Question Details

(solution) Question 11 pts Information regarding firm's potential revenue


Question 11 pts

Information regarding firm's potential revenue comes from

the demand the firm faces.

the supply of the firm.

both the supply and the demand.

None of the above.

Question 21 pts

If the last unit produced and sold by a business results in the marginal revenue being larger than the marginal cost, we can conclude that the business is generating more total revenue than total cost and is thus earning a profit.

True

False

Question 51 pts

Marginal cost is

the additional cost associated the last unit supplied.

the change in sunk costs associated with the production of one more unit of output.

the difference between total cost and total avoidable cost.

All of the above are correct.

Question 81 pts

A sunk cost is a cost that

is irrevocably committed.

cannot be recovered.

can no longer be avoided.

All of the above are correct.

Question 91 pts

You are deciding whether or not to take your car on a 1,500 mile highway trip. Which of the following is the least likely to affect your decision?

The price of gasoline.

The cost of oil changes.

Your periodic insurance payments.

Toll road tolls.

Question 101 pts

The shape of a firm's long-run average cost curve is determined by returns to scale.

True

False

Question 121 pts

The marginal cost curve crosses

the average total cost curve at its minimum.

the average avoidable cost curve at its minimum.

the average variable cost curve at its minimum.

All of the above.

Question 171 pts

According to the extended lecture notes, avoidable costs are the only costs that are relevant when a firm is deciding whether or not to produce.

True

False

Question 181 pts

According to the extended lecture notes, a perfectly competitive firm's supply curve is only the portion of the firm's marginal cost curve that lies above the minimum point on the firm's average avoidable cost curve.

True

False

Question 191 pts

According to the extended lecture notes, a perfectly competitive firm will temporarily shut down if the market price falls below

the firm's minimum average avoidable cost.

the firm's minimum average total cost.

the firm's minimum average sunk cost.

the firm's minimum average variable cost.

Question 231 pts

Other factors being constant, what would happen to a firm's revenue if they raised their price?

Revenue would increase.

Revenue would decrease.

Revenue would remain unchanged.

Revenue could increase, decrease, or remain unchanged.

Question 241 pts

According to the extended lecture notes, the output level that maximizes profit is the output level where per-unit, or average, profit is maximized.

True

False

Question 251 ptsSkip to question text.

Jane owns her own business and is doing an economic analysis of her business for the year 2008. She generated $700,000 revenue through the year. The cost of goods sold was $200,000. Jane maintains a $100,000 inventory. Utilities and other like expenses were $25,000. Jane owns the building that her business is in. She could rent her building for $30,000 per year if she didn't use it. She inherited the building from her parents, so she has no intentions of selling it. Suppose the value of the building at the beginning of the year was $250,000. At the end of the year it was worth $260,000. Around the beginning of 2008 Jane was offered $80,000 to come to work for an acquaintance in another business. Jane feels this is as much as she could get if she weren't in business for herself. Jane paid out $160,000 for employees. The sum of all other out-of-pocket expenses totaled $140,000. Five years ago Jane purchased a bunch of equipment for her business. It cost her $220,000 then. At the beginning of 2008 the equipment had a market value of $150,000. At the end of the year it was worth $130,000. Assume Jane could have earned 5 percent on the money she had tied up in her business. There would have to be $142,500 in Jane's pocket after all is said and done, so-to-speak, for Jane to have realized a zero economic profit.

True

False

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Question 261 pts

Refer back to question 25. The economic profit Jane actually ends up earning is $32,500.

True

False

Question 331 pts

Assume a firm only has one variable input. If it is better for the firm to produce than it is to temporarily shut down, the firm will increase the employment of the variable input at least up to the point

of diminishing marginal productivity.

where the average productivity of the variable input is maximum.

where the marginal productivity of the variable input is zero.

of maximum average productivity of the fixed inputs.

 


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