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
If a competitive firm is in short-run equilibrium, then A) economic profits equal zero. B) economic profits will be positive. C) economic profits will be negative. D) All of the above are possible in the short run. ANSWER D
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
Explain why shutting down and going out-of-business are different concepts. What will be an ideal response? ANSWER Shutting down means that the firm seizes production with the option of starting up production any time in the future. Going out-of-business is equal to exiting the industry. This involves reducing the amount of (the fixed input) […]
Date: September 9th, 2020
