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microeconomics
Questions and Answers of
Microeconomics
Which statement would be true about a person who goes to an all-you-can-eat restaurant?a) She will never eat more food than she would at a regular restaurant.b) She will eat until closing
Price gouging can take place only when ______.a) there is a natural disasterb) buyers are poorly informed about market conditionsc) some buyers are willing to pay the asking price, however
Price gouging will _____.a) raise consumer surplusb) lower consumer surplusc) have no effect on consumer surplus
If food were free in your school cafeteria, you would keep eating until _____.a) your total utility was zero.b) your marginal utility was zero.c) your consumer surplus was zero.d) you were sick.
Suppose Table 1 shows your demand schedule for cans of soda. (a) What is your total utility from three cans of soda? (b) What is your marginal utility from the third can of soda? (c) If price were
Suppose Table 2 shows your demand schedule for CDs. (a) What is your total utility from four CDs? (b) What is your marginal utility from the fourth CD? (c) If the price is $2, how much will your
Suppose that at three units purchased, marginal utility is $8 and total utility is $30. If the marginal utility of the fourth unit purchased is $6, how much is the total utility of four units?
You’re in the desert on an extremely hot day and become quite thirsty. Luckily you come upon a stand where they’re selling bottled water. You would be willing to pay $10 for the fi rst bottle, $5
You are willing to pay $25 (but not a penny more) for a half-hour massage. At the end of your session, the masseur offers a second half-hour session for $20. After thinking about it for little while,
There is a dollar sale on neckties. You buy 10. Estimate your consumer surplus if you would have been willing to pay $10 for the fi rst tie, $9 for the second, $8 for the third, and so forth.
Kirsten pays $2 for a bottle of water. Explain how it’s possible for her to be enjoying a consumer surplus.
What happens to the difference between ATC and AVC as a firm’s output expands?Explain.
Why are there no fixed costs in the long run?
Why is a business firm never in the long run?
On what basis does a firm decide whether or not to shut down? On what basis does it decide whether or not to go out of business?
Web Activity: How much are the fixed and variable costs of renting a compact car for a week at Boston’s Logan Airport? Go to www.budget.com orwww.avis.com.
Al and George’s used car lot has total revenue of $5 mil lion, fixed costs of $8 million, and variable costs of $4 million. In the short run the firm will , and in the long run it will
The decision to shut down is made in _______.a) both the short run and the long runb) neither the short run nor the long runc) the long rund) the short run
When MC is rising but still below ATC, then ______. a) ATC is decliningb) ATC is constantc) ATC is risingd) there is no way of determining what ATC is doing.
In general a firm’s ______.a) total cost rises as output rises up to a certain point and then begins to declineb) marginal cost rises as output rises up to a certain point and then begins to
If AVC is declining, then _______.a) marginal cost must be less than AVCb) marginal cost must be greater than ATCc) AVC must be greater than AFC.
Which of the following is most likely to be a variable cost?a) Real estate taxesb) Rental payments of IBM equipmentc) Interest on bonded indebtednessd) Fuel and power payments.
When output is zero , fixed cost is and variable cost is _______.a) zero , zerob) zero, more than zeroc) more than zero, zerod) more than zero, more than zero.
Which statement is false?a) When the firm shuts down, output is zero.b) When variable cost is zero, output is zero.c) When output is zero, total cost is zero.d) None of the above.
Total cost is the sum of ____.a) marginal cost and fixed costb) marginal cost and variable costc) variable cost and fixed cost
In the short run, _______.a) all costs are fixed costsb) all costs are variable costsc) some costs are fixed costsd) all costs are marginal costs.
Which statement is true?a) A firm will operate in the short run when total revenue exceeds fixed costs.b) A firm will operate in the short run when total revenue exceeds variable costs.c) A firm
A firm has a fixed cost of $100,000, and variable cost is $90,000 at an output of one. How much is marginal cost at an output of one?a) $10,000b) $90,000c) $100,000d) $190,000e) There is
Parkinson’s l aw is an example of _______.a) economies of scaleb) diseconomies of scalec) Adam Smith’s pin factoryd) the firm’s search for its most profitable output.
In the short run, a firm has two options: _______.a) stay in business or go out of businessb) stay in business or shut downc) operate or go out of businessd) operate or shut down.
As output expands to larger and larger numbers, _________ continues to decline.a) AFCb) AVCc) ATCd) MC
The salaries paid to people who are in the middle of three-year guaranteed contracts are _______.a) a fixed costb) a variable costc) a fixed cost or a variable costd) neither a fixed cost nor a
The marginal cost curve intersects ___________ at its/their minimum point(s). a) the ATC, but not the AVCb) the AVC, but not the ATCc) both the ATC and the AVCd) neither the ATC nor the AVC.
