Sophia __ Microeconomics Unit 3 Milestone 3 Quiz/Answers

You passed this Milestone 15 questions were answered correctly. 6UquNestiIonTs we3re a—nswerMed inIcLorrEectSly.TONE 3 Which example below represents a fixed input? Office space being rented Hourl ...

You passed this Milestone 15 questions were answered correctly. 6UquNestiIonTs we3re a—nswerMed inIcLorrEectSly.TONE 3 Which example below represents a fixed input? Office space being rented Hourly employees Utility bills Raw materials for construction CONCEPT Production Function and Constraints 2 The Prisoner's Dilemma can come into play when firms . are forced to advertise and market their goods to consumers are regulated by the government in order to provide fair pricing to consumers engage in predatory pricing to move each other out of the market decide whether to work together on things like price or production levels CONCEPT Oligopoly 3 Which of the following is why the long run average cost curve must lie at the same level or below any short run average cost curve? Because of economies of scale Because in the long run, all production costs are variable Because of the law of diminishing returns Because in the long run, a firm will generally operate at higher per-unit cost than in the short run CONCEPT Long-Run Supply Curve 4 Product Price Unit Cost Units Sold Units Produced Opportunity Cost $40.00 $10.00 200 1100 $850 Given the information in the table shown above, the accounting profit is which of the following? $11,000 $8,000 -$3,000 -$2,150 CONCEPT Economic Profit 5 Which scenario corresponds with economies of scale? An increase in production will cause the cost of the next unit to increase. A decrease in production will cause the next unit to first increase in cost, then decrease, then increase again. An increase in production will cause the cost of the next unit to decrease. A decrease in production will cause the next unit to cost the same. CONCEPT Economies, Constant and Diseconomies of Scale 6 Which of the following is true regarding how a market type interacts with constant, increasing and decreasing cost industries? In a perfectly competitive market, firms tend to experience diseconomies of scale at relatively low levels of output. In a monopoly, firms are likely to begin experiencing diseconomies of scale at relatively low levels of output. In a natural monopoly, firms will always reach diseconomies of scale at high levels of output. In a perfectly competitive market, firms will usually experience significant economies of scale until very high levels of output. CONCEPT Constant, Increasing and Decreasing Cost Industries 7 Given the information on this graph, this firm needs to produce which of the following number of units to break even? 10 11 12 13 CONCEPT Breakeven Point 8 Based on the graph above, should the firm increase, decrease or stay at current levels of production to maximize profit? Decrease until total revenue is at its highest point Increase until the slope of the total revenue curve and total cost curve are equal Decrease until total cost is at its lowest point Increase until the total revenue curve and total cost curve intersect CONCEPT Output Optimization: Total Revenue / Total Cost 9 Given the following production function for a train engine manufacturing company, at what point (or points) should the firm produce? E & D B & E D A CONCEPT Production Function and Constraints 10 Which of the following is a characteristic of monopolistic competition? Advertising increases the cost of production. Predatory price cutting occurs. Firms sell homogenous products. Cooperation between firms is sometimes used to maintain prices. CONCEPT Monopolistic Competition 11 This firm is currently producing at 25 units; which of the following should it do in order to maximize profit? The firm should decrease output. The firm should do nothing. It is already producing at maximum optimization. The firm should shut down production entirely. The firm should increase output to 80 units. CONCEPT Output Optimization: Marginal Revenue / Marginal Cost 12 If the variable costs for a firm are $40,000, the fixed costs are $20,000, and the firm sells 100 units, what are the firm's average total costs? $60,000 $20,000 $600 $400 CONCEPT Cost: Total, Marginal and Average 13 When a firm uses four machines, it can produce 300 units daily. A fifth machine allows the firm to product 440 units. Which of the following is true regarding production? The marginal product for the fifth machine is 140 units and the average product is 88 units. The marginal production for the fifth machine is 440 units and total production would be 740 units. The total production for nine machines would be 740 units with an average production of 123.33 units. The marginal product for the fourth machine is 300 and the average product is 75 units CONCEPT Product: Total, Marginal, Average, and (Marginal) Revenue 14 Given the graph shown here, the firm should contemplate shutting down production at which of the following points? When MC (the purple line) is greater than Q1 At Q2 At Q1 When MC (the purple line) reaches its lowest point CONCEPT Shut-down Point 15 Which of the following is a trait of a perfectly competitive market? Firms are not producing at minimum cost Information flows freely Barriers to entry exist Firms are price makers CONCEPT Perfect Competition 16 The additional income a company generates from selling one more unit due to this is called which of the following? Diseconomies of scale Price effect Break even point Output effect CONCEPT Revenue: Total, Marginal and Average 17 Product Price Unit Cost Units Sold Units Produced Opportunity Costs $35.00 $5.00 100 1000 $750 Given the information in the table shown here, the economic profit is which of the following? $1,500 $2,250 -$2,250 -$1,500 CONCEPT Economic Profit 18 Which of the following is true about marginal cost? The marginal cost will consistently fall with an increase in production. Marginal cost is the change in total cost that results from a single unit increase in the quantity produced. Marginal cost can be found at the intersection of a firm's budget constraints and production function. In the long run, every firm’s marginal cost must equal zero. CONCEPT Cost: Total, Marginal and Average 19 Which of the scenarios below is an example of a monopoly? A company produces a lemon-lime soda that is identical to others on the market in terms of taste but has a recognizable brand because of advertising. In this industry, it is easy to enter and exit the market. This industry has stable pricing due to the tendency of groups of firms to work together to set prices. A company engages in predatory price cutting in order to discourage any competition. CONCEPT Monopoly 20 Based on the descriptions below of different jobs Nancy has held, which would qualify as an oligopoly? Nancy was an administrative assistant for an oil company with very few other sellers. Other companies had trouble getting into the fossil fuel market. All the fossil fuel companies had the same information, but they had an information advantage over the buyers. Nancy was a customer service representative for the local water company. The company had exclusive rights to operate as the only company providing water to local residents since the costs to lay competing pipelines were a barrier to entry preventing competition. They were, however, regulated by the government. Nancy was a telemarketer for a software company with many buyers and sellers. Everyone’s products were fairly unique, but it was very easy to enter the software market. One advantage Nancy’s company had was that it had an informational advantage over many other companies. Nancy was a fruit vendor. In her market there were many buyers and sellers. It was easy and cheap to start a vendor stand. Everyone’s fruits were basically identical. CONCEPT Oligopoly 21 Number of Employees Total Production Marginal Product of Labor Marginal Revenue Product 0 0 0 1 9 9 2 24 15 3 36 12 4 43 7 If the price of the item is $15.00 per unit and the employees cost $125 each, how many employees should the firm hire to maximize their profit? One employees Three employees Two employees Four employees