Question 1

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

Accepted Answer

A) The land on which the farm is located 
B) The number of workers hired to harvest the crops 
C) The amount of fertilizer used each week 
D) The amount of water used each day 
A) The land on which the farm is located 
B) The number of workers hired to harvest the crops 
C) The amount of fertilizer used each week 
D) The amount of water used each day

Question 2

Suppose a firm produces the level of output at which the marginal cost of the last unit produced equals the price of the good. Which of the following statements is always true?

Accepted Answer

A) The firm should shutdown if its total revenue is less than its variable cost. 
B) The firm will earn a positive economic profit. 
C) The firm is maximizing its profit. 
D) The firm should produce more if its economic profit is positive. 
A) The firm should shutdown if its total revenue is less than its variable cost. 
B) The firm will earn a positive economic profit. 
C) The firm is maximizing its profit. 
D) The firm should produce more if its economic profit is positive.

Question 3

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each.    
Between 25 and 50 pizzas per day, the pizzeria's marginal cost is ________.

Accepted Answer

A) $4 
B) $6 
C) $8 
D) $16 
A) $4 
B) $6 
C) $8 
D) $16

Question 4

The accompanying table describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour.    
If the price of a telephone increases to from $5 to $10 an hour and nothing else changes, then:

Accepted Answer

A) total cost would not change. 
B) marginal cost would increase by $5 at every level of output. 
C) marginal cost would not change. 
D) average total cost would increase by $5 at every level of output. 
A) total cost would not change. 
B) marginal cost would increase by $5 at every level of output. 
C) marginal cost would not change. 
D) average total cost would increase by $5 at every level of output.

Question 5

Refer to the accompanying figure. The equilibrium price in this market is ________ and the equilibrium quantity is ________.

Accepted Answer

A) $25; 25 
B) $25; 30 
C) $30; 25 
D) $30; 30 
A) $25; 25 
B) $25; 30 
C) $30; 25 
D) $30; 30

Question 6

As price increases, firms in a perfectly competitive market find that it is:

Accepted Answer

A) beneficial to produce more units of output. 
B) more difficult to sell their product. 
C) beneficial to produce fewer units of output. 
D) easier to sell their product. 
A) beneficial to produce more units of output. 
B) more difficult to sell their product. 
C) beneficial to produce fewer units of output. 
D) easier to sell their product.

Question 7

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's profit-maximizing level of output is ________.

Accepted Answer

A) 30 
B) 60 
C) 80 
D) 100 
A) 30 
B) 60 
C) 80 
D) 100

Question 8

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 John's opportunity cost of cleaning windows for an hour?

Accepted Answer

A) $14 
B) $8 
C) $7 
D) $2 
A) $14 
B) $8 
C) $7 
D) $2

Question 9

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. If the market price of this good is $6, how many units would this seller produce?

Accepted Answer

A) 50 
B) 150 
C) 250 
D) 300 
A) 50 
B) 150 
C) 250 
D) 300

Question 10

The primary objective of most private firms is to:

Accepted Answer

A) maximize revenue. 
B) maximize profit. 
C) minimize cost. 
D) maximize output. 
A) maximize revenue. 
B) maximize profit. 
C) minimize cost. 
D) maximize output.

Question 11

Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 10 cents, then this firm:

Accepted Answer

A) should shut down. 
B) should produce 50 doughnuts. 
C) should shut down in the long run. 
D) will earn an economic loss. 
A) should shut down. 
B) should produce 50 doughnuts. 
C) should shut down in the long run. 
D) will earn an economic loss.

Question 12

A technological innovation that reduces a firm's cost of producing additional units of output will lead to:

Accepted Answer

A) an increase in the quantity supplied by the firm, but no change in the firm's supply. 
B) an increase in the firm's supply. 
C) a decrease in the quantity supplied by the firm, but no change in the firm's supply. 
D) a decrease in the firm's supply. 
A) an increase in the quantity supplied by the firm, but no change in the firm's supply. 
B) an increase in the firm's supply. 
C) a decrease in the quantity supplied by the firm, but no change in the firm's supply. 
D) a decrease in the firm's supply.

Question 13

If crude oil is a variable factor of production for a firm, then an increase in the price of crude oil will lead to:

Accepted Answer

A) a decrease in the quantity supplied by the firm, but no change in the firm's supply. 
B) a decrease in the firm's supply. 
C) an increase in the quantity supplied by the firm, but no change in the firm's supply. 
D) an increase in the firm's supply. 
A) a decrease in the quantity supplied by the firm, but no change in the firm's supply. 
B) a decrease in the firm's supply. 
C) an increase in the quantity supplied by the firm, but no change in the firm's supply. 
D) an increase in the firm's supply.

