Question 1

When MR = MC

Accepted Answer

A) marginal profit is maximized. 
B) total profit is maximized. 
C) marginal profit is positive. 
D) total profit is zero. 
A) marginal profit is maximized. 
B) total profit is maximized. 
C) marginal profit is positive. 
D) total profit is zero.

Question 2

Assume a profit maximizing firm's short-run cost is TC = 700 + 60Q.If its demand curve is P = 300 - 15Q,what should it do in the short run?

Accepted Answer

A) shut down 
B) continue operating in the short run even though it is losing money 
C) continue operating because it is earning an economic profit 
D) Cannot be determined from the above information 
A) shut down 
B) continue operating in the short run even though it is losing money 
C) continue operating because it is earning an economic profit 
D) Cannot be determined from the above information

Question 3

A monopoly will usually produce

Accepted Answer

A) where its demand curve is inelastic. 
B) where its demand curve is elastic. 
C) where its demand curve is either elastic or inelastic. 
D) only when its demand curve is perfectly inelastic. 
A) where its demand curve is inelastic. 
B) where its demand curve is elastic. 
C) where its demand curve is either elastic or inelastic. 
D) only when its demand curve is perfectly inelastic.

Question 4

At the point at which P=MC,suppose that a perfectly competitive firm's MC = $100,its AVC = $80 and its AC = $110.This firm should

Accepted Answer

A) shut down immediately. 
B) continue operating in the short run. 
C) try to take advantage of economies of scale. 
D) try to increase its advertising and promotion. 
A) shut down immediately. 
B) continue operating in the short run. 
C) try to take advantage of economies of scale. 
D) try to increase its advertising and promotion.

Question 5

When a firm produces at the point where MR = MC,the profit that it is earning is considered to be

Accepted Answer

A) maximum. 
B) normal. 
C) above normal. 
D) Not enough information is provided. 
A) maximum. 
B) normal. 
C) above normal. 
D) Not enough information is provided.

Question 6

The principle marginal revenue equal-marginal-cost rule for maximizing profit

Accepted Answer

A) does not apply to firms in the monopoly or oligopolistic industries. 
B) applies only for firm in perfect competition but not in monopolistic competition. 
C) applies to new firms but not to existing firms in an industry. 
D) applies to all the firms in all industries. 
A) does not apply to firms in the monopoly or oligopolistic industries. 
B) applies only for firm in perfect competition but not in monopolistic competition. 
C) applies to new firms but not to existing firms in an industry. 
D) applies to all the firms in all industries.

Question 7

In long-run equilibrium a perfectly competitive firm will operate where the price is

Accepted Answer

A) greater than MR but equal to MC and minimum ATC. 
B) greater than MR and MC,but equal to minimum ATC. 
C) greater than MC and minimum ATC,but equal to MR. 
D) equal to MR,MC and minimum to ATC. 
A) greater than MR but equal to MC and minimum ATC. 
B) greater than MR and MC,but equal to minimum ATC. 
C) greater than MC and minimum ATC,but equal to MR. 
D) equal to MR,MC and minimum to ATC.

Question 8

A monopolist sells 100 units at $10 per unit and 90 units at $15 per unit.The marginal revenue from the tenth unit is

Accepted Answer

A) $1000. 
B) $1350. 
C) $100. 
D) $350. 
A) $1000. 
B) $1350. 
C) $100. 
D) $350.

Question 9

A firm that seeks to maximize its revenue is most likely to adhere to which of the following?

Accepted Answer

A) MR = MC 
B) MR = 0 
C) MR = P 
D) MR < MC 
A) MR = MC 
B) MR = 0 
C) MR = P 
D) MR < MC

Question 10

Assume a perfectly competitive firm's short-run cost is TC = 100 + 160Q + 3Q2.If the market price is $196,what should it do?

Accepted Answer

A) produce 5 units and continue operating 
B) produce 6 units and continue operating 
C) produce zero units (i.e.,shut down) 
D) Cannot be determined from the above information 
A) produce 5 units and continue operating 
B) produce 6 units and continue operating 
C) produce zero units (i.e.,shut down) 
D) Cannot be determined from the above information

Question 11

What are the limitations in using break-even analysis?

Accepted Answer

It requires the use of linear cost and r

Question 12

The fact that a perfectly competitive firm has a perfectly elastic demand curve means

Accepted Answer

A) there is no limit to the firm's profits. 
B) there is no limit to the firm's revenues. 
C) that it can sell all it wants at any price. 
D) None of the above 
A) there is no limit to the firm's profits. 
B) there is no limit to the firm's revenues. 
C) that it can sell all it wants at any price. 
D) None of the above

Question 13

Mars Inc.produces 100,000 boxes of Snickers bars which sell for $4 a box.If variable costs are $3 per box,and it has $150,000 fixed operating costs,in the short run,it should

Accepted Answer

A) shut down as fixed costs are not being covered. 
B) keep producing as profits are $50,000. 
C) keep producing as variable costs are being met. 
D) keep producing as total costs are being recovered. 
A) shut down as fixed costs are not being covered. 
B) keep producing as profits are $50,000. 
C) keep producing as variable costs are being met. 
D) keep producing as total costs are being recovered.

Question 14

In perfect competition,if firms enter the market in the long run

Accepted Answer

A) total supply will increase causing market price to increase. 
B) total supply will decrease causing market price to decrease. 
C) total supply will decrease causing market price to increase. 
D) total supply will increase causing market price to decrease. 
A) total supply will increase causing market price to increase. 
B) total supply will decrease causing market price to decrease. 
C) total supply will decrease causing market price to increase. 
D) total supply will increase causing market price to decrease.

