Unit 6: Exploring Production, Costs and Perfect Competition

The production function shows the relationship between

• inventories and robots

• inputs and outputs

• outputs and time

• costs and returns

Which of the following would be an example of a fixed cost?

• A monthly electricity payment that is sometimes higher or lower

• A monthly electric bill of $26

• The wages you pay a varying # of employees

• A monthly rent payment of $500 that is locked in for a year

Define diminishing returns

• Increase in marginal product due to a fixed input

• Decrease in marginal product due to a fixed input

• Increase in marginal product as the output increases

• Decrease in productivity as variable inputs decrease

Diminishing returns is only visible in the Short Run

• True

• False

When a firm is producing 0 output; total cost =

• 0

• Marginal Cost

• Total Fixed Cost

• Total Variable Cost

Where is the optimal output found for a perfectly competitive firm?

• MC < MR

• MR = MC

• MR > MC

• Price > ATC

All of the following are characteristics of perfectly competitive firms except

• Large # of firms

• All produce the same product

• Always return to a break-even point in the LR

• High Barriers to enter

A positive cross-price elasticity indicates that the two goods are

In the short run, a firm should shut down if

• Price > ATC

• Price < AVC

• Price < ATC

• Price = ATC

All of the following are true about a perfectly competitive firm in long-run equilibrium except

• Economic Profit = 0

• P > ATC

• P > AVC

• P = MC