Average variable cost is found by dividing ________.a) variable cost by outputb) output by variable costc) marginal cost by outputd) output by marginal cost
Statement 1: AVC can never be higher than ATC. Statement 2: AVC and marginal cost are equal at an output of one __________.a) Statement 1 is true, and statement 2 is false.b) Statement 2 is true,
In Figure 1, if you want to produce an output of 100, in the long run you will choose a plant whose size is represented by _______.a) ATC1b) ATC2c) ATC3d) ATC4e) ATC5 Cost ($) Figure 1 100 ATC
In Figure 1, if you want to produce an output of 200, in the long run you will choose a plant whose size is represented by _______.a) ATC1b) ATC2c) ATC3d) ATC4e) ATC5 Cost ($) Figure 1 100 ATC
Which statement is false?a) AFC plus AVC equals ATC.b) Marginal cost equals AVC at an output of one.c) AVC equals ATC at an output of one.d) None of the above.
As output rises, the difference between ATC and AVC ______. a) risesb) stays the samec) falls
Adam Smith noted each of the following economies of scale except _______.a) specializationb) employment of expensive equipmentc) saving of time that would otherwise be spent going from one task to
In general, as output rises you first attain _______.a) increasing returns, then diminishing returns, then negative returnsb) diminishing returns, then negative returns, then increasing
The law of diminishing returns may also be called the law of _______.a) diminishing marginal outputb) diminishing positive returnsc) negative returnsd) increasing returns
Each of the following provides an example of economies of scale except ____.a) the computer software industryb) the pharmaceutical industryc) Adam Smith’s pin factoryd) movie and TV
We fi nd price by dividing _______.a) total revenue by output b) output by total revenue c) total cost by output d) output by total cost
The marginal cost curve intersects the average variable cost curve at the ______.a) shut-down pointb) break-even pointc) maximum profi t point
As output increases, eventually ________-.a) economies of scale become larger than diseconomies of scaleb) diseconomies of scale become larger than economies of scalec) economies of scale and
If price is above ATC, the firm will ______.a) shut down in the short run and go out of business in the long runb) shut down in the short run and stay in business in the long runc) operate in the
A production function shows a firm how to ______. a) maximize profitb) maximize outputc) minimize lossesd) minimize output
When total output is maximized, marginal output is ________.a) risingb) fallingc) positived) negativee) zero
Which statement is the most accurate?a) Virtually no one getting married thinks that considering whether or not to have a large we d ding is mainly an economic decision.b) Most American families
In the long run a business has two options:to _______or ________ to .
Variable costs change with _____.
At zero units of output, total cost is equal to ______.
The short run is the length of time it takes all fixed costs to become ____.
In the short run a firm has two options:(1) ______or (2) ___________.
A firm will operate in the short run as long as _______ are greater than __________; a firm will operate in the long run as long as ____________are greater than ________.
When AVC is less than price, in the short run the firm will _________.
Total revenue divided by output equals___________..
Fill in Table 1. TABLE 1 Output 012345 Fixed Cost $800 Variable Cost $100 150 200 270 360 Total Cost Marginal Cost
If a fi rm’s total revenue is $5 billion, its fi xed costs are $3 billion, and its variable costs are $1.5 billion, what does it do (a) in the short run and (b) in the long run?
If a firm’s total revenue is $20 million, its fixed costs are $12 million, and its variable costs are $22 million, what does it do (a) in the short run and (b) in the long run?
Given: Fixed cost = $500. Fill in Table 2. TABLE 2 Output 123456 Variable Cost $ 400 700 900 1,350 2,000 3,000 Total Cost AVC ATC Marginal Cost
(a) Fill in the marginal output column of Table 3. b) Diminishing returns set in with the worker. (c) Negative returns set in with the worker. TABLE 3 Number of Workers 0 01234567 4 8 9 10 11
If it cost Amazon.com $10 million to set up a database of potential customers and $100,000 each time it e-mailed them an advertising message, what would be the average total cost of sen d ing out 10
What is the lowest price the firm would accept in the short run? Cost ($) 130 120 110 100 90 80 70 60 50 40 Figure 3 2 4 6 8 10 12 Output MC ATC AVC 14 16 18 20 22
What is the lowest price the firm would accept in the long run? Cost ($) 130 120 110 100 90 80 70 60 50 40 Figure 3 MC ATC AVC 24 6 8 10 12 14 16 18 20 22 Output
On Figure 3, label the shut-down and break-even points. Cost ($) 130 120 110 100 90 80 70 60 50 40 Figure 3 2468 MC ATC AVC 10 12 14 16 18 20 22 Output
You just got closed out of an economics course you need to graduate and need to persuade the department chair to open another section. She tells you that the school will have to pay a part-time
A firm has a fixed cost of $1,000. At one unit of output variable cost is $1,200. Find (a) total cost at zero units of output and (b) marginal cost at one unit of output.
