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QUESTION

# micro-economics

This is due in 2 hrs need done asap!

Question 1. 1. A certain competitive firm sells its output for \$20 per unit. The 50th unit of output that the firm produces has a marginal cost of \$22. Production of the 50th unit of output does not necessarily (Points : 5)      increase the firm's total revenue by \$20.

increase the firm's total cost by \$22.

decrease the firm's profit by \$2.

increase the firm’s average variable cost by \$0.44.

Question 2. 2. The accountants hired by the Brookside Racquet Club have determined total fixed cost to be \$75,000, total variable cost to be \$130,000, and total revenue to be \$125,000. Because of this information, in the short run, the Brookside Racquet Club should (Points : 5)      shut down because staying open would be more expensive.

lower their prices to increase their profits.

stay open because shutting down would be more expensive.

stay open because the firm is making an economic profit.

Question 3. 3. Figure 14-6

Suppose a firm operating in a competitive market has the following cost curves:

Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total revenue (Points : 5)

can be represented by the area P3 x Q3.

can be represented by the area P3 x Q2.

can be represented by the area (P3-P2) x Q3.

is zero.

Question 4. 4. Table 14-9

Suppose that a firm in a competitive market faces the following revenues and costs:

Quantity

Total Revenue

Total Cost

0

\$0

\$10

1

\$9

\$14

2

\$18

\$19

3

\$27

\$25

4

\$36

\$32

5

\$45

\$40

6

\$54

\$49

7

\$63

\$59

8

\$72

\$70

9

\$81

\$82

Refer to Table 14-9 At which quantity of output is marginal revenue equal to marginal cost? (Points : 5)      3 units

6 units

8 units

9 units

Question 5. 5. Scenario 14-1

Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals \$15 and its average total cost equals \$11. The firm sells its output for \$12 per unit.

Refer to Scenario 14-1. At Q = 1,000, the firm's profits equal (Points : 5)

\$-200.

\$1,000.

\$3,000.

\$4,000.

Question 6. 6. Suppose that a firm in a competitive market is currently maximizing its short-run profit at an output of 50 units. If the current price is \$9, the marginal cost of the 50th unit is \$9, and the average total cost of producing 50 units is \$4, what is the firm's profit? (Points : 5)      \$0

\$200

\$250

\$450

Question 7. 7. Table 14-10

Suppose that a firm in a competitive market faces the following revenues and costs:

Quantity

Total Revenue

Total Cost

0

\$0

\$3

1

\$7

\$5

2

\$14

\$9

3

\$21

\$15

4

\$28

\$23

5

\$35

\$33

6

\$42

\$45

7

\$49

\$59

Refer to Table 14-10. This firm should continue to produce and sell units as long as the marginal cost of production is less than or equal to (Points : 5)      \$3.

\$5.

\$7.

\$9.

Question 8. 8. A firm in a competitive market has the following cost structure:

Output

Total Cost

0

\$5

1

\$10

2

\$12

3

\$15

4

\$24

5

\$40

If the market price is \$16, this firm will (Points : 5)      produce 4 units of output in the short run and exit in the long run.

produce 5 units of output in the short run and exit in the long run.

produce 5 units of output in the short run and face competition from new market entrants in the long run.

shut down in the short run and exit in the long run.

Question 9. 9. If a competitive firm is selling 1,000 units of its product at a price of \$9 per unit and earning a positive profit, then (Points : 5)      its total cost is less than \$9,000.

its marginal revenue is less than \$9.

its average revenue is greater than \$9.

the firm cannot be a competitive firm because competitive firms cannot earn positive profits.

Question 10. 10. Competitive firms that earn a loss in the short run should (Points : 5)      shut down if P < AVC.

raise their price.

lower their output.

All of the above are correct.

Question 11. 11. Figure 14-5

Suppose a firm operating in a competitive market has the following cost curves:

Refer to Figure 14-5. In the short run, if the market price is P4, individual firms in a competitive industry will earn (Points : 5)

positive profits.

zero profits.

losses but will remain in business.

losses and will shut down.

