustry. %he time perio' this economist referre' to is the A) market period. B) industry run. C) long run. D) short run. nser: 1 3. ssume the ool in'ustry is perfectly competitie. Ahy is it 'ifficult for a ool pro'ucer to ma+e e6cess profitsB A) The fact that ool producers are price takers.
11
B) The assumption that ool producers in the industry do not differentiate their products. C) The fact that the demand cur(e facing each ool producer is perfectly elastic. D) There is free entry into the ool industry. nser: 1 . ssume the ool in'ustry is perfectly competitie. %he mar+et 'eman' cure for ool is an' each in'ii'ual ool pro'ucer=s 'eman' cure is . A) donard sloping hori+ontal B) hori+ontal donard sloping C) hori+ontal hori+ontal D) donard sloping donard sloping nser: !. %he fast7foo' in'ustry is not consi'ere' perfectly competitie ecause: A) entry and e6it are strictly regulated $y the go(ernment. B) the firm
". %he optimal metho' of pro'uction is the one that A) ma6imi+es output regardless of cost. B) ma6imi+es inputs. C) minimi+es cost. D) minimi+es the normal rate of return. nser: C $se the information provided in "able 7.1 below to answer the questions that follow. %ale . 4nputs ;e9uire' to Pro'uce a Pro'uct -sing lternatie %echnologies
#. ;efer to %ale . aoe. Ahich technology is the most laor intensieB A) A B) B C) C D) D nser: 5. ;efer to %ale .. 4f the hourly age rate is < an' the hourly price of capital is <3, hich pro'uction technology shoul' e selecte'B A) A B) B 1"
C) C D) D nser: C $. %he ersion of the la of 'iminishing returns that applies to pro'uction A) implies that as e add more orkers our output decreases. B) applies only in the short run. C) is true only hen all inputs are (aria$le. D) applies in the short and long run. nser: . 2uppose output aries, ceteris parius, ith laor input in the folloing manner:
fter ho many units of laor 'o 'iminishing returns set inB A) % B) C) 5 D) They do not set in nser: 1 8. Ahen total pro'uct is ma6imie', marginal pro'uct A) and a(erage product are +ero. B) is positi(e $ut a(erage product is +ero. C) is +ero $ut a(erage product is positi(e. D) and a(erage product are positi(e. nser: C . Firms hae an incentie to sustitute laor for capital as the A) price of capital increases. B) price of capital decreases. C) price of la$or increases. D) marginal product of la$or decreases. nser: !3. t the Pampere' Pet 2alon the marginal pro'ucts of the first, secon', an' thir' or+ers are !3, $, an' 3 'ogs ashe', respectiely. %he total pro'uct (numer of 'ogs ashe') of the three or+er is A) 15.%%. B) %0. C) ,. D) 1%. nser: C !. 4f the pro'uct 'erie' from the last 'ollar spent on laor is greater than the pro'uct 'erie' from the last 'ollar spent on capital, then the firm A) is minimi+ing costs. B) should use more la$or and less capital to minimi+e costs. C) should use less la$or and more capital to minimi+e costs. 1%
D) should increase the price paid to la$or and decrease the price paid to capital to minimi+e costs. nser: !!. graph shoing all the cominations of capital an' laor that can e use' to pro'uce a gien amount of output is a(n) A) indifference cur(e. B) isouant. C) isocost line. D) production function. nser: !". graph shoing all the cominations of capital an' laor aailale for a gien total cost is the A) isocost line. B) isouant. C) $udget constraint. D) e6penditure set. nser: !#. %he point of tangency eteen an isocost line an' an iso9uant is necessarily A) the profit4ma6imi+ing com$ination of inputs that should $e hired to produce that output le(el. B) the least costly com$ination of inputs that can $e hired to produce the output le(el. C) $oth the profit4ma6imi+ing and least costly com$ination of inputs that can $e used to produce the output le(el. D) the minimum amount of output that can $e attained for that le(el of e6penditure. nser: !5. %he total cost cure for a firm can e 'erie' from iso9uants an' isocost lines y A) (arying the prices of capital and la$or and keeping total e6penditure constant. B) (arying production technologies' $ut keeping input prices and e6penditure le(els constant. C) (arying total e6penditures hile keeping input prices and production technology constant. D) (arying the price of either capital or la$or hile keeping total e6penditures and production technology constant. nser: C
1
Principles of Microeconomics, 8e (Case/Fair) Chapter 8: 2hort7;un Costs an' *utput 1ecisions Costs in the 2hort ;un Multiple Choice 1)
3n the short run A) e6isting firms do ?=T face limits imposed $y a fi6ed factor of production. B) all firms ha(e costs that they must $ear regardless of their output. C) ne firms can enter an industry. D) e6isting firms can e6it an industry. Anser! B Diff! 1 Type! F
") &hich statement is TR8>: Fi6ed costs
15
A) do ?=T e6ist in the long run. B) depend on the firm
%) >conomists usually assume that ******** is a fi6ed input in the ******* run. A) la$or short B) capital short C) la$or long D) capital long Anser! B Diff! 1 Type! F
) >conomists usually assume that la$or is ******* input in the ******* run. A) a fi6ed short B) a fi6ed long C) a (aria$le short D) part fi6ed and part (aria$le long Anser! C
1,
Diff! 1 Type! F
1/
5) The formula for total fi6ed cost is A) TFC TC G TVC . B) TFC TVC 4 TC . C) TFC TC KTVC . D) TFC TC 4 TVC . Anser!
