MicroEcon Final Exam (Exam 2 SG)

Variable costs are

• costs that change with the level of production.

• costs that change every day or every month.

• changes in total cost due to the production of an additional unit of output.

• costs that remain to be paid even if the firm shuts down temporarily.

The law of diminishing returns in a manufacturing plant of a fixed capacity implies that, eventually, employing one

• more worker will decrease the average amount of output per worker.

• fewer worker will decrease the average amount of output per worker.

• fewer worker will not affect the average amount of output per worker.

• more worker will increase the average amount of output per worker.

A purely competitive seller is

• neither a "price-maker" nor a "price-taker."

• both a "price-maker" and a "price-taker."

• a "price-maker."

• a "price-taker."

Which of the following is true concerning purely competitive industries?

• In the short-run, firms may incur economic losses or earn economic profits, but in the long-run they earn normal profits.

• There will be economic losses in the long run because of cut-throat competition.

• Economic profits will persist in the long run if consumer demand is strong and stable.

• There are economic profits in the long run but not in the short run.

An increasing-cost industry is associated with

• an upsloping long-run demand curve.

• a perfectly inelastic long-run supply curve.

• an upsloping long-run supply curve.

• a perfectly elastic long-run supply curve.

Supply curves tend to be

• less elastic in the long run because there is time for firms to enter or leave an industry.

• more elastic in the long run because there is time for firms to enter or leave the industry.

• perfectly inelastic in the long run because the law of scarcity imposes absolute limits on production.

• perfectly elastic in the long run because consumer demand will have sufficient time to adjust fully to changes in supply.

In which of the following instances will total revenue decline?

• Price rises and demand is inelastic.

• Price falls and demand is elastic.

• Price rises and demand is elastic.

• Price rises and supply is elastic.

The law of diminishing marginal utility explains why

• addicts can never get enough.

• supply curves slope upward.

• people will not only consume their favorite goods and not try new things.

• demand curves slope downward.

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. For a purely competitive firm, marginal revenue graphs as a

• straight line, parallel to the vertical axis.

• straight, upsloping line.

• straight, downward-sloping line.

• straight line, parallel to the horizontal axis.

The law of diminishing marginal utility states that

• it will take larger and larger amounts of resources beyond some point to produce successive units of a product.

• total utility is maximized when consumers obtain the same amount of utility per unit of each product consumed.

• price must be lowered to induce firms to supply more of a product.

• beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer.