Sections 9-10 Review II

If demand for a good is inelastic & supply is elastic, what happens when there is an increase in sales tax?

• The price of the good will not change.

• Producers will bear most of the burden of the tax.

• Consumers will bear most of the burden of the tax.

• Both consumers and producers will share the burden of the tax equally.

• Government revenue increases.

Ryan's Chess Board Co. increases all its inputs by 50 percent each. If Ryan's output increases by 100 percent, then the company is experiencing

• increasing returns to scale

• diseconomies of scale

• decreasing profits

• increasing marginal cost

• diminishing returns

Beyond a certain level of output, the short-run marginal cost will rise because

• there is no fixed input and costs will increase

• input prices increase when production increases and consumption is limited

• the demand for the good decreases when production is limited

• average fixed cost will continue to fall

• at least one input is fixed and eventually diminishing returns will occur

An increase in which of the following will cause a firm’s marginal cost curve to shift upward?

• the price of a variable input

• the price of a fixed input

• the level of output

• the demand for the firm’s product

• the availability of inputs

If the opportunity cost of producing good X relative to good Y is lower in Country A than Country B, then

• Goods X and Y are complements

• Goods X and Y are substitutes

• Country A has a comparative advantage for producing Good X

• Country A has a comparative advantage for producing Good Y

• Country B has an absolute advantage for producing Good Y

Assume that a firm is maximizing short-run profits and price is greater than average variable cost. It is true that:

• MR = MC

• MR > VC

• Price > ATC

• MR = ATC

• MC > ATC

In the short run, a profit-maximizing firm will shut down if which of the following is true?

• Economic profit < 0

• Normal profit < 0

• TR < TC

• MR = MC

• AVC < Price

A merger of two firms may increase economic efficiency by

• increasing economic profits but decreasing consumer surplus

• increasing consumer surplus by shifting the demand curve to the right

• decreasing producer surplus by increasing taxes

• decreasing average total cost through an increase in economies of scale

• decreasing output to reduce marginal cost and equalize price