2.The minimum possible average variable cost of production for a video rental st
ID: 1094876 • Letter: 2
Question
2.The minimum possible average variable cost of production for a video rental store is $1 per tape rental. If the equilibrium price of tape rentals falls to $1,
a. the firm will earn economic profit.
b. the firm will incur economic losses that are less than its fixed costs.
c. the firm will incur economic losses exactly equal to its fixed costs.
d. the firm will incur economic losses that exceed its fixed costs.
4.A factory employing labor as a variable input is unionized. The new union wage contract increases hourly wages by 20 percent. If there's no shift in the average product of labor curve after the union contract takes effect, the average variable cost curve for output in the factory will
a. be unaffected.
b. shift down.
c. shift up.
d. flatten out, so that it becomes a straight line.
5.Technological and managerial improvements in the U.S. automobile industry have resulted in increases in productivity. Other things being equal, an increase in the average product of automobile workers will
a. decrease the average cost of producing automobiles.
b. increase the average cost of producing automobiles.
c. have no effect on the cost of producing automobiles.
d. decrease fixed costs of producing automobiles.
9.The minimum possible average cost of production for videotape rentals is $1.50, and the minimum possible average variable cost of production of a tape rental is $1. If you operate a videotape rental store and the market equilibrium price of tape rentals is $1.25, you will
a. shut down.
b. incur economic losses that exceed your fixed costs.
c. incur economic losses that equal your fixed costs.
d. earn economic profit.
e. incur economic losses that are less than your fixed costs.
10.Assume the T-shirt industry is perfectly competitive. If the industry is in long-run equilibrium when the market price of T-shirts is $11,
a. the minimum possible average variable cost of producing T-shirts is $11.
b. the marginal cost of producing T-shirts exceeds $11.
c. the minimum possible average cost of producing T-shirts is $11.
d. new firms will be entering the industry.
11.The graph above shows the cost curves in the long run prevailing for a firm selling in a perfectly competitive market. When the industry is in long-run competitive equilibrium,
a. the price of the product will be $6.
b. the firm will produce 100 units of output per day and earn zero economic profit.
c. the firm will earn $330 of economic profit per day.
d. the marginal cost of production will be $8.
12.If the price of the product is $3,
a. new firms will enter the industry.
b. the firm will just cover its opportunity cost of production.
c. the industry will be in long-run equilibrium.
d. firms will incur economic losses of $80 per day.
2.The minimum possible average variable cost of production for a video rental store is $1 per tape rental. If the equilibrium price of tape rentals falls to $1, a. the firm will earn economic profit. b. the firm will incur economic losses that are less than its fixed costs. c. the firm will incur economic losses exactly equal to its fixed costs. d. the firm will incur economic losses that exceed its fixed costs. 4.A factory employing labor as a variable input is unionized. The new union wage contract increases hourly wages by 20 percent. If there's no shift in the average product of labor curve after the union contract takes effect, the average variable cost curve for output in the factory will a. be unaffected. b. shift down. c. shift up. d. flatten out, so that it becomes a straight line. 5.Technological and managerial improvements in the U.S. automobile industry have resulted in increases in productivity. Other things being equal, an increase in the average product of automobile workers will a. decrease the average cost of producing automobiles. b. increase the average cost of producing automobiles. c. have no effect on the cost of producing automobiles. d. decrease fixed costs of producing automobiles. 9.The minimum possible average cost of production for videotape rentals is $1.50, and the minimum possible average variable cost of production of a tape rental is $1. If you operate a videotape rental store and the market equilibrium price of tape rentals is $1.25, you will a. shut down. b. incur economic losses that exceed your fixed costs. c. incur economic losses that equal your fixed costs. d. earn economic profit. e. incur economic losses that are less than your fixed costs. 10.Assume the T-shirt industry is perfectly competitive. If the industry is in long-run equilibrium when the market price of T-shirts is $11, a. the minimum possible average variable cost of producing T-shirts is $11. b. the marginal cost of producing T-shirts exceeds $11. c. the minimum possible average cost of producing T-shirts is $11. d. new firms will be entering the industry. 11.The graph above shows the cost curves in the long run prevailing for a firm selling in a perfectly competitive market. When the industry is in long-run competitive equilibrium, a. the price of the product will be $6. b. the firm will produce 100 units of output per day and earn zero economic profit. c. the firm will earn $330 of economic profit per day. d. the marginal cost of production will be $8. 12.If the price of the product is $3, a. new firms will enter the industry. b. the firm will just cover its opportunity cost of production. c. the industry will be in long-run equilibrium. d. firms will incur economic losses of $80 per day.Explanation / Answer
2) b
4) b. Because the price for same output is going up (draw a graph and see for yourself)
5)d. Increase in productivity will lower the average fixed costs. But, the variable costs might increase owing to higher labor product
9)a,e losses are clearly less than fixed costs and the store will eventually be shut down for lack of capital
10)d)There will be profits when the output is higher. So, new firms will enter the industry than can give higher outputs thereby maximizing profits until long run equilibrium
11)b. All the three curves intersect at the point with 100 unit output a day. There the economic profit is zero
12)d. the equilibrium price is $4. This will incur a loss of $1 per unit sold
Since 80 units are sold, $80 loss is incurred
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