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Economic
Q:
Market supply is found by
A) vertically summing the relevant part of each individual producer's marginal cost curve.
B) horizontally summing the relevant part of each individual producer's marginal cost curve.
C) vertically summing each individual producer's average total cost curve.
D) horizontally summing each individual producer's average total cost curve.
Q:
Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
Refer to Figure 12-9. Identify the firm's short-run supply curve.
A) the marginal cost curve
B) the marginal cost curve from a and above
C) the marginal cost curve from b and above
D) the marginal cost curve from d and above
Q:
Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
Refer to Figure 12-9. Identify the short-run shut down point for the firm.
A) a
B) b
C) c
D) d
Q:
Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
Refer to Figure 12-9. At priceP4, the firm would
A) lose an amount equal to its fixed cost.
B) make a profit.
C) lose an amount less than fixed cost.
D) make a normal profit.
Q:
Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
Refer to Figure 12-9. At price P4, the firm would produce
A) Q3 units.
B) Q4 units.
C) Q5 units.
D) Q6 units.
Q:
Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
Refer to Figure 12-9. At priceP3, the firm would
A) lose an amount equal to its fixed cost.
B) lose an amount more than fixed cost.
C) lose an amount less than fixed cost.
D) break even.
Q:
Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
Refer to Figure 12-9. At price P3, the firm would produce
A) Q2 units
B) Q3 units.
C) Q4 units.
D) Q5 units.
Q:
Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
Refer to Figure 12-9. At priceP2, the firm would
A) lose an amount equal to its fixed cost.
B) lose an amount more than fixed cost.
C) lose an amount less than fixed cost.
D) break even.
Q:
Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
Refer to Figure 12-9. At price P2, the firm would produce
A) Q2 units.
B) Q3 units.
C) Q4 units.
D) zero units.
Q:
Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
Refer to Figure 12-9. At priceP1, the firm would
A) lose an amount equal to its fixed cost.
B) lose an amount more than fixed cost.
C) lose an amount less than fixed cost.
D) break even.
Q:
Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
Refer to Figure 12-9. At price P1, the firm would produce
A) Q1 units
B) Q3 units.
C) Q5 units.
D) zero units.
Q:
Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of $4,000. Max's explicit cost amounts to $3,000 per month more than his revenue. Should Max continue operating his business?
A) Max's explicit cost exceeds his total revenue. He should shut down his tattoo parlor.
B) Max should continue to run the tattoo parlor until his lease runs out.
C) If Max's marginal revenue is greater than or equal to his marginal cost, then he should stay in business.
D) This cannot be determined without information on his revenue.
Q:
Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of $4,000. The lease
A) is a fixed cost of operating the tattoo parlor.
B) is a variable cost of operating the tattoo parlor.
C) is an implicit cost of operating the tattoo parlor.
D) is part of the marginal cost of operating the tattoo parlor.
Q:
When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell
A) the output where marginal revenue equals marginal cost.
B) any positive output the entrepreneur decides upon because all of it can be sold.
C) nothing at all; the firm shuts down.
D) the output where average total cost equals price.
Q:
A perfectly competitive firm's supply curve is its
A) marginal cost curve.
B) marginal cost curve above its minimum average total cost.
C) marginal cost curve above its minimum average variable cost.
D) marginal cost curve above its minimum average fixed cost.
Q:
If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, the firm
A) is earning a profit.
B) should shut down.
C) should increase output.
D) should increase price.
Q:
Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output per day and her costs are as follows:Output per DayTotal Cost0$2013223734846157569271138136Suppose the current equilibrium price in the teapot market is $15. To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make? Draw a graph to illustrate your answer. Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).
Q:
Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output per day and her costs are as follows:Output per DayTotal Cost0$2013223734846157569271138136Suppose the current equilibrium price in the teapot market is $20. To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make? Draw a graph to illustrate your answer. Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).
Q:
Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output per day and her costs are as follows:Output per DayTotal Cost0$2013223734846157569271138136Suppose the current equilibrium price in the teapot market is $10. To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make? Draw a graph to illustrate your answer. Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).
Q:
To maximize profit, a firm will produce the level of output where MR = MC. If a firm actually makes a profit depends on the relationship of price to average total cost. What are the three possible relationships between price and average total cost that determine if a firm will make a profit, experience a loss, or break even?
Q:
If firms do not earn economic profits in a competitive equilibrium, why would the firms choose to stay in business?
Q:
For a given quantity, the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.
Q:
If price is equal to average variable cost, a perfectly competitive firm breaks even.
Q:
In the short run, if price falls below a firm's minimum average total cost, the firm should shut down.
