ECO 204 Week 2 Quiz

This paperwork of ECO 204 Week 2 Quiz consists of:

1. A firm that is earning positive profits in the short run has an incentive to ________ its scale of operation in the long run.

expand

contract

not change

encourage another firm to expand

2. The explanation for why marginal cost is positive and rising in the short run is ________ marginal product of labor in the production process.

a zero

a constant

an increasing

a diminishing

3. Tony's Lawn Service uses only one variable input, fertilizer. The firm's demand curve for fertilizer in the short run is the input's

total product curve.

marginal product curve.

marginal revenue product curve.

total cost curve.

4. A point on a total variable cost curve shows the ________ variable cost a firm will bear to produce a certain output.

highest

lowest

change in

average

5. When Burger Barn hires one worker, 20 customers can be served in an hour. When Burger Barn hires two workers, 50 customers can be served in an hour. The marginal product of the second worker is ________ customers served per hour.

15

30

40

67.5

6. Firms that are "breaking even" are

earning zero economic profits.

earning less than a normal rate of return.

shutting down in the short run.

All of the above are correct.

7. As long as price is sufficient to cover ________, the firm is better off by operating rather than by shutting down.

marginal cost

average fixed cost

average variable cost

marginal revenue

8. There are 100 dog kennels in Atlanta. An economist studying the pricing behavior of dog kennels tells you that she is limiting her analysis to a time period that does not allow for any new dog kennels to enter the industry or for any established dog kennels to leave the industry. The time period this economist referred to is the

market period.

industry run.

long run.

short run.

9. Firms will employ an input up to the point where

the wage rate equals the productivity of capital.

its marginal cost equals its marginal product.

the input's price equals its marginal revenue product.

the input's price equals its marginal product.

10. A firm will begin to experience diminishing returns at the point where

marginal cost increases.

marginal cost decreases.

marginal product increases.

Both B and C