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## economic profit in the long run

- (Table: Production Function for Soybeans) The table shows a production function for soybeans. Assume that the fixed input,

Econ 112 Take-Home Quiz 3 3

capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day.

The total cost of producing 25 bushels of soybeans is:

A) $50

B) $100

C) $150

D) $250

- When a cherry orchard in Oregon adds a worker, the total cost of production increases by $24,000. Adding the worker increases total cherry output by 600 pounds. Therefore, the marginal cost of the last pound of cherries produced is:

A. $19.

B. $4,000.

C. $24,000.

D. $40

- The larger the output, the greater the quantity of output over which fixed cost is spread. Called the ________ effect, this leads

to a ___________.

A) spreading; lower average fixed cost.

B) spreading; higher average fixed cost.

C) diminishing returns; lower average variable cost.

D) diminishing returns; higher average variable cost.

Chapter 12 Questions

- Which of the following is true for firms operating under perfect competition?

A. There are significant barriers to entry

B. There is a very high fixed cost, which reduces the number of firms in the industry

C. They must accept the market price, regardless of their output level

D. They can earn economic profit in the long run

Figure #1 – Perfectly Competitive Industry

Econ 112 Take-Home Quiz 3 4

- (Using the information in Figure #1). If the market price were $6, firms would earn:

A. Positive economic profit

B. Negative economic profit

C. Zero economic profit

- (Using the information in Figure #1). If the market price were $10, firms would earn:

A. Positive economic profit

B. Negative economic profit

C. Zero economic profit

- (Using the information in Figure #1). If the market price were $4, firms would earn:

A. Positive economic profit

B. Negative economic profit

C. Zero economic profit

- (Using the information in Figure #1). The shut-down price is:

A. $2

B. $4

C. $6

D. $8

- (Using the information in Figure #1). The break-even price is:

A. $2

B. $4

C. $6

D. $8

- (Using the information in Figure #1). In the long run, firms would expect the market price to be:

A. $8

Econ 112 Take-Home Quiz 3 5

B. $6

C. $4

D. $2