Question 12. 12. A profit-maximizing firm in a competitive market is able to sell its product for \$7. At its current level of out-put, the firm's average total cost is \$10. The firm’s marginal cost curve crosses its marginal revenue curve at an output level of 9 units. The firm experiences a (Points : 5)      profit of more than \$27.

profit of exactly \$27.

loss of more than \$27.

loss of exactly \$27.

Question 13. 13. For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of \$10 and a marginal cost of \$11. It follows that the (Points : 5)      production of the 100th unit of output increases the firm's profit by \$1.

production of the 100th unit of output increases the firm's average total cost by \$1.

firm's profit-maximizing level of outputis less than 100 units.

production of the 110th unit of output must increase the firm’s profit but by less than \$1.

Question 14. 14. Table 14-8

Suppose that a firm in a competitive market faces the following revenues and costs:

Quantity

Total Revenue

Total Cost

0

\$0

\$3

1

\$7

\$5

2

\$14

\$8

3

\$21

\$12

4

\$28

\$17

5

\$35

\$23

6

\$42

\$30

7

\$49

\$38

Refer to Table 14-8. The firm will produce a quantity greater than 4 because at 4 units of output, marginal cost (Points : 5)      is less than marginal revenue.

equals marginal revenue.

is greater than marginal revenue.

is minimized.

Question 15. 15. Table 14-14

The following table presents cost and revenue information for Bob’s bakery production and sales.

Quantity

Total Cost

Marginal Cost

Price

Total Revenue

Marginal Revenue

0

\$5.00

---

\$3.25

---

1

\$5.50

\$3.25

2

\$6.50

\$3.25

3

\$8.00

\$3.25

4

\$10.00

\$3.25

5

\$12.50

\$3.25

6

\$15.50

\$3.25

7

\$19.00

\$3.25

8

\$23.00

\$3.25

Refer to Table 14-14. Suppose that due to a decrease in the market demand for bread the market price of bread drops to \$2.75. At this new price, if Bob produces and sells the profit-maximizing quantity, how much profit will he earn? (Points : 5)      \$0.25

\$1.25

\$2.25

The firm will lose \$6.25.

Question 16. 16. For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the (Points : 5)      average total cost curve.

average variable cost curve.

marginal cost curve.

marginal revenue curve.

Question 17. 17. Mrs. Smith operates a business in a competitive market. The current market price is \$8.50. At her profit-maximizing level of production, the average variable cost is \$8.00, and the average total cost is \$8.25. Mrs. Smith should (Points : 5)      shut down her business in the short run but continue to operate in the long run.

continue to operate in the short run but shut down in the long run.

continue to operate in both the short run and long run.

shut down in both the short run and long run.

Question 18. 18. Figure 14-1

Suppose that a firm in a competitive market has the following cost curves:

Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is (Points : 5)

above \$6.30 but less than \$8.

above \$6.30.

less than \$6.30 but more than \$4.50.

less than \$4.50.

Question 19. 19. Suppose a firm in each of the two markets listed below were to increase its price by 30 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second mar-ket listed would not? (Points : 5)      oil and natural gas

cable television and gasoline

restaurants and MP3 players

movie theaters and ballpoint pens

Question 20. 20. If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should (Points : 5)      shut down.

reduce its output but continue operating.

continue to produce at the current levels.

increase its output.

Question 21. 21. Which of the following statements regarding a competitive firm is correct? (Points : 5)      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.

If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units.

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.

For all firms, average revenue equals the price of the good.

Question 22. 22. Scenario 14-1

Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals \$15 and its average total cost equals \$11. The firm sells its output for \$12 per unit.

Refer to Scenario 14-1. At Q = 999, the firm's total costs equal (Points : 5)

\$24,970.

\$24,975.

\$24,980.

\$25,025.

Question 23. 23. A key characteristic of a competitive market is that (Points : 5)      government antitrust laws regulate competition.

producers sell nearly identical products.

firms minimize total costs.

firms have price setting power.

