Question 1

Individual supply curves generally slope ________ because ________.

Accepted Answer

A) downward; sellers become more efficient with practice. 
B) upward; profits increase with quantity. 
C) downward; inputs are cheaper when purchased in high volume. 
D) upward; of increasing opportunity costs. 
A) downward; sellers become more efficient with practice. 
B) upward; profits increase with quantity. 
C) downward; inputs are cheaper when purchased in high volume. 
D) upward; of increasing opportunity costs.

Question 2

Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the accompanying table. $$\begin{array} { | c | c | } 
\hline \text { Number d Mugs Per Day } & \text { Tatal Cast Per Day } \
\hline 0 & \$ 10 \
\hline 1 & \$ 14 \
\hline 2 & \$ 19 \
\hline 3 & \$ 25 \
\hline 4 & \$ 32 \
\hline 5 & \$ 40 \
\hline 6 & \$ 49 \
\hline
\end{array}$$  
The marginal cost if the 4ᵗʰ mug per day is ________.

Accepted Answer

A) $5 
B) $7 
C) $8 
D) $32 
A) $5 
B) $7 
C) $8 
D) $32

Question 3

Average total cost is defined as:

Accepted Answer

A) total cost divided by total output. 
B) total cost divided by price. 
C) variable cost divided by total output. 
D) variable cost divided by price. 
A) total cost divided by total output. 
B) total cost divided by price. 
C) variable cost divided by total output. 
D) variable cost divided by price.

Question 4

Refer to the accompanying figure. Suppose a law is passed requiring restaurants to charge no more than $25 per meal. This law would:

Accepted Answer

A) decrease producer surplus. 
B) increase producer surplus. 
C) have no effect on producer surplus. 
D) have an ambiguous effect on producer surplus. 
A) decrease producer surplus. 
B) increase producer surplus. 
C) have no effect on producer surplus. 
D) have an ambiguous effect on producer surplus.

Question 5

If a firm spends $400 to produce 20 units of output and spends $880 to produce 40 units, then between 20 and 40 units of output, the marginal cost of production is:

Accepted Answer

A) $20. 
B) $24. 
C) $22. 
D) $480. 
A) $20. 
B) $24. 
C) $22. 
D) $480.

Question 6

Suppose Ben owns a small company that makes kites. The market for kites is perfectly competitive, and kites sell for $25 each. Ben's total production costs vary depending on the number of kites he makes each day, as shown in the accompanying table. $$\begin{array} { | c | c | } 
\hline \text { Number d kites Per Day } & \text { Tutal Cast Per Day (\$) } \
\hline 0 & 100 \
\hline 1 & 110 \
\hline 2 & 126 \
\hline 3 & 148 \
\hline 4 & 172 \
\hline 5 & 200 \
\hline 6 & 235 \
\hline
\end{array}$$  
Should Ben shut down?

Accepted Answer

A) Yes, because his economic profit is negative. 
B) Yes, because he cannot earn enough revenue to cover his variable cost. 
C) No, because his economic profit is positive. 
D) No, because he can earn enough revenue to cover his variable cost. 
A) Yes, because his economic profit is negative. 
B) Yes, because he cannot earn enough revenue to cover his variable cost. 
C) No, because his economic profit is positive. 
D) No, because he can earn enough revenue to cover his variable cost.

Question 7

In general, when the price of a variable factor of production increases:

Accepted Answer

A) total cost falls. 
B) the profit maximizing level of output rises. 
C) the profit-maximizing price falls. 
D) marginal cost rises. 
A) total cost falls. 
B) the profit maximizing level of output rises. 
C) the profit-maximizing price falls. 
D) marginal cost rises.

Question 8

Which of the following is the most likely to be a fixed factor of production at a pizza restaurant?

Accepted Answer

A) The number of waiters 
B) The size of the seating area 
C) The amount of pizza dough 
D) The amount of electricity 
A) The number of waiters 
B) The size of the seating area 
C) The amount of pizza dough 
D) The amount of electricity

Question 9

Suppose Ben owns a small company that makes kites. The market for kites is perfectly competitive, and kites sell for $25 each. Ben's total production costs vary depending on the number of kites he makes each day, as shown in the accompanying table. $$\begin{array} { | c | c | } 
\hline \text { Number d kites Per Day } & \text { Tutal Cast Per Day (\$) } \
\hline 0 & 100 \
\hline 1 & 110 \
\hline 2 & 126 \
\hline 3 & 148 \
\hline 4 & 172 \
\hline 5 & 200 \
\hline 6 & 235 \
\hline
\end{array}$$  
What is Ben's economic profit at his profit-maximizing level of output?

Accepted Answer

A) −$72 
B) −$73 
C) −$75 
D) −$100 
A) −$72 
B) −$73 
C) −$75 
D) −$100

Question 10

Total revenue minus both explicit and implicit costs defines a firm's:

Accepted Answer

A) gross earnings. 
B) profit. 
C) marginal earnings. 
D) net worth. 
A) gross earnings. 
B) profit. 
C) marginal earnings. 
D) net worth.

