Question

Riva crafts and sells hard cider as a part-time job. She can bottle and sell four...

Riva crafts and sells hard cider as a part-time job. She can bottle and sell four cases in a week. She is considering hiring her friend Atul to help her. Together, Riva and Atul can bottle and sell seven cases per week. What is Atul’s marginal product?

a.

3 cases

b.

7 cases

c.

2 cases

d.

5 cases

4 points   

QUESTION 16

When firms are neither entering nor exiting a perfectly competitive market,

a.

total revenue must equal total cost for each firm.

b.

economic profits must be zero.

c.

price must equal the minimum of marginal cost for each firm.

d.

Both a and b are correct.

4 points   

QUESTION 17

Which of the following statements is correct?

a.

Only for competitive firms does average revenue equal marginal revenue.

b.

For all firms, marginal revenue equals the price of the good.

c.

Only for competitive firms does average revenue equal the price of the good

d.

d. Marginal revenue can be calculated as total revenue divided by the quantity sold.

QUESTION 19

A firm produces 400 units of output at a total cost of $1,200. If fixed costs are $200,

a.

average total cost is $4.

b.

average fixed cost is $2.

c.

average total cost is $5.

d.

average variable cost is $2.50.

In a perfectly competitive market, the market supply curve is

a.

the marginal cost curve above average total cost for a representative firm.

b.

always a horizontal line.

c.

the horizontal sum of all the individual firms' supply curves.

d.

the vertical sum of all the individual firms’ supply curves.

4 points   

QUESTION 22

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba’s Bubble Gum Company encounters

a.

economies of scale.

b.

increasing marginal product.

c.

diseconomies of scale.

d.

diminishing marginal product.

4 points   

QUESTION 23

Scenario 14-3
Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20.

Refer to Scenario 14-3. At Q=500, the firm’s profits equal

a.

$1,000.

b.

$7,000.

c.

$10,000.

d.

$4,000.

Homework Answers

Answer #1

1) ans is A. Atuls marginal produxt is 3cases. Because marginal product is the addition in total product due to an additional labor hired.

16) ans is D. Firm will neither enter nor exit when economic profit is zero.

19) ans is D

AFC=TFC/Q=200/400=0.5

ATC=TC/Q=1200/400=3

AVC=TVC/Q=1000/400=2.5

22)ans is D. Diminishing marginal product means marginal product derieves from each succesive unit keeps on decreasing.

23) Profit=(P-AC)*Q=(20-12)*500=8*500=4000

Ans is D

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