Econ 201

Question 1

If a perfectly competitive industry is in long-run equilibrium, the price of the product equals minimum:

Answer 1

average total cost.

Question 2

If the law of diminishing marginal productivity holds true, eventually both the marginal cost curve and the average cost curve must become:

Answer 2

upward-sloping.

Question 3

The difference between economic profit and accounting profit is equal to

Answer 3

implicit revenues minus implicit costs

Question 4

rises when the point of diminishing marginal productivity is reached.

Answer 4

marginal cost curve

Question 5

Given that there are significant economies of scale involved in making flat screen television sets, the cost of manufacturing a flat screen television set most likely will:

Answer 5

fall as the industry matures.

Question 6

A firm’s total variable cost increases from $4,000 to $4,020 as the firm increases its output from 400 to 401 units. What is the marginal cost of producing the 401st unit?

Answer 6

$20

Question 7

Constant returns to scale means that long-run:

Answer 7

ATC does not change as output increases

Question 8

are positive even when no output is produced.

Answer 8

Total fixed costs

Question 9

The minimum point of the average total cost curve always occurs at a larger output level than the minimum point of the average variable cost curve because:

Answer 9

average fixed costs are falling

Question 10

If the average total cost of supplying a good exceeds the price at which the good can be sold, then entrepreneurs have:

Answer 10

no incentive to supply the good

Question 11

short-run decision

Answer 11

typically labor can be changed while other inputs (and the production technique) remain the same. Firms can change all of their inputs in the long run, but in the short run some inputs are fixed.

Question 12

typically downward-sloping at first but then upward-sloping.

Answer 12

long-run average cost curve

Question 13

price does more of the adjusting in the short run and quantity does more of the adjusting in the long run.

Answer 13

perfectly competitive market

Question 14

are opportunity costs that affect economic profits but are difficult to measure

Answer 14

Implicit costs

Question 15

To maximize profits, a perfectly competitive firm should produce until

Answer 15

marginal cost is equal to price

Question 16

economic profit

Answer 16

accounts for all costs, including opportunity costs,

Question 17

accounting profit

Answer 17

accounts only for explicit costs.

Question 18

At very high levels of output, total cost tends to:

Answer 18

increase at an increasing rate.

Question 19

Along a straight-line demand curve, elasticity

Answer 19

rises as price rises.

Question 20

Since capital is relatively scarce in India, the economically efficient method of producing food would probably:

Answer 20

not be capital-intensive.

Question 21

The law of diminishing marginal productivity implies that the marginal product of a variable input:

Answer 21

eventually declines

Question 22

are constrained because some inputs are fixed and others are variable.

Answer 22

short run decisions

Question 23

The upward-sloping portion of the short-run average total cost curve is caused by the presence of….

Answer 23

fixed inputs

Question 24

Economic efficiency is achieved at a particular output level if:

Answer 24

average total cost is as low as possible