Question 1

If diminishing marginal returns are in effect,

Accepted Answer

Diminishing marginal returns means that the marginal cost of production increases as output increases. This is because each additional unit of output requires more resources, which become increasingly scarce as production expands. Therefore, the firm must pay more to attract these resources, leading to higher marginal costs.

Question 2

Suppose a price taker is collecting $1,700 in total revenue and the total cost of its variable factors of production is $1,900 at its current level of output.One can predict that the firm will

Accepted Answer

The firm should shut down because its total revenue ($1,700) is less than its total variable costs ($1,900), meaning it cannot cover its variable costs and is incurring a loss by operating.

Question 3

-Refer to the graph above.We can tell that the firm is operating

Accepted Answer

In the short run, at least one factor of production is fixed, which is typically depicted in graphs showing production or cost curves.

Question 4

Suppose a price taker is collecting $1,250 in total revenue and the total cost of its variable factors of production is $1,000 at its current level of output.One can predict that the firm will

Accepted Answer

The firm will continue to operate because its total revenue ($1,250) is greater than its total variable costs ($1,000), meaning it can cover its variable costs and contribute to fixed costs.

Question 5

-Refer to the graph above.The firm is currently producing 3.5 units of output.If the market price is $10,the firm should

Accepted Answer

If the market price is $10 and the firm is producing 3.5 units, the firm should increase its output if the marginal cost of producing an additional unit is less than $10, as this would increase profits.

Question 6

-Refer to the graph above.If the given market price is $10,and the firm is producing 3.5 unit of output,the firm is

Accepted Answer

The firm is making a lower profit than it could because it is not producing at the level where marginal cost equals marginal revenue, which is necessary for profit maximization.

Question 7

The upward-sloping portion of the marginal cost curve above the minimum point on the average variable cost curve is the price taker's

Accepted Answer

The upward-sloping portion of the marginal cost curve above the minimum point on the average variable cost curve represents the extra cost that the price taker incurs for producing additional units of output. This cost must be covered by the price the market is willing to pay, which is determined by the supply and demand forces. Thus, the price taker's supply curve is determined by the marginal cost curve above the minimum point on the average variable cost curve.

Question 8

-Refer to the graph above.If the market price is $16 and this firm is maximizing profit,we know that the firm is producing

Accepted Answer

The answer of 
-Refer to the graph above.If the market...

Question 9

Which of the following statements is correct?

Accepted Answer

Marginal cost is the additional cost incurred by producing one extra unit of output. It is a variable cost because it changes with the level of output.

Question 10

The shutdown condition for a price taker is where

Accepted Answer

In the short run, a price taker will continue to operate as long as total revenue is greater than the cost of the variable factors of production. This is because the fixed costs are sunk costs that cannot be recovered in the short run. Therefore, option B is the correct choice as it represents the shutdown condition for a price taker.

Question 11

In which of the following pairs do the variables move in opposite directions?

Accepted Answer

When average product increases, average variable cost decreases, and vice versa, indicating they move in opposite directions.

Question 12

-Refer to the graph above.The gap between point J and K represents

Accepted Answer

The answer of 
-Refer to the graph above.The gap between...

Question 13

-Refer to the graph above.If the firm is producing the level of output at the minimum average total cost of production,then the firm is producing where output

Accepted Answer

The answer of 
-Refer to the graph above.If the firm...

Question 14

-Refer to the graph above.Which of the following statements is true?

Accepted Answer

The answer of 
-Refer to the graph above.Which of the...

Question 15

-Refer to the graph above.The firm uses labour and a fixed number of machines to produce output.We know that the marginal product of labour is at its maximum when output equals

Accepted Answer

The marginal product of labour is at its maximum when the total product curve is steepest. The total product curve is steepest at point A, where output equals 1.5 units.

Question 16

-Refer to the graph above.If the market price equals $16 and this firm is maximizing profit,which of the following is NOT true?

Accepted Answer

Fixed cost is not given in the graph.

Question 17

-Refer to the graph above.If the firm is a price taker and is producing the level of output at the minimum average total cost of production,this firm should

Accepted Answer

The answer of 
-Refer to the graph above.If the firm...

Question 18

-Refer to the graph above.If the market price is $16,at the profit maximizing output,total variable cost is

Accepted Answer

At the profit-maximizing output, the total variable cost is $40, as indicated by the graph.

Question 19

In order for a price taker to continue to operate and produce output,it must be the case that

Accepted Answer

A price taker can continue to operate in the short run as long as total revenue covers the variable costs, even if it incurs a loss on fixed costs.

Question 20

When the marginal return to the variable factor of production is diminishing,the marginal cost curve is

Accepted Answer

When the marginal return to the variable factor of production is diminishing, it means that the marginal product of that factor is decreasing. As a result, additional units of the variable factor of production are adding less and less to total output. This leads to an upward-sloping marginal cost curve, as it will cost more to produce each additional unit of output due to the decreasing marginal productivity of the variable factor.

Quiz 5: Perfectly Competitive Supply: the Cost Side of the Market

If diminishing marginal returns are in effect,

Suppose a price taker is collecting $1,700 in total revenue and the total cost of its variable factors of production is $1,900 at its current level of output.One can predict that the firm will

-Refer to the graph above.We can tell that the firm is operating

Suppose a price taker is collecting $1,250 in total revenue and the total cost of its variable factors of production is $1,000 at its current level of output.One can predict that the firm will

-Refer to the graph above.The firm is currently producing 3.5 units of output.If the market price is $10,the firm should

-Refer to the graph above.If the given market price is $10,and the firm is producing 3.5 unit of output,the firm is

The upward-sloping portion of the marginal cost curve above the minimum point on the average variable cost curve is the price taker's

-Refer to the graph above.If the market price is $16 and this firm is maximizing profit,we know that the firm is producing

Which of the following statements is correct?

The shutdown condition for a price taker is where

In which of the following pairs do the variables move in opposite directions?

-Refer to the graph above.The gap between point J and K represents

-Refer to the graph above.If the firm is producing the level of output at the minimum average total cost of production,then the firm is producing where output

-Refer to the graph above.Which of the following statements is true?

-Refer to the graph above.The firm uses labour and a fixed number of machines to produce output.We know that the marginal product of labour is at its maximum when output equals

-Refer to the graph above.If the market price equals $16 and this firm is maximizing profit,which of the following is NOT true?

-Refer to the graph above.If the firm is a price taker and is producing the level of output at the minimum average total cost of production,this firm should

-Refer to the graph above.If the market price is $16,at the profit maximizing output,total variable cost is

In order for a price taker to continue to operate and produce output,it must be the case that

When the marginal return to the variable factor of production is diminishing,the marginal cost curve is