Econ Test 3

1.

1 point

When a negative externality exists in a market, the cost to the producers

is greater than the cost to society

will be the same as the cost to society

will be less than the cost to society

will differ from the cost to society, regardless of whether an externality is present

2.

1 point

Economists normally assume that the goal of the firm is to

maximize its total revenue

maximize its profit

minimize its explicit costs

minimize its total costs

3.

1 point

When the entry and/or exit of the firms in an perfectly competitive industry does not affect the costs of the firms in the industry

the long run market supply curve will be horizontal

the long run market supply curve will be upward sloping

the longrun market supply curve will be downward sloping

the owners of the firms have no choice but to shut down their firms

4.

1 point

Economies of scale occur when a firm's

marginal costs are constant as output increases

long run average total costs are decreasing as output increases

long run average total costs are increasing as output increases

marginal costs are equal to average total costs for all levels of output

5.

1 point

As an example of an explicit cost of production would be the

cost of forgone labor earnings for an entreprenuer

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

lease payments for the land on which a firms factory stands

Both a and c are correct

6.

1 point

Which of the following statements best reflects a price-taking firm

if the firm were to charge more than the market price, it would sell none of its goods

the firm has an incentive to charge less than the market price to earn a higher revenue

the firm can sell only a limited amount of output at the market price before the market price will fall

price taking firms maximize profits by charging a price above marginal cost

7.

1 point

A negative externality will cause a private market to produce

less than is socially desirable

more than is socially desirable

exactly the quantity that is socially desirable

less than the same market would produce in the presence of a positive externailty

8.

1 point

According to Arthur Laffer, the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like (that is, what does a Laffer Curve look like?)

a U

an upside-down U

a horizontal straight line

upward sloping straight line

9.

1 point

Which of the following statements best expresses a firms profit maximizing decision rule assuming that price exceeds average variable cost?

If marginal revenue is greater than marginal cost, the firm should increase its output

If marginal revenue is less than marginal cost, the firm should decrease its output

If marginal revenue equals marginal cost, the firm should produce exactly the current output

all the above are correct

10.

1 point

When total revenue is less that total variable costs, a firm in a perfectly competitive market will

continue to operate as long as average revenue exceeds marginal cost

continue to operate as long as average revenue exceeds average fixed cost

shut down

raise its price

11.

1 point

the amount by which total costs increases when the firm produces one additional unit of output is called

average cost

marginal cost

fixed cost

variable cost

12.

1 point

When new firms have an incentive to enter a perfectly competitive market, their entry will

increase the price of their product

drive down profits and existing firms in the market

shift the market supply curve to the left

increase demand for the product

13.

1 point

If marginal cost is greater than average total cost, then

profits are increasing

economies of scale are becoming greater

average total cost remains constant

average total cost is increasing

14.

1 point

Given that q is the profit maximizing output, when a profit maximizing firm is earning profits, those profits can be calculated by

P x q

(MC-AVC) x q

(P-ATC) x q

(P-AVC) x q

15.

1 point

The marginal product of labor can be defined as

change in profit/change in labor

change in output/change in labor

change in labor/change in output

change in labor/change in total cost

16.

1 point

If education produces positive externalities, we would expect

the government to tax education

the government to subsidize education

students to major in economics so they can explain the benefits to a friend

college to relax admission requirements

17.

1 point

When the firms are either entering nor exiting, a perfectly competitive market,

Total revenue must equal total variable cost for each firm

economic profits must be zero

price must equal average variable cost for each firm

both a and c are correct

18.

1 point

Negative externalities occur when one persons actions

cause another person to lose money in stock market transaction

cause his or her employer to lose business

reveal his or her preference for foreign produced goods.

adversely affect the well being of a bystander who is not party to the action

19.

1 point

a production function is the relationship between inputs and

quantity of output

revenue

costs

profit

20.

1 point

profit is defined as

net revenue minus depreciation

total revenue minus total cost

average revenue minus average total cost

marginal revenue minus marginal cost

21.

1 point

The total cost of production for a firm is the

amount a firm recieves for the sale of its output

fixed cost less variable cost

market value of the inputs a firm uses in production

quantity of output minus the quantity of inputs used to make a good.

22.

1 point

average total cost can be calculated as

the quantity of output divided by the total cost

the total cost minus the quantity of output

average variable cost plus total fixed cost

the total cost divided by the quantity of output

23.

1 point

the perfectly competitive firm's short run supply curve is its

marginal revenue curve, but only the portion where marginal revenue exceeds marginal cost

marginal cost curve

marginal cost curve, but only the portion above the minimum of average total cost

marginal cost curve, but only the portion above the minimum of average variable cost

24.

1 point

in the long run, a firm that produces and sells computers gets to choose

how many workers to hire

the size of its factories

which short run average total cost curve to use

all the above are correct

25.

1 point

Which of the following is not a characteristic of a perfectly competitive market

firms are price takers

it is very difficult for new firms to enter the market

there are many sellers in the market

goods offered for sale are(essentially) the same

26.

1 point

If marginal cost is equal to average total cost, than

marginal cost is minimized

average total cost is minimized

average variable cost is minimized

marginal cost is zero