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Questions and Answers
The implicit rental rate to a firm of owning a building is
The implicit rental rate to a firm of owning a building is
- the sum of economic depreciation and forgone interest. (correct)
- the rent paid on the building.
- forgone interest only.
- the cost of using an alternative building.
- economic depreciation only.
Gerald is a freelance writer who could work for a newspaper at $25,000 a year but instead runs his own business making revenue of $40,000 a year. His only business expenses are $1,000 for writing materials and $12,000 for rent. What is Gerald's economic profit from working as a freelance writer?
Gerald is a freelance writer who could work for a newspaper at $25,000 a year but instead runs his own business making revenue of $40,000 a year. His only business expenses are $1,000 for writing materials and $12,000 for rent. What is Gerald's economic profit from working as a freelance writer?
2,000
The long run is a timeframe in which
The long run is a timeframe in which
- the firm may want to build a bigger plant, but cannot do so.
- the quantities of all factors of production can be varied. (correct)
- the firm is able to maximize revenue.
- the firm can hire all the workers it wants to employ, but it does not have sufficient time to buy more equipment.
- economic efficiency is achieved.
Marginal product
Marginal product
Refer to Table 10.2.1 which gives Tania's Teapots' total product schedule. The marginal product when Tania's increases the number of workers from 3 to 4 per day is
Refer to Table 10.2.1 which gives Tania's Teapots' total product schedule. The marginal product when Tania's increases the number of workers from 3 to 4 per day is
Refer to Table 10.2.1 which gives Tania's Teapots' total product schedule. The average product when Tania's hires two workers is
Refer to Table 10.2.1 which gives Tania's Teapots' total product schedule. The average product when Tania's hires two workers is
Refer to Table 10.2.1 which gives Tania's Teapots' total product schedule. Marginal product of labour reaches its maximum when the number of workers increases from
Refer to Table 10.2.1 which gives Tania's Teapots' total product schedule. Marginal product of labour reaches its maximum when the number of workers increases from
The law of diminishing marginal returns refers to the tendency for the ______ to eventually decrease as more labour is employed, everything else remaining the same.
The law of diminishing marginal returns refers to the tendency for the ______ to eventually decrease as more labour is employed, everything else remaining the same.
Refer to Table 10.3.1, which gives Tania's Teapots' total cost schedule. The average total cost of producing 16 teapots per day is
Refer to Table 10.3.1, which gives Tania's Teapots' total cost schedule. The average total cost of producing 16 teapots per day is
Refer to Table 10.3.1, which gives Tania's Teapots' total cost schedule. When output increases from 4 to 9 teapots, the marginal cost of one of the 5 teapots is
Refer to Table 10.3.1, which gives Tania's Teapots' total cost schedule. When output increases from 4 to 9 teapots, the marginal cost of one of the 5 teapots is
When the marginal product of labour is less than the average product of labour
When the marginal product of labour is less than the average product of labour
Which one of the following statements is false?
Which one of the following statements is false?
Economies of scale are present when
Economies of scale are present when
The minimum efficient scale is the smallest quantity of output at which
The minimum efficient scale is the smallest quantity of output at which
A price-taking firm faces a
A price-taking firm faces a
A perfectly competitive market is characterized by
A perfectly competitive market is characterized by
The shutdown point occurs at the point of minimum
The shutdown point occurs at the point of minimum
A perfectly competitive firm is maximizing profit or minimizing loss if it is producing the quantity at which
A perfectly competitive firm is maximizing profit or minimizing loss if it is producing the quantity at which
If MR>MC
If MR>MC
If a profit-maximizing firm in a perfectly competitive market is incurring an economic loss, then it must be producing a level of output where
If a profit-maximizing firm in a perfectly competitive market is incurring an economic loss, then it must be producing a level of output where
Refer to Figure 11.4.2, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run, market
Refer to Figure 11.4.2, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run, market
When a perfectly competitive market is in long-run equilibrium
When a perfectly competitive market is in long-run equilibrium
A decrease in demand brings all of the following except
A decrease in demand brings all of the following except
In a natural monopoly, the long-run average cost curve
In a natural monopoly, the long-run average cost curve
Refer to Figure 12.2.1. This single-price monopoly produces [blank] units per day and charges a price of $ [blank] per unit.
