Question

2-

Normal profits are

are part of the firm’s opportunity costs.

are the same as economic profits.

are part of the firm’s explicit costs.

All of the above answers are correct.

 

3-

Normal profits

are part of the firm’s opportunity costs.

are the same as economic profits.

are part of the firm’s explicit costs.

All of the above answers are correct.

 

4-

The marginal product of labor

equals the total product divided by quantity of labor.

equals the increase in cost when another worker is hired.

always decreases as more workers are hired.

equals the change in total product divided by the increase in the quantity of labor.

 

5-

Because the amount of labor a firm employs can be changed, the cost of labor is known as

minimum cost.

variable cost.

maximum cost.

fixed cost.

 

6-

As a typical firm increases its output, its marginal cost

is constant.

decreases at first and then increases.

increases at first and then decreases.

decreases.

 

7-

The vertical distance between average total cost curve and average variable cost curve is equal to

average fixed cost.

total fixed cost.

average variable cost.

average total cost.

 

8- As we observe the cost curves’ graph, we see that the

MC curve intersects the ATC curve at its maximum.

MC curve can not be U-shaped.

ATC curve always has a negative slope.

MC curve intersects the AVC curve and ATC curve at their minimums.

 

9-

Economies of scale occur when, as output increases, the

long-run average cost increases.

long-run average cost decreases.

short-run average total cost decreases.

long-run average cost stays constant.

 

10-

Diseconomies of scale is a result of

mismanagement.

difficulties of coordinating and controlling a large enterprise.

specialization of labor, capital, and management.

technological progress.

 

11-

One requirement for an industry to be perfectly competitive is that in the industry there are

few firms with very large market shares.

many firms with very large market shares.

many firms with very small market shares.

many firms selling different products.

 

12-

For the perfectly competitive broccoli producers in California, the INDUSTRY demand curve for broccoli is

a horizontal line.

downward sloping.

nonexistent.

upward sloping.

Answer 1

2. Ans: are part of the firm’s opportunity costs.

3. Ans: are part of the firm’s opportunity costs.

Explanation:

Normal profit = Total Revenue - Explicit cost

Economic profit = Total Revenue - Explicit cost - opportunity cost(or implicit cost)

Thus, Normal profit are part of the firm’s opportunity costs.

4. Ans: equals the change in total product divided by the increase in the quantity of labor.

5. Ans: variable cost.

Explanation:

Variable cost is the cost by employing a variable input such as labor.

6. Ans: decreases at first and then increases.

Explanation:

Since TFC is constant, any increase in output decreases the AFC. And since the marginal product rises initially, reaches a maximum and then decreases, the marginal costs decline initially, reaches its minimum and then rises.

7. Ans: average fixed cost.

Explanation:

AFC = ATC - AVC

8. Ans: MC curve intersects the AVC curve and ATC curve at their minimums.

9. Ans: long-run average cost decreases.

10. Ans: difficulties of coordinating and controlling a large enterprise.

11. Ans: downward sloping.

Explanation:

In a competitive market, industry demand curve is downward sloping and firm demand curve is a horizontal line.