🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
HomeStudy Guides420,000US230,000

ECON 101 Study Guide - Midterm Guide: Average Variable Cost, Average Cost, Alarm Clock

135 views13 pages
turquoisegnu128
1 Oct 2018
School
U of M
Department
Economics
Course
ECON 101
Professor
All

For unlimited access to Study Guides, a Grade+ subscription is required.

sangriahare462 and 5 others unlocked
ECON 101 Full Course Notes
30
ECON 101 Full Course Notes
Verified Note
30 documents

Document Summary

Unless a question explicitly says otherwise, assume that all demand curves slope downward, all supply curves slope upward, and there are no externalities. Mark box a for true and box b for false. Each correct answer adds 2 points to your score. Mark the box corresponding to the best answer. Each correct answer adds 5 points to your score. Each blank answer gives you 1 point: the graph below shows the demand and supply for pumpkins in new york city. Suppose the municipal government imposed a price floor on pumpkins of , and now increases it to . Increase by ,000: decrease by ,000, decrease by ,000. Version 1 page 2: sally spends all of her money on pizzas and salads. The graph below shows sally"s budget lines before and after the price of a pizza increased from to . The price of a salad did not change.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers

Related Documents

ECON 101
Final Exam
Study Guide
ECON 101 Study Guide - Midterm Guide: Average Variable Cost, Average Cost, Alarm Clock
turquoisegnu128
ECON 101
Final Exam
Study Guide
ECON 101 Study Guide - Final Guide: Economic Equilibrium, Price Ceiling, Deadweight Loss
turquoisegnu128
ECON 101
Final Exam
Study Guide
ECON 101 Study Guide - Midterm Guide: Demand Curve, Economic Equilibrium, Root Mean Square
turquoisegnu128

Related Questions

True or false and explain why:

A. Equilibrium in a monopolistically competitive market requires that firms be operating at the minimum point on the long-run average cost curve.

B. A high ratio of distribution cost to total cost tends to increase competition by widening the geographic area over which any individual producer can compete.

C. The price elasticity of demand tends to fall as new competitors introduce substitute products.

D. An efficiently functioning cartel achieves a monopoly price-output combination.

E. An increase in product differentiation tends to increase the slope of firm demand curves.

Q1. Average total cost is equal to
a. AFC + AVC
b. AFC/total output
c. AFC/AVC
d. AVC/AFC

Q2. As output increases, the ATC
a. increases
b. decreases
c. remains constant
d. falls and then rises

Q3. Total profit is equal to
a. total revenue minus total cost
b. total revenue minus explicit cost
c. total revenue minus variable cost
d. total revenue minus marginal cost

Q4. Marginal cost crosses the
a. AVC curve at the highest point of the AVC curve
b. ATC curve at the lowest point of the ATC curve
c. AFC curve at the lowest point of the AFC curve
d. ATC curve at the highest point of the ATC curve

Q5. Wages paid are an example of an explicit cost of doing business.
a. true
b. false

Q6. Any revenue over and above total cost is labeled economic profit.
a. true
b. false

Q7. If the selling price of a product is $10, the average total cost is $8, and total sales are 5,000 units, the total profit will be
a. $5,000
b. $8,000
c. $10,000
d. $20,000

Q8. Whenever marginal revenue exceeds marginal cost,
a. profit declines if output increases
b. profit increases if output increases
c. losses increase if output increases
d. marginal revenue must be rising

Q9. Under perfectly competitive conditions, marginal revenue is
a. greater than average revenue
b. equal to average revenue
c. less than average revenue
d. equal to the average variable

Q10. A firm's break-even point occurs where
a. marginal revenue equals marginal cost
b. marginal revenue equals average variable cost
c. total revenue equals total cost
d. total revenue equals total variable cost

Q11. The addition to total output resulting from using one more unit of a productive resource is the
a. average product
b. marginal input
c. total product
d. marginal product

Q12. Unlike a firm in pure competition, a monopolist may be able to
a. block the entry of new firms into the industry
b. continue to earn economic profits in the long run
c. earn economic profits in the short run
d. both (a) and (b)

Q13. Producer surplus is the difference between the price the firm is willing to sell its goods and the price it actually receives.
a. true
b. false

Q14. In the long run, under conditions of perfect competition, market forces come into play to
a. enhance profits
b. increase demand
c. eliminate profits
d. separate MR and AR

Q15. Consumer surplus is the area above the demand curve and below the equilibrium price.
a. true
b. false