Question 24. 24. Shrimp Galore, a shrimp harvesting business in the Pacific Northwest, has a 30-year loan on its shrimp har-vesting boat. The annual loan payment is \$25,000 and the boat has a market (salvage) value that exceeds its outstanding loan balance. Prior to the 2010 shrimp harvesting season, Shrimp Galore's accountant predicted that at expected market prices for shrimp, Shrimp Galore would have a net loss of \$75,000 dollars after paying all 2010 expenses (including the annual loan payment). In this case, Shrimp Galore should (Points : 5)      produce nothing and experience a loss of \$25,000.

produce nothing and experience a loss of \$75,000.

continue to operate because expected profits will rise in the future.

continue to operate even though it predicts a loss of \$75,000.

Question 25. 25. Which of the following expressions is correct for a competitive firm? (Points : 5)     &nbp;profit = (quantity of output) x (price - average total cost)

marginal revenue = (change in total revenue)/(quantity of output)

average total cost = total variable cost/quantity of output

average revenue = (marginal revenue) x (quantity of output)

Question 26. 26. Scenario 14-3

Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is \$17, and the average total cost of producing 500 units is \$12. The firm sells its output for \$20.

Refer to Scenario 14-3. At Q=500, the firm’s profits equal (Points : 5)

\$1,000.

\$4,000.

\$7,000.

\$10,000.

Question 27. 27. A firm in a competitive market has the following cost structure:

Output

Total Costs

0

\$10

1

\$12

2

\$15

3

\$19

4

\$24

5

\$30

6

\$37

7

\$46

8

\$55

9

\$65

If the market price is \$8, how many units of output should the firm produce to maximize profit? (Points : 5)      5 units

6 units

7 units

8 units

Question 28. 28. One of the defining characteristics of a perfectly competitive market is (Points : 5)      a small number of sellers.

a large number of buyers and a small number of sellers.

a similar product.

significant advertising by firms to promote their products.

Question 29. 29. Table 14-9

Suppose that a firm in a competitive market faces the following revenues and costs:

Quantity

Total Revenue

Total Cost

0

\$0

\$10

1

\$9

\$14

2

\$18

\$19

3

\$27

\$25

4

\$36

\$32

5

\$45

\$40

6

\$54

\$49

7

\$63

\$59

8

\$72

\$70

9

\$81

\$82

Refer to Table 14-9. If the firm’s marginal cost is \$11, it should (Points : 5)      increase production to maximize profit.

increase the price of the product to maximize profit.

reduce production to increase profit.

Question 30. 30. Which of the following statements best expresses a firm’s profit-maximizing decision rule? (Points : 5)      If marginal revenue is greater than marginal cost, the firm should increase its output.

If marginal revenue is less than marginal cost, the firm should shut down in the short run.

If marginal revenue equals marginal cost, the firm should produce exactly one more unit of output.

All of the above are correct.

Question 31. 31. In a competitive market, (Points : 5)      no single buyer or seller can influence the price of the product.

there are only a small number of sellers.

the goods offered by the different sellers are unique.

accounting profit is driven to zero as firms freely enter and exit the market.

Question 32. 32. Table 14-12

Bill’s Birdhouses

COSTS

REVENUES

Quantity

Produced

Total

Cost

Marginal/span>

Cost

Quantity

Demanded

Price

Total

Revenue

Marginal

Revenue

0

\$0

--

0

\$80

--

1

\$50

1

\$80

2

\$102

2

\$80

3

\$157

3

\$80

4

\$217

4

\$80

5

\$285

5

\$80

6

\$365

6

\$80

7

\$462

7

8

\$582

8

\$80

Refer to Table 14-12. What is the marginal cost of the 5th unit? (Points : 5)      \$55

\$60

\$68

\$80

Question 33. 33. Figure 14-6

Suppose a firm operating in a competitive market has the following cost curves:

Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total costs (Points : 5)

can be represented by the area P2 x Q2.

can be represented by the area P3 x Q2.

can be represented by the area (P3-P2) x Q3.

are zero.

Question 34. 34. Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of \$3 each. Which of the following statements is correct?

(i) Marginal revenue equals \$3.

(ii) Average revenue equals \$600.

