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CEN- module 21-27
Terms in this set (67)
The relationship between a firm's inputs and its quantity of output is known as the:
The short run is the period of time in which:
at least one input is fixed.
The term diminishing returns refers to a:
decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.
When drawing a total product curve, what is placed on the vertical axis of the graph?
quantity of output
The marginal product of labor is the:
slope of the total product of labor curve.
When Caroline's dress factory hires two workers, the total product is 50 dresses. When she hires three workers, total product is 48, and when she hires four workers, total product is 45. The marginal product of the third and fourth workers is:
decreasing and negative.
The long run is a planning period:
over which a firm can consider all inputs as variable.
Which cost concept is correctly defined?
ATC = AVC + AFC
The total cost curve is:
The larger the output, the greater the quantity of output over which fixed cost is spread. Called the _____ effect, this leads to a _____.
spreading; lower average fixed cost
Average total cost is the ratio of:
total cost to the quantity of output.
When Aishe's Bar-B-Que produces 10 pork sandwiches, the total cost is $5. When 11 pork sandwiches are produced, the total cost rises to $6. The marginal cost of the eleventh pork sandwich:
is greater than the average cost of 11 pork sandwiches.
Buford Bus Manufacturing installs a new assembly line. As a result, the output produced per worker increases. The marginal cost of output at Buford:
will decrease (the MC curve will shift down).
Average variable cost is:
total variable cost divided by output.
The marginal cost curve intersects the average variable cost curve at:
its lowest point.
Krista operates a dry-cleaning business in Tampa that incurs $900 per month in fixed costs. Last month her total output equaled 3,000 pounds of clothes. This month her total output fell to 2,700 pounds. This means her average fixed cost _____ by a little more than _____.
increased; 3.33 cents
When a fine caterer produces 30 catered meals, its marginal cost and average variable cost each equal $10. Therefore, assuming normally shaped cost curves, at 29 meals its marginal cost:
is less than $10 and its average variable cost is more than $10.
The curve that shows the additional cost of producing each additional unit of output is called the:
marginal cost curve.
Marginal cost is the change in:
total cost divided by the change in output.
Shelby runs a business producing picture frames. This month her total cost of production is $10,000, her variable cost of production is $6,000, and she produces 3,000 picture frames. It follows that:
average variable cost is $2.
When long-run average total cost declines as output increases:
there are increasing returns to scale.
It is common in large beer breweries for the long-run average total cost to decline as output increases. This indicates that many breweries operate under:
economies of scale.
The slope of a long-run average total cost curve exhibiting increasing returns to scale is:
At the long-run quantity of output, where the long-run average total cost curve is at its lowest point, it is tangent to the _____ of the corresponding short-run average total cost curve.
When an increase in the firm's output reduces its long-run average total cost, it experiences:
increasing returns to scale.
If all firms in an industry are price-takers, then:
an individual firm cannot alter the market price even if it doubles its output.
When perfect competition prevails, which characteristic of firms is likely to be observed?
They are all price-takers.
Oligopoly is a market structure that is characterized by a:
small number of interdependent firms producing identical or differentiated products.
The market structure that is characterized by only a small number of producers is referred to as a(n):
An industry characterized by a few interdependent firms and barriers to entry is called:
The sum of the squared market shares of each firm in an industry is the:
An example of monopolistic competition is the _____ market.
An industry with a large number of small firms producing a standardized product in a market with easy entry and exit of firms is:
If Trevor's local government gave him the exclusive right to sell breakfast bagels in his community, Trevor's monopoly would result from:
A monopoly is most likely to be temporary if the monopoly power is derived from:
The wedding dress industry is monopolistically competitive. As a result, which condition applies to this industry?
Dresses tend to be differentiated among the many sellers serving this market.
Because of the existence of a large number of similar but not identical substitutes in most communities, the market for chiropractors is best considered to be:
Perfect competition is characterized by:
the inability of any one firm to influence price.
Suppose that Madelyne builds a new jumbo jet that can carry five times more passengers than any other competitor. She has high fixed costs due to the quantity of capital used to build the jets, and average cost is decreasing for all levels of demand. In this case, Madelyne's monopoly would result from:
economies of scale.
Microsoft and its operating system are often cited as an example of a company that grew into a monopoly through:
For the Colorado beef industry to be classified as perfectly competitive, ranchers in Colorado must have _____ on prices and beef must be a _____ product.
no noticeable effect; standardized
An assumption of the model of perfect competition is:
many buyers and sellers.
The market for dentists in most communities can be considered a(n) _____ because there are a large number of similar but not identical dental services in the market.
A firm's total output times the price at which it sells that output is:
For a firm producing at any level of output lower than the most profitable one, an increase in output adds:
more to total revenue than to total cost.
Marginal revenue is a firm's:
ratio of the change in total revenue to the change in output. increase in total revenue when it sells an additional unit of output.
In the short run, a perfectly competitive firm produces output and breaks even if the firm produces the quantity at which:
P = ATC.
In the short run, if P > ATC, a perfectly competitive firm:
produces output and earns an economic profit.
Zoe's Bakery operates in a perfectly competitive industry. When the market price of iced cupcakes is $5, the profit-maximizing output level is 150 cupcakes. Her average total cost is $4, and her average variable cost is $3. Zoe's marginal cost is _____, and her short-run profits are _____.
The break-even price for a perfectly competitive firm is equal to the:
minimum value of average total cost.
The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where:
marginal cost equals price.
If a perfectly competitive firm is producing a quantity where P < MC, then profit:
can be increased by decreasing production.
Suppose a perfectly competitive firm can increase its profits by increasing its output. Then it must be true that the firm's:
marginal revenue exceeds its marginal cost.
The difference between total revenue and total cost is:
economic profit or loss.
A firm's shut-down point is the minimum value of:
average variable cost.
If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
produce at an economic loss.
The short-run supply curve for a perfectly competitive firm is its:
marginal cost curve above its average variable cost curve.
The shut-down point in the short run is the:
minimum point of AVC.
The demand curve for a perfectly competitive firm is:
Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, the market price will _____ and the output of a typical firm will _____.
In perfect competition, a change in fixed cost will:
encourage entry or exit in the long run so that price will change enough to leave firms earning zero profits.
In perfectly competitive long-run equilibrium:
all firms produce at the minimum point of their average total cost curves.
Provided that there are no external benefits or costs, resources are efficiently allocated when:
P = MC.
A perfectly competitive industry is said to be efficient because the:
average total cost of production of the industry's output is minimized.
In the long run, when there are economic losses, firms leave the industry, which will decrease the market supply and increase price until economic losses are zero.
If economic profits exist in perfect competition in the short run, then firms will enter in the long run because of easy entry, the short-run market _____ curve will shift to the right, and _____ in the market will _____.
supply; output; increase
Lilly is the price-taking owner of an apple orchard. The price of apples is high enough that Lilly is earning positive economic profits. In the long run, Lilly should expect:
lower apple prices due to the entry of new firms.
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