If the government’s goal is to generate a certain amount of tax revenue, a specific tax and an ad valorem tax on a monopoly have the same impact on social welfare. Indicate whether the statement is true or false ANSWER False. The ad valorem tax will reduce output and consumer surplus by less than […]
Date: September 9th, 2020
When the production of a good involves several inputs and inputs are used in fixed proportions, an increase in the cost of one input will usually cause total costs to A) rise more than in proportion. B) rise less than in proportion. C) remain unchanged. D) rise by the exact amount of the input price […]
Date: September 9th, 2020
In a graph of a firm’s short-run total costs and total revenue, the total cost and the total revenue curves, respectively, will intersect the vertical axis A) above the origin, above the origin. B) above the origin, at the origin. C) at the origin, at the origin. D) below the origin, below the origin. […]
Date: September 9th, 2020
Suppose a competitive firm’s total revenue is $1,000,000 where MR = MC, its explicit variable costs are $900,000, its fixed costs are $90,000 of which $60,000 are sunk in the short run. If its implicit opportunity costs are $50,000, the firm should A) produce because its economic profit is positive. B) produce because its economic […]
Date: September 9th, 2020
The reasons why a competitive firm’s short-run supply curve is upward sloping are A) the law of diminishing marginal returns and profit maximization. B) constant returns to scale and profit maximization. C) decreasing returns to scale and profit maximization. D) Both B and C. ANSWER A
Date: September 9th, 2020
The competitive firm’s supply curve is equal to A) its marginal cost curve. B) the portion of its marginal cost curve that lies above AC. C) the portion of its marginal cost curve that lies above AVC. D) the portion of its marginal cost curve that lies above AFC. ANSWER C
Date: September 9th, 2020
A firm should always shut down if its revenue is A) declining. B) less than its average fixed costs. C) less than its total costs. D) less than its avoidable costs. ANSWER D
Date: September 9th, 2020
If a firm is a price taker, then its marginal revenue will always equal A) price. B) total cost. C) zero. D) one. ANSWER A
Date: September 9th, 2020
A firm will shut down in the short run if A) total fixed costs are too high. B) total revenue from operating would not cover all costs. C) total revenue from operating would not cover variable costs. D) total revenue from operating would not cover fixed costs. ANSWER C
Date: September 9th, 2020
The government prefers an ad valorem tax to a specific tax that reduces the monopoly output by the same amount because A) consumers are not harmed by the ad valorem tax. B) the monopoly prefers the ad valorem tax. C) consumers prefer the ad valorem tax. D) the ad valorem tax transfers more revenue from […]
Date: September 9th, 2020