Question 11

The difference between the price a seller actually receives for a good and the seller's reservation price is:

Accepted Answer

A) producer surplus. 
B) profit. 
C) variable cost. 
D) consumer surplus. 
A) producer surplus. 
B) profit. 
C) variable cost. 
D) consumer surplus.

Question 12

Suppose 30 employees per day can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output would require:

Accepted Answer

A) an additional 30 employees per day. 
B) more than 30 additional employees per day. 
C) a total of 60 or fewer employees per day. 
D) fewer than 30 additional employees per day. 
A) an additional 30 employees per day. 
B) more than 30 additional employees per day. 
C) a total of 60 or fewer employees per day. 
D) fewer than 30 additional employees per day.

Question 13

For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. As the market price of this good increases, the quantity produced by this seller will ________.

Accepted Answer

A) increase 
B) decrease 
C) stay the same 
D) stay the same until the price rises above $6 per unit, and then it will increase 
A) increase 
B) decrease 
C) stay the same 
D) stay the same until the price rises above $6 per unit, and then it will increase

Question 14

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table.    
What is the lowest price per window that would induce John to spend at least one hour per day cleaning windows?

Accepted Answer

A) $7 
B) $1 
C) $3 
D) $2 
A) $7 
B) $1 
C) $3 
D) $2

Question 15

Suppose Sarah owns a small company that makes wedding cakes. The accompanying table shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day. $$\begin{array} { | c | c | } 
\hline \text { Number of Cales Per Day } & \text { Tatal Cast Per Day } \
\hline 0 & \$ 100 \
\hline 1 & \$ 180 \
\hline 2 & \$ 220 \
\hline 3 & \$ 300 \
\hline 4 & \$ 400 \
\hline 5 & \$ 520 \
\hline 6 & \$ 660 \
\hline
\end{array}$$  
If the market for wedding cakes is perfectly competitive, and wedding cakes sell for $125 each, then at her profit-maximizing level of output, Sarah's profit will be ________ per day.

Accepted Answer

A) $90 
B) $100 
C) $105 
D) $625 
A) $90 
B) $100 
C) $105 
D) $625

Question 16

The long run is best defined as:

Accepted Answer

A) one year or more. 
B) a period of time sufficiently long that all factors of production are variable. 
C) the period of time between annual accounting reports. 
D) a period of time sufficiently long that at least one factor of production is fixed. 
A) one year or more. 
B) a period of time sufficiently long that all factors of production are variable. 
C) the period of time between annual accounting reports. 
D) a period of time sufficiently long that at least one factor of production is fixed.

Question 17

Suppose a profit-maximizing firm in a perfectly competitive market is earning an economic profit of $1,345. If the firm's fixed cost increases from $200 to $300, the firm will:

Accepted Answer

A) reduce its output. 
B) raise its price. 
C) earn a greater profit. 
D) earn a smaller profit. 
A) reduce its output. 
B) raise its price. 
C) earn a greater profit. 
D) earn a smaller profit.

Question 18

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table.    
How many hours a day should John spend cleaning windows?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 19

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table.    
What is the lowest price per window that John would be willing to accept to spend 4 hours per day cleaning windows?

Accepted Answer

A) $7 
B) $2 
C) $3.50 
D) $11 
A) $7 
B) $2 
C) $3.50 
D) $11

Question 20

Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will:

Accepted Answer

A) intensify its production of good X. 
B) shift into producing good Y. 
C) anticipate a price increase for good X. 
D) charge a higher price for good X. 
A) intensify its production of good X. 
B) shift into producing good Y. 
C) anticipate a price increase for good X. 
D) charge a higher price for good X.

Exam 6: Perfectly Competitive Supply

Individual supply curves generally slope ________ because ________.

Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the accompanying table. Number d Mugs Per Day Tatal Cast Per Day 0 \ 10 1 \ 14 2 \ 19 3 \ 25 4 \ 32 5 \ 40 6 \ 49 The marginal cost if the 4ᵗʰ mug per day is ________.

Average total cost is defined as:

Refer to the accompanying figure. Suppose a law is passed requiring restaurants to charge no more than $25 per meal. This law would:

If a firm spends $400 to produce 20 units of output and spends $880 to produce 40 units, then between 20 and 40 units of output, the marginal cost of production is:

In general, when the price of a variable factor of production increases:

Which of the following is the most likely to be a fixed factor of production at a pizza restaurant?

Total revenue minus both explicit and implicit costs defines a firm's:

The difference between the price a seller actually receives for a good and the seller's reservation price is:

Suppose 30 employees per day can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output would require:

For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. As the market price of this good increases, the quantity produced by this seller will ________.

The long run is best defined as:

Suppose a profit-maximizing firm in a perfectly competitive market is earning an economic profit of $1,345. If the firm's fixed cost increases from $200 to $300, the firm will:

Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

Individual supply curves generally slope because .