Question 1

If a firm's marginal revenue is below its marginal cost,an increase in production will usually

Accepted Answer

A)  increase profits. 
B)  leave profits unchanged. 
C)  decrease profits. 
D)  increase marginal revenue. 
A)  increase profits. 
B)  leave profits unchanged. 
C)  decrease profits. 
D)  increase marginal revenue. C

Question 2

It is usually assumed that a perfectly competitive firm's supply curve is given by its marginal cost curve.In order for this to be true,which of the following additional assumptions are necessary?
I.That the firm seek to maximize profits.
II.That the marginal cost curve be positively sloped.
III.That price exceeds average variable cost.
IV.That price exceeds average total cost.

Accepted Answer

A)  I and II only. 
B)  I and II but not III and IV. 
C)  I and III but not II and IV. 
D)  I, II and III, but not IV. 
A)  I and II only. 
B)  I and II but not III and IV. 
C)  I and III but not II and IV. 
D)  I, II and III, but not IV. D

Question 3

Suppose a farmer is a price taker in soybeans with cost functions given by   Suppose the farmer has to pay a 10% tax on revenue.The new profit maximizing level of output is

Accepted Answer

A)  unaffected by the tax. 
B)  increased because of the tax. 
C)  decreased because of the tax. 
D)  Not enough information to determine. 
A)  unaffected by the tax. 
B)  increased because of the tax. 
C)  decreased because of the tax. 
D)  Not enough information to determine. C

Question 4

If an unregulated (because it produces electricity from hydroelectric power)electric company is a monopolist and faces demand of Q = 50 - 10P.   The profit maximizing output is

Accepted Answer

A)  5 
B)  10 
C)  25 
D)  50 
A)  5 
B)  10 
C)  25 
D)  50

Question 5

If an unregulated electric company is a monopolist and faces demand of Q = 50 - 10P,its marginal revenue function is given by

Accepted Answer

A)  5 -   Q 
B)  1 -   Q 
C)  5 -   Q 
D)  5 -   Q 
A)  5 -   Q 
B)  1 -   Q 
C)  5 -   Q 
D)  5 -   Q

Question 6

Suppose a farmer is a price taker (MR = P = 6)in soybeans with cost functions given by   The level of profits is

Accepted Answer

A)  10 
B)  20 
C)  30 
D)  -10 
A)  10 
B)  20 
C)  30 
D)  -10

Question 7

If demand is inelastic,marginal revenue will be

Accepted Answer

A)  positive. 
B)  zero. 
C)  negative. 
D)  constant. 
A)  positive. 
B)  zero. 
C)  negative. 
D)  constant.

Question 8

If a firm wished to maximize total revenues it should produce where

Accepted Answer

A)  marginal cost is zero. 
B)  marginal revenue is zero. 
C)  marginal revenue is equal to marginal cost. 
D)  marginal revenue is equal to price. 
A)  marginal cost is zero. 
B)  marginal revenue is zero. 
C)  marginal revenue is equal to marginal cost. 
D)  marginal revenue is equal to price.

Question 9

Suppose a farmer is a price taker in soybeans with cost functions given by   Suppose the farmer has to pay a 10% tax on revenue.This has the effect of

Accepted Answer

A)  flattening marginal cost. 
B)  increasing marginal revenue. 
C)  decreasing marginal cost. 
D)  decreasing marginal revenue. 
A)  flattening marginal cost. 
B)  increasing marginal revenue. 
C)  decreasing marginal cost. 
D)  decreasing marginal revenue.

Question 10

If price is equal to short-run average variable cost,the firm is at the point known as

Accepted Answer

A)  the break even point. 
B)  the profit maximizing point. 
C)  the shutdown point. 
D)  the revenue maximizing point. 
A)  the break even point. 
B)  the profit maximizing point. 
C)  the shutdown point. 
D)  the revenue maximizing point.

