Of all the costs shown below incurred by Superior Airways, which is an example of an implicit cost?
a. The salaries paid to the pilots.
b. The jet fuel bills.
c. The purchases of parts needed for maintenance of the aircraft.
d. The rent that could be earned on an aircraft that is owned and used by Superior.
Everything that needs to be given up whenever a choice is made is called:
a. an implicit cost.
b. an explicit cost.
c. an opportunity cost.
d. a sunk cost.
Accounting profit is generally ________ than economic profit, because accountants ________ implicit costs in their calculations.
a. greater, consider
b. greater, do not consider
c. smaller, consider
d. smaller, do not consider
The law of diminishing marginal product of labor occurs when:
a. The law of diminishing marginal product of labor occurs when:
b. every additional worker hired reduces the total costs of the firm.
c. every additional worker hired contributes a smaller increase in production than previously hired workers.
d. every additional worker hired contributes a smaller increase in total costs than previously hired workers.
Based on the table above, what is the marginal cost of the tenth unit?
a. $250
b. $200
c. $50
d. $300
Based on the table above, if the fixed cost is $500, what is the average total cost of the fifth unit?
b. $140
c. $240
d. $100
Based on the table above, what is the average variable cost of the fourth unit?
b. $125
Economies of scale occur when ________ as the quantity of output increases.
a. short-run average total cost falls
b. short-run average total cost rises
c. long-run average total cost falls
d. long-run average total cost rises
The cost of raw materials will fall under the category of:
a. fixed costs.
b. variable costs.
c. implicit costs.
d. average fixed costs.
The factory rent payments made by a firm fall under the category of:
c. short-run costs.
d. average variable costs.
Which of the following is NOT a characteristic of monopolistic competition?
a. There are many sellers.
b. There are many buyers.
c. Everybody is perfectly informed.
d. The goods are identical across sellers.
The diagram depicting monopolistic competition in the short run:
a. is very similar to the short-run monopoly diagram.
b. is very similar to the short-run perfect competition diagram.
c. is very similar to the short-run oligopoly diagram.
d. is completely different from the diagrams of all the other types of markets.
If the average-total-cost curve of a firm in monopolistic competition happens to be above the demand curve, it means:
a. the firm will have to sell a lot in order to make a profit.
b. the firm will have to sell at a very high price in order to make a profit.
c. other firms are performing better in the market than the firm depicted in the diagram.
d. the firm will be incurring losses in the short run.
In the long run, firms in monopolistic competition will see their price:
a. become equal to their average variable cost.
b. become equal to their average total cost.
c. remain well above their average total cost.
d. become equal to their marginal cost.
If firms in monopolistic competition are enjoying positive economic profits, in the long run:
a. they will continue enjoying such profits, since new firms will be unable to enter the industry.
b. consumers will cease wanting to buy the good and will switch to cheaper alternatives.
c. this will attract new firms into the industry, causing prices to drop and profits to disappear.
d. the government will have to step in and regulate the price.
In long-run equilibrium, firms in monopolistic competition ________ than firms in perfect competition.
a. produce less
b. charge a lower price
c. have bigger profits
d. have lower costs
In long-run equilibrium in a monopolistically competitive market, the price will be equal to:
a. marginal cost.
b. marginal revenue.
c. average variable cost.
d. average total cost.
A major critique of advertising is that:
a. it provides information to consumers that they would be better off without.
b. it manipulates people's tastes and preferences.
c. it promotes excessive competition among firms in the industry.
d. it undermines the market price.
A major argument in favor of advertising is that:
a. it provides information to consumers that allows them to make better choices.
b. it helps people reaffirm their tastes and preferences.
c. it promotes competition among firms in the industry, leading to lower prices.
d. it will lower the market price.
According to the text, branding can be good for society because:
a. it allows people to show off the branded goods they use or wear.
b. it keeps generic goods from taking over the market.
c. it provides useful information to consumers about the quality of branded goods.
d. it helps firms enjoy higher prices and profits.
e. Superbowl commercials are the best.