Q:
Maximizing average profit is equivalent to maximizing total profit.
Q:
A perfectly competitive firm breaks even at a price equal to its minimum average total cost.
Q:
Table 12-4QuantityAverage Fixed CostAverage Variable CostMarginal Cost20$40$18$18402014106013.1162080102240100830621206.614090Table 12-4 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units.Refer to Table 12-4. If the market price is $45, the firmA) earn a profit of $3,600.B) will suffer a loss of $200.C) will break even.D) will earn profit of $1,040.
Q:
Table 12-4QuantityAverage Fixed CostAverage Variable CostMarginal Cost20$40$18$18402014106013.1162080102240100830621206.614090Table 12-4 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units.Refer to Table 12-4. If the market price is $45 the firm will produceA) 60 units.B) 80 units.C) 100 unitsD) 120 units
Q:
Figure 12-8 Refer to Figure 12-8. Suppose the firm produces 4,000 units. What does the shaded area labeled B represent?
A) the firm's economic loss
B) total variable cost
C) average variable cost
D) total fixed cost
Q:
Figure 12-8 Refer to Figure 12-8. Suppose the market price is $120. Which of the following is true?
A) The firm earns a profit equal to the area A.
B) The firm earns a profit equal to the area A + B.
C) The firm suffers a loss equal to the area A.
D) The firm will break even.
Q:
Figure 12-8 Refer to Figure 12-8. Suppose the firm produces 4,000 units. What does the shaded area labeled A represent?
A) total variable cost
B) profit
C) total fixed cost
D) total revenue
Q:
Figure 12-7 Figure 12-7 illustrates the cost curves of a perfectly competitive firm.
Refer to Figure 12-7. If the market price is P2 the firm
A) will break even and produce a quantity of Q2.
B) will make a profit and produce a quantity of Q2.
C) will make a profit and produce a quantity of Q1.
D) will make a profit and produce a quantity of Q3.
Q:
Figure 12-7 Figure 12-7 illustrates the cost curves of a perfectly competitive firm.
Refer to Figure 12-7. If the market price is P3 the firm
A) will break even.
B) will make a profit.
C) will earn enough revenue to cover its variable costs but not its fixed costs.
D) will produce a quantity of Q1.
Q:
Figure 12-7 Figure 12-7 illustrates the cost curves of a perfectly competitive firm.
Refer to Figure 12-7. If the market price is P1
A) The firm will experience a loss and raise its price to P2. The firm will then break even.
B) The firm will break even by producing a quantity of Q2.
C) The firm will experience a loss since price is less than ATC.
D) The firm may make a profit if it can increase the demand for its product.
Q:
A perfectly competitive firm will maximize its profit at the rate of output where the vertical distance between its total revenue and total cost is the largest. This is the same rate of output where
A) average total cost equals marginal revenue.
B) marginal revenue equals marginal profit.
C) marginal revenue equals marginal cost.
D) marginal revenue equals average revenue.
Q:
Figure 12-6 Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples.
Refer to Figure 12-6. If Jason maximizes his profit he will produce the output rate indicated by point ________ and his average profit will equal ________.
A) d; $3 minus ATC at point d
B) b; $3 minus ATC at point b
C) e; $3 minus ATC at point e
D) a; $3
Q:
Figure 12-6 Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples.
Refer to Figure 12-6. Which of the following statements is true?
A) Jason should produce where MC equals $3 (point d) where he will minimize his losses.
B) Jason should produce where the distance between MC and his demand curve is greatest (point b).
C) Jason cannot earn a profit from selling any number of apples.
D) Jason should produce where MC equals $3 (point d) where he will maximize his profit.
Q:
Figure 12-6 Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples.
Refer to Figure 12-6. Jason is currently producing 20 thousand pounds of apples. To maximize his profit Jason should
A) keep production at 20 thousand pounds.
B) increase production to the output rate indicated by point d.
C) increase production to the output rate indicated by point e.
D) decrease production to the output rate indicated by point a.
Q:
Figure 12-6 Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples.
Refer to Figure 12-6. To maximize his profit, Jason should produce the rate of output indicated by point
A) a.
B) b.
C) e.
D) d.
Q:
A firm will make a profit when
A) P > AVC.
B) P > ATC.
C) P = ATC.
D) P = MC.
Q:
A firm will break even when
A) P = ATC.
B) P > ATC.
C) P < AVC.
D) P = AVC.
