question
Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML:
a) can choose the price at which it sells its butter but not the quantity of butter that it produces.
b) can choose quantity of butter that it produces but not the price at which it sells its butter
c) can choose both the price at which it sells its butter and the quantity of butter that it produces.
d) cannot choose either the price at which it sells it butter or the quantity of butter that it produces.
a) can choose the price at which it sells its butter but not the quantity of butter that it produces.
b) can choose quantity of butter that it produces but not the price at which it sells its butter
c) can choose both the price at which it sells its butter and the quantity of butter that it produces.
d) cannot choose either the price at which it sells it butter or the quantity of butter that it produces.
answer
b) can choose quantity of butter that it produces but not the price at which it sells its butter.
question
In order to maximize profits, the firm should stop producing after it makes the (Table 14:11)
a) first unit.
b) second unit.
c) fourth unit.
d) fifth unit.
a) first unit.
b) second unit.
c) fourth unit.
d) fifth unit.
answer
d) fifth unit
question
Refer to Table 14-16. For this firm, the price is:
a) $120
b) $10
c) $15
d) $5
a) $120
b) $10
c) $15
d) $5
answer
c) $15
question
The term shutdown
a) and the term exit both refer to short-run decisions that a firm might make.
b) and the term exit both refer to long-run decisions that a firm might make.
c) refers to a short-run decision that a firm might make, whereas the term exit refers to a long-run decision that a firm might make
d) refers to a long-run decision that a firm might make, whereas the term exit refers to a short-run decision that a firm might make.
a) and the term exit both refer to short-run decisions that a firm might make.
b) and the term exit both refer to long-run decisions that a firm might make.
c) refers to a short-run decision that a firm might make, whereas the term exit refers to a long-run decision that a firm might make
d) refers to a long-run decision that a firm might make, whereas the term exit refers to a short-run decision that a firm might make.
answer
c) refers to a short-run decision that a firm might make, whereas the term exit refers to a long-run decision that a firm might make.
question
Consider a firm that operates in a perfectly competitive market. The firm is producing at its profit maximizing output level. If this is true, then:
a) average revenue is maximized.
b) the firm must be earning a positive economic profit.
c) marginal revenue is greater than the market price.
d) price must be equal to marginal cost.
a) average revenue is maximized.
b) the firm must be earning a positive economic profit.
c) marginal revenue is greater than the market price.
d) price must be equal to marginal cost.
answer
d) price must be equal to marginal cost.
question
Refer to Figure 14-3. If the market price is $10, what is the firm's total cost?
a) $15
b) $30
c) $35
d) $50
a) $15
b) $30
c) $35
d) $50
answer
c) $35
question
Refer to Table 14-10. At which level of output in the table is average variable cost equal to $6?
a) 2 units
b) 3 units
c) 4 units
d) 5 units
a) 2 units
b) 3 units
c) 4 units
d) 5 units
answer
d) 5 units
question
Refer to Table 14-12. What is the marginal revenue from selling the 5th unit?
a) $12
b) $68
c) $80
d) $480
a) $12
b) $68
c) $80
d) $480
answer
c) $80
question
Refer to Table 14-13. In order to maximize profits, how many units should Diana's Dress Emporium produce?
a) 5
b) 6
c) 7
d) 8
a) 5
b) 6
c) 7
d) 8
answer
d) 8
question
Which of the following is not a characteristic of a perfectly competitive market?
a) There are many buyers and sellers.
b) Firms can freely enter and exit the market.
c) Many firms have market power.
d) Firms sell very similar products.
a) There are many buyers and sellers.
b) Firms can freely enter and exit the market.
c) Many firms have market power.
d) Firms sell very similar products.
answer
c) Many firms have market power.
question
Consider a firm operating in a perfectly competitive market. At its current output of 200 units, marginal revenue is $28. At this output, average total cost is minimized and equals $25. Given this information, what should the firm do?
a) Continue to produce 200 units, since costs per unit are minimized
b) Increase output beyond 200 units, since this higher output will yield the profit maximizing output level.
c) Decrease output below 200 units, since this lower output will result in the profit maximizing output level.
d) More information is needed to determine the firm's next step.
a) Continue to produce 200 units, since costs per unit are minimized
b) Increase output beyond 200 units, since this higher output will yield the profit maximizing output level.
c) Decrease output below 200 units, since this lower output will result in the profit maximizing output level.
d) More information is needed to determine the firm's next step.
answer
b) Increase output beyond 200 units, since this higher output will yield the profit maximizing output level.
question
Which of the following statements regarding a competitive firm is correct?
a) Because demand is downward sloping, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output.
b) If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units.
c) By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price.
d) For all firms, average revenue equals the price of the good.
a) Because demand is downward sloping, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output.
b) If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units.
c) By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price.
d) For all firms, average revenue equals the price of the good.
answer
d) For all firms, average revenue equals the price of the good.
question
When price exceeds average variable cost in the short run, a competitive firm's marginal cost curve is regarded as its supply curve because
a) the position of the marginal cost curve determines the price for which the firm should sell its product.
b) among the various cost curves, the marginal cost curve is the only one that slopes upward.
c) the marginal cost curve determines the quantity of output the firm is willing to supply at any price.
a) the position of the marginal cost curve determines the price for which the firm should sell its product.
b) among the various cost curves, the marginal cost curve is the only one that slopes upward.
c) the marginal cost curve determines the quantity of output the firm is willing to supply at any price.
answer
c) the marginal cost curve determines the quantity of output the firm is willing to supply at any price.
question
Refer to Table 14-14. When Bob produces and sells the profit-maximizing quantity, how much profit does he earn?
a) $0.25
b) $2.75
c) $4.00
d) $5.25
a) $0.25
b) $2.75
c) $4.00
d) $5.25
answer
c) $4.00
question
Refer to Table 14-3. For this firm, the marginal revenue is
a) $39.
b) $26.
c) $13.
d) $0
a) $39.
b) $26.
c) $13.
d) $0
answer
c) $13
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