Economics Quiz 12-14

Which of the following conditions can describe a firm with diminishing returns to scale in a competitive market and negative accounting profit?

• Total revenue is zero.

• Marginal revenue exceeds marginal cost.

• Total revenue and cost are equal.

• Economic profits are positive.

• Marginal cost exceeds total cost.

Which of the following statements describes a competitive market?

• Firms enter the market in response to positive economic profits.

• Firms exit the market in response to positive economic profits.

• Firms enter the market until marginal revenue equals marginal cost.

• Economic profits do not affect the entry or exit of firms.

• Economic profits will always be positive.

The company DJI increases production of drones by 10% in a competitive market. Which of the following values increases 10%?

• deadweight loss

• consumer surplus

• marginal cost

• marginal revenue

• total revenue

In which situation would accounting profit be negative?

• Total revenue exceeds opportunity cost.

• Opportunity cost exceeds total revenue.

• Total revenue exceeds total cost.

• Total cost exceeds total revenue.

• Opportunity cost exceeds total cost.

Which of the following values is constant for a firm in a competitive market?

• total costs

• variable costs

• total revenue

• marginal revenue

• marginal cost

Which of the following costs best describes a firm’s rent?

• marginal cost

• social cost

• fixed cost

• opportunity cost

• variable cost

What impact would hiring additional workers have on a firm’s costs?

• increasing fixed costs

• increasing social welfare

• increasing variable costs

• diminishing returns to scale

• increasing marginal revenue

Which of the following institutions is NOT a firm?

• Charles Schwab brokerage

• Federal Reserve

• ManuLife financial advisors

• Starbucks

• Amazon

For what PRIMARY reason do diminishing returns to scale exist?

• Consumers switch to cheaper alternatives.

• Marginal revenue is constant.

• Firms cannot predict demand.

• Not all inputs are equally productive.

• Some costs are variable.

Which of the following examples BEST demonstrates diminishing returns to scale?

• As firms increase quantity supplied, market price rises.

• As firms expand, fixed costs increase.

• As firms increase quantity, marginal cost decreases.

• As firms enter new markets, horizontal integration reduces profits.

• As more workers are hired, additional workers produce less.