Question 15

You've been hired by an unprofitable firm to determine whether it should shut down its operation.The firm currently uses 70 workers to produce 300 units of output per day.The daily wage (per worker)is $100,and the price of the firm's output is $30.The cost of other variable inputs is $500 per day.Although you don't know the firm's fixed cost,you know that it is high enough that the firm's total costs exceed its total revenue.You know that the marginal cost of the last unit is $30.Should the firm continue to operate at a loss? Carefully explain your answer.

Accepted Answer

VC = $7,000 + 500.Thus AVC = 7

Question 16

If a monopoly wants to maximize its profit,it should produce in the range where

Accepted Answer

A) its average costs are declining. 
B) its demand curve is elastic. 
C) its marginal costs are declining. 
D) its marginal costs are less than its average costs. 
A) its average costs are declining. 
B) its demand curve is elastic. 
C) its marginal costs are declining. 
D) its marginal costs are less than its average costs.

Question 17

If a perfectly competitive firm incurs an economic loss,it should

Accepted Answer

A) shut down immediately. 
B) try to raise its price. 
C) shut down in the long run. 
D) shut down if this loss exceeds fixed cost. 
A) shut down immediately. 
B) try to raise its price. 
C) shut down in the long run. 
D) shut down if this loss exceeds fixed cost.

When MR = MC

Assume a profit maximizing firm's short-run cost is TC = 700 + 60Q.If its demand curve is P = 300 - 15Q,what should it do in the short run?

A monopoly will usually produce

At the point at which P=MC,suppose that a perfectly competitive firm's MC = $100,its AVC = $80 and its AC = $110.This firm should

When a firm produces at the point where MR = MC,the profit that it is earning is considered to be

The principle marginal revenue equal-marginal-cost rule for maximizing profit

In long-run equilibrium a perfectly competitive firm will operate where the price is

A monopolist sells 100 units at $10 per unit and 90 units at $15 per unit.The marginal revenue from the tenth unit is

A firm that seeks to maximize its revenue is most likely to adhere to which of the following?

Assume a perfectly competitive firm's short-run cost is TC = 100 + 160Q + 3Q².If the market price is $196,what should it do?

What are the limitations in using break-even analysis?

The fact that a perfectly competitive firm has a perfectly elastic demand curve means

Mars Inc.produces 100,000 boxes of Snickers bars which sell for $4 a box.If variable costs are $3 per box,and it has $150,000 fixed operating costs,in the short run,it should

In perfect competition,if firms enter the market in the long run

If a monopoly wants to maximize its profit,it should produce in the range where

If a perfectly competitive firm incurs an economic loss,it should

Introduction

The Firm and Its Goals

Supply and Demand

Demand Elasticity

Demand Estimation and Forecasting Appendices 5A and 5B

The Theory and Estimation of Production Appendices 6A,6B,and 6C

The Theory and Estimation of Cost Appendices 7A,7B,and 7C

Pricing and Output Decisions: Monopolistic Competition and Oligopoly

Special Pricing Practices

Game Theory and Asymmetric Information

Capital Budgeting and Risk

The Multinational Corporation in a Global Setting

Government and Industry: Challenges and Opportunities for Todays Manager

The Global Soft Drink Industry

Filters

Exam 8: Pricing and Output Decisions: Perfect Competition and Monopoly Appendices 8A and 8B

When MR = MC

Assume a profit maximizing firm's short-run cost is TC = 700 + 60Q.If its demand curve is P = 300 - 15Q,what should it do in the short run?

A monopoly will usually produce

At the point at which P=MC,suppose that a perfectly competitive firm's MC = $100,its AVC = $80 and its AC = $110.This firm should

When a firm produces at the point where MR = MC,the profit that it is earning is considered to be

The principle marginal revenue equal-marginal-cost rule for maximizing profit

In long-run equilibrium a perfectly competitive firm will operate where the price is

A monopolist sells 100 units at $10 per unit and 90 units at $15 per unit.The marginal revenue from the tenth unit is

A firm that seeks to maximize its revenue is most likely to adhere to which of the following?

Assume a perfectly competitive firm's short-run cost is TC = 100 + 160Q + 3Q2.If the market price is $196,what should it do?

What are the limitations in using break-even analysis?

The fact that a perfectly competitive firm has a perfectly elastic demand curve means

Mars Inc.produces 100,000 boxes of Snickers bars which sell for $4 a box.If variable costs are $3 per box,and it has $150,000 fixed operating costs,in the short run,it should

In perfect competition,if firms enter the market in the long run

If a monopoly wants to maximize its profit,it should produce in the range where

If a perfectly competitive firm incurs an economic loss,it should

Introduction

The Firm and Its Goals

Supply and Demand

Demand Elasticity

Demand Estimation and Forecasting Appendices 5A and 5B

The Theory and Estimation of Production Appendices 6A,6B,and 6C

The Theory and Estimation of Cost Appendices 7A,7B,and 7C

Pricing and Output Decisions: Monopolistic Competition and Oligopoly

Special Pricing Practices

Game Theory and Asymmetric Information

Capital Budgeting and Risk

The Multinational Corporation in a Global Setting

Government and Industry: Challenges and Opportunities for Todays Manager

The Global Soft Drink Industry

Filters

Assume a perfectly competitive firm's short-run cost is TC = 100 + 160Q + 3Q².If the market price is $196,what should it do?