question
Profit is maximized when which of the following conditions occurs?
answer
Marginal revenue equals marginal cost.
question
If a competitive firm is losing money then it should:
answer
shut down if its losses are greater than total fixed costs.
question
As shown in Exhibit 8-12, if the price is OD, a perfectly competitive firm maximizes profit at which point on its marginal cost curve?
answer
I.
question
As shown in Exhibit 8-12, the firm will not produce in the short-run if the price is below:
answer
OA.
question
If marginal revenue exceeds marginal cost in the short run, total revenue for the perfectly competitive firm is greater than total cost.
answer
False
question
A fishing boat owner brings 50,000 fish to market and the market price is $4 per fish. Her average variable cost of 50,000 fish is $1 and the fixed cost of the boat is $100,000. What is her profit per fish?
answer
$1.
question
The profit maximizing or loss minimizing quantity of output for any firm to produce exists at that output level in which:
answer
marginal revenue equals marginal cost.
question
In short-run perfectly competitive equilibrium, which of the following is always true?
answer
Profit can be negative, zero, or positive.
question
Suppose that you have returned from your fishing expedition with 20,000 fish. The market price is $3 per fish. Your average fixed cost was $1 and your total variable cost was $5,000. If the price jumps to $3.50 before you sell your first fish, how much extra profit, if any, do you earn?
answer
Extra profit is enough to cover all of the variable costs of your next two trips.
question
If the price of a product falls below average total cost in the short run, the firm:
answer
experiences a loss.
question
As shown by the five points in Exhibit 8-13, the firm's total economic profit is maximized when the price is:
answer
P5.
question
In Exhibit 8-7, if this firm is currently producing 20 units of output, this firm:
answer
is earning a total profit of $60.
question
As shown in Exhibit 8-19, assume that a perfectly competitive industry is in long-run equilibrium at point A and the demand curve shifts from D1 to D2. The result is a long-run supply curve drawn from point:
answer
A to point C.
question
If input prices for a perfectly competitive firm increase as the output of the industry expand in the long run, the long-run industry supply curve will:
answer
have a positive slope.
question
In Exhibit 8-14, if output is at 200 units per week, total economic profit for the firm is:
answer
negative.
question
If a firm in a competitive industry is making zero economic profit but still producing, it must be the case that:
answer
MC = MR = ATC.
question
If at some output level for a firm price exceeds average total cost, then the firm is earning an economic profit.
answer
True
question
Perfectly competitive markets are characterized by:
answer
firms selling a homogeneous product.
question
Which of the following correctly explains why sellers in a perfectly competitive market are price takers?
answer
There are many sellers, and so the market process generates an equilibrium price that cannot be influenced by any one seller. Thus they have no choice but to take the price generated by the market process.
question
As shown in Exhibit 8-19, assume that a perfectly competitive industry is in long-run equilibrium at point A. If the demand curve shifts from D1 to D2, the adjustment sequence between points will be:
answer
A to B, then to C.
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