Question 14

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. $$\begin{array} { | c | c | } 
\hline \text { Number d Mugs Per Day } & \text { Tatal Cast Per Day } \
\hline 0 & \$ 10 \
\hline 1 & \$ 14 \
\hline 2 & \$ 19 \
\hline 3 & \$ 25 \
\hline 4 & \$ 32 \
\hline 5 & \$ 40 \
\hline 6 & \$ 49 \
\hline
\end{array}$$  
If the market for mugs is perfectly competitive, and mugs sell for $7.50 each, then Chris should make ________ mugs per day.

Accepted Answer

A) 0 
B) 4 
C) 5 
D) 6 
A) 0 
B) 4 
C) 5 
D) 6

Question 15

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The accompanying table describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day.    
When the firm uses 9 employee-hours per day, its total revenue each day is:

Accepted Answer

A) $240. 
B) $160. 
C) $120. 
D) $18. 
A) $240. 
B) $160. 
C) $120. 
D) $18.

Question 16

Your neighbors have offered to pay you to look after their dog while they are on vacation. It will take you one hour per day to feed, walk, and care for the dog, which you can do either before or after you go to work. Your regular job pays $10 per hour, and you can work up to eight hours per day. The smallest amount of money you would accept to look after your neighbor's dog each day is equal to:

Accepted Answer

A) $10, because that is your opportunity cost of one hour of work. 
B) $15, because overtime wages are generally 1.5 times your regular wage when you work more than eight hours a day. 
C) zero, because your regular job is not available for more than eight hours per day. 
D) the value you place on one hour of leisure. 
A) $10, because that is your opportunity cost of one hour of work. 
B) $15, because overtime wages are generally 1.5 times your regular wage when you work more than eight hours a day. 
C) zero, because your regular job is not available for more than eight hours per day. 
D) the value you place on one hour of leisure.

Question 17

When Acme Dynamite produces 250 units of output, its variable cost is $2,000, and its fixed cost is $500. It sells each unit of output for $25. If the price of dynamite drops to $10, should Acme Dynamite continue to operate in the short run?

Accepted Answer

A) No, because price is less than average total cost. 
B) Yes, because price is less than average variable cost. 
C) No, because price is not greater than average total cost. 
D) Yes, because price is greater than average variable cost. 
A) No, because price is less than average total cost. 
B) Yes, because price is less than average variable cost. 
C) No, because price is not greater than average total cost. 
D) Yes, because price is greater than average variable cost.

Question 18

Which of the following statements is true for both Microsoft and a locally owned restaurant?

Accepted Answer

A) Both are perfect competitors. 
B) Both confront perfectly elastic demand for their products. 
C) Neither firm is able to influence the price of their products. 
D) Both seek to maximize profits. 
A) Both are perfect competitors. 
B) Both confront perfectly elastic demand for their products. 
C) Neither firm is able to influence the price of their products. 
D) Both seek to maximize profits.

Question 19

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The accompanying table describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day.    
When the firm uses 9 employee-hours per day, it earns a daily ________ of ________.

Accepted Answer

A) loss; $64 
B) profit; $64 
C) loss; $114 
D) profit; $114 
A) loss; $64 
B) profit; $64 
C) loss; $114 
D) profit; $114

Question 20

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.    
Should John spend a third hour cleaning windows?

Accepted Answer

A) Yes, because he would earn $28. 
B) Yes, because the additional amount he would earn is $14, which is greater than his opportunity cost of $7. 
C) No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7. 
D) Yes, because the additional amount he would earn is $6, which is better than earning nothing. 
A) Yes, because he would earn $28. 
B) Yes, because the additional amount he would earn is $14, which is greater than his opportunity cost of $7. 
C) No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7. 
D) Yes, because the additional amount he would earn is $6, which is better than earning nothing.

Exam 6: Perfectly Competitive Supply

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

Suppose a firm produces the level of output at which the marginal cost of the last unit produced equals the price of the good. Which of the following statements is always true?

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. Between 25 and 50 pizzas per day, the pizzeria's marginal cost is ________.

Refer to the accompanying figure. The equilibrium price in this market is ________ and the equilibrium quantity is ________.

As price increases, firms in a perfectly competitive market find that it is:

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's profit-maximizing level of output is ________.

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. If the market price of this good is $6, how many units would this seller produce?

The primary objective of most private firms is to:

Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 10 cents, then this firm:

A technological innovation that reduces a firm's cost of producing additional units of output will lead to:

If crude oil is a variable factor of production for a firm, then an increase in the price of crude oil will lead to:

When Acme Dynamite produces 250 units of output, its variable cost is $2,000, and its fixed cost is $500. It sells each unit of output for $25. If the price of dynamite drops to $10, should Acme Dynamite continue to operate in the short run?

Which of the following statements is true for both Microsoft and a locally owned restaurant?

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

Refer to the accompanying figure. The equilibrium price in this market is and the equilibrium quantity is .