Question

When Brenda’s Pastry employs three workers, total output is 6 dozen pastries per hour.  After Brenda hires a fourth worker, the number of pastries produced increases to 7 dozen per hour.  Which of the following is true about the marginal product (MP) and average product (AP) of labor for Brenda’s Pastry?

a.Because the MP of the fourth worker is greater than the AP of three workers, AP must fall when the fourth worker is hired

b.Because the MP of the fourth worker is less than the AP of three workers, AP must rise when the fourth worker is hired

c.Because the MP of the fourth worker is greater than the AP of three workers, AP must rise when the fourth worker is hired

d.Because the MP of the fourth worker is less than the AP of three workers, AP must fall when the fourth worker is hired

Economies of scale exist when:

a.a firm's decision to hire additional inputs does not result in an increase in input prices

b.the long-run average cost of production falls as the output increases

c.the firm is too small and too specialized

d.the firm is too large and too diversified

A firm should __________output whenever MR > MC because ___________:

a.reduce; revenue will rise by more than costs thus increasing the firm’s profit

b.increase; total revenue is less than total cost, thus profits will increase

c.increase; revenues will rise by more than costs thus increasing the firm’s profit

d.leave output unchanged; selling more will cause MR to increase by less than MC

A firm with the ability to affect the price of its product:

a.faces a downward sloping demand curve

b.has no demand curve (i.e., the relationship between price and quantity demanded breaks down)

c.has a perfectly elastic demand curve

d.can sell whatever quantity it products without changing its price

Monopolistically competitive industries differ from perfectly competitive industries in that:

a.there are barriers to entry in the former but not the latter

b.there are few producers in monopolistically competitive industries and many in perfect competition

c.there is product differentiation in monopolistically competitive industries but not in perfect competition

d.monopolistic competition has easy entry

An industry in which one firm can supply the entire market at a lower price than two or more firms can is called a

a.legal monopoly

b.single-price monopoly

c.natural monopoly

d.price-discriminating monopoly

Suppose excellent weather leads to a larger than normal tomato crop. If there is a relatively small change in price compared to the change in quantity resulting from this large crop, what does this imply about the price elasticity of demand for tomatoes?

a.it is relatively elastic

b.it is relatively inelastic

c.it is perfectly elastic

d.it is perfectly inelastic

Answer 1