D Diff! 1 Type! F
,) The an Ranger' a landscaping company' has total costs of 9'000 and total (aria$le costs of 91'000. The an Ranger
/) The Farley Farm' a dairy company' has total costs of 915'000 and total (aria$le costs of 9"'000. The Farley Farm
1
D) indeterminate $ecause the firm
) Amy spends 95'000 on remodeling a storefront that she then opens as a take4out deli. Business has not $een (ery successful' and she needs an additional 91'000 to keep the deli open. &hich of the folloing is TR8>: A) The 95'000 Amy spent on remodeling represents a part of the total (aria$le cost of her $usiness. B) The 95'000 Amy spent is a fi6ed cost of her $usiness. C) The 91'000 represents her marginal costs of production. D) The 91'000 Amy needs to keep the deli open represents her total fi6ed costs. Anser! B Diff! " Type! A
12
2) Dana spends 910'000 on remodeling a storefront that she then opens as a shoe store. The $usiness has not $een (ery successful' and she needs an additional 9%'000 to keep the shoe store open. &hich of the folloing is TR8>: A) The 910'000 Dana spent on remodeling represents a part of the total (aria$le cost of her $usiness. B) The 9%'000 represents her marginal costs of production. C) The 910'000 Dana spent on remodeling is a fi6ed cost of her $usiness. D) The 9%'000 Dana needs to keep the deli open represents her total fi6ed costs. Anser! C Diff! " Type! A
10) Firms ha(e ******* o(er their ******* costs in the short run. A) control fi6ed B) no control fi6ed C) control o(erhead D) no control (aria$le Anser! B Diff! 1 Type! F
11) The formula for a(erage fi6ed costs is A) TFC 4 q.
B) TFC Kq.
C) qKTFC .
D)
120
SqKSTFC . Anser! B Diff! 1 Type! F
Refer to the information provided in Figure .1 below to answer the questions that follow.
Figure 8.
121
1") Refer to Figure .1 a$o(e. The total fi6ed costs for Cyndy
Refer to the information provided in Figure .2 below to answer the questions that follow.
Figure 8.!
1%) Refer to Figure ." a$o(e. The total fi6ed costs for The Bar$er hop are 9%'000. 3f The Bar$er hop produces %00 hair cuts' the a(erage fi6ed costs are A) 9."0. B) 95. C) 910. D) 9100. Anser!
12"
C Diff! " Type! A
1) As output increases' a(erage fi6ed costs A) decrease. B) initially decrease and then increase. C) remain constant. D) increase. Anser! A Diff! 1 Type! F
12%
15) Both Qate and Qyle on saltater taffy factories. Qate
1,) hort4run costs that depend on the le(el of output are A) total fi6ed cost only. B) total (aria$le costs only. C) total costs only. D) $oth total (aria$le costs and total costs. Anser! D Diff! 1 Type! F
1/) The total (aria$le cost cur(e A) increases as output increases. B) shos the (aria$le cost of production gi(en current factor prices. C) starts at the origin.
12
D) All of the a$o(e Anser! D Diff! 1 Type! F
1) A point on a total (aria$le cost cur(e shos the ******** (aria$le cost a firm ill $ear to produce a certain output. A) highest B) loest C) change in D) a(erage Anser! B Diff! 1 Type! F
12) &hich of the folloing is most likely to $e a (aria$le cost for a firm: A) The interest payments made on loans B) The franchiser
125
Refer to the information provided in "able .1 below to answer the questions that follow. %ale 8.
