Economics T2 - How markets work Flashcards
A firm may choose to produce at a loss in the short run, and wisely so, if it is at least: covering its fixed costs. covering its noncash costs. covering its average fixed costs. covering its variable costs. All answers are correct
covering its variable costs.
If quantity supplied changes by 10 percent when price changes by 20 percent, the price elasticity of supply is: 0.5 5 50 20 All answers are correct
0.5
The competitive firm's short-run supply curve is also its: MPP curve above maximum APP. AVC curve through its entire range. MVP curve above maximum MVP. MC curve above minimum AVC. All answers are correct
MC curve above minimum AVC.
Marginal costs are the costs relevant to a decision because they:
a) are the only costs that will be affected by the decision.
b) are typically less than average costs.
c) are typically greater than average costs.
d) can be greater or less than opportunity costs.
e) All answers are correct
are the only costs that will be affected by the decision.
If producers increase the quantity supplied in response to an increase in the price of their product, they will experience:
A a decline in total revenue if supply is inelastic.
B a decline in total revenue if supply is elastic.
C a decline in total revenue no matter whether supply is elastic or inelastic.
D an increase in total revenue.
E All answers are correct
an increase in total revenue.
A ‘peasant response’ to a decrease in the price of a major output is:
to bring the Master a shrubbery
to produce less of the item in question.
to expand production in an effort to maintain living standards.
to check to see if marginal revenue exceeds average variable cost.
continue to produce to meet their own needs.
All answers are correct
continue to produce to meet their own needs.
If ATC is $10 per unit, AFC is $6 per unit and average revenue is $5 per unit the firm should immediately cease production.
True/False
False
T/F
Where irrigation water is an input in producing corn, a change in the price of irrigation water will not cause a change in the quantity of corn produced.
False
Farmers tend to maintain output when prices have fallen because:
supply is inelastic in the short-run.
agricultural production systems are constrained by biological factors.
of asset fixity.
of a high proportion of fixed costs.
All answers are correct
agricultural production systems are constrained by biological factors.
T/F
The most profitable level of output is always where ATC is a minimum.
False
Which of the following would cause the long-run Riverina poultry supply curve to shift to the right?
Discovery of an inexpensive serum injection that makes broilers gain weight much more rapidly.
Discovery of a lower cost air cooling system that keeps building temperature constant at a more desirable level.
The return from renting surplus farm land to others increases greatly.
The cost of broiler processing equipment increases substantially.
All answers are correct
Discovery of an inexpensive serum injection that makes broilers gain weight much more rapidly.
A family farm that is operated solely with that family’s labour:
will have lower labour costs than if they used hired labour instead.
will have no labour cost unless they pay themselves a salary.
cannot escape a labour cost in operating their farm.
will have no real labour cost, thus their net farm income over purchased inputs is entirely an economic as well as bookkeeping profit.
All answers are correct
cannot escape a labour cost in operating their farm.
T/F
The supply curve for peanuts slopes downward to the right because large farms can increase their output so much easier than small farms can.
False
A firm that is a profit-maximiser will increase its output until:
its marginal revenue is positive.
its marginal revenue is increasing.
marginal revenue is positive, but decreasing.
marginal revenue exceeds marginal cost.
All answers are correct
marginal revenue exceeds marginal cost.
T/F
In the case where Py = MR = MC = ATC, profit must be zero.
False
