Question 1

A competitive firm will maximize profit by producing the level of output at which:

Accepted Answer

A)  the last unit of output produced adds the same amount to total revenue as to total cost. 
B)  the additional revenue from the last unit of output produced exceeds the additional cost of the last unit by the largest amount. 
C)  the firm's total revenue exceeds total cost by the largest amount. 
D)  both a and b 
E)  both a and c 
A)  the last unit of output produced adds the same amount to total revenue as to total cost. 
B)  the additional revenue from the last unit of output produced exceeds the additional cost of the last unit by the largest amount. 
C)  the firm's total revenue exceeds total cost by the largest amount. 
D)  both a and b 
E)  both a and c E

Question 2

Refer to the following:
Total cost schedule for a competitive firm:
 $$\begin{array} { c c } 
\text { Output } & \text { Total Cost } \
\hline 0 & \$ 10 \
1 & \mathbf { 6 0 } \
\mathbf { 2 } & \mathbf { 8 0 } \
\mathbf { 3 } & 110 \
4 & 165 \
5 & \mathbf { 2 4 5 } \
\hline
\end{array}$$
-If market price is $60, how many units of output will the firm produce?

Accepted Answer

A)  Zero units of output because the firm shuts down. 
B)  1 unit of output. 
C)  2 units of output. 
D)  3 units of output. 
E)  none of the above. 
A)  Zero units of output because the firm shuts down. 
B)  1 unit of output. 
C)  2 units of output. 
D)  3 units of output. 
E)  none of the above. E

Question 3

Refer to the following:
The table below shows a competitive firm's short-run production function. Labor is the firm's only variable input, and market price for the firm's product is $2 per unit.
 $\begin{array}{ll} \text {Units of Labor }& \text {Units of Output }\
3 & 370 \
4 & 490 \
5 & 570 \
6 & 600 \
7 & 620
\end{array}$
-If market price for the firm's product increases to $5, how many units of labor will the firm employ at a wage rate of $200?

Accepted Answer

A)  0, the firm shuts down 
B)  4 
C)  5 
D)  6 
E)  7 
A)  0, the firm shuts down 
B)  4 
C)  5 
D)  6 
E)  7 C

Question 4

Refer to the following:
Consider a competitive industry and a price-taking firm that produces in that industry. The market demand and supply functions are estimated to be:
Demand:
 $$Q _ { d } = 10,000 - 10,000 P + 1.0 \mathrm { M }$$ 
Supply:
 $$Q _ { s } = 80,000 + 10,000 P - 4,000 P _ { I }$$ 
where Q is quantity, P is the price of the product, M is income, and
 $P _ { I }$ is the input price. The manager of the perfectly competitive firm uses time-series data to obtain the following forecasted values of M and
 $P _ { I }$ for 2015:
 $\hat { M } = \$ 50,000 \text { and } \hat { P } _ { I } = \$ 20$ 
The manager also estimates the average variable cost function to be
 $$A V C = 3.0 - 0.0027 Q + 0.0000009 Q ^ { 2 }$$ 
Total fixed costs will be $2,000 in 2015.
-The profit (loss) is

Accepted Answer

A)  $2,600 
B)  $2,000 
C)  $4,000 
D)  $3,250 
E)  none of the above 
A)  $2,600 
B)  $2,000 
C)  $4,000 
D)  $3,250 
E)  none of the above

Question 5

Use the following information to answer Questions.
Sport Tee Corporation manufactures T-shirts bearing the logos of professional baseball and football teams. The wholesale market for sport T-shirts is perfectly competitive.The manager forecasts the wholesale price of T-shirts next year to be $7.00. The firm's estimated marginal cost is $S M C = 12 - 0.005 Q + 0.0000008 Q ^ { 2 }$ where Q is the number of T-shirts produced and sold each month. Sport Tee Corporation will have a fixed cost of $2,000 per month.
-Average variable cost at Sport Tee is

Accepted Answer

A)  12 - 0.01Q + 0.0000024Q2 
B)  12 - 0.0025Q + 0.000000266Q2 
C)  12 - 0.0001Q + 0.000001Q2 
D)  12Q -0.0025Q2 + 0.000000266Q3 
E)  none of the above 
A)  12 - 0.01Q + 0.0000024Q2 
B)  12 - 0.0025Q + 0.000000266Q2 
C)  12 - 0.0001Q + 0.000001Q2 
D)  12Q -0.0025Q2 + 0.000000266Q3 
E)  none of the above