Q16. Under perfect competition, market price is determined by market demand and supply.
a. true
b. false

Q17. The more that firms advertise, the closer they get to perfect competition.
a. true
b. false

Q18. Perfect competition assumes that a producer is interested in maximizing profit.
a. true
b. false

Q19. In the long run, under conditions of perfect competition, the buyer will eventually be able to buy the product at a
a. price equal to the lowest point on the ATC curve past the optimal scale of operation
b. price below cost
c. price equal to the lowest point on the ATC curve at the optimal scale of operation
d. discount

Q20. The lowest possible ATC curve is attained at the optimal scale of output.
a. true
b. false

A competitive firm’s short-run demand for labor will rise when the price of its product rises.

True

False

As the wage rate rises, the marginal revenue product of labor increases.

True

False

A competitive firm’s demand for labor always slopes down in the short-run, but may slope upwards or downwards in the long run.

True

False

When labor an capital are complements in production, a higher wage will cause a firm to use more capital in the long run.

True

False

If labor is a regressive factor, then a firm’s long-run demand for labor may or may not be downward sloping.

True

False

The short-run demand curve for labor for a firm in any type of market for its output coincides with

the upward-sloping portion of the marginal revenue product curve.

the downward-sloping portion of the marginal revenue product curve.

the downward-sloping portion of the marginal product curve.

the marginal labor cost curve.

An increase in the price of labor will, in the short run, cause a competitive firm’s

marginal cost to increase, the quantity it sells to decrease, and therefore reduce the quantity of labor demanded.

price of its output to increase, leaving the quantity of labor demanded unchanged.

marginal revenue product of labor to decrease, and therefore reduce demand for labor.

marginal revenue product of labor to increase, and therefore increase demand for labor.

Which of the following would cause the firm’s short-run demand curve for labor to shift to the right?

A decrease in the wage rate.

An increase in the price of the firm’s product.

An increase in the rental rate paid to capital.

A decrease in the amount of complementary capital available.

If increased capital usage reduces the firm’s short-run demand for labor, then

labor is a regressive factor.

labor and capital are complements in production.

labor and capital are substitutes in production.

labor is a Giffen factor.

When is the law of demand violated for labor? That is, with regards to the law of labor demand, when does an increase in the wage not lead to a reduction in the quantity of labor demanded?

Never.

When the substitution and scale effects are in opposition, with the scale effect being the larger.

When labor is a regressive factor.

When labor earns zero economic rent.

If the wage rate rises, then the firm’s long-run marginal costs change, which in turn affects the firm’s output level and its employment of labor. This phenomenon is known as

the substitution effect.

the scale effect.

the regressive-factor effect.

the factor-price effect.

When will the scale effect of a wage increase cause a reduction in the quantity of labor demanded?

Always.

When labor is not a regressive factor.

When labor and capital are substitutes in production.

When labor and capital are complements in production.

Consider the usual case where a higher wage rate increases a firms’ marginal costs. In this case, the industry’s demand curve for labor

is more wage inelastic than the individual firms’ demand curves would indicate.

coincides with the horizontal sum of individual firms’ demand curves.

contains only substitution effects but no scale effects.

is horizontal at the going wage rate.

To maximize profits, a monopolist will hire the quantity of labor at which marginal revenue product of labor

is downward sloping and equal to the market wage rate.

is downward sloping and equal to marginal labor cost.

minus marginal labor cost is maximized.

is maximized.

A firm’s revenue minus its factor payments equals

zero.

the profits or losses earned by the firm.

the quasi-rents earned by the factors of production.

the firm’s total revenue.

As the amount of labor used in production increases, total product

increases at low levels of labor and decreases at higher levels of labor.

increases at high levels of labor and decreases at low levels of labor.

always increases.

always decreases.

A profit-maximizing price taker will produce at a level where

the wage equals the marginal product of labor.

the marginal revenue product of labor equals the price of their output.

the wage rate equals the price of their output.

the marginal revenue product of labor equals the wage rate.

If the wage rate is $10 per hour and one worker can produce 2 units of output per hour, then the marginal cost of production is

$5.

$10.

$20.

The answer cannot be determined from the information given.

A firm’s long-run demand for labor is more wage-elastic than its short-run demand for labor.

True

False

A monopsonist’s short-run demand curve for labor coincides with its marginal revenue product of labor curve.

True

False

Workers will receive higher wages when an employer faces an upward-sloping supply curve for labor.

True

False

The profit an owner receives is equivalent to the rent received for her entrepreneurial services.

