Profit- maximising fir ms want to maximize the difference between
total revenue and total cost.
marginal revenue and marginal cost.
marginal revenue and average cost.
total revenue and marginal cost.
Which statement is FALSE?
Fixed costs do not depend on the firm's level of output.
Fixed costs are zero if the firm is producing nothing .
Fixed costs are the difference between total costs and total variable costs.
There are no fixed costs in the long run.
Which of the following is most likely to be a variable cost for a firm?
The monthly rent on office space that it leased for a year.
The franchiser's fee that a restaurant must pay to the national restaurant chain
The interest payments made on loans.
Workers’ wages.
The costs that depend on output in the short run are
total variable costs only.
both total variable costs and total costs.
total costs only
total fixed cost only
The short run, as economists use the phrase, is characterized by
a period where the law of diminishing returns does not hold.
at least one fixed factor of production, and firms neither leaving nor entering the industry.
all inputs being variable.
no variable inputs - that is all of the factors of production are fixed
Diminishing marginal returns implies
increasing average fixed costs.
decreasing marginal costs.
decreasing average variable costs.
increasing marginal costs.
Which of the following is a correct statement about the relationship between average product (AP) and marginal product (MP)?
If AP is at a maximum, then MP is also.
If TP is declining then AP is negative.
If AP exceeds MP, then AP is falling.
If AP = MP, then total product is at a maximum.
If the total product of two workers is 80 and the total product of 3 workers is 90, then the marginal product of the third worker is _____ and the average product of the third worker is _______.
270; 160
3.33; 10
10; 30
30; 10
Engineers for Imran Bike Company have determined that a 15% increase in “all” inputs will cause a 15% increase in output. Assuming that input prices remain constant, you correctly deduce that such a change will cause ________ as output increases.
Long- run average costs to increase
Long- run marginal costs to increase
Long-run average costs to remain constant
Long- run average costs to decrease
Suppose Isa Khan’s Ice Cream experiences economies of scale up to a certain point and diseconomies of scale beyond that point. Its long-run average cost curve is most likely to be
upward sloping to the right.
U-shaped.
horizontal.
downward sloping to the right.
A graph showing all the combinations of capital and labour that can be used to produce a given amount of output is
an isocost line.
a production function.
an isoquant.
an isoquant.
The rate at which a firm can substitute capital for labour and hold output constant is the
law of diminishing marginal returns.
marginal rate of technical substitution.
marginal rate of substitution.
marginal rate of production.
A graph showing all the combinations of capital and labour available for a given total cost is the
budget constraint.
isoquant.
expenditure set.
isocost line.
The formula for average fixed costs is
dTFC/dq.
TFC/q.
q/TFC.
TFC - q.
The formula for AVC is
q/TVC.
dTVC/dq.
dq/dTVC.
TVC/q.
Marginal revenue is
the additional profit the firm earns when it sells an additional unit of output.
the added revenue that a firm takes in when it increases output by one additional unit.
the difference between total revenue and total costs.
the ratio of total revenue to quantity.
A firm in a perfectly competitive industr y is producing 50 units, its profit-maximising quantity. Industry price is E 2,000; total fixed costs are 25,000 and average variable costs are E 800. The firm's economic profit is
E 15,000.
E 25,000.
E 35,000.
Zero.
The amount of profit a firm makes can be shown on a diagram using
the AC and AR curves.
the MR and AR curves.
the AC and MC curves.
the MR and MC curves.
A firm’s choice of profit-maximising output can be shown on a diagram using