Q:
Table 12-3QuantityTotal CostAverage Total CostMarginal Cost0$10.00----------115.00$15.00$5.00217.508.752.50322.507.505.00430.007.507.50540.008.0010.00652.508.7512.50767.509.6415.00885.0010.6317.509105.0011.6720.00Arnie sells basketballs in a perfectly competitive market. Table 12-3 summarizes Arnie's output per day (Q), total cost (TC), average total cost (ATC) and marginal cost (MC).Refer to Table 12-3. What will Arnie's output be and how much profit will he earn if the market price of basketballs is $5.00?A) Q = 1; profit = -$10.B) Q = 3; profit = -$7.50C) Q = 0; profit = -$10.00D) Price and profit cannot be determined from the information given.
Q:
Table 12-3QuantityTotal CostAverage Total CostMarginal Cost0$10.00----------115.00$15.00$5.00217.508.752.50322.507.505.00430.007.507.50540.008.0010.00652.508.7512.50767.509.6415.00885.0010.6317.509105.0011.6720.00Arnie sells basketballs in a perfectly competitive market. Table 12-3 summarizes Arnie's output per day (Q), total cost (TC), average total cost (ATC) and marginal cost (MC).Refer to Table 12-3. What price (P) will Arnie charge and how much profit will he earn if the market price of basketballs is $12.50?A) Price and profit cannot be determined from the information given.B) P = $12.50; profit = $52.50C) P = $12.50; profit = $22.50D) P = $20; profit = $75.00.
Q:
Profit is the difference between
A) marginal revenue and marginal cost.
B) total revenue and variable cost.
C) total revenue and total explicit cost.
D) total revenue and total cost.
Q:
What is always true at the quantity where a firm's average total cost equals average revenue?
A) The firm's revenue is maximized.
B) The firm's profit is maximized.
C) The firm breaks even.
D) Marginal cost equals marginal revenue.
Q:
If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then
A) marginal revenue is less than price.
B) average total cost is at a minimum.
C) total revenue equals total cost.
D) price exceeds average total cost.
Q:
Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC) and average total cost (ATC). Which of the following equations is equal to a firm's average profit?
A) P - ATC
B) (P - ATC) Q
C) (P Q) - TC
D) P - TC
Q:
Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC) and average total cost (ATC). Which of the following equations is equal to a firm's profit?
A) P - ATC
B) (P Q) - TC
C) (P Q) - (P ATC)
D) P - TC
Q:
Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
Refer to Figure 12-5. What is the minimum price the firm requires to produce output?
A) $20
B) $14
C) $5
D) It cannot be determined
Q:
Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
Refer to Figure 12-5. The figure shows the cost structure of a firm in a perfectly competitive market. If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what happens to its profit-maximizing output level?
A) It increases.
B) It decreases.
C) It remains the same.
D) It could increase, decrease or remain constant, depending on whether the firm is able to cut costs somewhere else.
Q:
Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
Refer to Figure 12-5. If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what happens in the diagram above?
A) All the cost curves shift upward.
B) Only the average variable cost and average total cost curves shift upward; marginal cost is not affected.
C) Only the average total cost curve shifts upward; the marginal cost and average variable cost curves are not affected.
D) None of the curves shifts; only the fixed cost curve, which is not shown here, is affected.
Q:
Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
Refer to Figure 12-5. What is the amount of the firm's fixed cost of production?
A) $5,400
B) $6,750
C) $8,100
D) It cannot be determined.
Q:
Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
Refer to Figure 12-5. The firm's manager suggests that the firm's goal should be to maximize average profit. If the firm does this, what is the amount of profit that it will earn?
A) $6,600
B) $6,750
C) $12,150
D) $36,000
Q:
Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
Refer to Figure 12-5. The firm's manager suggests that the firm's goal should be to maximize average profit. In that case, what is the output level and what is the average profit that will achieve the manager's goal?
A) Q = 1,350 units, average profit =$5
B) Q = 1,100 units, average profit =$6
C) Q = 1,350 units, average profit =$9
D) Q = 1,800 units, average profit =$20
Q:
Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
Refer to Figure 12-5. If the market price is $20, what is the average profit at the profit-maximizing quantity?
A) $5
B) $6
C) $9
D) $20
Q:
Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
Refer to Figure 12-5. If the market price is $20, what is the amount of the firm's profit?
A) $5,400
B) $6,750
C) $8,100
D) $16,200
Q:
Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
Refer to Figure 12-5. If the market price is $20, what is the firm's profit-maximizing output?
A) 750 units
B) 1,100 units
C) 1,350 units
D) 1,800 units
Q:
Assume that after the record year for U.S. farm income in 2013, farmers are expected to break even in 2014. This means that at the quantity being produced in 2014
A) MC =AVC.
