Costs and Price

Week I Quiz Results/Answers ECO561 1. tax ontogenesiss when * producer surplus add-ons 2. An add in the terms of an inelastic close * increases tax tax incomes 3. Price elasticity of Demand increases when * people become slight expenditure sensitive over time 4. The purpose of a market in a market organization is to * bring buyers and denounceers into contact 5. By specializing in the overlapion of mavin good, a company is able to benefit from economies of home base which increases its revenue. Which of the following is an attribute of specialization? * Saving time by allowing a worker to focus on wizard task . The market system promotes progress by * providing incentive for technological advances 7. Productive efficiency is achieved when * the surpass technology is used 8. The market is said to be in vestibular sense when * neither a shortage nor a surplus exists 9. The market exit move to a higher balance wheel toll if * the increase in choose is greater than t he increase in planning 10. The intersection of supply and demand will be at a lower equilibrium impairment but a higher equilibrium quantity if * demand is constant and supply increases 11. When a price ceiling occurs the market price will be lower than the equilibrium price 12. Because the goals of stanchs, entrepreneurs, and workers need assorted incentives, which of the following principles applies? * Self-interest Week 2 Quiz Results/Answers ECO561 1. Purely belligerent unshakables increase total revenue by * increasing payoff (To increase revenue, hards look to increase price or quantity, as price multiply by quantity equals total revenue. Purely competitive fasts can sell as much as they want at the market price. Adding redundant units of the product does not result in a permute in the market price.Therefore, since purely competitive firms do not influence price, they increase total revenue by increasing quantity). 2. What argon two ship canal for a competitive f irm to determine the optimal level of production, that is, the level of production that will maximize acquire or pick at losings? * Comparing total revenue to total greet or b atomic number 18(a) revenue to peripheral prices (A firm can look at two factors when considering whether it is maximizing acquire or minimizing losses. First, it can find the maximal discrimination between total revenue and total speak to.Second, a firm can look at the additive revenue gained from selling one more(prenominal) unit and at the step-upal cost from producing that extensional unit. As retentive as the additional revenue from selling one more unit is greater than the cost of producing that unit, the firm will continue to increase its revenue. If the additional cost of producing an otherwise unit is greater than the additional revenue generated by selling that additional unit, the firm takes away from its total profit this is the difference between revenue and cost.Thus, a firm maxim izes its profit by producing at the point where bare(a) revenue equals marginal cost. Before that, additional profit can be generated, duration after that, the firm reduces it boilersuit profit). 3. Suppose that a firm determines that its marginal revenue is greater than its marginal cost, it would be better to * increase production (Inelastic goods are necessities that consumers continue to secure even when the price increases. This increases the revenue, as more is paid for each good. The helping alteration in price increases faster than the change in quantity, which whitethorn remain constant.When more is paid for a good or a service, revenue increases). 4. It is profitable for a firm to continue employing additional resources as long as * Marginal Revenue Product = Marginal alternative Cost (As with the optimal level of production for a good, the optimal frugal consumption of a resource is determined by ensuring that the revenue from that resource is at least equal to t he marginal cost of that resource) 5. As additional units are produced, the marginal revenue product falls for all firms because marginal product decreases.For firms operating in industries that are not perfectly competitive, marginal revenue product also falls because * product price falls as output increases (While perfectly or purely competitive firms must direct the price set by supply and demand in the market, firms lining other market structures have some control over the price they set for their products. However, to increase the quantity demanded of their product, they must decrease their price. In doing so, man some firms whitethorn have the ability to set diametric prices for different groups, called price discriminating, most firms cannot.As a result, the firm must lower the price on that good for all consumers therefore, the product price falls as output increases) 6. All things being equal, an increase in demand for a product * increases demand for the resources use d in its production (When a firm sees an increase in the demand for its product, it will increase its production. In doing so, the firm increases the demand for the resources it uses to produce its product. An increase in demand for a product does increase the quantity supplied. The firm sees that it can increase the price on each unit to address the shortage that emerges, so there is more sold.This does not mean that the firm changes the amount of production at the passkey price) 7. Marginal cost can be be as the addition to _____ of one more unit of output. * total shifting cost (Marginal cost measures the cost of producing the side by side(p) unit. Because stock-still be do not change with additional output, they do not add to total fixed costs. In addition, while average costsboth total and fixedchange with additional levels of output, as average costs are divided by the quantity produced, they do not reflect the full addition to the cost.Thus, the cost of producing an addi tional unit reflects the additional cost of inputs needed for production (variable costs). 8. If a firm starts small and, over time, builds successively larger plant sizes or adds additional work space in an office, average total costs are most likely to * initial decrease then increase 9. Demand for resources, including labor, depend on its * productivity While being profitable, available, and cordial are relevant to the demand for resources, the productivity of the resource in head word determines how profitable the good or service will be. 0. The primary difference between increasing- and decreasing-cost industries lies in * the fact that the average total cost (ATC) of firms in increasing-cost industries will first decline and then eventually increase with output, while decreasing-cost firms experience progressively lower ATC with increased output (By definition, an increasing-cost industry experiences a rising ATC as output increases, while a decreasing-cost industry enjoys a lower ATC as output increases. 11. When adding labor or other factors of production, businesses whitethorn see their total product rise, but see their per-unit increase in return for each additional unit diminish. This phenomenon * is known as change magnitude marginal product and has general market application (The diminishing marginal product theory states that the marginal product decreases as a firm, introduces one new input into production while holding all other inputs fixed. ) 12.In the short run, firms should shut down if The correct answer is A. AVC P. In the long term, a firm wants to receive a price greater than the cost of production per unit average total cost. In the short term, a firm may have bills, regardless of whether it is producing anything. For example, a firm may have signed a long-term lease or may have other contracts it is obligated to pay. These costs are generally fixed costs that do not vary with the level of production.However, firms also have a vari ety of other costs that are lonesome(prenominal) incurred if the firm is producing variable costs. Thus, in the short term, a firm should determine how to minimize the costs it will face, such as closing down and only paying the fixed costs or continuing to operate and incur both the fixed costs and variable costs but offsetting the variable costs and some of the fixed costs with the revenues earned from production.If the price is less than the average variable cost, then only some of the variable costs will be covered and all of the fixed costs are incurred therefore, the firm is spending more by continuing to operate sooner than shutting down. 13. When you are considering the value of a resource in its next best use, you are considering its * opportunity cost Opportunity cost is defined as the value of the next best use of the resources. In economic terms, opportunity costs include both the explicit costs of production and the implicit costs of production. 14.Of the four major ma rket structuresperfectly competitive, noncompetitive competition, oligopoly, monopoly reducing variable costs of production * enhance profit per-unit, because profit equals revenue minus cost (Under all market structures, the profit maximation rule stays the same, that is MC = MR. A cost reduction in all cases reduces the MC and increases the profit margin. ) Week Three Quiz Results ECO561 1. Answered 2. Answered 3. Answered 4. Answered 5. Answered 6. Answered 7. unrequited 8. unanswered 9. unanswered 10. Unanswered 11. Unanswered 12. Unanswered 13. Unanswered 14. Unanswered - Top of division Bottom of Form 1. Answered 2. Answered 3. Answered 4. Answered 5. Answered 6. Answered 7. Unanswered 8. Unanswered 9. Unanswered 10. Unanswered 11. Unanswered 12. Unanswered 13. Unanswered 14. Unanswered - Top of Form 7. Marginal cost can be defined as the addition to _____ of one more unit of output. Bottom of Form