Question 1

At the profit-maximizing level of output,what is true of the total revenue (TR)and total cost (TC)curves?

Accepted Answer

A) They must intersect,with TC cutting TR from below. 
B) They must intersect,with TC cutting TR from above. 
C) They must be tangent to each other. 
D) They cannot be tangent to each other. 
E) They must have the same slope. 
A) They must intersect,with TC cutting TR from below. 
B) They must intersect,with TC cutting TR from above. 
C) They must be tangent to each other. 
D) They cannot be tangent to each other. 
E) They must have the same slope. E

Question 2

A firm's producer surplus equals its economic profit when

Accepted Answer

A) average variable costs are minimized. 
B) average fixed costs are minimized. 
C) marginal costs equal marginal revenue. 
D) fixed costs are zero. 
E) total revenues equal total variable costs. 
A) average variable costs are minimized. 
B) average fixed costs are minimized. 
C) marginal costs equal marginal revenue. 
D) fixed costs are zero. 
E) total revenues equal total variable costs. D

Question 3

Consider the following diagram where a perfectly competitive firm faces a price of $40.   Figure 8.1
-Refer to Figure 8.1.At the profit-maximizing level of output,AVC is

Accepted Answer

A) $22. 
B) $26. 
C) $30. 
D) $32. 
E) $40. 
A) $22. 
B) $26. 
C) $30. 
D) $32. 
E) $40. B

Question 4

The textbook for your class was not produced in a perfectly competitive industry because

Accepted Answer

A) there are so few firms in the industry that market shares are not small,and firms' decisions have an impact on market price. 
B) upper-division microeconomics texts are not all alike. 
C) it is not costless to enter or exit the textbook industry. 
D) of all of the above reasons. 
A) there are so few firms in the industry that market shares are not small,and firms' decisions have an impact on market price. 
B) upper-division microeconomics texts are not all alike. 
C) it is not costless to enter or exit the textbook industry. 
D) of all of the above reasons.

Question 5

The "perfect information" assumption of perfect competition includes all of the following except one.Which one?

Accepted Answer

A) Consumers know their preferences. 
B) Consumers know their income levels. 
C) Consumers know the prices available. 
D) Consumers can anticipate price changes. 
E) Firms know their costs,prices and technology. 
A) Consumers know their preferences. 
B) Consumers know their income levels. 
C) Consumers know the prices available. 
D) Consumers can anticipate price changes. 
E) Firms know their costs,prices and technology.

Question 6

Table 8.1  
-Refer to Table 8.1.That the firm is perfectly competitive is evident from its

Accepted Answer

A) increasing marginal cost. 
B) increasing total cost. 
C) zero economic profits. 
D) constant marginal revenue. 
E) absence of marginal values at Q = 0. 
A) increasing marginal cost. 
B) increasing total cost. 
C) zero economic profits. 
D) constant marginal revenue. 
E) absence of marginal values at Q = 0.

Question 7

If current output is less than the profit-maximizing output,which must be true?

Accepted Answer

A) Total revenue is less than total cost. 
B) Average revenue is less than average cost. 
C) Average revenue is greater than average cost. 
D) Marginal revenue is less than marginal cost. 
E) Marginal revenue is greater than marginal cost. 
A) Total revenue is less than total cost. 
B) Average revenue is less than average cost. 
C) Average revenue is greater than average cost. 
D) Marginal revenue is less than marginal cost. 
E) Marginal revenue is greater than marginal cost.

Question 8

If managers do not choose to maximize profit,but pursue some other goal such as revenue maximization or growth,

Accepted Answer

A) they are more likely to become takeover targets of profit-maximizing firms. 
B) they are less likely to be replaced by stockholders. 
C) they are less likely to be replaced by the board of directors. 
D) they are more likely to have higher profit than if they had pursued that policy explicitly. 
E) their companies are more likely to survive in the long run. 
A) they are more likely to become takeover targets of profit-maximizing firms. 
B) they are less likely to be replaced by stockholders. 
C) they are less likely to be replaced by the board of directors. 
D) they are more likely to have higher profit than if they had pursued that policy explicitly. 
E) their companies are more likely to survive in the long run.

Question 9

If price is between AVC and ATC,the best and most practical thing for a perfectly competitive firm to do is

Accepted Answer

A) raise prices. 
B) lower prices to gain revenue from extra volume. 
C) shut down immediately,but not liquidate the business. 
D) shut down immediately and liquidate the business. 
E) continue operating,but plan to go out of business. 
A) raise prices. 
B) lower prices to gain revenue from extra volume. 
C) shut down immediately,but not liquidate the business. 
D) shut down immediately and liquidate the business. 
E) continue operating,but plan to go out of business.