Refer to Figure 12.2.1. This single-price monopoly produces [blank] units per day and charges a price of $ [blank] per unit.
A single-price monopolist's demand curve
A single-price monopolist's demand curve
The marginal revenue curve for a single-price monopoly
The marginal revenue curve for a single-price monopoly
If marginal revenue equals zero, then demand at this level of output is
If marginal revenue equals zero, then demand at this level of output is
The pursuit of wealth by capturing economic rent
The pursuit of wealth by capturing economic rent
Which of the following markets will have the largest deadweight loss?
Which of the following markets will have the largest deadweight loss?
Consider Figure 12.3.3. Which area indicates the deadweight loss from a single-price monopoly?
Consider Figure 12.3.3. Which area indicates the deadweight loss from a single-price monopoly?
Consider Figure 12.3.3. In a single-price monopoly, which area indicates producer surplus?
Consider Figure 12.3.3. In a single-price monopoly, which area indicates producer surplus?
In the prisoners' dilemma with players Art and Bob, each prisoner would be best off if
In the prisoners' dilemma with players Art and Bob, each prisoner would be best off if
Refer to Table 14.2.8. Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each optometrist can choose to advertise his service or not. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. Which of the following statements correctly describes Dr. Smith's strategy given what Dr. Jones may do?
Refer to Table 14.2.8. Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each optometrist can choose to advertise his service or not. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. Which of the following statements correctly describes Dr. Smith's strategy given what Dr. Jones may do?
Refer to Table 14.2.8. Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each optometrist can choose to advertise his service or not. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. Which of the following statements correctly describes Dr. Jones' strategy given what Dr. Smith may do?
Refer to Table 14.2.8. Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each optometrist can choose to advertise his service or not. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. Which of the following statements correctly describes Dr. Jones' strategy given what Dr. Smith may do?
Refer to Table 14.2.8. Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each optometrist can choose to advertise his service or not. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. Which of the following statements correctly categorizes the Nash equilibrium for the game?
Refer to Table 14.2.8. Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each optometrist can choose to advertise his service or not. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. Which of the following statements correctly categorizes the Nash equilibrium for the game?
In the prisoners' dilemma, with players Art and Bob, the dominant strategy equilibrium is that
In the prisoners' dilemma, with players Art and Bob, the dominant strategy equilibrium is that
Which is not a characteristic of oligopoly?
Which is not a characteristic of oligopoly?
Consider a "prisoners' dilemma" game consisting of two firms in collusion to maximize profit. The game is repeated indefinitely and each player employs a tit-for-tat strategy. The equilibrium when the two firms share the monopoly profit is called a
Consider a "prisoners' dilemma" game consisting of two firms in collusion to maximize profit. The game is repeated indefinitely and each player employs a tit-for-tat strategy. The equilibrium when the two firms share the monopoly profit is called a
To maximize profit, a firm hires the quantity of labour at which
To maximize profit, a firm hires the quantity of labour at which
If marginal product of a restaurant employee is 10 customers per hour, and the price of a meal is $15, the restaurant employee's value of marginal product is
If marginal product of a restaurant employee is 10 customers per hour, and the price of a meal is $15, the restaurant employee's value of marginal product is
Refer to Table 17.2.1. If the firm can sell all the output it wants for the price of $4 a unit, what is the profit-maximizing number of workers if the wage rate is $12?
Refer to Table 17.2.1. If the firm can sell all the output it wants for the price of $4 a unit, what is the profit-maximizing number of workers if the wage rate is $12?
The income effect of a higher wage is
The income effect of a higher wage is
Flashcards
Implicit Rental Rate
Implicit Rental Rate
The sum of economic depreciation and forgone interest.
Economic Profit
Economic Profit
The difference between the total revenue a firm receives from selling its output and
the total cost of producing that output.