"0) Refer to Ta$le .1. Assuming the price of la$or L) is 95 per unit and the price of capital K ) is 910 per unit' hat production techniue should this firm use to produce " units of output: A) #roduction techniue A B) #roduction techniue B C) The firm is indifferent $eteen production t echniue A and production techniue B. D) 3t is impossi$le to determine if the firm should select production techniue A or B $ecause total fi6ed costs are not gi(en. Anser! B Diff! " Type! A
"1) Refer to Ta$le .1. Assuming the price of la$or L) is 95 per unit and the price of capital K ) is 910 per unit' the total (aria$le cost of producing one unit of output is A) 91,. B) 9100. C) 91"0. D) 9""0. Anser! B
12,
Diff! " Type! A
"") Refer to Ta$le .1. Assume that the rele(ant time period is the short run. Assuming the price of la$or L) is 95 per unit and the price of capital K ) is 910 per unit' this firm
12/
"%) Refer to Ta$le .1. Assuming the price of la$or L) is 95 per unit and the price of capital K ) is 910 per unit' the marginal cost of producing the third unit of output is A) 9%0. B) 90. C) 950. D) indeterminate from this information. Anser! B Diff! " Type! A
") Refer to Ta$le .1. Assuming the price of la$or L) is 95 per unit and the price of capital K ) is 910 per unit' hich of the folloing statements is TR8>: A) The firm ill use production techniue A to produce all three units of output. B) The firm ill use production techniue B to produce all three units of output. C) The firm ill use production techniue B to produce the first to units of output and production techniue A to produce the third unit of output. D) The firm ill use production techniue A to produce the first unit and production techniue B to produce the second and third units of output. Anser! C Diff! " Type! A
"5) 7arginal cost A) is the increase in total cost resulting from producing one more unit. B) is the a(erage cost of production di(ided $y output. C)
12
euals the increase in AVC resulting from producing one more unit. D) alays euals a(erage cost. Anser! A Diff! " Type! D
",) A firm ill $egin to e6perience diminishing returns at the point here A) marginal cost increases. B) marginal cost decreases. C) marginal product increases. D) Both B and C Anser! A Diff! " Type! D
"/) Diminishing marginal returns implies A) decreasing a(erage (aria$le costs. B) decreasing marginal costs. C) increasing marginal costs. D) decreasing a(erage fi6ed costs. Anser! C Diff! " Type! D
") The e6planation for hy marginal cost is positi(e and rising in the short run is ******* marginal product of la$or in
122
the production process. A) a +ero B) a constant C) an increasing D) a diminishing Anser! D Diff! 1 Type! F
"2) 3n the short run hen the marginal product of la$or ********' the marginal cost of an additional unit of output *********. A) rises rises B) falls falls C) rises falls D) falls doesnOt change Anser! C Diff! " Type! F
%0) Total (aria$le costs A) initially increase as output increases and then decrease. B) alays decrease ith output. C) alays increase ith output. D) initially decrease and then increase ith output.
"00
C Diff! 1 Type! F
%1) The formula for MC is A) TVC Kq.
B) qKTVC .
C) STVC Kq. D) STVC KSq. Anser! D Diff! 1 Type! F
%") The formula for AVC is A) qKTVC .
B) TVC Kq.
C) STVC KSq. D) SqKSTVC . Anser! B Diff! 1 Type! F
"01
%%) Because marginal cost is alays ******** in the short run' total (aria$le cost alays ******** hen output increases. A) positi(e increases B) positi(e decreases C) negati(e increases D) negati(e decreases Anser! A Diff! " Type! C
%) 3n the short run here total (aria$le cost is ********* at an) ********* rate' marginal cost is positi(e and decreasing. A) increasing increasing B) increasing decreasing C) decreasing increasing D) decreasing decreasing Anser! B Diff! % Type! C
Refer to the information provided in Figure .3 below to answer the questions that follow.
"0"
Figure 8."
%5) Refer to Figure .%. The marginal cost of the 10th $asket$all is A) 9". B) 9%. C) 9%.05. D) 95.0. Anser! A Diff! " Type! A
"0%
%,) Refer to Figure .%. The marginal cost of the ninth $asket$all is A) less than 9". B) 9". C) 9%. D) greater than 9%. Anser! A Diff! % Type! A
%/) For >lliotlliot
Refer to the information provided in "able .2 below to answer the questions that follow. %ale 8.!