Question 10

Which of the following cases are examples of industries that have potentially increasing costs due to scarce inputs?

Accepted Answer

A) Petroleum production 
B) Medical care 
C) Legal services 
D) all of the above 
A) Petroleum production 
B) Medical care 
C) Legal services 
D) all of the above

Question 11

Figure 8.2
-Refer to Figure 8.2.As the competitive industry,not just the firm in question,moves toward long-run equilibrium,the firm will be forced to operate at what level of output?

Accepted Answer

A) 22 
B) 34 
C) 38. 
D) 50 
E) 64 
A) 22 
B) 34 
C) 38. 
D) 50 
E) 64

Question 12

Homer's Boat Manufacturing cost function is:   The marginal cost function is:   If Homer can sell all the boats he produces for $1,200,what is his optimal output? Calculate Homer's profit or loss.

Accepted Answer

The profit maximizing output level is wh

Question 13

Consider the following statements when answering this question I.In the long-run equilibrium of a perfectly competitive market,a firm's producer surplus equals the sum of the economic rents earned on its inputs to production.
II.In the long-run equilibrium of a perfectly competitive market,the amount of economic profit earned can differ across firms,but not the amount of producer surplus.

Accepted Answer

A) I and II are true. 
B) I is true,and II is false. 
C) I is false,and II is true. 
D) I and II are false. 
A) I and II are true. 
B) I is true,and II is false. 
C) I is false,and II is true. 
D) I and II are false.

Question 14

Figure 8.2
-Refer to Figure 8.2.At P = $80,the profit-maximizing output in the short run is

Accepted Answer

A) 22. 
B) 34. 
C) 39. 
D) 50. 
E) 64. 
A) 22. 
B) 34. 
C) 39. 
D) 50. 
E) 64.

Question 15

Assume the market for tortillas is perfectly competitive.The market supply and demand curves for tortillas are given as follows:
supply curve:
P = .000002Q demand curve: P = 11 - .00002Q
The short run marginal cost curve for a typical tortilla factory is:
MC = .1 + .0009Q
a.Determine the equilibrium price for tortillas.
b.Determine the profit maximizing short run equilibrium level of output for a tortilla factory.
c.At the level of output determined above,is the factory making a profit,breaking-even,or making a loss? Explain your answer.
d.Assuming that all of the tortilla factories are identical,how many tortilla factories are producing tortillas?

Accepted Answer

a. The equilibrium price is the price at

Question 16

In the long run,a firm's producer surplus is equal to the

Accepted Answer

A) economic rent it enjoys from its scarce inputs. 
B) revenue it earns in the long run. 
C) positive economic profit it earns in the long run. 
D) difference between total revenue and total variable costs. 
E) difference between total revenue and total fixed costs. 
A) economic rent it enjoys from its scarce inputs. 
B) revenue it earns in the long run. 
C) positive economic profit it earns in the long run. 
D) difference between total revenue and total variable costs. 
E) difference between total revenue and total fixed costs.

Question 17

Figure 8.2
-Refer to Figure 8.2.At P = $80,how much is profit in the short run?

Accepted Answer

A) $88 
B) $306 
C) $351 
D) $1000 
E) $1024 
A) $88 
B) $306 
C) $351 
D) $1000 
E) $1024

Question 18

The perfectly competitive firm's marginal revenue curve is

Accepted Answer

A) exactly the same as the marginal cost curve. 
B) downward-sloping,at twice the (negative)slope of the market demand curve. 
C) vertical. 
D) horizontal. 
E) upward-sloping. 
A) exactly the same as the marginal cost curve. 
B) downward-sloping,at twice the (negative)slope of the market demand curve. 
C) vertical. 
D) horizontal. 
E) upward-sloping.

Question 19

Which of following is an example of a homogeneous product?

