Perfect competition is efficient because all the following conditions hold except ________.

A. total product is maximized

B. firms maximize profit and produce on their supply curves

C. consumers get a real bargain and pay a price below the value of the good

D. firms minimize their average total cost of producing the good

In the short run, the profit-maximizing firm will ________. A. break even if marginal revenue equals marginal cost B. make an economic profit if marginal cost is less than average total cost C. incur an economic loss if average fixed cost exceeds marginal revenue D. incur an economic loss if average total cost exceeds marginal revenue

Average variable cost is at a minimum when ________.

A. marginal cost equals average variable cost

B. average total cost is at a minimum

C. marginal cost exceeds average fixed cost

D. average total cost exceeds average variable cost

Draw a graph showing a firm that is making a profit in a perfectly competitive market. Be sure your graph includes the firm’s demand curve, marginal revenue curve, marginal cost curve, average total cost curve, and average variable cost curve, and make sure to indicate the area representing the firm’s profit.

A firm that is producing the quantity at which marginal cost exceeds both average total cost and the market price will increase its economic profit by ________.

A. producing a larger quantity

B. raising the price to equal marginal cost

C. producing a smaller quantity

D. producing the quantity that minimizes average total cost

The average product of labor increases as output increases if ________.

A. marginal product exceeds average product

B. average product exceeds marginal product

C. total product increases

D. marginal product increases

An increase in the wage rate ________.

A. shifts the average total cost curve and the marginal cost curve upward

B. shifts the average fixed cost and average variable cost curve upward

C. increases average variable cost but does not change marginal cost

D. does not change average variable cost but increases average total cost

Adam Smith’s “invisible hand” refers to a. the subtle and often hidden methods that businesses use to profit at consumers’ expense. b. the ability of free markets to reach desirable outcomes, despite the self-interest of market participants.

An increase in the rent that a firm pays for its factory does not increase ________.

A. total cost

B. fixed cost

C. marginal cost

D. average fixed cost

Marginal returns start to decrease when more and more workers ________.

A. have to share the same equipment and workspace

B. produce less and less total output

C. require jobs to be too specialized

D. produce less and less average product

A firm’s cost of production equals ________.

A. all the costs paid with money, called explicit costs

B. the implicit costs of using all the firm’s own resources

C. all explicit costs and implicit costs, excluding normal profit

D. the costs of all resources used by the firm whether bought in the marketplace or owned by the firm

A group of 10 people have the following annual incomes: $55,000,$30,000, $15,000,$20,000, $35,000,$80,000, $40,000,$45,000, $30,000,$50,000. Calculate the share of total income received by each quintile of this income distribution. Do the top and bottom quintiles in this distribution have a greater or larger share of total income than the top and bottom quintiles of the U.S. income distribution for 2005?

Susan is a single mother with three children. She can earn $8 per hour and works up to 2,000 hours per year. However, if she does not earn any income at all, she will receive government benefits totaling$16,000 per year. For every $1 of income she earns, her level of government support will be reduced by$1. Create a table, patterned after the given table.

$$\begin{matrix} \text{Number of Work Hours} & \text{Earnings from Work} & \text{Government Benefits} & \text{Total Income}\\ \text{1500} & \text{9000} & \text{1000} & \text{10000}\\ \text{1200} & \text{7200} & \text{2800} & \text{10000}\\ \text{900} & \text{5400} & \text{4600} & \text{10000}\\ \text{600} & \text{3600} & \text{6400} & \text{10000}\\ \text{300} & \text{1800} & \text{8200} & \text{10000}\\ \text{0} & \text{0} & \text{10000} & \text{10000}\\ \end{matrix}$$

The first column should show Susan’s choices of how many hours to work per year, up to 2,000 hours. The second column should show her earnings from work. The third column should show her level of government support, given her earnings. The final column should show her total income, combining earnings and government support.

Susan is a single mother with three children. She can earn $8 per hour and works up to 2,000 hours per year. However, if she does not earn any income at all, she will receive government benefits totaling$16,000 per year. For every $1 of income she earns, her level of government support will be reduced by$1. Create a table. The first column should show Susan’s choices of how many hours to work per year, up to 2,000 hours. The second column should show her earnings from work. The third column should show her level of government support, given her earnings. The final column should show her total income, combining earnings and government support.