Micro II Quiz week 13 - set 2

Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. When Silvio's uses 2 ovens and hires the 3rd worker, the marginal product of labor is ________ the average product of labor, and therefore the average product of labor ________.

• less than; decreases

• less than; increases

• greater than; decreases

• greater than; increases

Dustin's copy shop can use four alternative plants. The figure above shows the average total cost curves for Plant 1 (ATC1), Plant 2 (ATC2), Plant 3 (ATC3), and Plant 4 (ATC4).What is Dustin's long-run average cost if the output is 3,000 copies per day?

• 3.7 cents per copy

• 5.0 cents per copy

• 8.5 cents per copy

• More information is needed to determine the long-run average cost.

Economies of scale refer to

• the point at which marginal cost equals average cost.

• the fact that in the long run, fixed costs remain constant as output increases.

• the range of output over which the long-run average cost falls as output increases.

• a feature of short-run production functions but not long-run production functions

In the above figure, the long-run average cost curve exhibits economies of scale

• between 5 and 10 units per hour.

• between 10 and 20 units per hour.

• between 20 and 25 units per hour.

• along the entire curve.

When a firm is experiencing diseconomies of scale

• the MP curve has a negative slope.

• the LRAC curve has a positive slope.

• it must also experience diminishing returns to labor.

• the MC curve has a negative slope.

Minneapolis business Rogue Chocolatier sells specialty chocolate bars with a high cocoa content. Rogue can produce 15 chocolate bars per day with one employee, 29 with 2, 35 with 3 and 40 with 4 employees. Which statement is TRUE?

• Rogue's marginal product curve decreases continually.

• Rogue's marginal product curve initially increases and then decreases.

• Rogue's total product curve increases at an increasing rate.

• Rogue's marginal product curve decreases initially and then increases.

Which of the following is TRUE regarding a perfectly competitive firm?

• The firm can charge a lower price than its competitors and thereby sell more output and increase its profits.

• The firm always earns a normal profit.

• The firm's marginal revenue continually decreases.

• The firm's minimum efficient scale is small relative to the market demand.

The price elasticity of demand for any particular perfectly competitive firm's output is

• less than 1.

• 1.

• equal to zero.

• infinite.

A competitive firm's total revenue minus its total opportunity cost equals its

• marginal revenue.

• economic profit.

• opportunity cost.

• normal profit.

The table above shows the total cost incurred by Sue's Coat Shop, a perfectly competitive firm. If the market price of a coat is $285, Sue's will maximize economic profit by selling ________ coats a day.

• 7

• 8

• 9

• 11