Long Run
Long Run
A period of time in which the firm can vary the quantities of all the factors of production.
Marginal Product
Marginal Product
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Marginal Product of Labor
Marginal Product of Labor
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Average Product of Labor
Average Product of Labor
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Law of Diminishing Marginal Returns
Law of Diminishing Marginal Returns
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Average Total Cost
Average Total Cost
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Marginal Cost
Marginal Cost
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Diminishing Marginal Returns
Diminishing Marginal Returns
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Economies of Scale
Economies of Scale
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Minimum Efficient Scale
Minimum Efficient Scale
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Price-Taking Firm
Price-Taking Firm
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Perfectly Competitive Market
Perfectly Competitive Market
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Shutdown Point
Shutdown Point
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Profit Maximization Rule
Profit Maximization Rule
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Marginal Revenue Curve
Marginal Revenue Curve
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Rent Seeking
Rent Seeking
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Natural Monopoly
Natural Monopoly
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Single-Price Monopoly
Single-Price Monopoly
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Consumer Surplus
Consumer Surplus
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Producer Surplus
Producer Surplus
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Collusion
Collusion
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Dominant Strategy
Dominant Strategy
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Nash Equilibrium
Nash Equilibrium
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Oligopoly
Oligopoly
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Cooperative Equilibrium
Cooperative Equilibrium
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Marginal Revenue
Marginal Revenue
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Value of Marginal Product of Labor
Value of Marginal Product of Labor
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Income Effect
Income Effect
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Study Notes
Economic Principles
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Implicit rental rate: The sum of economic depreciation and forgone interest, representing the opportunity cost of owning a building.
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Economic profit: Revenue minus explicit and implicit costs, including the opportunity cost of resources.
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Long run: A period in which all factors of production, including machinery, can be altered.
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Marginal product: The change in total output resulting from a one-unit increase in a variable input, like labor. It's the slope of the total product curve.
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Law of diminishing marginal returns: As more of a variable input (e.g., labor) is added to a fixed input (e.g., machinery), the marginal output eventually decreases.
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Average total cost: Total cost divided by total output.
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Marginal cost: the increase in total cost from producing one more unit of output
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Shutdown point: the point on the average variable cost curve where the firm is indifferent between producing and shutting down
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Perfectly competitive market: Many buyers and sellers, standardized products, free entry and exit, price takers.
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Long-run equilibrium in a perfectly competitive market: Firms earn zero economic profit (price=minimum average total cost).
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Monopoly: Single firm, unique product, significant barriers to entry.
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Single-price monopoly: Sets a single price for all units of output.
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Marginal revenue: Change in total revenue from selling one additional unit.
Production Schedule
- Marginal product of labor: The change in output from adding one more worker (e.g., from 3 to 4 workers).
- Average product of labor: Total output divided by the number of workers.
Cost Schedule
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Average total cost: Total cost divided by output.
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Marginal cost: Change in total cost from producing one additional unit.
Additional Concepts
- Economies of scale: A situation in which the average total cost falls as output increases.
- Minimum efficient scale: The smallest quantity of output at which the long-run average total cost reaches its lowest level.
- Price-taking firm: A firm that must accept the market price for its output, as it has negligible impact on the market price. This means its demand curve is perfectly elastic.
- Nash equilibrium: A situation where no participant can improve their outcome by changing their strategy, given the strategies of the other participants.
- Prisoner's Dilemma: A game theory scenario where rational individual choices lead to outcomes that are not optimal for the group. In the prisoner's dilemma game, both parties confess rather than deny, which is worse for both.
- Deadweight loss: The loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved or is not achievable.
- Economic rent: the extra income earned by a firm.
- Tit-for-tat strategy: A strategy in a repeated game where a player initially cooperates, and then imitates the opponent's previous move.
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Description
Test your understanding of key economic principles such as implicit rental rates, economic profit, long run production, and marginal costs. This quiz covers essential concepts that are fundamental to economics and production theory. Challenge yourself to apply these concepts to different scenarios.
