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Unit 10 - ReviewMultiple ChoiceIdentify the choice that best completes the statement or answers the question.____1.Suppose a local floral shop has explicit costs of $200,000 per year and implicit costs of $50,000 per year. If the store earned an economic profit of $50,000 last year, this means that the store's accounting profit equaled:a.$10,000.b.$50,000.c.$100,000.d.$200,000.e.$100,000.____2.Suppose Eastland College does not hold summer classes but could rent out the campus to various summer sports camps for $100,000. The potential revenue of the summer camps represents a(n):a.normal profit.b.explicit cost.c.total cost.d.sunk cost.e.implicit cost of capital.____3.Pauli's Pizza offers the following prices: one slice for $2, two slices for $3.50, three slices for $4.50, four slices for $5.00. Sal orders two slices. From this we know that Sal's marginal benefit from the second slice must be at least ________ while the marginal benefit from the third slice must be less than ________.a.$3.50; $4.50b.$3.50; $1.00c.$1.50; $1.00d.$1.50; $4.50e.$5.50; $10.50Sigmund tutors five students for the introductory psychology class. The students differ in their willingness to pay for a one-hour session. The second column of the table shows their willingness to pay. Sigmund has estimated his costs of providing tutoring hours(he has no sunk costs) and these costs appear in the last column.StudentStudents'Willingness to PayHours ofTutoringSigmund'sCostPeter$251$5Quincy15210Rosemary5315Sally20420Tomas10525Table 53-2: Tutoring____4.(Table 53-2: Tutoring) Sigmund faces:a.increasing marginal benefit.b.constant marginal benefit.c.increasing marginal cost.d.decreasing marginal cost.e.constant marginal cost.____5.(Table 53-2: Tutoring) Sigmund's optimal number of tutoring hours is:a.5.b.4.c.3.d.2.e.1.____6.To determine the quantity of any activity that will maximize total net benefit, economists employ the ________ rule.a.average decision ruleb.total decision rulec.principle of marginal analysisd.principle of average analysise.utility maximizing rule.____7.If marginal costs remain constant as output increases, this means the marginal cost curve is:a.vertical.b.horizontal.c.upward-sloping.d.downward-sloping.e.U-shaped.Scenario 54-1: Marginal Product of Labor Quantity of LaborMarginal Product of Labor0191172153134115967758____8.(Scenario 54-1: Marginal Product of Labor) Using the marginal product of labor curve in the figure, the total product of labor for five workers is:a.11 bushels.b.45 bushels.c.55 bushels.d.75 bushels.e.64 bushels.Figure 54-1: Total Product____9.(Figure 54-1: Total Product) When hiring units of labor between zero and L1 units of labor, which of the following statements is true?a.The marginal product of labor is increasing.b.The marginal product of labor is decreasing.c.Total product is increasing at a diminishing rate.d.Average product is decreasing.e.Total product is increasing at a constant rate.____10.You own a small deli that produces sandwiches, soups, and other items for customers in your town. Which of the following is a decision most likely to be made in the long run at your deli?a.You order more breadsticks from the local bakery.b.You ask your beverage distributor to deliver more soft drinks next week.c.You decide keep the deli open two more hours on the two busiest nights of the week.d.You place a newspaper advertisement to attract part-time workers from the local college.e.You renovate the second floor of your building to increase the size of the dining room.Figure 54-2: Change in Total Product____11.(Figure 54-2: Change in Total Product) The figure shows a production function changing from TP1 to TP2. Which of the following choices is a likely cause of this shift?a.Workers in the firm are less productive on average.b.The firm employed more of a variable input in the short run.c.The firm has suffered a decrease in available technology.d.The firm employed more of a fixed input in the long run.e.The price of employing the variable input increased.Quantityof Land(in hectares)Quantityof LaborTotalProduct(apples picked)10001018102151032110426Table 54-5: Tonya's ProductionFunction for Apples____12.(Table 54-5: Tonya’s Production Function for Apples) The information provided tells you that Tonya is operating:a.in the long run.b.in the short run.c.in a very expensive location.d.at a loss.e.with maximum efficiency.The table describes Bonnie's production function for Good Z. Assume labor is the only variable input that Bonnie uses to produce Good Z.Quantity ofLabors Hired(workers)Quantity ofGood Z Produced(per time period)001752150325043255375Table 54-6: Bonnie's ProductionFunction for Good Z____13.(Table 54-6: Bonnie's Production Function for Good Z) The marginal product of labor from hiring the second worker is ________ units of Good Z.a.150b.225c.75d.250e.100Quantityof OutputVariable CostVCTotal CostTC005015010027012031001504140190524062503007320370Table 55-1: Cost Data____14.