"0
%) Refer to Ta$le .". 3f herry produces +ero earrings' her total fi6ed costs are A) 90. B) 950. C) 9100. D) indeterminate from this information. Anser! C Diff! " Type! A
%2) Refer to Ta$le .". 3f herry produces one pair of earrings' her total (aria$le costs are A) 950. B) 9100. C) 9150. D) indeterminate from this information. Anser! A Diff! " Type! A
0) Refer to Ta$le .". 3f herry produces to pairs of earrings' her marginal cost is A) 90. B) 95. C) 9/".50. D)
"05
91"".50. Anser! A Diff! " Type! A
1) Refer to Ta$le .". 3f herry produces three pairs of earrings' her total (aria$le costs are A) 9",.,/. B) 910. C) 91/5. D) 9""5. Anser! B Diff! " Type! A
") Refer to Ta$le .". 3f herry produces fi(e pairs of earrings' her total costs are A) 9%"0. B) 9%,0. C) 9%/0. D) 900. Anser! C Diff! " Type! A
%) Refer to Ta$le .". 3f herry produces four pairs of earrings' her a(erage fi6ed costs are A) 9.
"0,
B) 9"0. C) 9"5. D) 9100. Anser! C Diff! " Type! A
) Refer to Ta$le .". Assume that herryarrings is producing in a perfectly competiti(e market and the market price for earrings is 9,0. To ma6imi+e profits herry should produce ********** pairs of earrings. A) to B) three C) four D) fi(e Anser! C Diff! " Type! A
"0/
5) 3f e kno a(erage total cost and the amount of output' then e can alays calculate total cost $y A) adding a(erage total cost and the amount of output. B) su$tracting the amount of output from a(erage total cost. C) multiplying a(erage total cost $y the amount of output. D) di(iding a(erage total cost $y the amount of output. Anser! C Diff! " Type! A
,) 3f marginal cost is a$o(e a(erage (aria$le cost' then A) a(erage (aria$le cost is increasing. B) marginal cost must $e decreasing. C) a(erage (aria$le cost is constant. D) a(erage (aria$le cost is decreasing. Anser! A Diff! 1 Type! F
/) 3f the marginal cost cur(e is $elo the a(erage (aria$le cost cur(e' then A) a(erage (aria$le costs are increasing. B) a(erage (aria$le costs are decreasing. C) marginal cost must $e decreasing. D)
"0
a(erage (aria$le costs could either $e increasing or decreasing. Anser! B Diff! 1 Type! F
) 3f the a(erage (aria$le cost cur(e is a$o(e the marginal cost cur(e' then A) marginal costs must $e decreasing. B) a(erage (aria$le costs must $e increasing. C) marginal costs must $e increasing. D) marginal costs can $e either increasing or decreasing. Anser! D Diff! 1 Type! F
2) The marginal cost cur(e intersects the a(erage (aria$le cost cur(e at the ******* (alue of the a(erage (aria$le cost cur(e. A) ma6imum B) minimum C) +ero D) a(erage Anser! B Diff! 1 Type! C
"02
50) Tenty4fi(e students in a class take a test for hich the a(erage grade is /5. Then a tenty4si6th student enters the class' takes the test' and scores 0. The test a(erage calculated ith ", students ill *******. A) rise a$o(e /5 B) fall $elo /5 C) change from /5 $ut the direction is unclear D) still eual /5 Anser! A Diff! 1 Type! C
51) 3f a firm
5") 3f a firm
"10
95. D) 92.%,. Anser! B Diff! " Type! A
5%) 3f the a(erage (aria$le cost of the fifth hat is 9%0' then the total (aria$le cost of fi(e hats is A) 9,. B) 9150. C) 9100. D) indeterminate from this information. Anser! B Diff! " Type! A
"11
Refer to the information provided in Figure .4 below to answer the questions that follow. %ost %urves for &i'ro (ven
Figure 8.#
5) Refer to Figure .. 7icro =(en
55) Refer to Figure .. 3f to microa(e o(ens are produced' 7icro =(en
"1"
Diff! " Type! A
