Cost
1) Assume firms in an industry break even. New investors ________ attracted to the industry and current ones ________ running away from it.
A) are not; are not
B) are not; are
C) are; are not
D) are; are
Answer:A
2) Firms that are "breaking even" are
A) earning zero economic profits.
B) earning less than a normal rate of return.
C) shutting down in the short run.
D) All of the above are correct.
Answer:A
3) Firms earning a profit will want to ________ their profits in the short run while firms suffering losses will want to ________ their losses.
A) maximize; maximize
B) maximize; minimize
C) minimize; maximize
D) minimize; minimize
Answer:B
4)In the short run,
A)all firms that earn a loss will shut down.
B)if current firms are earning a profit, new firms will enter the industry.
C)firms act such that they minimize losses or maximize profits.
D)All of the above are correct.
Answer:C
Refer to the information provided below in Figure 9.1 to answer the questions that follow.
25) Refer to Figure 9.1. This farmer maximizes profits by producing ________ bushels of wheat.
A) 6
B) 9
C) 12
D) 16
Answer:C
26)Refer to Figure 9.1. If this farmer maximizes profits, his total costs will be
A) $11.
B) $66.
C) $90.
D) $132.
Answer:D
27) Refer to Figure 9.1. If this farmer maximizes profits, his TVC will be
A) $24.
B) $42.
C) $108.
D) $255.
Answer:C
28)Refer to Figure 9.1. If this farmer maximizes profits, his fixed costs will be
A) $0.
B) $24.
C) $45.
D) indeterminate unless we know the level of output the firm is producing.
Answer:B
29)Refer to Figure 9.1. If this farmer maximizes profits, his total revenue will be
A) $90.
B) $135.
C) $180.
D) $240.
Answer:C
30) Refer to Figure 9.1. If this farmer maximizes profits, his profits will be
A) -$24.
B) $45.
C) $48.
D) $72.
Answer:C
31)Refer to Figure 9.1. If this farmer maximizes profits, his operating profit (or loss) will be
A) -$24.
B) $48.
C) $72.
D) $156.
Answer:C
32)Refer to Figure 9.1. This farmer will earn zero operating profit if price will be
A) $7.
B) $9.
C) $10.
D) $11.
Answer:A
33) Refer to Figure 9.1. This farmer will earn zero economic profit if price will be
A) $7.
B) $9.
C) $10.
D) $11.
Answer:C
34)Refer to Figure 9.1. This farmer's shutdown point price is
A) $0.
B) $4.
C) $7.
D) $10.
Answer:C
Refer to the information provided in Figure 9.7 below to answer the questions that follow.
35) Refer to Figure 9.7. In which of the following price ranges will the firm continue to operate but at a loss?
A) $5-$6
B) $6-$7
C) $7-$8
D) $8-$9
Answer:B
36)Refer to Figure 9.7. The firm's shut down point is at a price of
A) $5
B) $6
C) $7
D) $8
Answer:B
37)Refer to Figure 9.7. Suppose demand for wheat is initially D2. If consumer incomes increase, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat and individual profit maximizing firms will produce ________ bushels of wheat.
A) D3; increase; 15
B) D1; increase; 10
C) D3; decrease; 7
D) D1; decrease; 0
Answer:A
38)Refer to Figure 9.7. Suppose demand for wheat is initially D2. If the price of rice (a substitute for wheat) falls, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat and individual profit maximizing firms will produce ________ bushels of wheat.
A) D3; increase; 15
B) D1; increase; 13
C) D3; decrease; 10
D) D1; decrease; 0
Answer:D
39) Refer to Figure 9.7. If demand for wheat is D2, then a profit maximizing firm will produce ________ units and earn a profit of ________.
A) 13; $0
B) 7; $0
C) 13; $91
D) 15; $30
Answer: B
40)Refer to Figure 9.7. If demand for wheat is D3, then a profit maximizing firm will produce ________ units and earn ________.
A) 15; positive profits
B) 9; positive profits
C) 12; negative profits
D) 13; exactly a normal return
Answer:A
41) Refer to Figure 9.7. If demand for wheat is D3, then in the long run
A) the firm will shut down.
B) the firm will exit the industry.
