2. (Points: 1.0) In an industry characterized by constant cost (across the indus
ID: 1254669 • Letter: 2
Question
2. (Points: 1.0)In an industry characterized by constant cost (across the industry), the long run market supply curve is
1. decreasing
2. horizontal
3. increasing
4. indeterminate
5. vertical
6. (Points: 1.0)
Which ordering best describes how a perfectly competitive industry (characterized by constant cost) would respond to a sudden increase in popularity of the product? The market demand curve will shift to the right causing the market
1. price to increase, and all firms in the industry will earn higher profits at lower quantities of output.
2. price to increase. Increased profits will encourage new firms to enter the market. The market supply curve will shift to the right. When the market returns to its long-run equilibrium, quantity will be higher, but price will be the same as before the surge.
3. price to increase, and a new long-run equilibrium to be established at a higher price and a higher quantity.
4. price and quantity to increase. The market supply curve will shift to the left and the new long-run market equilibrium will be at a a higher price, but at the same quantity as before the surge.
5. price and quantity to increase. Increased profits will encourage new firms to enter the industry. The market supply curve shifts to the right. The new long-run market equilibrium will be at a higher quantity and higher price than before the surge in popularity.
9. (Points: 1.0)
Private incentives in markets with external benefits lead to ………… while private incentives in markets with external costs lead to ………..
1. deadweight loss; deadweight loss
2. excess total economic surplus; efficiency
3. maximum total economic surplus; deadweight loss
4. excess total economic surplus; deadweight loss
F) efficiency; efficiency
10. (Points: 1.0)
Suppose that computers are produced using labor and capital. Assume that capital is fixed in the short run and that the computer manufacturers cannot influence the price of labor. An improvement in the technology of producing computers will
1. increase the marginal product of labor which will cause the short-run marginal cost to decrease, and the short-run supply curve to shift left
2. increase the marginal product of labor which will cause the short-run marginal cost to increase, and the short-run supply curve to shift right
3. decrease the marginal product of labor which will cause the short-run marginal cost to increase, and the short-run supply curve to shift right
4. increase the marginal product of labor which will cause the short-run marginal cost to decrease, and the short-run supply curve to shift to the right
5. decrease the marginal product of labor which will cause the short-run marginal cost to decrease, and the short-run supply curve to shift right
13. (Points: 1.0)
Chris was the business manager for a real estate firm earning an annual salary of $40,000. Then Chris decided to open a consulting business. Chris hired an administrative assistant at $15,000 per year and rents office space (utilities included) for $3,000 per month. Chris earned $100,000 in total revenue the first year.
Chris's economic profit is _______.
1. $9,000
2. $100,000
3. $49,000
4. $60,000
5. $64,000
Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Pat's accounting profit (loss) is
1. -$1,000
2. $ 50,000
3. $ 6,000
4. $ 15,000
5. $ 34,000
15. (Points: 1.0)
Suppose a firm is collecting $1,700 in total revenues and the total costs associated to its variable factors of production are $1,900 at its current level of output. One can predict that the firm will
1. continue to operate.
2. raise its price.
3. earn a loss.
4. shutdown.
5. earn a profit
16. (Points: 1.0)
The price a firm' s output is $9 and the marginal cost of the last unit produced is $8.50. This means the
1. the benefit associated to the last unit produced is greater than the extra cost.
2. the benefit associated to the last unit produced is less than the extra cost.
3. firm is earning an average profit of $0.50.
4. firm should lower its output to increase profits.
5. firm is earning profits.
17. (Points: 1.0)
The law of diminishing marginal returns
1. applies only to small and medium sized firms.
2. is both a short and long run concept.
3. is a short run concept.
4. is a long run concept.
5. applies only to large firms.
18. (Points: 1.0)
At a total cost of $3,100, a company can produce 4 scooters. It has fixed costs of $1,000. If it produces 6 scooters, the costs of production total $3,900. Which of the following statement is true?
1. The Total Variable Costs of producing 4 scooters is $3,100.
2. when output is between 4 and 6 scooters the company's Short-run Marginal Cost is $400.
3. The Total Variable Costs of producing 6 scooters is $3,900.
4. At an output of 6 scooters, the company's Average Total Cost is $600.
5. when output is between 4 and 6 scooters the company's Short-run Marginal Cost is $1000.
Explanation / Answer
2. (Points: 1.0)
In an industry characterized by constant cost (across the industry), the long run market supply curve is
1. decreasing
2. horizontal
3. increasing
4. indeterminate
5. vertical
Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Pat's accounting profit (loss) is
1. -$1,000
2. $ 50,000
3. $ 6,000
4. $ 15,000
5. $ 34,000
15. (Points: 1.0)
Suppose a firm is collecting $1,700 in total revenues and the total costs associated to its variable factors of production are $1,900 at its current level of output. One can predict that the firm will
1. continue to operate.
2. raise its price.
3. earn a loss.
4. shutdown.
5. earn a profit
16. (Points: 1.0)
The price a firm' s output is $9 and the marginal cost of the last unit produced is $8.50. This means the
1. the benefit associated to the last unit produced is greater than the extra cost.
2. the benefit associated to the last unit produced is less than the extra cost.
3. firm is earning an average profit of $0.50.
4. firm should lower its output to increase profits.
5. firm is earning profits.
17. (Points: 1.0)
The law of diminishing marginal returns
1. applies only to small and medium sized firms.
2. is both a short and long run concept.
3. is a short run concept.
4. is a long run concept.
5. applies only to large firms.
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