Please help answers the following reviewer questions for final exam. Thanks. 1 T
ID: 1227453 • Letter: P
Question
Please help answers the following reviewer questions for final exam. Thanks.
1 The short run is defined as a:
a. period of time less than 1 year.
b. period of time less than 6 months.
c. period in which some factors of production are considered to be fixed in quantity.
d. time period in which some factors of production are fixed, but it cannot exceed 1 year.
2. Trevor’s Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for a price of $65. Trevor’s Tire Company’s total cost is
a.
$7,500.
b.
$25,000.
c.
$32,500.
d.
$67,500.
3 A fixed factor of production is defined in the text as one:
a. that exists in nature and there is only so much of it.
b. that can be used for one thing only.
c. that can never produce more or less in any time period.
d. whose quantity cannot be changed in a particular period.
4 A relationship between output and the quantity of a variable factor of production used in a period, given the levels of all other factors of production is a(n):
a. budget constraint.
b. planning curve.
c. indifference curve.
d. total product curve.
5. Assuming that all other factors of production are held constant, marginal product is the change in ________ output resulting from a 1-unit change in _______ .
a. total; a variable input
b. total; a fixed input
c. total; average product
d. per unit; a fixed input
6. The difference between accounting profit and economic profit is
a.
explicit costs.
b.
implicit costs.
c.
total revenue.
d.
marginal product.
7. A farm can produce 1,000 bushels of wheat per year with 2 workers and 1,300 bushels of
wheat per year with 3 workers. The marginal product of the third worker is:
a. 100 bushels.
b. 300 bushels.
c. 1,300 bushels.
d. 2,300 bushels.
8. Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold?
a.
$5 and 50 units
b.
$5 and 100 units
c.
$10 and 50 units
d.
$10 and 100 units
9. Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each. Which of the following statements is correct?
(i)
Marginal revenue equals $3.
(ii)
Average revenue equals $600.
(iii)
Average revenue exceeds marginal revenue, but we don’t know by how much.
a.
(i) only
b.
(iii) only
c.
(i) and (ii) only
d.
(i), (ii), and (iii)
10. Which of the following statements is correct?
a.
The value of the marginal product curve is the labor demand curve for competitive, profit-maximizing firms.
b.
A competitive, profit-maximizing firm hires workers up to the point where the value of the marginal product of labor equals the wage.
c.
By hiring labor up to the point where the value of the marginal product of labor equals the wage, the firm is producing where price equals marginal cost.
d.
All of the above are correct.
11. The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which
a.
total revenue is equal to variable cost.
b.
total revenue is equal to fixed cost.
c.
total revenue is equal to total cost.
d.
profit is maximized.
12. Which of the following statements best expresses a firm’s profit-maximizing decision rule?
a.
If marginal revenue is greater than marginal cost, the firm should increase its output.
b.
If marginal revenue is less than marginal cost, the firm should shut down in the short run.
c.
If marginal revenue equals marginal cost, the firm should produce exactly one more unit of output.
d.
All of the above are correct.
13. A monopoly
a.
can set the price it charges for its output and earn unlimited profits.
b.
takes the market price as given and earns small but positive profits.
c.
can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.
d.
can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits.
14. The fundamental source of monopoly power is
a.
barriers to entry.
b.
profit.
c.
decreasing average total cost.
d.
a product without close substitutes.
15. A benefit of a monopoly is
a.
efficient production.
b.
decreasing long-run marginal costs.
c.
profit that can be invested in research and development.
d.
All of the above are correct.
16. Which of the following is not an example of a barrier to entry?
a.
Mighty Mitch’s Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world.
b.
A pharmaceutical company obtains a patent for a specific high blood pressure medication.
c.
A musician obtains a copyright for her original song.
d.
An entrepreneur opens a popular new restaurant.
17. Imperfectly competitive firms are characterized by
a.
horizontal demand curves.
b.
standardized products.
c.
a large number of small firms.
d.
price setting ability.
18. Patent and copyright laws are major sources of
a.
natural monopolies.
b.
government-created monopolies.
c.
resource monopolies.
d.
antitrust regulation.
19. The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)
a.
perfectly competitive market.
b.
monopolistically competitive market.
c.
oligopoly.
d.
monopoly.
20. One key difference between an oligopoly market and a competitive market is that oligopolistic firms
a.
are price takers while competitive firms are not.
b.
can affect the profit of other firms in the market by the choices they make while firms in competitive markets do not affect each other by the choices they make.
c.
sell completely unrelated products while competitive firms do not.
d.
sell their product at a price equal to marginal cost while competitive firms do not.
21. Which of the following is a characteristic of a natural monopoly?
a.
Fixed costs are typically a small portion of total costs.
b.
Average total cost declines over large regions of output.
c.
The product sold is a natural resource such as diamonds or water.
d.
All of the above are correct.
22. The marginal product of labor is defined as the change in
a.
output per additional unit of revenue.
b.
output per additional unit of labor.
c.
revenue per additional unit of labor.
d.
revenue per additional unit of output.
23. A competitive firm sells its output for $30 per unit. The marginal product of the 10th worker is 20 units of output per day; the marginal product of the 11th worker is 16 units of output per day. The firm pays its workers a wage of $150 per day. For the 11th worker, the value of the marginal product of labor is
a.
$120.
b.
$240.
c.
$480.
d.
$2,400.
24. Typically, as a firm hires additional workers, the marginal product of labor
a.
decreases, and the value of the marginal product of labor decreases.
b.
stays constant, and the value of the marginal product of labor decreases.
c.
decreases, and the value of the marginal product of labor stays constant.
d.
decreases, and the value of the marginal product of labor increases.
25. The value of the marginal product of any input is equal to the marginal product of that input multiplied by the
a.
wage.
b.
marginal cost of the output.
c.
change in total profit.
d.
market price of the output.
a.
