31. Critics of advertising argue that it: A) establishes brand loyalty, which pr
ID: 1240721 • Letter: 3
Question
31.
Critics of advertising argue that it:
A) establishes brand loyalty, which promotes competition.
B) results in more variety of products.
C) lowers price by increasing competition.
D) serves as a barrier to entry for new firms.
32.
Assume that a firm's marginal revenue just barely exceeds marginal cost. Under these conditions the firm should:
A) expand output.
B) maintain output.
C) contract output.
D) There is insufficient information to answer the question.
33.
Exhibit 7-8 Costs schedules for producing pizza
Pizzas
Fixed
Cost
Variable
Cost
Total
Cost
Marginal
Cost
0
$
$
$
$
1
5
2
13
3
10
4
100
140
5
20
6
85
7
215
By filling in the blanks in Exhibit 7-8, the total cost of producing 3 pizzas is shown to be equal to:
A) $123.
B) $113.
C) $105.
D) $100.
E) $23.
34.
Bill lives in Montana and likes to grow zucchini. He applies fertilizer to his crops twice during the growing season and notices that the second layer of fertilizer increases his crop, but not as much as the first layer. What economic concept best explains this observation?
A) The law of diminishing returns.
B) The law of diminishing marginal utility.
C) The principal-agent problem.
D) Return equalization principle.
35.
Jerome, the florist, sold 500 bridesmaid's bouquets in June. He estimates his costs that month were ATC = $10, AVC = $6, and MC = $9. If he sold each bouquet at the constant market price of $9, Jerome:
A) made an economic profit of $500.
Pizzas
Fixed
Cost
Variable
Cost
Total
Cost
Marginal
Cost
0
$
$
$
$
1
5
2
13
3
10
4
100
140
5
20
6
85
7
215
Explanation / Answer
If wage is fixed than the labor supply will be horizontalsince the wage cannot change. D is the answer
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