You are on page 1of 7

A price-taking firm makes air conditioners. The market price of one of their new air conditioners is \$140.

The firm's total cost information is given in the table below:

How many air conditioners should the firm produce per day if its goal is to maximize its profit? conditioners per day

An individual's supply curve shows his or her: profit from producing at each quantity. willingness to pay at each quantity. hourly wage for producing at each quantity. opportunity cost of producing at each quantity. As the market price of a service increases, more people will decide to perform that service because: service jobs are in higher demand than manufacturing jobs. more people will find that the market price exceeds their reservation price. higher prices always result in higher revenue. higher-priced services are more prestigious.

Which of the following is most likely to be a variable factor of production at a university? The location of the university.

The school mascot. The number of teaching assistants. The size of the basketball arena or football stadium. When some factors of production are fixed, in order to increase production by equal amounts, a firm would need to add successively: larger and larger quantities of the fixed factors. larger and larger quantities of the variable factor. smaller and smaller quantities of the variable factor. constant quantities of the variable factor. A variable factor of production: is variable only in the short run. is fixed in the long run but variable in the short run. plays no role in the law of diminishing marginal returns. is variable in both the short run and the long run.

The location of a firm will be a _________ factor of production in ________ run. variable; the long variable; the short fixed; both the short and long fixed; the long

Which of the following factors of production is likely to be fixed in the short run? The location of the firm. The amount of paper used. The number of employee-hours. The amount of electricity consumed.

A decrease in the price the firm receives for its output will cause the firm to: leave output unchanged and earn smaller profits. reduce output and earn smaller profits or larger losses. expand output and earn smaller profits. cut wages and payments to factors of production. In general, if the price of a variable factor of production increases: price rises. total costs fall. marginal costs rise. the profit maximizing level of output rises. Suppose a perfectly competitive firm knows that it is not going to shut down, but it is going to earn a loss. It should pick the output level where: total revenues are maximized. total costs are minimized. price equals marginal cost. the costs of the variable factors of production are minimized.

Assuming the perfectly competitive firm is experiencing diminishing marginal returns to its variable factors of production, as output price rises, the firm will: produce more. earn profits. produce less. earn losses. Which of the following would cause supply to shift to the left? Wages rise. Expectations about future demand improve. Demand for the good falls. The price of the good falls.

14.

Refer to the supply function above. The elasticity of supply along this curve is: greater than one over the entire supply curve. equal to one over the entire supply curve. declining as quantity increases. increasing as quantity increases. Antony's Pizza uses the same dough, sauce, and cheese for pizza and calzones. When the price of pizza is low, Antony produces more calzones. For Antony, with respect to price, supply of pizza is ________ compared to supply at a pizza restaurant that does not serve calzones. more inelastic more unpredictable unitary elastic more elastic Mike knows how to make hamburgers (like many other people), and got a minimum wage job at Burger King. With respect to price elasticity of supply, the supply curve for hamburgers is __________ because the inputs to production are _________. elastic; flexible inelastic; immobile inelastic; mobile inelastic; flexible

17.

Refer to the figure above. When the market is in equilibrium, total consumer surplus received by the buyers is: \$100 \$625 \$125 \$200 A price-taker confronts a demand curve that is: vertical at the market price. horizontal at the market price. downward sloping. upward sloping. The most important decision that sellers make is: whether to expand factory facilities. whether to change the price of their product.

whether to produce another unit. whether to set profit maximization as a goal. A rational seller will sell another unit if: the price that could be charged is greater than the equilibrium price. the quantity demanded of the seller's output is greater than zero. the profit earned from the sale of the next unit is greater than the profit earned on the sale of the last unit. the cost of making the next unit is less than the revenue gained by selling the next unit. Total revenue minus total explicit and implicit costs defines: marginal earnings. gross earnings. profit. net worth.

The short run is defined as: a period in which all factors of production are variable. one year or less. the period of time between quarterly accounting reports. a period in which at least one factor of production is fixed. It takes a bus and a driver to produce bus service for the students in a college town. Therefore, the bus and the driver are the ___________ for bus service. factors of production short run output variable cost only inputs in the long run If a perfectly competitive firm produces an output level where price is less than marginal costs, then the firm should: expand output to earn greater profits or smaller losses. raise its price. leave its output decision unchanged. reduce output to earn greater profits or smaller losses. Marginal cost is calculated as: the percentage change in total costs divided by the percentage change in output.

the change in output divided by the change in total costs.

the change in total costs divided by the change in output. A firm's total profit equals: price times quantity sold. price minus average total cost. (price minus average total cost) times the quantity sold. marginal benefit minus marginal cost. Which firm is most likely to meet the condition for perfect competition that resources are mobile? A farm A sidewalk pretzel vendor A movie theater A department store