$7,500.
b.
$25,000.
c.
$32,500.
d.
$67,500.
Explanation / Answer
Ans.
1 The short run is defined as a:
c. period in which some factors of production are considered to be fixed in quantity.
2. Trevor’s Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for a price of $65. Trevor’s Tire Company’s total cost is
a.
$7,500.
b.
$25,000. (=$500 x 50)
c.
$32,500.
d.
$67,500.
3 A fixed factor of production is defined in the text as one:
a. that exists in nature and there is only so much of it.
b. that can be used for one thing only.
c. that can never produce more or less in any time period.
d. whose quantity cannot be changed in a particular period.
4 A relationship between output and the quantity of a variable factor of production used in a period, given the levels of all other factors of production is a(n):
d. total product curve.
5. Assuming that all other factors of production are held constant, marginal product is the change in ________ output resulting from a 1-unit change in _______ .
a. total; a variable input
6. The difference between accounting profit and economic profit
b.
implicit costs
c.
total revenue.
d.
marginal product.
7. A farm can produce 1,000 bushels of wheat per year with 2 workers and 1,300 bushels of
wheat per year with 3 workers. The marginal product of the third worker is:
a. 100 bushels.
b. 300 bushels.
c. 1,300 bushels.
d. 2,300 bushels.
8. Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold?
a.
$5 and 50 units
b.
$5 and 100 units
c.
$10 and 50 units
d.
$10 and 100 units
9. Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each. Which of the following statements is correct?
(i)
Marginal revenue equals $3. (MR=AR=P)
(ii)
Average revenue equals $600.
(iii)
Average revenue exceeds marginal revenue, but we don’t know by how much.
a.
(i) only
b.
(iii) only
c.
(i) and (ii) only
d.
(i), (ii), and (iii)
10. Which of the following statements is correct?
a.
The value of the marginal product curve is the labor demand curve for competitive, profit-maximizing firms.
b.
A competitive, profit-maximizing firm hires workers up to the point where the value of the marginal product of labor equals the wage.
c.
By hiring labor up to the point where the value of the marginal product of labor equals the wage, the firm is producing where price equals marginal cost.
d.
All of the above are correct.
11. The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which
a.
total revenue is equal to variable cost.
b.
total revenue is equal to fixed cost.
c.
total revenue is equal to total cost.
d.
profit is maximized.
12. Which of the following statements best expresses a firm’s profit-maximizing decision rule?
a.
If marginal revenue is greater than marginal cost, the firm should increase its output.
b.
If marginal revenue is less than marginal cost, the firm should shut down in the short run.
c.
If marginal revenue equals marginal cost, the firm should produce exactly one more unit of output.
d.
All of the above are correct.
13. A monopoly
a.
can set the price it charges for its output and earn unlimited profits.
b.
takes the market price as given and earns small but positive profits.
c.
can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.
d.
can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits.
14. The fundamental source of monopoly power is
a.
barriers to entry.
b.
profit.
c.
decreasing average total cost.
d.
a product without close substitutes.
15. A benefit of a monopoly is
a.
efficient production.
b.
decreasing long-run marginal costs.
c.
profit that can be invested in research and development.
d.
All of the above are correct.
16. Which of the following is not an example of a barrier to entry?
a.
Mighty Mitch’s Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world.
b.
A pharmaceutical company obtains a patent for a specific high blood pressure medication.
c.
A musician obtains a copyright for her original song.
d.
An entrepreneur opens a popular new restaurant.
17. Imperfectly competitive firms are characterized by
a.
horizontal demand curves.
b.
standardized products.
c.
a large number of small firms.
d.
price setting ability.
18. Patent and copyright laws are major sources of
a.
natural monopolies.
b.
government-created monopolies.
c.
resource monopolies.
d.
antitrust regulation.
19. The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)
a.
perfectly competitive market.
b.
monopolistically competitive market.
c.
oligopoly.
d.
monopoly.
20. One key difference between an oligopoly market and a competitive market is that oligopolistic firms
a.
are price takers while competitive firms are not.
b.
can affect the profit of other firms in the market by the choices they make while firms in competitive markets do not affect each other by the choices they make.
c.
sell completely unrelated products while competitive firms do not.
d.
sell their product at a price equal to marginal cost while competitive firms do not.
21. Which of the following is a characteristic of a natural monopoly?
a.
Fixed costs are typically a small portion of total costs.
b.
Average total cost declines over large regions of output.
c.
The product sold is a natural resource such as diamonds or water.
d.
All of the above are correct.
22. The marginal product of labor is defined as the change in
a.
output per additional unit of revenue.
b.
output per additional unit of labor.
c.
revenue per additional unit of labor.
d.
revenue per additional unit of output.
23. A competitive firm sells its output for $30 per unit. The marginal product of the 10th worker is 20 units of output per day; the marginal product of the 11th worker is 16 units of output per day. The firm pays its workers a wage of $150 per day. For the 11th worker, the value of the marginal product of labor is
a.
$120.
b.
$240.
c.
$480.
d.
$2,400.
24. Typically, as a firm hires additional workers, the marginal product of labor
a.
decreases, and the value of the marginal product of labor decreases.
b.
stays constant, and the value of the marginal product of labor decreases.
c.
decreases, and the value of the marginal product of labor stays constant.
d.
decreases, and the value of the marginal product of labor increases.
25. The value of the marginal product of any input is equal to the marginal product of that input multiplied by the
a.
wage.
b.
marginal cost of the output.
c.
change in total profit.
d.
market price of the output.
Correct Answers have been highlighted.
a.
$7,500.
b.
$25,000. (=$500 x 50)
c.
$32,500.
d.
$67,500.
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