21) Suppose the government introduces a ceiling on the fees that lawyers are permitted to charge.

This fee ceiling

A) is always inefficient.
B) results in an inefficient use of resources when the ceiling is above the equilibrium fee.
C) results in an efficient use of resources when the ceiling is above the equilibrium fee.
D) results in an efficient use of resources when the ceiling is below the equilibrium fee.
E) is always efficient.

Use the figure below to answer the following questions.

Figure 6.1.2

22) Refer to Figure 6.1.2. If a rigorously enforced price ceiling is set at $10, then
A) 100 units will be sold at a price of $20 each.
B) 100 units will be sold at a price of $15 each.
C) 150 units will be sold at a price of $15 each.
D) 200 units will be sold at a price of $10 each.
E) 100 units will be sold at a price of $10 each.

23) Refer to Figure 6.1.2. What would be the maximum black market price of the good if a price
ceiling is set at $10 a unit?
A) $10
B) $15
C) $20
D) 50 goods sold at $10 and 50 goods sold at $20
E) 50 goods sold at $10 and 50 goods sold at $15

24) A firm will want to increase its scale of plant if

A) it is persistently producing on the upward-sloping part of its short-run average total cost
curve.
B) it is persistently producing on the downward-sloping part of its short-run average total cost
curve.
C) it is producing below minimum efficient scale.
D) marginal cost is below average total cost.
E) marginal cost is below average variable cost.

25) The minimum efficient scale is the smallest quantity of output at which
A) the long-run average cost curve reaches its lowest level.
B) the average total cost curve reaches its lowest level.
C) the average fixed cost curve reaches its lowest level.
D) economies of scale begin.
E) diminishing returns begin.

26) The long-run average cost curve is the relationship between the lowest attainable average
total cost and output, when plant size is ________ and labour is ________. The long-run average
cost curve is made up of the segments of individual average ________ cost curves with the
lowest average ________ cost for a given output.
A) varied; varied; variable; variable
B) varied; varied; total; total
C) varied; held constant; variable; variable
D) held constant; varied; total; total
E) held constant; varied; variable; variable

27) Economies of scale refer to the range of output over which

A) long-run average cost rises as output increases.
B) marginal cost exceeds average cost.
C) long-run average cost falls as output increases.
D) the marginal product of labour decreases.
E) marginal product equals average product.

Use the table below to answer the following questions.

Table 12.2.1

28) Refer to Table 12.2.1, which gives the total revenue schedule and total cost schedule of a
perfectly competitive firm. The short-run equilibrium price of one unit of the good is
A) $3.
B) $10.
C) $15.
D) $25.
E) $30.

29) Refer to Table 12.2.1, which gives the total revenue schedule and total cost schedule of a
perfectly competitive firm. The marginal revenue received from the sale of the 4th unit of output
is
A) $3.
B) $15.
C) $10.
D) $120.
E) $30.

Use the figure below to answer the following question.

Figure 12.2.1

30) Refer to Figure 12.2.1, which shows a perfectly competitive firm's total revenue and total
cost curves. Which one of the following statements is false?
A) Economic profit is the vertical distance between the total revenue curve and the total cost
curve.
B) At an output of Q1 units a day, the firm makes zero economic profit.
C) At an output greater than Q3 units a day, the firm incurs an economic loss.
D) At an output of Q2 units a day, the firm incurs an economic loss.
E) At an output less than Q1 units a day, the firm incurs an economic loss.

31) Which of the following is part of a firm's opportunity cost of production?

I. wages
II. utility costs
III. interest on a bank loan
IV. interest forgone on funds used to buy capital equipment
A) I only
B) II only
C) III only
D) IV only
E) I, II, III, and IV

32) A firm's total product curve describes

A) the minimum cost of producing a given amount of output.
B) the maximum output that a given quantity of labour can produce.
C) how the maximum attainable output varies as the size of the firm's plant varies, given the
quantity of labour employed.
D) how the management of the firm makes decisions over the short run.
E) how the amount of labour varies as the amount of output varies.

33) Marginal product of labour is the increase in total product that results from a
A) one-unit increase in the quantity of labour employed, other inputs remaining the same.
B) one-unit increase in the quantity of fixed inputs employed, holding the quantity of the variable
inputs constant.
C) one-unit increase in both the quantity of variable and fixed inputs.
D) change in the cost of labour.
E) 1 percent change in the quantity of labour and the quantity of capital employed.

34) Suppose a 1-unit increase in labour, from 2 to 3 workers, increases output from 10 to 15 tea
cups. The marginal product from the increase in the quantity of labour is
A) 1 tea cup.
B) 3 tea cups.
C) 4 tea cups.
D) 5 tea cups.
E) 15 tea cups.

35) Which one of the following statements is true?

A) The highest value of average product occurs where average product is greater than marginal
product.
B) When the average product curve is rising, marginal product is less than average product.
C) When the average product curve is falling, marginal product is greater than average product.
D) The maximum total product occurs at minimum marginal product.
E) The highest value of average product occurs where average product equals marginal product.

36) When Coffee 'n' Cream in Victoria, British Columbia hires two students, 64 customers can
be served in one hour. Suppose the manager of the restaurant observes that after hiring the third
student, 80 customers are being served in one hour. The marginal product of the third student is
________ customers per hour.
A) 4
B) 16
C) 8
D) 26.67
E) 32

37) If the marginal product of the fifth worker is 34, then the total product of five workers
A) is 35.
B) is 24.
C) is 170.
D) is 6.8.
E) cannot be calculated with the information given.

38) Which one of the following does not occur in perfect competition?
A) No single firm can exert a significant influence on the market price of the good.
B) There are many buyers.
C) There are significant restrictions on entry into the market.
D) Sellers and buyers are well informed about prices.
E) Established firms have no advantage over new ones.

39) A price taker is a firm that

A) must lower its price if it wants to sell more output.
B) sets the market price.
C) cannot influence the market price.
D) is incurring an economic loss.
E) can raise its price if it lowers output.

40) Marginal revenue is

A) the change in total quantity that results from a one-unit increase in the price of the good.
B) the change in total revenue that results from a one-unit increase in the quantity sold.
C) economic profit divided by the quantity sold.
D) the change in economic profit that results from a one-unit increase in the quantity sold.
E) total revenue minus total cost.