5,) Refer to Figure .. 3f three microa(e o(ens are produced' a(erage (aria$le costs are A) 91,,.,/. B) 9%%%.%%. C) 9500. D) 91'500. Anser! A Diff! " Type! A
"1%
5/) Refer to Figure . The marginal cost of the third microa(e o(en is A) 91%%.%%. B) 9150. C) 9%50. D) indeterminate from this information. Anser! B Diff! " Type! A
5) Refer to Figure .. 8p to #oint A A) marginal costs are decreasing. B) marginal costs are increasing. C) a(erage (aria$le costs are decreasing. D) a(erage (aria$le costs are increasing. Anser! C Diff! " Type! A
52) Refer to Figure .. After #oint A A) a(erage total costs are increasing. B) marginal costs are decreasing. C) a(erage (aria$le costs are decreasing. D)
"1
a(erage (aria$le costs are increasing. Anser! D Diff! " Type! A
,0) Refer to Figure .. 7arginal costs i ll eual a(erage (aria$le costs at A) to microa(e o(ens. B) three microa(e o(ens. C) si6 microa(e o(ens. D) an indeterminate le(el of output from this information. Anser! C Diff! " Type! A
,1) Refer to Figure .. 3f si6 microa(e o(ens are produced' 7icro =(en
"15
,") Refer to Figure .. The marginal cost of the si6th microa(e o(en is A) 9%.%%. B) 911,.,/. C) 9"00. D) 91"00. Anser! B Diff! % Type! A
,%) Refer to Figure . A(erage (aria$le costs are mi nimi+ed at an output le(el A) of ". B) of %. C) of ,. D) that is indeterminate from this information. Anser! C Diff! " Type! A
,) Refer to Figure .. 3f si6 microa(e o(ens are produced' 7icro =(en
"1,
indeterminate from this information. Anser! B Diff! " Type! A
,5) Refer to Figure .. A(erage total costs ill $e minimi+ed at A) si6 microa(e o(ens. B) an output le(el $eteen three and si6 microa(e o(ens. C) to microa(e o(ens. D) an output le(el greater than si6 microa(e o(ens. Anser! D Diff! " Type! A
,,) Refer to Figure .. The (ertical distance AB represents A) total fi6ed costs. B) marginal costs. C) a(erage fi6ed costs. D) a(erage total costs. Anser! A Diff! " Type! A
"1/
Refer to the information provided in Figure .5 below to answer the questions that follow.
Figure 8.5
,/) Refer to Figure .5. The total fi6ed costs for =llie
,) Refer to Figure .5. 3f three o(ens are produced' a(erage (aria$le costs are A) 91,,.,/. B) 9%.%%. C) 9500.
"1
D) 91'500. Anser! B Diff! " Type! A
,2) Refer to Figure .5. The marginal cost of the third o(en is A) 950. B) 9100. C) 9150. D) indeterminate from this information. Anser! A Diff! " Type! A
"12
/0) A short run total cost schedule is a ********* cost schedule shifted upard $y the amount of ******** cost. A) total fi6ed marginal B) marginal total (aria$le C) total (aria$le total fi6ed D) total (aria$le marginal Anser! C Diff! 1 Type! F
/1) There are outputs for hich ******** costs e6ceed ******** costs i n the short run. A) total fi6ed total B) a(erage (aria$le a(erage total C) total (aria$le total D) a(erage total a(erage (aria$le Anser! D Diff! 1 Type! C
/") Total cost is A) TFC 4 TVC .
B) TFC KTVC .
C) TFC G TVC .
D)
""0
AFC G AVC . Anser!
C Diff! 1 Type! F
/%) ATC is
A) TC Kq.
B) qKTC .
C) AFC 4 AVC .
D) STC 4 Sq. Anser! A Diff! 1 Type! F
/) The Framing Nallery frames posters. The Framing Nallery has total fi6ed costs of 9500. The Framing Nallery
""1
/5) A(erage (aria$le cost and a(erage total costs get closer together as output increases $ecause A) diminishing returns set in. B) a(erage fi6ed costs decrease as output increases. C) marginal costs decrease as output increases. D) economies of scale $ecome apparent. Anser! B Diff! " Type! A
Refer to the information provided in Figure .6 below to answer the questions that follow.
