Macroeconomics Answers

QUESTION 13

Remaining open requires:

1. The firm to satisfy all of its customers.
2. The firm to break the law.
3. The price to exceed the firm’s average variable cost.
4. The price to exceed the firm’s average fixed cost.
5. The price to exceed the firm’s average total cost.

QUESTION 14

If price falls below the price at the shutdown point:

1. The firm will shut down immediately.
2. The firm will begin producing a larger quantity.
3. The firm will decrease its output slightly.
4. The firm will simply begin charging customers a higher price.
5. There is no hope left for the world.

QUESTION 15

Many of the reasons that supply curves shift:

1. Cannot be determined.
2. Are too complex to specifically express.
3. Relate to underlying changes in costs.
4. Relate to underlying changes in demand.
5. Are caused by decreases in demand for the firm’s product.

QUESTION 11

The profit-maximizing choice for a perfectly competitive firm:

1. Is where the total cost is greater than the total revenue.
2. Is where the total cost is less than the marginal revenue.
3. Will occur at the level of output where marginal revenue is greater than total cost.
4. Will occur at the level of output where marginal revenue is equal to total cost.
5. Will occur at the level of output where marginal revenue is equal to marginal cost.

QUESTION 12

When a firm is experiencing losses, it must face a question:

1. Should it continue producing or should it shut down?
2. How much pie does somebody really need?
3. How much weight does one have to lose before it is enough?
4. Who cares about weight loss anyway?
5. All of the above.

QUESTION 9

A firm in perfect competition faces a perfectly elastic demand curve for its product:

1. The firm’s demand curve is a horizontal line at the market price level.
2. The firm’s demand curve is a horizontal line at the variable cost level.
3. The firm’s demand curve no longer exists.
4. All of the above.
5. None of the above. 

QUESTION 10

Because a perfectly competitive firm is a price taker:

1. It takes all of the prices it can get.
2. It takes more than its fair share of prices.
3. It can sell any quantity at the market-determined price.
4. It can sell only the necessary quantity at the market-determined price.
5. It can sell any quantity at any price that it chooses.

QUESTION 1

In a perfectly competitive market, competitors are:

1. A dime a dozen.
2. Nonexistent.
3. Unable to compete.
4. Earning significant profits.
5. All of the above.

QUESTION 2

Other chapters will examine other industry types:

1. Monopoly.
2. Monopolistic Competition.
3. Oligopoly.
4. All of the above.
5. None of the above.  

QUESTION 3

If a firm in a perfectly competitive market raises the price of its product:

1. It will increase its revenues.
2. It will outsell its competitors.
3. It will lose all of its sales to competitors.
4. All of the above.
5. None of the above.

QUESTION 4

A perfectly competitive firm must be:

1. Better than its competitors to survive.
2. A very small player in the overall market.
3. A market leader.
4. The only option in that market.
5. Happy.

QUESTION 5

When economists use the term capital, they:

1. Are referring only to financial capital.
2. Are referring to financial capital and opportunity cost.
3. Do not mean financial capital.
4. Both answers A and B above.
5. Both answers A and C above. 

QUESTION 6

Different products:

1. Cannot exist.
2. Have different production functions.
3. Have identical production functions.
4. All of the above.
5. None of the above.

QUESTION 7

Eventually, additional workers:

1. Will have decreasing marginal product.
2. Will have increasing marginal product.
3. Will not have a marginal product.
4. Will forget their marginal product.
5. All of the above.

QUESTION 8

Profit is:

1. Always positive.
2. What’s left over from revenues after the firm pays all other costs.
3. The residual.
4. Both answers A and B above.
5. Both answers B and C above.

QUESTION 9Mathematically, marginal cost:

1. Cannot exist.
2. Will always be negative.
3. Could never be negative.
4. Is the change in total cost divided by the change in output.
5. Is the change in output compared to the change in total cost.

