ECON 528 Midterm || 100% CORRECT ANSWERS!!
According to the profit-maximization goal, the firm should attempt to maximize short-run
profits since there is too much uncertainty associated with long-run profits. correct answers .
False
If Melissa owns a software company that incurs no fixed costs, then correct answers her total
cost equals her total variable cost
In the short run, a firm cannot change the amount of capital it uses. Therefore the cost of
capital is a correct answers fixed cost.
Because the amount of labor a firm employs can be changed, the cost of labor is known as
correct answers variable cost.
Marginal cost equals correct answers the change in total cost that results from a one-unit
increase in output
A factor of production that can be easily changed in the relevant time period is called a:
correct answers variable input.
Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio."
Membership at his fitness center is very low and at this rate, Adam needs an additional
$12,000 per year to keep his studio open. Which of the following is true?
a. The $10,000 Adam spent on equipment is the total cost of starting the business and the
$12,000 he'll need to continue operations is a marginal cost.
b. The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll
need to continue operations is a variable cost. Correct
c. The variable cost of running the studio is $22,000.
d. The fixed cost of running the studio is $22,000. correct answers The $10,000 Adam spent
on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a
variable cost.
Which of the following is the best example of a short run adjustment?
a. Your local Wal-Mart hires two more associates.
b. Toyota builds a new assembly plant in Texas.
c. Smith University completed negotiations to acquire a large piece of land to build its new
library.
d. A local bakery purchases another commercial oven as part of its capacity expansion.
correct answers Your local Wal-Mart hires two more associates.
Academic book publishers hire editors, designers, and production and marketing managers
who help prepare books for publication. Because these employees work on several books
simultaneously, the number of people the company hires will not go up and down with the
quantity of books the company publishes during any particular year. The salaries and benefits
of people in these job categories will be included in correct answers fixed cost and total cost
but not variable cost.
If, for a given output level, a perfectly competitive firm's price is less than its average
variable cost, the firm correct answers should shut down.
, the economic short run correct answers It is a period during which at least one of the firm's
inputs is fixed.
A change in all of the following variables will change the market demand for a product
except
a. tastes.
b. population and demographics.
c. the price of the product.
d. income. correct answers the price of the product.
If the price of steel increases drastically, the quantity of steel demanded by the building
industry will fall significantly over the long run because correct answers buyers of steel are
more sensitive to a price change if they have more time to adjust to the price change
A change in which variable will change the market demand for a product?
A) the price of the product
B) population
C) technology
D) the prices of substitutes in production correct answers population
Which of the following statements about the price elasticity of demand is correct?
A) The elasticity of demand for a good in general is equal to the elasticity of demand for a
specific brand of the good.
B) The absolute value of the elasticity of demand ranges from zero to one.
C) Demand is more elastic in the long run than it is in the short run.
D) Demand is more elastic the smaller the percentage of the consumer's budget the item takes
up. correct answers Demand is more elastic in the long run than it is in the short run.
Over the past twenty years, the number of small family farms has fallen significantly and in
their place there are fewer, but larger, farms owned by corporations. Which of the following
best explains this trend? correct answers economies of scale in farming
The president of Toyota's Georgetown plant was quoted as saying, "Demand for high
volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out the
expertise and knowledge we painstakingly built up over the years." This quote suggests that
correct answers as Toyota expanded its capacity, it experienced diseconomies of scale
If the marginal product of capital is six times as large as the marginal product of labor and the
price of capital is three times as large as the price of labor, for costs to be minimized: correct
answers more capital should be used and less labor.
Would you expect economies of scope to occur in the following situation; Producing two
goods that use the same resource correct answers yes
_______ approach is the easier approach to achieve optimal production when the firm is at
the start of their production plan correct answers resource
According to the profit-maximization goal, the firm should attempt to maximize short-run
profits since there is too much uncertainty associated with long-run profits. correct answers .
False
If Melissa owns a software company that incurs no fixed costs, then correct answers her total
cost equals her total variable cost
In the short run, a firm cannot change the amount of capital it uses. Therefore the cost of
capital is a correct answers fixed cost.
Because the amount of labor a firm employs can be changed, the cost of labor is known as
correct answers variable cost.
Marginal cost equals correct answers the change in total cost that results from a one-unit
increase in output
A factor of production that can be easily changed in the relevant time period is called a:
correct answers variable input.
Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio."
Membership at his fitness center is very low and at this rate, Adam needs an additional
$12,000 per year to keep his studio open. Which of the following is true?
a. The $10,000 Adam spent on equipment is the total cost of starting the business and the
$12,000 he'll need to continue operations is a marginal cost.
b. The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll
need to continue operations is a variable cost. Correct
c. The variable cost of running the studio is $22,000.
d. The fixed cost of running the studio is $22,000. correct answers The $10,000 Adam spent
on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a
variable cost.
Which of the following is the best example of a short run adjustment?
a. Your local Wal-Mart hires two more associates.
b. Toyota builds a new assembly plant in Texas.
c. Smith University completed negotiations to acquire a large piece of land to build its new
library.
d. A local bakery purchases another commercial oven as part of its capacity expansion.
correct answers Your local Wal-Mart hires two more associates.
Academic book publishers hire editors, designers, and production and marketing managers
who help prepare books for publication. Because these employees work on several books
simultaneously, the number of people the company hires will not go up and down with the
quantity of books the company publishes during any particular year. The salaries and benefits
of people in these job categories will be included in correct answers fixed cost and total cost
but not variable cost.
If, for a given output level, a perfectly competitive firm's price is less than its average
variable cost, the firm correct answers should shut down.
, the economic short run correct answers It is a period during which at least one of the firm's
inputs is fixed.
A change in all of the following variables will change the market demand for a product
except
a. tastes.
b. population and demographics.
c. the price of the product.
d. income. correct answers the price of the product.
If the price of steel increases drastically, the quantity of steel demanded by the building
industry will fall significantly over the long run because correct answers buyers of steel are
more sensitive to a price change if they have more time to adjust to the price change
A change in which variable will change the market demand for a product?
A) the price of the product
B) population
C) technology
D) the prices of substitutes in production correct answers population
Which of the following statements about the price elasticity of demand is correct?
A) The elasticity of demand for a good in general is equal to the elasticity of demand for a
specific brand of the good.
B) The absolute value of the elasticity of demand ranges from zero to one.
C) Demand is more elastic in the long run than it is in the short run.
D) Demand is more elastic the smaller the percentage of the consumer's budget the item takes
up. correct answers Demand is more elastic in the long run than it is in the short run.
Over the past twenty years, the number of small family farms has fallen significantly and in
their place there are fewer, but larger, farms owned by corporations. Which of the following
best explains this trend? correct answers economies of scale in farming
The president of Toyota's Georgetown plant was quoted as saying, "Demand for high
volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out the
expertise and knowledge we painstakingly built up over the years." This quote suggests that
correct answers as Toyota expanded its capacity, it experienced diseconomies of scale
If the marginal product of capital is six times as large as the marginal product of labor and the
price of capital is three times as large as the price of labor, for costs to be minimized: correct
answers more capital should be used and less labor.
Would you expect economies of scope to occur in the following situation; Producing two
goods that use the same resource correct answers yes
_______ approach is the easier approach to achieve optimal production when the firm is at
the start of their production plan correct answers resource