Figure 8.$
/,) Refer to Figure .,. Cur(e 1 is =utdoor >uipment
"""
//) Refer to Figure .,. Cur(e " is =utdoor >uipment
/) Refer to Figure .,. Cur(e % is =utdoor >uipment
/2) Refer to Figure .,. The (ertical distance AB is =utdoor >uipment
""%
total cost. Anser! B Diff! " Type! D
0) 3f marginal cost is $elo a(erage total cost' a(erage total cost ill A) $e ma6imi+ed. B) $e decreasing. C) $e increasing. D) remain constant. Anser! B Diff! " Type! A
1) 3f marginal cost euals a(erage total cost' a(erage total cost ill A) $e ma6imi+ed. B) decrease. C) increase. D) $e minimi+ed. Anser! D Diff! " Type! A
") The short4run a(erage total cost cur(e e(entually $egins t o increase at an increasing rate $ecause of A) economies of scale. B)
""
the constraint that the firm cannot change production technologies. C) diminishing returns phenomena. D) increasing returns to scale. Anser! C Diff! 1 Type! F
%) The la of diminishing marginal returns A) results in a(erage total cost ATC ) and marginal cost MC ) cur(es e(entually increasing at an increasing rate. B) results in MC $ut not ATC cur(es e(entually increasing at an increasing rate. C) causes a(erage fi6ed costs to decline continuously as output increases. D) causes the difference $eteen a(erage total cost and a(erage (aria$le cost to shrink as output increases. Anser! A Diff! " Type! D
""5
) 3n the short run a firmOs loest cost le(el of output is the minimum point on its ********* cost cur(e. A) a(erage total B) total (aria$le C) a(erage fi6ed D) marginal Anser! A Diff! " Type! F
5) A firm is producing output less than the output associated ith the minimum point on the firmOs short run a(erage (aria$le cost cur(e. At this le(el of output the firm uses its fi6ed capital input ******** and its (aria$le la$or input *********. A) at the loest a(erage cost at the loest a(erage cost B) at the loest a(erage cost at a higher than the loest a(erage cost C) at a higher than the loest a(erage cost at the loest a(erage cost D) at a higher than the loest a(erage cost at a higher than the loest a(erage cost Anser! D Diff! % Type! C
,) Consider an output $eyond the minimum point of a firmOs short run a(erage total cost cur(e. At this le(el of output the firm can use its ******* input at a loer a(erage cost $ut only $y using its ******* input at a higher a(erage cost. A) fi6ed capital (aria$le la$or B) (aria$le la$or fi6ed capital C)
"",
(aria$le capital fi6ed la$or D) fi6ed la$or (aria$le capital Anser! A Diff! % Type! A
%rue/False 1)
A(erage fi6ed costs rise continuously as uantity of output rises. Anser! FA> Diff! 1 Type! F
") The increase in total cost that results from producing one more unit of output is the marginal cost. Anser! TR8> Diff! " Type! D
%) The $est com$ination of inputs at one le(el of production may not $e $est at other le(els. Anser! TR8> Diff! 1 Type! F
) 3f marginal cost is increasing' then a(erage (aria$le cost must $e increasing simultaneously. Anser! FA> Diff! 1 Type! F
*utput 1ecisions: ;eenues, Costs, an' Profit Ma6imiation Multiple Choice 1)
The main decision for a profit ma6imi+ing perfectly competiti(e firm is not hat ********** $ut hat
""/
***********. A) le(el of output to produce price to charge B) price to charge le(el of output to produce C) le(el of output to produce total re(enue to achie(e D) price to charge total cost to achie(e Anser! B Diff! 1 Type! F
") 3f an indi(idual perfectly competiti(e firm charges a price a$o(e the industry euili$rium price' it ill A) sell all that it can produce and gain eual re(enue ith competitors. B) sell all that it can produce and gain more re(enue than competitors. C) sell part of hat it can produce and gain less re(enue than competitors ill. D) not sell any of hat it produces. Anser! D Diff! 1 Type! F
%) 3f an indi(idual perfectly competiti(e firm charges a price $elo the industry euili$rium price' it ill A) not sell anything. B) sell part of hat it produces. C) sell all that it produces and gain more re(enue than competing firms ill. D) sell all that it produces $ut gain less re(enue than competing firms ill. Anser!
""
D Diff! 1 Type! F
) Any firm
B) P I q.
C) P Kq.
D) MRKq.
