Microeconomics Units 3-5

The relationship in the graph above best illustrates the economic concept of

• opportunity cost

• diminishing marginal utility in consumption

• diminishing marginal returns in production

• production possibilities

Locotek produces toy trains and pays each worker $350 per week. Five workers can produce 40 trains per week and six workers can produce 45 trains per week. The marginal product per week of the sixth worker is

• 5 trains

• 7 trains

• 42.5 trains

• $70

In the graph, the vertical distance CF represents the

• total cost of producing Q1 units of output

• average total cost of producing Q1 units of output

• average variable cost of producing Q1 units of output

• amount of the firm's loss resulting from producing Q1 units of output

The table above shows the amount of labor inputs necessary to produce given levels of output. If the cost of a unit of labor is $20 and total fixed cost is $100, the average total cost of producing 20 units of output is

• $2

• $7

• $40

• $120

If the firm produces Q1 units of output with two inputs, the firm will be experiencing which of the following in the long run?

• Increasing marginal returns

• Decreasing marginal returns

• Economies of scale

• Diseconomies of scale

At the current output level, a firm finds that it has the potential to increase its profit by expanding output. If P = price, MR = marginal revenue, and MC = marginal cost, which of the following must hold at the current output for this firm?

• P = MR = MC

• MR = MC

• MR > MC

• MC > MR

In the short run, the firm will stop production when the price falls below

• 0A

• 0B

• 0C

• 0D

Given the cost and demand schedules depicted, if the firm increased output from q1 to q2, it would

• earn a normal profit

• experience an increase in profits

• experience an decline in profits

• increase revenues, but not costs

At the price 0A, economic profits are

• ABJG

• ABKH

• ABLI

• ACMG

Which of the following statements best describes the graph?

• Economic losses are incurred, and the firm will increase price until no losses are incurred.

• Economic losses are incurred, and exit of firms from the market will cause prices to increase in the long run.

• Economic profits are earned, and costs will increase until no profits are earned.

• Economic profits are earned, and entry of firms into the market will cause prices to decrease in the long run.