Econ Final Exam Test 1 And 2
Questions And Answers
/. Belinda is the owner of a department store. Last year her total revenue was $525,000
and her total labor costs were $200,00. Her overhead expenses, including insurance
and legal fees, were $175,000. The rent on the building was $45,000. Belinda could
earn $105,000 per year working at a nearby department store. If her total revenue
increases to $600,000 this year and all of her other expenses are held constant we
know that her economic profit is now - Answer-✅$75,000
/.A firm's production function is similar to a recipe used to make a cake in the sense that
the production function shows the combination of _________ used to produce
________. - Answer-✅inputs ; outputs
/.If a firm hires another worker and her marginal product of labor is negative, we know
that the firm's total out is - Answer-✅decreasing
/.In the accompanying table, diminishing marginal product begins after the _______ unit
of output. (Ex 2. 4) - Answer-✅second
/.Assume that a firm hires an additional employee. If the marginal product for that
employee is greater than for the previous employee hired, it must be because - Answer-
✅there are gains from specialization
/.Kareem's AFC was ________ per bike. (Ex 2, 6) - Answer-✅$375
/.If the marginal cost curve is U-shaped - Answer-✅there are productivity gains from
specialization before diminishing marginal product sets in.
/.Samantha owns a gas station. If she moves into a larger lot but finds that her average
costs have increased in the long run, we know that Samantha is experiencing - Answer-
✅diseconomies of scale.
/.In competitive markets - Answer-✅buyers can expect to find consistently low prices
and wide availability of the goods that they want.
/.Firms in every market structure - Answer-✅will attempt to maximize profits.
/.If this firm is maximizing profits, total revenue is represented by the area (Ex 2 11) -
Answer-✅A x C
, /.A company produces at an output level where marginal revenue is equal to marginal
cost and has the following revenue and cost levels:
Marginal cost curve intersects the AVC curve at $140.
Marginal cost curve intersects the ATC curve at $150.
Marginal cost curve intersects the marginal revenue curve at $200.
What do you suggest this firm should do in the short run? - Answer-✅The firm should
continue to produce at a profit level of $50 per unit.
/.What should a firm in a competitive market do if there is no possible output where the
price would at least be equal to average variable costs? - Answer-✅The firm should
shut down in the short run.
/.A firm would be making positive profits if the price is (Ex 2 14) - Answer-✅above $5
/.A firm would shut down in the short run if the price is (Ex 2 15) - Answer-✅below $4
/.It's easy to determine if a firm is making long-run production decisions by looking at its
cost structure because, in the long run, a firm does not have any _____ costs. - Answer-
✅fixed
/.You shop at the local drugstore because it is convenient. This situation is best
described as - Answer-✅monopolistic competition with differentiation by location.
/.Caskets are produced in a monopolistic competitive market. One producer, Final
Boxes, sells 20 caskets a week at a price of $550 each. Its average total cost is $600.
From this information, we know that - Answer-✅this producer is losing $1000 a week.
/.Which of the following is the best example of a monopolistically competitive market? -
Answer-✅retail clothing stores.
/.In the long run, both monopolistic competition and competitive markets result in -
Answer-✅zero economic profit for firms.
/.To maximize profit, the monopolistically competitive firm show will charge a price per
unit of (Ex 2 21) - Answer-✅$20.17
/.Which of the following best describes the relationship between price and marginal
revenues for monopolistic competitors? - Answer-✅Price is above marginal revenue, as
a general rule, regardless of the number of firms in the monopolistically competitive
industry.
/.If monopolistically competitive firms are making positive economic profits, then new
firms would - Answer-✅begin to enter the industry
Questions And Answers
/. Belinda is the owner of a department store. Last year her total revenue was $525,000
and her total labor costs were $200,00. Her overhead expenses, including insurance
and legal fees, were $175,000. The rent on the building was $45,000. Belinda could
earn $105,000 per year working at a nearby department store. If her total revenue
increases to $600,000 this year and all of her other expenses are held constant we
know that her economic profit is now - Answer-✅$75,000
/.A firm's production function is similar to a recipe used to make a cake in the sense that
the production function shows the combination of _________ used to produce
________. - Answer-✅inputs ; outputs
/.If a firm hires another worker and her marginal product of labor is negative, we know
that the firm's total out is - Answer-✅decreasing
/.In the accompanying table, diminishing marginal product begins after the _______ unit
of output. (Ex 2. 4) - Answer-✅second
/.Assume that a firm hires an additional employee. If the marginal product for that
employee is greater than for the previous employee hired, it must be because - Answer-
✅there are gains from specialization
/.Kareem's AFC was ________ per bike. (Ex 2, 6) - Answer-✅$375
/.If the marginal cost curve is U-shaped - Answer-✅there are productivity gains from
specialization before diminishing marginal product sets in.
/.Samantha owns a gas station. If she moves into a larger lot but finds that her average
costs have increased in the long run, we know that Samantha is experiencing - Answer-
✅diseconomies of scale.
/.In competitive markets - Answer-✅buyers can expect to find consistently low prices
and wide availability of the goods that they want.
/.Firms in every market structure - Answer-✅will attempt to maximize profits.
/.If this firm is maximizing profits, total revenue is represented by the area (Ex 2 11) -
Answer-✅A x C
, /.A company produces at an output level where marginal revenue is equal to marginal
cost and has the following revenue and cost levels:
Marginal cost curve intersects the AVC curve at $140.
Marginal cost curve intersects the ATC curve at $150.
Marginal cost curve intersects the marginal revenue curve at $200.
What do you suggest this firm should do in the short run? - Answer-✅The firm should
continue to produce at a profit level of $50 per unit.
/.What should a firm in a competitive market do if there is no possible output where the
price would at least be equal to average variable costs? - Answer-✅The firm should
shut down in the short run.
/.A firm would be making positive profits if the price is (Ex 2 14) - Answer-✅above $5
/.A firm would shut down in the short run if the price is (Ex 2 15) - Answer-✅below $4
/.It's easy to determine if a firm is making long-run production decisions by looking at its
cost structure because, in the long run, a firm does not have any _____ costs. - Answer-
✅fixed
/.You shop at the local drugstore because it is convenient. This situation is best
described as - Answer-✅monopolistic competition with differentiation by location.
/.Caskets are produced in a monopolistic competitive market. One producer, Final
Boxes, sells 20 caskets a week at a price of $550 each. Its average total cost is $600.
From this information, we know that - Answer-✅this producer is losing $1000 a week.
/.Which of the following is the best example of a monopolistically competitive market? -
Answer-✅retail clothing stores.
/.In the long run, both monopolistic competition and competitive markets result in -
Answer-✅zero economic profit for firms.
/.To maximize profit, the monopolistically competitive firm show will charge a price per
unit of (Ex 2 21) - Answer-✅$20.17
/.Which of the following best describes the relationship between price and marginal
revenues for monopolistic competitors? - Answer-✅Price is above marginal revenue, as
a general rule, regardless of the number of firms in the monopolistically competitive
industry.
/.If monopolistically competitive firms are making positive economic profits, then new
firms would - Answer-✅begin to enter the industry
