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27. For a market economy to work efficiently
a. | the external costs must be paid. |
28. External costs are the result of the actions of
c. | firms and consumers. |
29. Silvia shares a house with two other people. She is a concert pianist and often practices at home. One roommate enjoys listening to her practice, but the other does not. For the roommate who enjoys listening to Silvia’s music, this is an example of ________; for the other roommate, it is an example of ________.
d. | the free-rider problem; the tragedy of the commons |
30. A negative externality exists whenever
b. | production of a good creates an external cost. |
31. What needs to be done to ensure that a company is profitable?
c. | The company needs to both minimize costs and maximize revenue. |
32. Total revenue minus total cost is equal to
d. | profit. | ||
. | |||
33. Which of the following statements is true?
c. | Economists consider all costs to be explicit costs. |
34. Explicit costs are
b. | always paid out of pocket. |
35. If a firm has total costs of $535,000 and its implicit costs are $165,000, how much are its explicit costs?
c. | $370,000 | ||
36. Maria owns a small pizza restaurant, where she works full-time in the kitchen. Her total revenue last year was $100,000, and rent was $3,000 per month. She pays one employee $2,000 per month, and the cost of ingredients and overhead averages $500 per month. Maria could earn $35,000 per year as the manager of a competing pizza restaurant nearby. Her total explicit costs last year were?
d. | $66,000. | ||
37. Lisette is the owner of a bakery that earns zero economic profit. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her total explicit costs were
53K38. Implicit costs can be difficult to measure because
a. | business owners cannot always observe them directly. |
39. Economists consider both explicit costs and implicit costs when measuring economic profit. The reason they consider implicit costs is that
c. | a business must cover its opportunity costs as well as its out-of-pocket expenses to be truly profitable. |
40. Economic profit is equal to
d. | total revenue minus implicit costs and explicit costs. |
41. A firm characterized as a price taker
c. | has no control over the price it pays, or receives, in the market. |
42. The perfectly competitive firm cannot influence the market price because
c. | the firm’s production levels are too small to affect the market. |
43 Which of the following is NOT a characteristic of a perfectly competitive industry?
b. | Sellers have better information about the product than consumers. |
44. Which is an example of an almost perfectly competitive market?
e. | farmers’ markets | ||
45. Which characteristic of competitive markets is mainly responsible for firms making zero economic profits in the long run?
e. | easy entry into and exit from the market |
46. Suppose a perfectly competitive broccoli farm can produce 35 crates at an output level where marginal revenue equals marginal cost. The price per crate of broccoli is $25 and the average total cost is $30. What is the total profit or loss that this farm is earning?
b. | -$175.00 | ||
47. Refer to the accompanying figure. Point ________ corresponds to the profit-maximizing quantity that a competitive firm would produce
c. | C | ||
48. If this firm is maximizing profits, total revenue is represented by the area
c. | (A – B) x C. | ||
49. Marcy owns a photography business in Wynwood. The market for photography is very competitive. At Marcy’s current production level, her marginal cost is $15 and her marginal revenue is $12. In order to maximize profits, Marcy should
a. | decrease production. | ||
50. A company produces at an output level where marginal cost is equal to marginal revenue and has the following revenue and cost levels:
Total revenue = $1,450. Total cost = $1,500. Total variable cost = $1,300
What would you suggest?
b. | continue to produce because the loss is less than the total fixed cost |