(Table 55-1: Cost Data) The table shows some cost data for a firm currently operating in the short run. What is the value of the total variable cost for this firm when the firm is producing five units of output?a.$50b.$240c.$60d.$190e.It is impossible to determine without more information.____15.Buford Bus Manufacturing installs a new assembly line. As a result, the output produced per worker increases. The marginal cost of output at Buford:a.will increase (the MC curve will shift upward).b.will decrease (the MC curve will shift downward).c.will be unchanged.d.is at its maximum.e.is declining and approaching zero.____16.The marginal cost curve is the mirror image of the:a.total product curve.b.average product curve.c.marginal product curve.d.average total cost curve.e.marginal utility curve.Figure 55-2: Short-Run Costs____17.(Figure 55-2: Short-Run Costs) The vertical difference between curve B and curve C at any quantity of output is:a.marginal cost.b.fixed cost.c.average fixed cost.d.average variable cost.e.profit.Figure 55-3: Short-Run Costs II____18.(Figure 55-3: Short-Run Costs II) Curve 1 crosses the average variable cost curve at:a.3 units of output.b.approximately 5.3 units of output.c.the minimum value of Curve 2.d.the level of output at which diminishing marginal returns begin.e.the level of output that corresponds to zero average fixed cost.____19.(Figure 55-3: Short-Run Costs II) Curve 1 crosses the average total cost curve at:a.the minimum value of Curve 2.b.approximately 4.3 units of output.c.approximately 2.8 units of output.d.Point A.e.the level of output that corresponds to the point of diminishing marginal returns.____20.At 20 units of output, a firm finds that its average variable cost is $5 per unit and its average total cost is $8 per unit. Therefore, its:a.marginal cost is less than $3 per unit.b.marginal cost is $3 per unit.c.average fixed cost is $3 per unit.d.total fixed cost is $300.e.total cost is $80.Figure 55-4: A Firm's Cost Curves____21.(Figure 55-4: A Firm's Cost Curves) The curve labeled V represents the firm's ________ curve.a.total costb.average total costc.marginal costd.average variable coste.average fixed cost____22.(Figure 55-4: A Firm's Cost Curves) The curve labeled W represents the firm's ________ curve.a.average fixed costb.marginal costc.average variable costd.total variable coste.average total cost____23.A firm's total fixed cost:a.stays constant in the short run.b.falls as the firm produces more output in the short run.c.falls as the firm produces more output in the long run.d.increases as the firm produces more output.e.is irrelevant in computing a firm’s profitability.____24.As production increases and the fixed cost is divided by larger quantities of output, this leads to lower average fixed cost. This is referred to as the ________ effect.a.diminishing returnsb.spreadingc.constant costd.increasing returnse.marginal returns____25.If ATC is equal to MC, then one is operating:a.at the minimum point of ATC.b.on the downward-sloping portion of ATC.c.on the upward-sloping portion of ATC.d.at a profitable level of output.e.at the point of diminishing marginal returns.____26.The curve that illustrates the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output is the:a.short-run average total cost curve.b.production possibilities curve.c.marginal cost curve.d.total product curve.e.long-run average total cost curve.____27.Sunk costs:a.are not considered in marginal analysis.b.help to determine the optimal quantity of an activity.c.can dramatically increase marginal costs.d.are the same as variable costs.e.have no impact on economic profit.____28.For large beer breweries, it is common for long-run average total cost to decline as output increases. This indicates that many breweries achieve:a.diseconomies of scale.b.diminishing marginal returns.c.economies of scale.d.constant returns to scale.e.fixed cost minimization.Figure 56-2: Cost Curves____29.(Figure 56-2: Cost Curves) If a firm currently was producing at point C on the ATC2 in the figure but anticipates increasing output to 225,000 units in the long run, the firm will build a ________ plant and experience ________.a.smaller; economies of scaleb.smaller; diseconomies of scalec.larger; economies of scaled.larger; constant returns to scalee.larger; diseconomies of scale____30.If your firm is operating in the negatively sloped portion of a long-run average total cost curve, then your production exhibits:a.higher wages.b.increasing returns to scale.c.decreasing returns to scale.d.increased input prices.e.inferior production technology.____31.If your local government gives you the exclusive right to sell breakfast bagels in your community, your monopoly would result from:a.control of a scarce resource or input.b.technological superiority.c.increasing returns to scale.ernment-created barriers.e.diseconomies of scale.