# Econ Exam 2

### 75 terms by Nicholas_Z

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### Which of the following is correct as it relates to cost curves?

Marginal cost intersects average total cost at the latter's minimum point.

### The law of diminishing marginal utility states that

beyond some point additional units of a product will yield less and less extra satisfaction to a consumer.

\$8

### The long run is characterized by

he ability of the firm to change its plant size

### Suppose that, when producing 10 units of output, a firm's AVC is \$22, its AFC is \$5, and its MC is \$30. This

firm's total cost is \$270

### The law of diminishing marginal utility explains why

demand curves slope downward

### The theory of consumer behavior assumes that:

consumers behave rationally, attempting to maximize their satisfaction

oligopoly.

MP is zero.

### The basic characteristic of the short run is that

the firm does not have sufficient time to change the size of its plant.

total profit.

### Which of the following is not a characteristic of pure competition?

price strategies by firms

### Refer to the above diagram. The vertical distance between ATC and AVC reflects:

the average fixed cost at each level of output.

### Refer to the above data. In the long run the firm should use plant size "A" for:

10 to 30 units of output.

\$15.

15

### Refer to the above short-run production and cost data. In Figure B curve (3) is

MC and curve (4) is AVC.

### Accounting profits equal total revenue minus

total explicit costs.

\$35.

### When diseconomies of scale occur:

the long-run average total cost curve rises.

### Refer to the above short-run production and cost data. The curves of Figures A and B suggest that:

marginal cost reaches a minimum where marginal product is at its maximum.

20.

\$6 and \$4

### A consumer who has a limited budget will maximize utility or satisfaction when the:

ratios of the marginal utility of each product purchased divided by its price are equal.

### If a firm increases all of its inputs by 10 percent and its output increases by 10 percent, then:

it is encountering constant returns to scale.

\$13.33.

### An industry comprised of a very large number of sellers producing a standardized product is known as:

pure competition.

TFC+TVC/Q

45.

### The short run is characterized by:

fixed plant capacity.

### The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is:

8 units of utility.

### If total utility is increasing, marginal utility:

is positive, but may be either increasing or decreasing.

### In the above diagram curves 1, 2, and 3 represent the:

marginal, average, and total product curves respectively.

### As the firm in the above diagram expands from plant size #3 to plant size #5, it experiences:

economies of scale.

### Use the following data to answer the next question(s). The letters A, B, and C designate three successively larger plant sizes. Refer to the above data. In the long run the firm should use plant size "C" for:

all units of output greater than 80.

### Economies of scale are indicated by:

the declining segment of the long-run average total cost curve.

### To maximize utility a consumer should allocate money income so that the:

marginal utility obtained from the last dollar spent on each product is the same.

total utility.

a "price taker."

### When a consumer shifts purchases from product X to product Y the marginal utility of:

X rises and the marginal utility of Y falls.

\$16.

\$8.

\$105.

### Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa= 5 and MUb/Pb= 8. Ben should purchase:

more of B and less of A.

### Average fixed cost:

declines continually as output increases.

### An industry comprised of 40 firms, none of which has more than 3 percent of the total market for a differentiated product is an example of:

monopolistic competition.

0BEQ.

zero.

0BEQ plus BCDE.

### Economies and diseconomies of scale explain:

why the firm's long-run average total cost curve is U-shaped.

### In the above figure, curves 1, 2, 3, and 4 represent the:

MC, ATC, AVC, and AFC curves respectively.

pure monopoly

### Marginal cost is the:

change in total cost that results from producing one more unit of output.

### If MUa/Pa= 100/\$35 = MUb/Pb= 300/? = MUc/Pc= 400/?, the prices of products b and c in consumer equilibrium:

are \$105 and \$140 respectively.

### Marginal product is:

the increase in total output attributable to the employment of one more worker.

its fixed costs.

BCDE.

### Suppose that MUx/Pxexceeds MUy/Py. To maximize utility the consumer who is spending all her money income should buy:

more of X and less of Y.

### Suppose you have a limited money income and you are purchasing products A and B whose prices happen to be the same. To maximize your utility you should purchase A and B in such amounts that:

their marginal utilities are the same.

### The basic difference between the short run and the long run is that:

at least one resource is fixed in the short run, while all resources are variable in the long run.

### Fixed cost is:

any cost which does not change when the firm changes its output.

-5

### In the long run:

all costs are variable costs.

### To economists, the main difference between the short run and the long run is that:

in the long run all resources are variable, while in the short run at least one resource is fixed.

\$37

### Economic profits are calculated by subtracting:

explicit and implicit costs from total revenue.

### Refer to the above short-run production and cost data. In Figure A curve (1) is:

average product and curve (2) is marginal product.

### If a firm increases all of its inputs by 10 percent and its output increases by 15 percent, then:

it is encountering economies of scale.

### If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that:

economies of scale are being realized.

### Marginal product is:

the increase in total output attributable to the employment of one more worker.

### The theory of consumer behavior assumes that:

consumers behave rationally, attempting to maximize their satisfaction.

\$8.

0BEQ.

### In the long run:

all costs are variable costs.

Example: