Economic Exam Questions

15. In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is ( )

Such firms identify this optimized level of output by determining the specific point at which marginal revenue and marginal cost are equal. The value to the firm is that this knowledge tells them when they have maximized their profit making potential. Going past this point will result in a negative return.

The table above lists the number of acres it takes to produce one cargo container of oranges and one cargo container of bananas in the United States and Costa Rica. Which of the following is true?

Explain what action a profit maximizing firm takes if marginal revenue is greater than marginal cost:

the highest-cost firm in operation breaks even, while the low cost firms will earn profit.

Question 13 If the supply curve of a factor of production facing a competitive firm is perfectly elastic, then from the firm's point of view: (a) none of the factor's earnings is necessary transfer payment (b) all of the factor's earnings is producer surplus (c) none of the factor's earnings is rent (d) all of the factor's earnings is rent

C. Small number of firms, price maker, limited entry and exit, and a standardized product

Suppose losses cause industry X to contract and, as a result, the prices of relevant inputs decline. Industry X is:

23) When customers buy on the basis of a reference price or because the price conveys a particular quality image to them, they are being influenced by ____________.

|18. |(Figure: A Perfectly Competitive Firm in the Short Run) The firm's total revenue from the sale of its most profitable level of |

8. Compared to a perfectly competitive industry with the same demand and cost curves, a monopoly’s price and output will be which of the following?

As the number of organizations increase, the industry supply curve shifts to the right denoted by S2. In the long run, firms will be operating at minimum of ATC and economic profit will be zero again. Long run prices will be equal to initial price (p1) and the equilibrium quantity will be higher. Companies will likely have similar cost structures and will grow in quantity over time. Prices cannot go below this because companies will exit at prices below this level.

Your response Exercise 5-1 Fixed and Variable Cost Behavior [LO1] Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,200 and the variable cost per cup of coffee served is $0.22. Requirement 1: Fill in the following table with your estimates of total costs and cost per cup of coffee at the indicated levels of activity for a coffee stand. (Round average cost per cup of coffee to 3 decimal places. Omit the "$" sign in your response.) 2,000 Fixed cost Variable cost Total cost Average cost per cup of coffee served $ $ $

After a time, the existence of subnormal profits would cause firms to leave the industry. Supply would fall and prices rise. Hence long run equilibrium is one of normal profits only.

profit. This however is simply not true and has been proven time and time again with the