A fi rm has a fi xed cost of $2,500. At one unit of output variable cost is $3,400. Find (a) total cost at zero units of output and (b) marginal cost at one unit of output.
Your business has just three costs—rent of $1,000 a month; wages of $3,000 for your sole employee; and electricity, which costs $500 a month. If your monthly sales were $4,000, what would you do
How do you fi nd the most efficient output, and how do you fi nd the most profitable output?
At the output at which a firm maximizes its profits, what two variables are equal?At the output at which a firm minimizes its losses, what two variables are equal?
At the output at which MC = MR, suppose that price were higher than AVC but lower than ATC. What should the firm do in the short run and the long run? Explain your answer.
If the perfect competitor is losing money in the short run, what happens in the market to drive up price?
Can you think of any dot-coms that may be considered perfect competitors?
Practical Application: How have you used the Internet to search for product information and lower prices?
Web Activity: Is the coin collector’s market close to being perfectly competitive?Let’s use the example of silver dollars auctioned on eBay. Go to www.ebay.com, click on “Coins & Paper Money”
A firm with explicit costs of $2 million , no implicit costs, and total revenue of $3 million would have .a) zero economic profitb) zero accounting profitc) an accounting profit and an economic
In Figure 1, at which output is the firm operating most efficiently? a) 30b) 39c) 46d) 50 Price ($) 220 200 180 160 140 120 100 80 60 40 20 Figure 1 10 20 MC ATC AVC D, MR 30 40 50 60 70 80 90
The marginal cost curve intersects the ATC curve at its _________.a) minimum point, which is the break-even pointb) maximum point, which is the break-even pointc) minimum point, which is the
A profit-maximizing firm will increase production when ________.a) price is less than marginal costb) price equals marginal costc) price exceeds marginal revenued) price exceeds marginal cost
The lowest point on a firm’s short-run supply curve is at the ________. a) break-even pointb) shut-down pointc) most profitable output pointd) lowest point on the marginal cost curve.
A firm will operate at that output where MC equals MR ______.a) only when it is maximizing its profitsb) only when it is minimizing its lossesc) both when it is maximizing its profits and when it
Statement 1: Price is equal to total revenue divided by output. Statement 2: A firm never maximizes profits. a) Statement 1 is true, and statement 2 is false.b) Statement 2 is true, and statement
If a firm is producing a level of output at which that output’s marginal cost is less than the price of the good, _______-.a) it is producing too much to maximize its profitsb) it is probably
A firm will operate at that output at which MC = MR _______. a) only in the short runb) only in the long runc) in both the short run and the long rund) in neither the short run nor the long run
Statement 1: The firm’s short-run supply curve runs up the marginal cost curve from the shut-down point to the break-even point. Statement 2: The firm will not accept a price below the break-even
Which of these markets would definitely not be perfectly competitive?a) foreign currencyb) wheatc) HDTVsd) the New York Stock Exchange.
Perfect competition is _____.a) the prevalent form of competition in the United Statesb) the only form of competition in the United Statesc) found occasionallyd) probably impossible to fi nd
Under perfect competition, __________.a) many firms have some influence over priceb) a few firms have influence over pricec) no firm has any influence over price
Under perfect competition, there are _______. a) many firms producing an identical productb) a few firms producing an identical productc) many firms producing a differentiated productd) a few
The perfect competitor is _____.a) a price maker rather than a price takerb) a price taker rather than a price makerc) a price taker and a price makerd) neither a price maker nor a price taker
The determination of whether two products are identical _______.a) is done by market researchb) takes place in the minds of the buyersc) is done by the governmentd) is done by the sellers.
The perfect competitor’s demand curve is ______.a) always horizontal b) always vertical c) sometimes horizontal d) sometimes vertical.
Which statement about the perfect competitor is true? a) She may charge a little below market price to get more customers.b) She may charge a little above market price to imply that her product is
Each of the following is a characteristic of perfect competition except _______.a) many firmsb) identical productsc) perfect mobilityd) varying prices charged by different firms
In the short run the perfect competitor will probably _____-. a) make a profit or break evenb) take a loss or break evenc) make a profit or take a loss
In the long run the perfect competitor will _________-. a) make a profitb) break evenc) take a loss
Under perfect competition _________profits are always zero in the long run.a) accountingb) economicc) both economic and accountingd) neither accounting or economic.
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