C) new firms will enter the industry and the current firms will expand production.
D) None of the above is correct.
Answer:C
42)Refer to Figure 9.7. If demand for wheat is D1, then a profit maximizing firm will produce ________ units and earn ________.
A) 0; negative profits
B) 5; zero profits
C) 10; negative profits
D) 12; positive profits
Answer: A
43) Refer to Figure 9.7. If demand for wheat is D1, then in the long run
A) the firm will increase its price and output.
B) the firm will exit the industry.
C) new firms will enter the industry and the current firms will expand production.
D) firms will increase their output so that their average fixed cost per unit falls.
Answer: B
44)Operating profit is
A) TR - TC.
B) TR - TFC.
C) TR - TVC.
D) TVC - TFC.
Answer:C
45)Economic profit is
A) TR - TC.
B) TR - TFC.
C) TR - TVC.
D) TVC - TFC.
Answer:A
46)A firm earns an operating profit if
A) revenues exceed variable costs of production.
B) revenues equal fixed costs.
C) price is less than average variable costs of production.
D) price equals marginal cost.
Answer: A
47) A firm suffers an operating loss if
A) price exceeds average variable cost but is less than average total cost.
B) price exceeds marginal cost.
C) revenues are smaller than total variable costs of production.
D) revenues are greater than total variable costs of production but less than total costs.
Answer:C
21) Under perfect competition,
A) resources are allocated among firms efficiently.
B) final products are distributed among households efficiently.
C) the system produces the goods and services consumers want.
D) All of the above are correct.
Answer:D
22)Which assumption leads to an efficient allocation of resources among firms?
A) Factor markets are open and competitive.
B) All firms pay the same prices for identical inputs.
C) Firms behave so as to maximize their profits.
D) All of the above are correct.
Answer:D
26) In perfect competition, ________ is the condition that ensures that firms produce the right things.
A) MUX = PX.
B) P = MC.
C) P = ATC.
D) MRPL = ATC.
Answer: B
9) The following market structure is an example of an imperfect market:
A) monopoly.
B) oligopoly.
C) monopolistic competition.
D) All of the above are correct.
Answer:D
A) are not; are not
B) are not; are
C) are; are not
D) are; are
Answer:A
2) Firms that are "breaking even" are
A) earning zero economic profits.
B) earning less than a normal rate of return.
C) shutting down in the short run.
D) All of the above are correct.
Answer:A
3) Firms earning a profit will want to ________ their profits in the short run while firms suffering losses will want to ________ their losses.
A) maximize; maximize
B) maximize; minimize
C) minimize; maximize
D) minimize; minimize
Answer:B
4)In the short run,
A)all firms that earn a loss will shut down.
B)if current firms are earning a profit, new firms will enter the industry.
C)firms act such that they minimize losses or maximize profits.
D)All of the above are correct.
Answer:C
Refer to the information provided below in Figure 9.1 to answer the questions that follow.
25) Refer to Figure 9.1. This farmer maximizes profits by producing ________ bushels of wheat.A) 6
B) 9
C) 12
D) 16
Answer:C
26)Refer to Figure 9.1. If this farmer maximizes profits, his total costs will be
A) $11.
B) $66.
C) $90.
D) $132.
Answer:D
27) Refer to Figure 9.1. If this farmer maximizes profits, his TVC will be
A) $24.
B) $42.
C) $108.
D) $255.
Answer:C
28)Refer to Figure 9.1. If this farmer maximizes profits, his fixed costs will be
A) $0.
B) $24.
C) $45.
D) indeterminate unless we know the level of output the firm is producing.
Answer:B
29)Refer to Figure 9.1. If this farmer maximizes profits, his total revenue will be
A) $90.
B) $135.
C) $180.
D) $240.
Answer:C
30) Refer to Figure 9.1. If this farmer maximizes profits, his profits will be
A) -$24.
B) $45.
C) $48.
D) $72.
Answer:C
31)Refer to Figure 9.1. If this farmer maximizes profits, his operating profit (or loss) will be
A) -$24.
B) $48.
C) $72.
D) $156.
Answer:C
32)Refer to Figure 9.1. This farmer will earn zero operating profit if price will be
A) $7.
