During the hot days, the Electricity Company generates more electricity by using more fuel and increasing the working hours of its employees. This production decision by the company is a ………. decision. long-run. intermediate run. market run. short-run.
Question 1
During the hot days, the Electricity Company generates more electricity by using more fuel and increasing the working hours of its employees. This production decision by the company is a ………. decision.
long-run.
intermediate run.
market run.
short-run.
Question 2
An indifference diagram has movies on the horizontal axis and sodas on the vertical axis. The marginal rate of substitution MRS measures the quantity of soda that the consumer has to give up to get one extra movie.
True
False
Question 3
As the output Q increases, the average fixed cost AFC …….., and the
falls continuously; has a U shape
has a U shape; has a U shape
falls continuously; falls continuously
has a U shape; falls continuously
Question 4
The
True
False
Question 5
If the average variable cost AVC is decreasing as output Q increases, then the marginal cost MC is definitely
below the AVC
increasing
above the AVC
decreasing too
Question 6
When the firm in a perfect competition market finds that the price of its product P is below the marginal cost MC of production, then
It should increase the amount produced Q until P = MC
It should reduce the amount produced Q until P = MC
It should raise its price until P = MC
It should lower its price until P = MC
Question 7
All the decisions made by people who operate firms have one overriding objective, which is to ____.
maximize the firm's market share
maximize the quantity that the firm sells
maximize the firm's total revenue
maximize the firm's economic profit
Question 8
The law of diminishing returns (decreasing MP and AP) is observed only in the short-run production
True
False
Question 9
The firm’s short-run production is a period of time in which all inputs (factors of production) can be varied and all the costs are fixed costs.
True
False
Question 10
A firm should increase its output if the price P exceeds its marginal revenue MR.
True
False
Question 11
The long-run production
is a period of time in which all factors of production can be varied.
is a period of time in which the firm can vary labor but not capital.
is a period of time in which the firm can vary capital but not labor.
means a long period of time, always longer than a year.
Question 12
A budget line shows the
consumption preferences of a consumer at given levels of income and prices.
rate at which consumers wish to substitute one good for another.
complete set of preferences for a household at various incomes.
consumption possibilities of a consumer at given levels of income and prices.
Question 13
The law of diminishing (decreasing) returns states that: when capital is fixed and more units of labor are used
the total product of labor increases but eventually decreases.
the price of any variable input increases but eventually decreases.
the marginal and the average products of labor increase but eventually decrease.
the total revenue of the firm increases but eventually decreases.
Question 14
Suppose that Dave has $200 to spend per week and he buys only magazines and pizza. The price of a pizza is $10 and the price of a magazine is $5. If Dave buys 20 magazines per week, which of the following amount of pizza is not affordable to him?
11
10
9
8
Question 15
A firm in perfect competition has MC = P = $10, AVC = $8, and ATC = $12. This firm should continue producing although it is incurring a loss
True
False
Question 16
A
TR = TC.
MC = ATC.
MC = AVC.
MC = MR.
Question 17
Adel has a budget of $40 which he plans to spend on cookies and milk. The price of milk is $1 per gallon, and the price of cookies is $2 per dozen. If Adel buys 12 gallons of milk, how many dozens of cookies will he buy if he spends all of his income?
20
12
28
14
Question 18
The firm in the perfect competition market will shut down if
it cannot cover its marginal revenues
it cannot cover its total costs
it cannot cover its fixed costs
it cannot cover its variable costs
Question 19
If the consumer’s budget line in the above graph shifts from DA to DB to DC, these shifts represent that
the price of carrots is rising, other things being constant.
the price of compact discs is falling, other things being constant.
the price of carrots is falling, other things being constant.
the price of compact discs is rising, other things being constant.
Question 20
The return that the entrepreneur can obtain in the best alternative business is called the
marginal revenue.
economic profit.
marginal profit.
normal profit.
Question 22
An indifference diagram has movies on the horizontal axis and sodas on the vertical axis. As the consumption of movies increases, the marginal rate of substitution, MRS falls and the indifference curve becomes flatter.
True
False
Question 23
The average total cost of production is equal to the total cost divided by the total number of workers hired.
True
False
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