Anser! B Diff! 1 Type! F
""2
5) The added re(enue that a firm takes in hen it increases output $y one additional unit is ******* re(enue. A) total B) marginal C) (aria$le D) fi6ed Anser! B Diff! " Type! A
,) 7arginal re(enue is the A) ratio of total re(enue to uantity. B) difference $eteen total re(enue and total costs. C) added re(enue that a firm takes in hen it increases output $y one additional unit. D) additional profit the firm earns hen it sells an additional unit of output. Anser! C Diff! " Type! D
/) 3n perfect competition' the marginal re(enue cur(e A) and the demand cur(e facing the firm are identical. B) is alays a$o(e the demand cur(e facing the firm. C) is alays $elo the demand cur(e facing the firm. D)
"%0
intersects the demand cur(e hen marginal re(enue is minimi+ed. Anser! A Diff! 1 Type! F
) The relationship $eteen the price that a perfectly competiti(e firm can charge $uyers and the firmOs marginal re(enue is that the price is ********* marginal re(enue o(er all output. A) a$o(e B) $elo C) eual to D) sometimes a$o(e and sometimes $elo Anser! C Diff! 1 Type! F
2) #rofit4ma6imi+ing firms ant to ma6imi+e the difference $eteen A) total re(enue and marginal cost. B) total re(enue and total cost. C) marginal re(enue and marginal cost. D) marginal re(enue and a(erage cost. Anser! B Diff! 1 Type! F
"%1
10) Assume Dell Computer CompanyT7 operates in a perfectly competiti(e market producing 5'000 computers per day. At this output le(el' price e6ceeds this firm
Refer to the information provided in "able .5 below to answer the following questions. %ale 8.5
11) Refer to Ta$le .5. Assume that fruit $askets are sold in a perfectly competiti(e market. The market price of a fruit $asket is 9"". To ma6imi+e profits' >6otic Fruit should sell ********** fruit $askets). A) three B) four C) fi(e D) si6 Anser! D Diff! "
"%"
Type! A
1") Refer to Ta$le .5. Assume that fruit $askets are sold in a perfectly competiti(e market. The market price of a fruit $asket is 915. To ma6imi+e profits' >6otic Fruit should sell ********** fruit $askets). A) +ero B) to C) three D) fi(e Anser! D Diff! " Type! A
"%%
1%) 3f a firm
A Diff! % Type! C
1) 3f a profit ma6imi+ing firm is currently producing here MR MC ' it should A) increase output so that marginal re(enue is less than marginal cost. B) decrease output so that marginal re(enue ill $e greater than marginal cost and the firm
15) 3f a firm is producing here MR M MC ' A) the re(enue gained $y producing one more unit of output e6ceeds the cost incurred $y doing so. B) the re(enue gained $y producing one more unit of output euals the cost incurred $y doing so. C) the re(enue gained $y producing one more unit of output is less than the cost incurred $y doing so. D)
"%
the firm is already ma6imi+ing profits $ecause re(enue is $eing increased $y more than costs. Anser! A Diff! " Type! A
1,) oe
"%5
1/) The profit4ma6imi+ing le(el for all firms' regardless of industry structure' is the output le(el here A) TR MC .
B) P MC .
C) ATC P .
D) MC MR.
Anser! D Diff! 1 Type! F
Refer to the information provided in Figure .7 below to answer the questions that follow.
Figure 8.
1) Refer to Figure ./. 3f Buffy gi(es 1/ perms per day' her daily profit is A) 9%. B) 910. C) 95. D) 951. Anser! D Diff! "
"%,
Type! A
12) A firm in a perfectly competiti(e industry is producing 50 units' its profit4ma6imi+ing uantity. 3ndustry price is 9"' total fi6ed costs are 9"5' and total (aria$le costs are 90. The firm
"%/
"0) &heat is produced in a perfectly competiti(e market. 7arket demand for heat increases. This ill cause the indi(idual heat farmer
"1) Assume soy$eans are produced in a perfectly competiti(e industry. A soy$ean farmer is currently ma6imi+ing his profits. 3f the market price of soy$eans falls' after the farmer ad@usts to the ne price' he ill $e producing ********** $ushels of soy$eans and his profit ill $e **********. A) feer the same B) feer loer C) more the same D) the same num$er of the same Anser! B Diff! % Type! C
Refer to the information provided in Figure . below to answer the questions that follow.
