1) Economists generally define the short run as being
A. that period of time in which all inputs are variable.
B. that period of time in which at least one of the firm's inputs, usually plant size, is fixed.
C. any period of time less than six months.
D. any period of time less than one year.
2) Production functions indicate the relationship between
A. factor costs and output prices.
B. the value of inputs and average costs.
C. factor inputs and the quantity of output.
D. factor inputs and factor prices.
3) Which of the following is a short-run decision for a firm?
A. Expanding the firm's distribution network of long-haul freight trucks and smaller delivery trucks.
B. Firing workers
C. Downsizing the firm's manufacturing plant
D. Investing in a new addition to the firm's manufacturing plant
4) Suppose that a firm is currently producing 500 units of output. At this level of output, TVC = $1,000 and TFC = $2,500. What is the firms ATC?
A. $2
B. $7
C. $10
D. $5
5) When total product is rising,
A. marginal product must be positive.
B. variable cost must be declining.
C. marginal product must be negative.
D. fixed cost must be rising.
6) Which of the following is closest to a perfectly competitive market?
A. the pizza market
B. the market for corn
C. the market for breakfast cereal
D. the market for automobiles
7) Being a price taker essentially means
A. the firm cannot legally set its price below the market price.
B. a firm can influence the market price.
C. a firm cannot influence the market price.
D. the firm cannot legally set its price above the market price.
8) The total revenue of a perfectly competitive firm is calculated by
A. dividing price by quantity.
B. multiplying price by quantity.
C. multiplying quantity by average total cost.
D. multiplying average revenue by price.
9) The perfectly competitive firm cannot influence the market price because
A. its production is too small to affect the market.
B. it is a price maker.
C. its costs are too high.
D. it has market power.
10) If a firm is a perfect competitor, then
A. its marginal cost will exceed marginal revenue at the optimal level of output.
B. the demand curve for its product is perfectly elastic.
C. it can independently set the price of the product it sells without regard to what other firms in the market are doing.
D. it is impossible for the firm to earn short-run economic profits.
11) For a firm in a perfectly competitive market, average revenue equals
A. the market price.
B. average cost.
C. the change in total revenue.
D. price divided by quantity.