B) $9.
C) $10.
D) $11.
Answer:A
33) Refer to Figure 9.1. This farmer will earn zero economic profit if price will be
A) $7.
B) $9.
C) $10.
D) $11.
Answer:C
34)Refer to Figure 9.1. This farmer's shutdown point price is
A) $0.
B) $4.
C) $7.
D) $10.
Answer:C
Refer to the information provided in Figure 9.7 below to answer the questions that follow.
35) Refer to Figure 9.7. In which of the following price ranges will the firm continue to operate but at a loss?A) $5-$6
B) $6-$7
C) $7-$8
D) $8-$9
Answer:B
36)Refer to Figure 9.7. The firm's shut down point is at a price of
A) $5
B) $6
C) $7
D) $8
Answer:B
37)Refer to Figure 9.7. Suppose demand for wheat is initially D2. If consumer incomes increase, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat and individual profit maximizing firms will produce ________ bushels of wheat.
A) D3; increase; 15
B) D1; increase; 10
C) D3; decrease; 7
D) D1; decrease; 0
Answer:A
38)Refer to Figure 9.7. Suppose demand for wheat is initially D2. If the price of rice (a substitute for wheat) falls, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat and individual profit maximizing firms will produce ________ bushels of wheat.
A) D3; increase; 15
B) D1; increase; 13
C) D3; decrease; 10
D) D1; decrease; 0
Answer:D
39) Refer to Figure 9.7. If demand for wheat is D2, then a profit maximizing firm will produce ________ units and earn a profit of ________.
A) 13; $0
B) 7; $0
C) 13; $91
D) 15; $30
Answer: B
40)Refer to Figure 9.7. If demand for wheat is D3, then a profit maximizing firm will produce ________ units and earn ________.
A) 15; positive profits
B) 9; positive profits
C) 12; negative profits
D) 13; exactly a normal return
Answer:A
41) Refer to Figure 9.7. If demand for wheat is D3, then in the long run
A) the firm will shut down.
B) the firm will exit the industry.
C) new firms will enter the industry and the current firms will expand production.
D) None of the above is correct.
Answer:C
42)Refer to Figure 9.7. If demand for wheat is D1, then a profit maximizing firm will produce ________ units and earn ________.
A) 0; negative profits
B) 5; zero profits
C) 10; negative profits
D) 12; positive profits
Answer: A
43) Refer to Figure 9.7. If demand for wheat is D1, then in the long run
A) the firm will increase its price and output.
B) the firm will exit the industry.
C) new firms will enter the industry and the current firms will expand production.
D) firms will increase their output so that their average fixed cost per unit falls.
Answer: B
44)Operating profit is
A) TR - TC.
B) TR - TFC.
C) TR - TVC.
D) TVC - TFC.
Answer:C
45)Economic profit is
A) TR - TC.
B) TR - TFC.
C) TR - TVC.
D) TVC - TFC.
Answer:A
46)A firm earns an operating profit if
A) revenues exceed variable costs of production.
B) revenues equal fixed costs.
C) price is less than average variable costs of production.
D) price equals marginal cost.
Answer: A
47) A firm suffers an operating loss if
A) price exceeds average variable cost but is less than average total cost.
B) price exceeds marginal cost.
C) revenues are smaller than total variable costs of production.
D) revenues are greater than total variable costs of production but less than total costs.
Answer:C
21) Under perfect competition,
A) resources are allocated among firms efficiently.
B) final products are distributed among households efficiently.
C) the system produces the goods and services consumers want.
D) All of the above are correct.
Answer:D
22)Which assumption leads to an efficient allocation of resources among firms?
A) Factor markets are open and competitive.
B) All firms pay the same prices for identical inputs.
C) Firms behave so as to maximize their profits.
D) All of the above are correct.
Answer:D
26) In perfect competition, ________ is the condition that ensures that firms produce the right things.
A) MUX = PX.
B) P = MC.
C) P = ATC.
D) MRPL = ATC.
Answer: B
9) The following market structure is an example of an imperfect market:
A) monopoly.
B) oligopoly.
C) monopolistic competition.
D) All of the above are correct.
Answer:D
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