"%
Figure 8.8
"") Refer to Figure .. This farmer
"%2
"%) Refer to Figure .. 3f this farmer is producing the profit4ma6imi+ing le(el of output' her profit is A) 90. B) 9"'00. C) 9%'000. D) 91"'000. Anser! C Diff! " Type! A
") Refer to Figure .. 3f the market price of soy$eans falls to 9' then to ma6imi+e profits this farmer should produce A) "00 $ushels of soy$eans. B) /00 $ushels of soy$eans. C) 1'000 $ushels of soy$eans. D) a le(el of output that is indeterminate from this information. Anser! B Diff! " Type! A
"5) Refer to Figure .. At the market price of 9 per $ushel' if this farmer produces /00 $ushels of soy$eans' the total re(enue ould $e A) 91'"00. B) 9"'00. C) 95',00. D)
"0
9'00. Anser! C Diff! " Type! A
Refer to the information provided in Figure .! below to answer the questions that follow.
Figure 8.
"1
",) Refer to Figure .2. This farmer
"/) Refer to Figure .2. 3f this farmer is producing the profit ma6imi+ing le(el of output' her profit is A) 90. B) 91'000. C) 9"'000. D) 9%'000. Anser! C Diff! " Type! A
") Refer to Figure .2. 3f the market price of hay falls to 91' then to ma6imi+e profits this farmer should produce A) %50 $ales of hay. B) 500 $ales of hay. C) /50 $ales of hay. D)
""
a le(el of output that is indeterminate from this information. Anser! A Diff! " Type! A
"2) Refer to Figure .2. At the market price of 91 per $ushel' if this farmer produces %50 $ales of hay' the total re(enue ould $e A) 91'"00. B) 9"'00. C) 95',00. D) 9,'%00. Anser! D Diff! " Type! A
%0) Refer to Figure .2. At the market price of 91' if this farmer produces the profit ma6imi+ing uantity' hat profit ill he make: A) 90 B) 9"'000 C) 9/00 D) indeterminant from this information Anser! A Diff! " Type! A %1) A perfectly competiti(e firm ill earn positi(e economic profits in the range of output for hich the firmOs price is ********* its minimum a(erage total cost. A)
"%
$elo B) a$o(e C) eual to D) $elo its marginal cost and Anser! B Diff! % Type! A
%") 3f a perfectly competiti(e firmOs a(erage total cost cur(e is a$o(e its demand schedule at e(ery le(el of output' then the firm ill earn ******* profits. A) positi(e B) $reake(en C) negati(e D) +ero Anser! C Diff! " Type! A
%%) A perfectly competiti(e firm $reaks e(en at the le(el of output here A) # M ATC B) # H ATC C) # ATC D) # 7C Anser! C
"
Diff! % Type! A
%) 3f # 7C and 7C M ATC' then a perfectly competiti(e firm ill earn ****** profits. A) positi(e B) +ero C) negati(e D) $reake(en Anser! A Diff! % Type! A
%5) 3f a perfectly competiti(e firm is currently producing here # 7C and 7C ATC' then the firm ill earn ******** profits. A) positi(e B) +ero C) negati(e D) a$o(e normal Anser! B Diff! " Type! A
"5
%,) 3f an industry supply cur(e increases hile the industry demand cur(e remains the same' then an indi(idual firm in a perfectly competiti(e industry currently earning positi(e profits ill see its profits *********. A) increase B) not change C) decrease D) impossi$le to determine Anser! C Diff! % Type! A
%/) The rising part of a perfectly competit i(e firmOs ******** cost cur(e is the firmOs short run ********* cur(e. A) a(erage total supply B) a(erage (aria$le demand C) a(erage fi6ed demand D) marginal supply Anser! D Diff! " Type! C
%) The la of supply holds for perfectly competiti(e firms assuming that each firm tries to A) ma6imi+e profits. B) minimi+e total costs C) ma6imi+e re(enue D)
",
minimi+e (aria$le costs Anser! A Diff! 1 Type! F
%rue/False 1)
The total re(enue cur(e for a perfectly competiti(e firm ill $e a straight line ith positi(e slope. Anser! TR8> Diff! 1 Type! F
") The marginal re(enue cur(e for a perfectly competiti(e firm ill $e donard sloping. Anser! FA> Diff! 1 Type! F
"/
) 7arginal costs reflect changes in (aria$le costs. Anser! TR8> Diff! 1 Type! F
5) The short4run is a period of less than one year. Anser! FA> Diff! " Type! D
,) The production decision is a short4run decision. Anser! TR8> Diff! " Type! D
"