Question 6

Use the following information to answer Questions.
Sport Tee Corporation manufactures T-shirts bearing the logos of professional baseball and football teams. The wholesale market for sport T-shirts is perfectly competitive.The manager forecasts the wholesale price of T-shirts next year to be $7.00. The firm's estimated marginal cost is $S M C = 12 - 0.005 Q + 0.0000008 Q ^ { 2 }$ where Q is the number of T-shirts produced and sold each month. Sport Tee Corporation will have a fixed cost of $2,000 per month.
-Monthly profit will be

Accepted Answer

A)  -$2,000 
B)  -$1,150 
C)  $4,250 
D)  $3,400 
E)  $2,250 
A)  -$2,000 
B)  -$1,150 
C)  $4,250 
D)  $3,400 
E)  $2,250

Question 7

Refer to the following:
   
The graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry. The graph on the right shows current industry demand and supply.
-What is the marginal revenue for the FIRM from selling the 250th unit of output?

Accepted Answer

A)  $10 
B)  $8 
C)  $6 
D)  $4 
E)  zero 
A)  $10 
B)  $8 
C)  $6 
D)  $4 
E)  zero

Question 8

Refer to the following figure, showing the marginal revenue product (MRP) and the average revenue product (ARP) curves of a perfectly competitive firm hiring a single variable input, labor.
  
-If the wage is above $______, the firm will shut down and hire zero workers in the short run.

Accepted Answer

A)  $41 
B)  $30 
C)  $35 
D)  $32 
A)  $41 
B)  $30 
C)  $35 
D)  $32

Question 9

Use the following information to answer Questions .
Radon Research Corporation (RRC) is one of 24 firms in Albuquerque testing homes for dangerous levels of radon gas. There is a standard test that all testing companies use. The manager of RRC wants to know the number of homes to test in 2015 in order to maximize the firm's profit. The manager forecasted a price of $160 for radon tests in 2015.
The firm's marginal cost was estimated as $S M C = 200 - 15 Q + 0.8 Q ^ { 2 }$ where Q is the number of tests performed each week. RRC's fixed cost will be $250 per week.
-How many radon tests per week should be undertaken?

Accepted Answer

A)  12.5 
B)  15.5 
C)  16.8 
D)  17.3 
E)  20 
A)  12.5 
B)  15.5 
C)  16.8 
D)  17.3 
E)  20

Question 10

Refer to the following:
   
The graph on the left shows the short-un cost curves for a firm in a perfectly competitive market, and the graph on the right shows the current market conditions in this industry.
-In order to maximize profit, how much output should the firm produce?

Accepted Answer

A)  20 units 
B)  40 units 
C)  50 units 
D)  60 units 
E)  80 units 
A)  20 units 
B)  40 units 
C)  50 units 
D)  60 units 
E)  80 units

Question 11

In a perfectly competitive market,

Accepted Answer

A)  a firm can attract more customers by lowering its price. 
B)  a firm can sell as much as it wants at the existing market price. 
C)  the additional revenue from selling one more unit of output is less than the market price. 
D)  both a and c 
E)  both b and c 
A)  a firm can attract more customers by lowering its price. 
B)  a firm can sell as much as it wants at the existing market price. 
C)  the additional revenue from selling one more unit of output is less than the market price. 
D)  both a and c 
E)  both b and c

Question 12

Refer to the following figure:
   
The figure above shows cost curves for a perfectly competitive firm.
-Suppose that market price is $2.60. A firm producing 800 units of output

Accepted Answer

A)  is earning the maximum amount of profit, $880. 
B)  is earning the maximum amount of profit, $2,080. 
C)  should produce 500 units of output instead, to earn profits of $500. 
D)  should produce 1100 units of output instead, to earn profits of $1,100. 
E)  should shut down 
A)  is earning the maximum amount of profit, $880. 
B)  is earning the maximum amount of profit, $2,080. 
C)  should produce 500 units of output instead, to earn profits of $500. 
D)  should produce 1100 units of output instead, to earn profits of $1,100. 
E)  should shut down

Question 13

Refer to the following:
   
The graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry. The graph on the right shows current industry demand and supply.
-What output should the firm produce?