____32.Suppose that you build a new jumbo jet that can carry five times more passengers than any other competitor. You experience high fixed costs due to the quantity of capital used to build the jets. There's decreasing average cost for all levels of demand. In this case, your monopoly would result from which of the following?a.sunk costsb.locationc.economies of ernment restrictionse.advertising____33.Which of the following is not a barrier to entry?a.control of an input essential for ernment-created barriers such as patentsc.a ban on certain kinds of advertisingd.the existence of significant economies of scalee.the elimination of trade barriers such as tariffs.____34.In an oligopoly:a.there are many sellers.b.there are no barriers to entry.c.firms recognize their interdependence.d.total surplus is maximized.e.products are homogenous.____35.A monopoly will have a Herfindahl-Hirschman Index (HHI) equal to about:a.1.b.100.c.1,000.d.10,000.e.zero.____36.The HHI for ________ where ________ have (has) ________ of the market is ________ .a.monopolistic competition; four firms each; 25%; 10,000b.oligopoly; three firms each; 50%; 5,000c.oligopoly; two firms each; 50%; 5,000d.monopoly; one firm; 100%; 100,000e.perfect competition; 10,000 firms each; 0%; 10,000.____37.Monopolistic competition is similar to perfect competition in that firms in both market structures:a.are price-takers.b.produce goods that are perfect substitutes.c.find it beneficial to advertise.d.can earn positive long-run economic profits.e.do not face any barriers to entry into the industry in the long run.____38.The market for dentists in most communities can be considered ________ because there are a large number of similar, but not identical, substitutes in the market.a.monopolistically competitiveb.a monopolyc.perfectly competitived.an oligopolye.a regulated natural monopoly____39.According to the cost-minimization rule, the firm must hire labor and capital to the point where:a.The marginal product is equal to zero for each input.b.The marginal product is equal for each input.c.The marginal revenue product is equal for each input.d.The total product is equal for each input.e.The marginal product per dollar is equal for both inputs.____40.A firm is hiring labor and capital in the cost-minimizing combination. Which of the following would cause the firm to increase hiring capital and decrease hiring of labor?a.Demand for the product being produced increases by 5%.b.The price of capital and labor both increase by 5%.c.The productivity of labor increases by 5%.d.The price of capital increases by 5%.e.The price of labor increases 5%.Unit 10 - ReviewAnswer SectionMULTIPLE CHOICE1.ANS:CPTS:1DIF:MREF:Module 52/16MSC:Analytical Thinking2.ANS:EPTS:1DIF:MREF:Module 52/16MSC:Concept-Based3.ANS:CPTS:1DIF:MREF:Module 53/17MSC:Analytical Thinking4.ANS:EPTS:1DIF:MREF:Module 53/17MSC:Critical Thinking5.ANS:APTS:1DIF:MREF:Module 53/17MSC:Critical Thinking6.ANS:CPTS:1DIF:MREF:Module 53/17MSC:Fact-Based7.ANS:BPTS:1DIF:MREF:Module 53/17MSC:Critical Thinking8.ANS:DPTS:1DIF:MREF:Module 54/18MSC:Critical Thinking9.ANS:APTS:1DIF:MREF:Module 54/18MSC:Critical Thinking10.ANS:EPTS:1DIF:MREF:Module 54/18MSC:Concept-Based11.ANS:DPTS:1DIF:MREF:Module 54/18MSC:Critical Thinking12.ANS:BPTS:1DIF:MREF:Module 54/18MSC:Critical Thinking13.ANS:CPTS:1DIF:MREF:Module 54/18MSC:Critical Thinking14.ANS:DPTS:1DIF:MREF:Module 55/19MSC:Analytical Thinking15.ANS:BPTS:1DIF:MREF:Module 55/19MSC:Critical Thinking16.ANS:CPTS:1DIF:MREF:Module 55/19MSC:Fact-Based17.ANS:CPTS:1DIF:MREF:Module 55/19MSC:Concept-Based18.ANS:APTS:1DIF:MREF:Module 55/19MSC:Concept-Based19.ANS:APTS:1DIF:MREF:Module 55/19MSC:Concept-Based20.ANS:CPTS:1DIF:MREF:Module 55/19MSC:Analytical Thinking21.ANS:CPTS:1DIF:MREF:Module 55/19MSC:Concept-Based22.ANS:EPTS:1DIF:MREF:Module 55/19MSC:Concept-Based23.ANS:APTS:1DIF:MREF:Module 55/19MSC:Analytical Thinking24.ANS:BPTS:1DIF:MREF:Module 55/19MSC:Definitional25.ANS:APTS:1DIF:MREF:Module 55/19MSC:Critical Thinking26.ANS:EPTS:1DIF:MREF:Module 55/19MSC:Critical Thinking27.ANS:APTS:1DIF:MREF:Module 56/20MSC:Fact-Based28.ANS:CPTS:1DIF:MREF:Module 56/20MSC:Concept-Based29.ANS:EPTS:1DIF:MREF:Module 56/20MSC:Concept-Based30.ANS:BPTS:1DIF:MREF:Module 56/20MSC:Concept-Based31.ANS:DPTS:1DIF:MREF:Module 57/21MSC:Concept-Based32.ANS:CPTS:1DIF:MREF:Module 57/21MSC:Critical Thinking33.ANS:CPTS:1DIF:MREF:Module 57/21MSC:Fact-Based34.ANS:CPTS:1DIF:MREF:Module 57/21MSC:Definitional35.ANS:DPTS:1DIF:MREF:Module 57/21MSC:Analytical Thinking36.ANS:CPTS:1DIF:MREF:Module 57/21MSC:Analytical Thinking37.ANS:EPTS:1DIF:MREF:Module 57/21MSC:Concept-Based38.ANS:APTS:1DIF:MREF:Module 57/21MSC:Definitional39.ANS:EPTS:1DIF:MREF:Module 72/36MSC:Definitional40.ANS:EPTS:1DIF:MREF:Module 72/36MSC:Analytical Thinking ................
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