Question 11

A firm's total revenue is equal to

Accepted Answer

A)  total quantity produced times marginal cost. 
B)  total quantity produced times market price. 
C)  marginal revenue times total quantity produced. 
D)  market price divided by total quantity produced. 
A)  total quantity produced times marginal cost. 
B)  total quantity produced times market price. 
C)  marginal revenue times total quantity produced. 
D)  market price divided by total quantity produced.

Question 12

A firm that sought to "maximize market share" would choose to produce an output level for which marginal revenue was equal to

Accepted Answer

A)  marginal cost 
B)  average cost. 
C)  price. 
D)  zero. 
A)  marginal cost 
B)  average cost. 
C)  price. 
D)  zero.

Question 13

A firm's marginal revenue is defined as

Accepted Answer

A)  the ratio of total revenue to total quantity produced. 
B)  the additional output produced by lowering price. 
C)  the additional revenue received due to technical innovation. 
D)  the additional revenue received when selling one more unit of output. 
A)  the ratio of total revenue to total quantity produced. 
B)  the additional output produced by lowering price. 
C)  the additional revenue received due to technical innovation. 
D)  the additional revenue received when selling one more unit of output.

Question 14

If an unregulated (because it produces electricity from hydroelectric power)electric company is a monopolist and faces demand of Q = 100 - 50P.   The profit maximizing output is

Accepted Answer

A)  50 
B)  100 
C)  25 
D)  12.5 
A)  50 
B)  100 
C)  25 
D)  12.5

Question 15

Suppose a farmer is a price taker in soybeans with cost functions given by   Suppose the farmer has to purchase a license for $50,the new marginal cost function is

Accepted Answer

A)  still MC = .2q + 2 
B)  MC = .2q + 50 
C)  MC = .2q + 52 
D)  MC = 50 
A)  still MC = .2q + 2 
B)  MC = .2q + 50 
C)  MC = .2q + 52 
D)  MC = 50

Question 16

In order to maximize profits,a firm that can sell all it wants without affecting price should produce

Accepted Answer

A)  where average variable costs are minimized. 
B)  where marginal cost is equal to average variable costs. 
C)  where marginal cost is equal to price. 
D)  where marginal cost is a minimum. 
A)  where average variable costs are minimized. 
B)  where marginal cost is equal to average variable costs. 
C)  where marginal cost is equal to price. 
D)  where marginal cost is a minimum.

Question 17

In order to maximize profits,a firm should produce at the output level for which

Accepted Answer

A)  average cost is minimized. 
B)  marginal revenue equals marginal cost. 
C)  marginal cost is minimized. 
D)  price minus average cost is as large as possible. 
A)  average cost is minimized. 
B)  marginal revenue equals marginal cost. 
C)  marginal cost is minimized. 
D)  price minus average cost is as large as possible.

Question 18

Which of the following conditions would result in the short run marginal cost curve not correctly reflecting the supply behavior of a profit maximizing firm?

Accepted Answer

A)  The firm is a price taker. 
B)  Price exceeds average total cost. 
C)  The elasticity of demand facing the firm is -3. 
D)  the firm can vary several inputs in the short run. 
A)  The firm is a price taker. 
B)  Price exceeds average total cost. 
C)  The elasticity of demand facing the firm is -3. 
D)  the firm can vary several inputs in the short run.

Question 19

If a firm is a price taker,its marginal revenue is

Accepted Answer

A)  equal to market price. 
B)  less than market price. 
C)  greater than market price. 
D)  a multiple of market price that may be either greater than or less than one. 
A)  equal to market price. 
B)  less than market price. 
C)  greater than market price. 
D)  a multiple of market price that may be either greater than or less than one.

Question 20

In general,microeconomic theory assumes that firms attempt to maximize the difference between

Accepted Answer

A)  total revenue and accounting costs. 
B)  price and marginal cost. 
C)  total revenues and economic costs. 
D)  economic costs and average cost. 
A)  total revenue and accounting costs. 
B)  price and marginal cost. 
C)  total revenues and economic costs. 
D)  economic costs and average cost.