Accepted Answer

A)  200 
B)  250 
C)  150 
D)  300 
A)  200 
B)  250 
C)  150 
D)  300

Question 14

Refer to the following:
Consider a competitive industry and a price-taking firm that produces in that industry. The market demand and supply functions are estimated to be:
Demand:
 $$Q _ { d } = 10,000 - 10,000 P + 1.0 \mathrm { M }$$ 
Supply:
 $$Q _ { s } = 80,000 + 10,000 P - 4,000 P _ { I }$$ 
where Q is quantity, P is the price of the product, M is income, and
 $P _ { I }$ is the input price. The manager of the perfectly competitive firm uses time-series data to obtain the following forecasted values of M and
 $P _ { I }$ for 2015:
 $\hat { M } = \$ 50,000 \text { and } \hat { P } _ { I } = \$ 20$ 
The manager also estimates the average variable cost function to be
 $$A V C = 3.0 - 0.0027 Q + 0.0000009 Q ^ { 2 }$$ 
Total fixed costs will be $2,000 in 2015.
-The minimum value of average variable cost is $_____.

Accepted Answer

A)  $0.50 
B)  $0.75 
C)  $0.975 
D)  $1.00 
E)  $2.15 
A)  $0.50 
B)  $0.75 
C)  $0.975 
D)  $1.00 
E)  $2.15

Question 15

Refer to the following figure:
   
The figure above shows cost curves for a perfectly competitive firm.
-If market price is $0.70, a profit-maximizing firm will produce _____ units of output and earn profits of _____.

Accepted Answer

A)  500, -$450 
B)  500, -$50 
C)  zero, -$450 
D)  zero, -$400 
A)  500, -$450 
B)  500, -$50 
C)  zero, -$450 
D)  zero, -$400

Question 16

Which of the following is NOT a characteristic of a constant cost competitive industry-As the industry expands in the long run,

Accepted Answer

A)  the price of the product remains constant. 
B)  inputs prices remain constant. 
C)  the cost of production remains constant. 
D)  the number of firms remain constant. 
E)  none of the above 
A)  the price of the product remains constant. 
B)  inputs prices remain constant. 
C)  the cost of production remains constant. 
D)  the number of firms remain constant. 
E)  none of the above

Question 17

Which of the following is NOT a characteristic of long-run equilibrium for a perfectly competitive firm?

Accepted Answer

A)  Price is greater than long-run average cost. 
B)  Price is equal to long-run marginal cost. 
C)  Economic profit is zero. 
D)  The firm produces the output level at which long-run average cost is at its minimum. 
A)  Price is greater than long-run average cost. 
B)  Price is equal to long-run marginal cost. 
C)  Economic profit is zero. 
D)  The firm produces the output level at which long-run average cost is at its minimum.

Question 18

Refer to the following:
Consider a competitive industry and a price-taking firm that produces in that industry. The market demand and supply functions are estimated to be:
Demand:
 $$Q _ { d } = 10,000 - 10,000 P + 1.0 \mathrm { M }$$ 
Supply:
 $$Q _ { s } = 80,000 + 10,000 P - 4,000 P _ { I }$$ 
where Q is quantity, P is the price of the product, M is income, and
 $P _ { I }$ is the input price. The manager of the perfectly competitive firm uses time-series data to obtain the following forecasted values of M and
 $P _ { I }$ for 2015:
 $\hat { M } = \$ 50,000 \text { and } \hat { P } _ { I } = \$ 20$ 
The manager also estimates the average variable cost function to be
 $$A V C = 3.0 - 0.0027 Q + 0.0000009 Q ^ { 2 }$$ 
Total fixed costs will be $2,000 in 2015.
-The marginal cost function is:

Accepted Answer

A)  SMC = 3.0 -0.0027Q + 0.0000009Q2 
B)  SMC = 3.0 - 0.00135Q + 0.00000045Q2 
C)  SMC = 3.0Q -0.0027Q2 + 0.0000009Q3 
D)  SMC = 3.0 -0.0054Q + 0.0000018Q2 
E)  none of the above 
A)  SMC = 3.0 -0.0027Q + 0.0000009Q2 
B)  SMC = 3.0 - 0.00135Q + 0.00000045Q2 
C)  SMC = 3.0Q -0.0027Q2 + 0.0000009Q3 
D)  SMC = 3.0 -0.0054Q + 0.0000018Q2 
E)  none of the above

Question 19

Suits Only, a dry cleaning firm that specializes in cleaning men's and women's business suits, operates in a perfectly competitive market. Robin Smith, an exceptionally talented manager, has been hired to manage Suits Only. In the dry cleaning business, a manager typically makes a salary of $400 per week. Suits Only faces the long-run average and marginal costs shown in the figure below. In long-run competitive equilibrium, the market price for cleaning a business suit is $4.50.  
-The typical dry-cleaning firm has a minimum long-run average cost of cleaning a business suit equal to $________ and the typical dry cleaning firm earns economic profit equal to $______.