Accepted Answer

A) Gasoline 
B) Copper 
C) Personal computers 
D) Winter parkas 
E) both A and B 
A) Gasoline 
B) Copper 
C) Personal computers 
D) Winter parkas 
E) both A and B

Question 20

When the price faced by a competitive firm was $5,the firm produced nothing in the short run.However,when the price rose to $10,the firm produced 100 tons of output.From this we can infer that

Accepted Answer

A) the firm's marginal cost curve must be flat. 
B) the firm's marginal costs of production never fall below $5. 
C) the firm's average cost of production was less than $10. 
D) the firm's total cost of producing 100 tons is less than $1000. 
E) the minimum value of the firm's average variable cost lies between $5 and $10. 
A) the firm's marginal cost curve must be flat. 
B) the firm's marginal costs of production never fall below $5. 
C) the firm's average cost of production was less than $10. 
D) the firm's total cost of producing 100 tons is less than $1000. 
E) the minimum value of the firm's average variable cost lies between $5 and $10.

At the profit-maximizing level of output,what is true of the total revenue (TR)and total cost (TC)curves?

A firm's producer surplus equals its economic profit when

Consider the following diagram where a perfectly competitive firm faces a price of $40. Figure 8.1 -Refer to Figure 8.1.At the profit-maximizing level of output,AVC is

The textbook for your class was not produced in a perfectly competitive industry because

The "perfect information" assumption of perfect competition includes all of the following except one.Which one?

Table 8.1 -Refer to Table 8.1.That the firm is perfectly competitive is evident from its

If current output is less than the profit-maximizing output,which must be true?

If managers do not choose to maximize profit,but pursue some other goal such as revenue maximization or growth,

If price is between AVC and ATC,the best and most practical thing for a perfectly competitive firm to do is

Which of the following cases are examples of industries that have potentially increasing costs due to scarce inputs?

Figure 8.2 -Refer to Figure 8.2.As the competitive industry,not just the firm in question,moves toward long-run equilibrium,the firm will be forced to operate at what level of output?

Homer's Boat Manufacturing cost function is: The marginal cost function is: If Homer can sell all the boats he produces for $1,200,what is his optimal output? Calculate Homer's profit or loss.

Figure 8.2 -Refer to Figure 8.2.At P = $80,the profit-maximizing output in the short run is

In the long run,a firm's producer surplus is equal to the

Figure 8.2 -Refer to Figure 8.2.At P = $80,how much is profit in the short run?

The perfectly competitive firm's marginal revenue curve is

Which of following is an example of a homogeneous product?

When the price faced by a competitive firm was $5,the firm produced nothing in the short run.However,when the price rose to $10,the firm produced 100 tons of output.From this we can infer that

Preliminaries

The Basics of Supply and Demand

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment,time and Capital Markets

General Equilibrium and Economic Efficiency 1-83

Markets With Asymmetric Information

Externalities and Public Goods

Filters

Exam 8: Profit Maximization and Competitive Supply

At the profit-maximizing level of output,what is true of the total revenue (TR)and total cost (TC)curves?

A firm's producer surplus equals its economic profit when

Consider the following diagram where a perfectly competitive firm faces a price of $40. Figure 8.1 -Refer to Figure 8.1.At the profit-maximizing level of output,AVC is

The textbook for your class was not produced in a perfectly competitive industry because

The "perfect information" assumption of perfect competition includes all of the following except one.Which one?

Table 8.1 -Refer to Table 8.1.That the firm is perfectly competitive is evident from its

If current output is less than the profit-maximizing output,which must be true?

If managers do not choose to maximize profit,but pursue some other goal such as revenue maximization or growth,

If price is between AVC and ATC,the best and most practical thing for a perfectly competitive firm to do is

Which of the following cases are examples of industries that have potentially increasing costs due to scarce inputs?

Figure 8.2 -Refer to Figure 8.2.As the competitive industry,not just the firm in question,moves toward long-run equilibrium,the firm will be forced to operate at what level of output?

Homer's Boat Manufacturing cost function is: The marginal cost function is: If Homer can sell all the boats he produces for $1,200,what is his optimal output? Calculate Homer's profit or loss.

Figure 8.2 -Refer to Figure 8.2.At P = $80,the profit-maximizing output in the short run is

In the long run,a firm's producer surplus is equal to the

Figure 8.2 -Refer to Figure 8.2.At P = $80,how much is profit in the short run?

The perfectly competitive firm's marginal revenue curve is

Which of following is an example of a homogeneous product?

When the price faced by a competitive firm was $5,the firm produced nothing in the short run.However,when the price rose to $10,the firm produced 100 tons of output.From this we can infer that

Preliminaries

The Basics of Supply and Demand

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment,time and Capital Markets

General Equilibrium and Economic Efficiency 1-83

Markets With Asymmetric Information

Externalities and Public Goods

Filters