B) MR =MC.
C) MR =ATC.
D) AVC =ATC.
Q:
Article Summary
According to the Department of Agriculture, net farm income will grow to a record high of $120.6 billion in 2013, up from the previous high mark in 2011 and after adjusting for inflation, its second highest level since 1973. Net cash income, however, is expected to fall by 10 percent due to unsold inventories. Exports of chickens and milk are expected to rise by 3 percent and 17 percent, respectively.
Source: Ros Krasny, "Farm income poised for record 2013: USDA," Reuters, August 27, 2013.
Refer to the Article Summary. All else equal, the increase in demand for chicken and milk exports will ________ the market prices for these exports and ________ economic profit in these markets.
A) increase; decrease
B) decrease; increase
C) increase; increase
D) decrease; decrease
Q:
All of the following can be used to compute average profit except
A) marginal profit minus marginal cost.
B) total profit divided by quantity.
C) average revenue minus average total cost
D) price minus average total cost.
Q:
A perfectly competitive firm earns a profit when price is
A) equal to minimum average total cost.
B) above minimum average total cost.
C) equal to minimum average variable cost.
D) equal to minimum average fixed cost.
Q:
Figure 12-4 Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
Refer to Figure 12-4. If the market price is $30, should the firm represented in the diagram continue to stay in business?
A) No, it should shut down because it is making a loss.
B) No, it should shut down because it cannot cover its variable cost.
C) Yes, because it is covering part of its fixed cost.
D) Yes, because it is making a profit.
Q:
Figure 12-4 Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
Refer to Figure 12-4. If the market price is $30 and the firm is producing output, what is the amount of the firm's profit or loss?
A) loss of $1,080
B) profit of $1,440
C) loss of $2,520
D) profit of $1,300
Q:
Figure 12-4 Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
Refer to Figure 12-4. What is the amount of its total fixed cost?
A) $1,080
B) $1,440
C) $2,520
D) It cannot be determined.
Q:
Figure 12-4 Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
Refer to Figure 12-4. If the market price is $30 and if the firm is producing output, what is the amount of its total variable cost?
A) $7,200
B) $6,480
C) $5,400
D) $3,960
Q:
Figure 12-4 Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
Refer to Figure 12-4. If the market price is $30, the firm's profit-maximizing output level is
A) 0.
B) 130.
C) 180.
D) 240.
Q:
If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm
A) is earning a profit.
B) should shut down.
C) is incurring a loss.
D) is breaking even.
Q:
Figure 12-3 Refer to Figure 12-3. Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity. Identify the area that represents the loss.
A) P2deP1
B) P3cbP1
C) P3caP0
D) 0P1bQ1
Q:
If a perfectly competitive firm's price is above its average total cost, the firm
A) is earning a profit.
B) should shut down.
C) is incurring a loss.
D) is breaking even.
Q:
A firm's total profit can be calculated as all of the following except
A) total revenue minus total cost.
B) average profit per unit times quantity sold.
C) (price minus average total cost) times quantity sold.
D) marginal profit times quantity sold.
Q:
Assuming a market price of $4, fill in the columns in the following table. What is the profit-maximizing level of production? What are the two ways to determine the profit-maximizing level of production?QuantityTotal Revenue (TR)Total Cost (TC)ProfitMarginal Revenue (MR)Marginal Cost (MC)03152639414520628740
Q:
Fill in the columns in the following table and use the values in the table to determine the profit-maximizing level of output.QuantityTotal Revenue (TR)Total Cost (TC)ProfitMarginal Revenue (MR)Marginal Cost (MC)00315521063158420115251563021735308404294560105085
Q:
Explain two different ways to determine the profit-maximizing level of output for a firm in a perfectly competitive market.
Q:
How are market price, average revenue, and marginal revenue related for a perfectly competitive firm and why?
Q:
For a perfectly competitive firm, at the profit-maximizing output average revenue equals marginal cost.
Q:
Being a price-taker, a perfectly competitive firm cannot receive a producer surplus in the short run.
Q:
Assume that price is greater than average variable cost. If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102, then the firm is probably producing more than its profit-maximizing quantity.
Q:
A perfectly competitive firm's marginal revenue curve is downward sloping.
Q:
An increase in a firm's fixed cost will not change the firm's profit-maximizing output in the short run.
Q:
A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000. The price of each bushel is $50. Calculate the firm's short-run profit or loss.
A) loss of $14,000
B) profit of $14,000
C) profit of $50,000
D) There is insufficient information to answer the question.