Accepted Answer

A)  $4.50, $0 
B)  $2, $2.50 per suit cleaned 
C)  $3, $1.50 per suit cleaned 
D)  $2, $0 
A)  $4.50, $0 
B)  $2, $2.50 per suit cleaned 
C)  $3, $1.50 per suit cleaned 
D)  $2, $0

Question 20

Use the following information to answer Questions.
Sport Tee Corporation manufactures T-shirts bearing the logos of professional baseball and football teams. The wholesale market for sport T-shirts is perfectly competitive.The manager forecasts the wholesale price of T-shirts next year to be $7.00. The firm's estimated marginal cost is $S M C = 12 - 0.005 Q + 0.0000008 Q ^ { 2 }$ where Q is the number of T-shirts produced and sold each month. Sport Tee Corporation will have a fixed cost of $2,000 per month.
-To maximize profit how many T-shirts should be produced and sold each month?

Accepted Answer

A)  1,000 
B)  2,000 
C)  3,000 
D)  4,000 
E)  5,000 
A)  1,000 
B)  2,000 
C)  3,000 
D)  4,000 
E)  5,000

A competitive firm will maximize profit by producing the level of output at which:

Refer to the following: Total cost schedule for a competitive firm: Output Total Cost 0 \ 10 1 110 4 165 5 -If market price is $60, how many units of output will the firm produce?

Refer to the following: The graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry. The graph on the right shows current industry demand and supply. -What is the marginal revenue for the FIRM from selling the 250th unit of output?

Refer to the following figure, showing the marginal revenue product (MRP) and the average revenue product (ARP) curves of a perfectly competitive firm hiring a single variable input, labor. -If the wage is above $______, the firm will shut down and hire zero workers in the short run.

Refer to the following: The graph on the left shows the short-un cost curves for a firm in a perfectly competitive market, and the graph on the right shows the current market conditions in this industry. -In order to maximize profit, how much output should the firm produce?

In a perfectly competitive market,

Refer to the following figure: The figure above shows cost curves for a perfectly competitive firm. -Suppose that market price is $2.60. A firm producing 800 units of output

Refer to the following: The graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry. The graph on the right shows current industry demand and supply. -What output should the firm produce?

Refer to the following figure: The figure above shows cost curves for a perfectly competitive firm. -If market price is $0.70, a profit-maximizing firm will produce _ units of output and earn profits of _.

Which of the following is NOT a characteristic of a constant cost competitive industry-As the industry expands in the long run,

Which of the following is NOT a characteristic of long-run equilibrium for a perfectly competitive firm?

Managers, Profits, and Markets

Demand, Supply, and Market Equilibrium

Marginal Analysis for Optimal Decisions

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

Exam 11: Managerial Decisions in Competitive Markets

A competitive firm will maximize profit by producing the level of output at which:

Refer to the following: Total cost schedule for a competitive firm: Output Total Cost 0 \ 10 1 110 4 165 5 -If market price is $60, how many units of output will the firm produce?

Refer to the following: The graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry. The graph on the right shows current industry demand and supply. -What is the marginal revenue for the FIRM from selling the 250th unit of output?

Refer to the following figure, showing the marginal revenue product (MRP) and the average revenue product (ARP) curves of a perfectly competitive firm hiring a single variable input, labor. -If the wage is above $______, the firm will shut down and hire zero workers in the short run.

Refer to the following: The graph on the left shows the short-un cost curves for a firm in a perfectly competitive market, and the graph on the right shows the current market conditions in this industry. -In order to maximize profit, how much output should the firm produce?

In a perfectly competitive market,

Refer to the following figure: The figure above shows cost curves for a perfectly competitive firm. -Suppose that market price is $2.60. A firm producing 800 units of output

Refer to the following: The graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry. The graph on the right shows current industry demand and supply. -What output should the firm produce?

Refer to the following figure: The figure above shows cost curves for a perfectly competitive firm. -If market price is $0.70, a profit-maximizing firm will produce _____ units of output and earn profits of _____.

Which of the following is NOT a characteristic of a constant cost competitive industry-As the industry expands in the long run,

Which of the following is NOT a characteristic of long-run equilibrium for a perfectly competitive firm?

Managers, Profits, and Markets

Demand, Supply, and Market Equilibrium

Marginal Analysis for Optimal Decisions

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

Refer to the following figure: The figure above shows cost curves for a perfectly competitive firm. -If market price is $0.70, a profit-maximizing firm will produce _ units of output and earn profits of _.