Question

Question 16.

Where is the shut down point in one of the following?

Select one:

a. Price is equal to average variable cost.

b. Price is equal to average total cost.

c. Price is between average total cost and average variable cost.

d. Price is above average total cost.

Question 17.

Which of the following best descibes the relationship between supply curve and the marginal cost curve for the purely competitive firm in the short run?

Select one:

a. The marginal cost curve and supply curve are the same above the average total cost curve.

b. The supply curve is the same as the marginal cost curve above the average variable cost curve.

c. The marginal cost curve has nothing to do with supply curve.

d. The supply curve is the same as the marginal cost curve throughout its upward sloping part.

Question 18.

Which of the following best states why why in the short run a firm may decide to continue to produce, even with economic losses?

Select one:

a. Total revenue is greater than total variable cost but less than total cost.

b. Price is greater than average variable cost but less tha average total cost.

c. Economic losses areless than fixed cost.

d. One of the above is incorrect.

e. All of the above are reasons for continuing production.

Question 19.

Which of the following demonstrates marginal thinking?

Select one:

a. working out an extra hour per week.

b. deciding to never eat meat.

c. both B and C.

d. deciding to spend one more hour studying economics tonight because you think the improvement on your next test will be large enough to make it worthwhile to you.

Question 20.

Which of the following is true of resources?

Select one:

a. Increasing the amount of resources available could eliminate scarcity.

b. Both B and C.

c. They are the inputs used to produce goods and services.

d. Their availability is unlimited.

Answer 1

Answer:

16. a. Price is equal to average variable cost. This is the point where the firm makes no profits.So it exits.

17. b. The supply curve is the same as the marginal cost curve above the average variable cost curve. Below the total variable cost, the firm will have no output as it is not profitable to supply below that level.

18. b. Price is greater than average variable cost but less than average total cost. Here, though the firm will undergo losses, it will go on in the short run, (but may exit in the long run).

19. d. deciding to spend one more hour studying economics tonight because you think the improvement on your next test will be large enough to make it worthwhile to you. Marginal thinking enables a person to compare marginal cost with marginal benefit. If the marginal benefit is greater than the marginal cost, then the effort is worthwhile.

20. c. They are the inputs used to produce goods and services Resources are limited. Wants are unlimited. Because of unlimited wants, we can never eliminate scarcity.