16.          To the economist total cost includes:

A)            explicit and implicit costs, including a normal profit.

B)            neither implicit nor explicit costs.

C)            implicit, but not explicit, costs.

D)            explicit, but not implicit, costs.

17.          The law of diminishing returns indicates that:

A)            as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.

B)            because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped.

C)            the demand for goods produced by purely competitive industries is downsloping.

D)            beyond some point the extra utility from additional units of a product will yield the consumer a lower satisfaction.

18.          If you owned a small farm, which of the following would be a fixed cost?

A)            harvest labor

B)            hail insurance

C)            fertilizer       

D)            seed

19.          If you operated a small bakery, which of the following would be a variable cost in the short run?

A)            baking ovens

B)            interest on business loans

C)            annual lease payment for use of the building

D)            baking supplies (flour, salt, etc.)

20.          Marginal cost is the:

A)            rate of change in total fixed cost that results from producing one more unit of output.

B)            change in total cost that results from producing one more unit of output.

C)            change in average variable cost that results from producing one more unit of output.

D)            change in average total cost that results from producing one more unit of output.

21.          Economies of scale are indicated by:

A)            the rising segment of the average variable cost curve.

B)            the declining segment of the long-run average total cost curve.

C)            the difference between total revenue and total cost.

D)            a rising marginal cost curve.

22.          Diseconomies of scale:

A)            pertain to the long run.

B)            pertain to the short run.

C)            are synonymous with diminishing returns.

D)            are synonymous with increasing returns.

23.          Which of the following is not characteristic of pure competition?

A)            price strategies by firms

B)            a standardized product

C)            no barriers to entry

D)            a larger number of sellers

24.          For a purely competitive seller, price equals:

A)            average revenue.

B)            marginal revenue.

C)            total revenue divided by output.

D)            all of the above.

25.          A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating:

A)            price and average total cost.

B)            price and average fixed cost.

C)            marginal revenue and marginal cost.

D)            price and marginal revenue.

26.          Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation:

A)            should close down in the short run.

B)            is maximizing its profits.

C)            is realizing a loss of $60.

D)            is realizing an economic profit of $40.

27.          If a purely competitive firm shuts down in the short run:

A)            its loss will be zero.

B)            it will realize a loss equal to its total variable costs.

C)            it will realize a loss equal to its total fixed costs.

D)            it will realize a loss equal to its total costs.

 

Use the following to answer questions 28-30:

Answer questions 28-30 on the basis of the following data confronting a firm:

28.          Refer to the above data. This firm is selling its output in a(n):

A)            imperfectly competitive market.

B)            monopolistic market.

C)            purely competitive market.

D)            oligopolistic market.

29.          Refer to the above data. At the profit-maximizing output the firm's total revenue is:

A)            $48.

B)            $32.

C)            $80.

D)            $64.

30.          Refer to the above data. The firm's:

A)            economic profit is $12.

B)            economic profit is $16.

C)            loss is $14.

D)            economic profit is $3.

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