True

False

When high levels of labor are employed, total production tends to increase at a decreasing rate.

True

False

The substitution effect on labor always decreases the quantity of labor demanded when the wage rate increases.

True

False

A firm’s marginal revenue product of labor equals the marginal product of labor multiplied by the per-unit cost of labor.

True

False

Tastes and preferences are relevant to individual choices for consumption but not relevant to choices for supplying labor.

True

False

A higher wage will always cause a worker to increase the quantity of labor supplied.

True

False

The substitution and income effects of a wage increase both cause consumption to rise.

True

False

A worker’s labor supply may either rise or fall when nonlabor income increases, depending on whether the substitution effect or the income effect dominates.

True

False

When an increase in marginal productivity increases workers’ nonlabor income, the effect on the quantity of labor supplied is ambiguous/uncertain.

True

False

A technological improvement that is permanent is more likely to raise employment than one that is temporary.

True

False

Other factors being constant, firms that provide on-the-job training to workers will tend to pay higher wages.

True

False

If there is discrimination, employers engage in it a cost.

True

False

Human capital tends to increase over the course of a person’s life.

True

False

In the indifference curve budget line model of labor supply,

labor is measured along the horizontal axis and leisure is measured along the vertical axis.

labor is measured along the horizontal axis and consumption is measured along the vertical axis.

consumption is measured along the horizontal axis and labor is measured along the vertical axis.

consumption is measured along the horizontal axis and leisure is measured along the vertical axis.

In the indifference curve budget line model of labor supply, the slope of the indifference curve is used to measure

the wage rate.

labor’s marginal product.

the worker’s nonlabor income.

the marginal value of leisure.

If a worker has chosen a quantity of labor where the marginal value of leisure exceeds the wage rate, she would be better off by

choosing less leisure.

providing fewer hours of labor.

providing more hours of labor.

staying at this combination of labor and consumption.

When there is an increase in the wage rate there will be

both a substitution effect and an income effect.

only a substitution effect.

only a substitution effect.

either a substitution effect or an income effect.

When the wage rate rises, the substitution effect leads a worker to

increase consumption while the income effect leads to a decrease in consumption.

decrease consumption while the income effect leads to an increase in consumption.

increase consumption, as does the income effect.

substitution sleep for other leisure.

Consider the indifference curve budget line model of labor supply, and assume consumption and leisure are both normal goods. A higher wage rate would result in

more consumption and less leisure.

a reduction in the worker’s marginal value of leisure.

reduced consumption if the income effect is larger than the substitution effect.

increased labor only if the substitution effect outweighs the income effect.

When the wage rate rises, a worker chooses to replace some leisure hours with work hours, even if he would remain equally well off. This phenomenon is known as

compensating differential.

the income effect.

the substitution effect.

intertemporal substitution.

Which of the following will shift a worker’s labor supply curve to the left?

Higher nonlabor income.

A lower wage rate, assuming the substitution effect dominates the income effect.

New machinery that substitutes for labor and lowers its marginal product.

A decrease in the marginal value of leisure.

Which of the following would cause a rightward shift in the labor demand curve?

Manna from heaven.

A rise in the wage rate.

A rise in workers’ marginal productivity.

A decline in workers’ nonlabor incomes.

When some jobs are inherently more risky or unpleasant than other jobs, different workers will be paid different wages because of

differences in human capital.

differing access to capital.

compensating differentials

discrimination.

Discrimination is difficult to measure empirically because

it is hard to measure and control for differences in marginal productivity.

data on racial and gender differences is rarely available.

discrimination is practiced by very few employers.

economists find no significant wage differentials due to gender or race.

Intertemporal substitution dictates that

people will work less in periods of high productivity.

people will spend more in periods of high productivity.

people will work more in periods of high productivity.

people will spend less in periods of high productivity.

A decrease in the wage rate causes the budget line to

become flatter.

become steeper.

shift upward.

shift downward.

An increase in the marginal productivity of labor will tend to

shift the labor supply curve rightward if the change is temporary.

result in an increase in employment if the change is temporary.

result in an increase in employment if the change is permanent.

all of the above.

A downward shift in a worker’s budget line is a result of

an increase in the wage rate.

a decrease in the wage rate.

an increase in nonlabor income.

a decrease in nonlabor income

One deficiency of the labor-leisure indifference curve analysis is that because indifference curves are always tangent to the worker’s budget line, the model cannot explain why some people choose not to work.

True

False