QUESTION 10

Fixed cost are expenditures that do not change regardless of the level of production:

1. Because fixed inputs do not change in the short run.
2. Because fixed inputs always change in the short run.
3. Only if the firm is experiencing economies of scale.
4. Only if the firm is experiencing diminishing marginal product.
5. Are set on Mars. 

QUESTION 11

The amount of fixed costs varies:

1. In the short run.
2. Whenever pollution occurs.
3. Along with the number of workers hired.
4. According to the specific line of business.
5. In the level of acidity.

QUESTION 12

This pattern of diminishing marginal utility:

1. Is impossible in the real world.
2. Is common in production.
3. Is rare in production.
4. Always exists in any business setting.
5. All of the above.

QUESTION 13

We calculate the average total cost:

1. By dividing total cost by the total quantity produced.
2. By dividing total cost by the marginal quantity produced.
3. By dividing total cost by the fictional quantity produced.
4. By dividing the amount produced by total cost.
5. Only in case of emergencies.

QUESTION 14

We calculate marginal cost:

1. Only in case of emergencies.
2. Only in case of necessities.
3. By taking the change in total cost between two levels of output and dividing it by the change in output.
4. By dividing total cost by the total quantity produced.
5. By inches.

QUESTION 15

The marginal cost curve:

1. Is always a straight line.
2. Is upward sloping.
3. Is downward sloping.
4. Does not really exist.
5. Was illustrated by Kevin Spacey in the movie “Fast Times at Ridgemont High”.

QUESTION 16

At any level of output, the average variable cost curve:

1. Will be increasing.
2. Will be decreasing.
3. Will be constant.
4. Will be honest.
5. Will lie below the curve for average total cost.

QUESTION 17

The point of transition between where marginal cost is pulling average total cost down and where it is pulling it up:

1. Occurs at all levels of production.
2. Must occur at the maximum point of the average total cost curve.
3. Must occur at the minimum point of the average total cost curve.
4. Must not occur on the average total cost curve.
5. Needs help paying its bills. 

QUESTION 18

Fixed costs are often:

1. Simply errors made by accountants.
2. Invented by economists to overemphasize profits.
3. Mistaken for variable costs by seasoned businesspeople.
4. Variable costs.
5. Sunk costs that a firm cannot recoup.

QUESTION 19

This tells a firm whether it can earn profits given the current price in the market.

1. Average cost.
2. Variable cost.
3. Fixed cost.
4. Total cost.
5. No cost.

QUESTION 20

This helps producers understand how increasing or decreasing production affects profits.

1. Average cost.
2. Variable cost.
3. Fixed cost.
4. Total cost.
5. Marginal cost.

QUESTION 21

Because all costs are variable, the long run production function:

1. Shows the most efficient way of producing any level of output.
2. Only exists in fairytales.
3. Cannot help us in any way.
4. Represents costs as fixed.
5. All of the above.

QUESTION 22

The long run depends on the specifics of the firm in question:

1. But it can never be longer than one year.
2. But it must always be shorter than one year.
3. But it can never be longer than five years.
4. But it can never be shorter than five years.
5. It is not a precise period of time.

QUESTION 23

Physical capital and labor:

1. Cannot simultaneously exist.
2. Are mutually exclusive inputs.
3. Can only serve as complements to each other.
4. Can often serve as substitutes for each other.
5. Are better than bacon.

QUESTION 24

What determines whether an employer is likely to use production technologies that conserve on the number of workers or technologies with more workers and less machinery?

1. The length of the short run.
2. The length of the long run.
3. The cost of labor in the particular location.
4. The religious beliefs of the business’ owners.
5. The length of time the firm has been in operation.

QUESTION 25

Economies of scale exist:

1. When the demand for scales is high.
2. When the supply of scales is high.
3. When the larger scale of production leads to lower average costs.
4. When the larger scale of production leads to higher average costs.
5. When fish sell off their outerwear.

QUESTION 26

The long-run average cost curve will be the least expensive average cost curve:

1. Only if the employer is in Greece.
2. For any level of output.
3. Only at certain levels of output.
4. Only at the highest levels of output.
5. In the case of a shortage.