If a firm's marginal revenue is below its marginal cost,an increase in production will usually

Suppose a farmer is a price taker in soybeans with cost functions given by Suppose the farmer has to pay a 10% tax on revenue.The new profit maximizing level of output is

If an unregulated (because it produces electricity from hydroelectric power)electric company is a monopolist and faces demand of Q = 50 - 10P. The profit maximizing output is

If an unregulated electric company is a monopolist and faces demand of Q = 50 - 10P,its marginal revenue function is given by

Suppose a farmer is a price taker (MR = P = 6)in soybeans with cost functions given by The level of profits is

If demand is inelastic,marginal revenue will be

If a firm wished to maximize total revenues it should produce where

Suppose a farmer is a price taker in soybeans with cost functions given by Suppose the farmer has to pay a 10% tax on revenue.This has the effect of

If price is equal to short-run average variable cost,the firm is at the point known as

A firm's total revenue is equal to

A firm that sought to "maximize market share" would choose to produce an output level for which marginal revenue was equal to

A firm's marginal revenue is defined as

If an unregulated (because it produces electricity from hydroelectric power)electric company is a monopolist and faces demand of Q = 100 - 50P. The profit maximizing output is

Suppose a farmer is a price taker in soybeans with cost functions given by Suppose the farmer has to purchase a license for $50,the new marginal cost function is

In order to maximize profits,a firm that can sell all it wants without affecting price should produce

In order to maximize profits,a firm should produce at the output level for which

Which of the following conditions would result in the short run marginal cost curve not correctly reflecting the supply behavior of a profit maximizing firm?

If a firm is a price taker,its marginal revenue is

In general,microeconomic theory assumes that firms attempt to maximize the difference between

Economic Models

Utility and Choice

Individual Demand Curves

Uncertainty

Game Theory

Production

Costs

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

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Exam 8: Profit Maximization and Supply

If a firm's marginal revenue is below its marginal cost,an increase in production will usually

Suppose a farmer is a price taker in soybeans with cost functions given by Suppose the farmer has to pay a 10% tax on revenue.The new profit maximizing level of output is

If an unregulated (because it produces electricity from hydroelectric power)electric company is a monopolist and faces demand of Q = 50 - 10P. The profit maximizing output is

If an unregulated electric company is a monopolist and faces demand of Q = 50 - 10P,its marginal revenue function is given by

Suppose a farmer is a price taker (MR = P = 6)in soybeans with cost functions given by The level of profits is

If demand is inelastic,marginal revenue will be

If a firm wished to maximize total revenues it should produce where

Suppose a farmer is a price taker in soybeans with cost functions given by Suppose the farmer has to pay a 10% tax on revenue.This has the effect of

If price is equal to short-run average variable cost,the firm is at the point known as

A firm's total revenue is equal to

A firm that sought to "maximize market share" would choose to produce an output level for which marginal revenue was equal to

A firm's marginal revenue is defined as

If an unregulated (because it produces electricity from hydroelectric power)electric company is a monopolist and faces demand of Q = 100 - 50P. The profit maximizing output is

Suppose a farmer is a price taker in soybeans with cost functions given by Suppose the farmer has to purchase a license for $50,the new marginal cost function is

In order to maximize profits,a firm that can sell all it wants without affecting price should produce

In order to maximize profits,a firm should produce at the output level for which

Which of the following conditions would result in the short run marginal cost curve not correctly reflecting the supply behavior of a profit maximizing firm?

If a firm is a price taker,its marginal revenue is

In general,microeconomic theory assumes that firms attempt to maximize the difference between

Economic Models

Utility and Choice

Individual Demand Curves

Uncertainty

Game Theory

Production

Costs

Perfect Competition in a Single Market

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Pricing in Input Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters