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21. Diminishing returns to labor occur because of: Inefficiency in the production process. The use of inferior factors of production. A rising ratio of labor to capital. Lower opportunity costs of the factors of production. 22. If an additional unit of labor costs $15 and has a MPP of 50 units of output, the marginal cost is: $0.30. $0.50. $7.50. $750.00. 23. Marginal cost: Decreases whenever marginal physical product decreases. Increases whenever marginal physical product decreases. Always rises in the short run. All of the above. 24. As the production rate is increased, average fixed costs: Are constant. First fall, then rise (in a U-shaped curve). Decline. Increase. 25. A U-shaped average total cost curve implies: First, diminishing returns, and then, increasing returns. First, marginal cost less than average total cost, and then marginal cost greater than average total cost. That total costs are at a minimum at the minimum of the average cost curve. A linear total cost curve. 26. When the average total cost curve is rising, then the marginal cost curve will be: Below the average fixed cost curve. Falling with greater output. Above the average total cost curve. Below the average total cost curve. 27. Accounting costs and economic costs may differ because: The explicit cost for at least one factor is less than the factor's opportunity cost. Accounting costs include implicit costs and economic costs do not. Explicit costs are positive. All of the above. 28. When the wage rate is $24 per hour and the MPP of a worker is 3 units per hour, the unit labor cost is: $3.00 per unit. $8.00 per unit. $24.00 per unit. $72.00 per unit. 29. In the short run, when a firm produces zero output, total cost equals: Zero. Variable costs. Fixed costs. Marginal costs. 30. An essential characteristic of a perfectly competitive firm is that: It is a price maker. It is a price taker. The market-demand curve is perfectly elastic. Each firm's demand curve is perfectly inelastic. 31. A firm that makes zero economic profits: Must eventually go bankrupt. Does not cover its variable costs and should shut down. Incurs an accounting loss. Covers all its costs, including a provision for normal profit. Answer the following questions on the basis of this information. Suppose a firm has an annual expenses of $170,000 in wages and salaries, $75,000 in materials, $60,000 in rental expense, and $5,000 in interest expense on capital. The owner-manager does not choose to pay himself, but he could receive income of $90,000 by working elsewhere. The firm earns revenues of $320,000 per year. 32. What are the annual economic costs for the firm described above? The discount rate increases. $305,000. $310,000. $400,000. 33. What is the economic profit for the firm described above? $60,000. $10,000. Loss of $80,000. Loss of $90,000. 34. To receive a normal profit the firm described above would have to: Reduce expenses by $10,000. Earn $80,000 more in revenue. Earn $90,000 more in revenue. Earn $310,000 more in revenue. Consider the following information for a perfectly competitive firm. Assume that Q equals the level of output and all costs are economic costs. Market price = $120. Total cost = 200 + 40Q + 0.5(Q squared) Marginal cost = 40 + Q 35. At the profit-maximizing or loss-minimizing output level, economic profit would equal: $120. $3,000 $6,600. $9,600. 36.Under these conditions, the firm should produce an output of: zero (i.e. shutdown). 40. 60. 80. 37. At an output of 10 units, total variable costs equal: $45. $65. $450. $650. 38. If a perfectly competitive firm wanted to maximize its total revenues, it would produce: The output where MC equals price. As much as it is capable of producing. The output where the ATC curve is at a minimum. The output where the marginal cost curve is at a minimum. 39. If a perfectly competitive firm is producing a rate of output for which MC exceeds price, then the firm: Must have an economic loss. Can increase its profit by increasing output. Can increase its profit by decreasing output. Is maximizing profit. 40. If long-run economic losses are being experienced in a competitive market: More firms will enter the market. The market supply curve will shift to the right. Equilibrium price will rise as firms exit. All of the above.