(iii) Average revenue exceeds marginal revenue, but we don’t know by how much. (Points : 5)

(i) only

(iii) only

(i) and (ii) only

(i), (ii), and (iii)

Question 35. 35. A firm in a competitive market has the following cost structure:

Output

Total Cost

0

\$5

1

\$10

2

\$12

3

\$15

4

\$24

5

\$40

If the market price is \$4, this firm will (Points : 5)      produce 2 units in the short run and exit in the long run.

produce 3 units in the short run and exit in the long run.

produce 4 units in the short run and exit in the long run.

shut down in the short run and exit in the long run.

Question 36. 36. Mrs. Smith is operating a firm in a competitive market. The market price is \$6.50. At her profit-maximizing level of output, her average total cost of production is \$7.00, and her average variable cost of production is \$6.00. Which of the following statements about Mrs. Smith’s firm is correct? (Points : 5)      Mrs. Smith is earning a loss and should shut down in the short run.

Mrs. Smith is earning a loss but should continue to operate in the short run.

Mrs. Smith is earning a profit since the price is above the average variable cost.

Without knowing Mrs. Smith's marginal cost, we cannot determine whether she should stay in business or shut down.

Question 37. 37. If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then (Points : 5)      a one-unit increase in output will increase the firm's profit.

a one-unit decrease in output will increase the firm's profit.

total revenue exceeds total cost.

total cost exceeds total revenue.

Question 38. 38. Figure 14-4

Suppose a firm operating in a competitive market has the following cost curves:

Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that (Points : 5)

fixed costs decrease as output increases from Q3 to Q4.

it can earn a positive profit by increasing production to Q4.

profit is still maximized at a production level of Q3.

average revenue exceeds marginal revenue at a production level of Q4.

Question 39. 39. When price is greater than marginal cost for a firm in a competitive market, (Points : 5)      marginal cost must be falling.

the firm must be minimizing its losses.

there are opportunities to increase profit by increasing production.

the firm should decrease output to maximize profit.

Question 40. 40. When a restaurant stays open for lunch service even though few customers patronize the restaurant for lunch, which of the following principles is (are) best demonstrated?

(i) Fixed costs are sunk in the short run.

(ii) In the short run, only fixed costs are important to the decision to stay open for lunch.

(iii) If revenue exceeds variable cost, the restaurant owner is making a smart decision to      remain open for lunch. (Points : 5)

(i) and (ii) only

(ii) and (iii) only

(i) and (iii) only

(i), (ii), and (iii)

Question 41. 41. Mrs. Smith operates a business in a competitive market. The current market price is \$8.10. At her profit-maximizing level of production, the average variable cost is \$8.00, and the average total cost is \$8.25. Mrs. Smith should (Points : 5)      shut down her business in the short run but continue to operate in the long run.

continue to operate in the short run but shut down in the long run.

continue to operate in both the short run and long run.

shut down in both the short run and long run.

Question 42. 42. Which of the following is not a characteristic of a perfectly competitive market? (Points : 5)      Firms are price takers.

Firms have difficulty entering the market.

There are many sellers in the market.

Goods offered for sale are largely the same.

Question 43. 43. Which of the following is a characteristic of a competitive market? (Points : 5)      There are many buyers but few sellers.

Firms sell differentiated products.

There are many barriers to entry.

Buyers and sellers are price takers.

Question 44. 44. Figure 14-6

Suppose a firm operating in a competitive market has the following cost curves:

Refer to Figure 14-6. Firms will earn positive profits in the short run if the market price (Points : 5)

is less than P1.

is greater than P1 but less than P3.

equals P3.

exceeds P3.

Qustion 45. 45. In a competitive market, the actions of any single buyer or seller will (Points : 5)      have a negligible impact on the market price.

have little effect on market equilibrium quantity but will affect market equilibrium price.

affect marginal revenue and average revenue but not price.

adversely affect the profitability of more than one firm in the market.

Question 46. 46. Suppose that in a competitive market the equilibrium price is \$2.50. What is marginal revenue for the last unit sold by the typical firm in this market? (Points : 5)      less than \$2.50

more than \$2.50

exactly \$2.50

The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm.

Question 47. 47. A firm will shut down in the short run if, for all positive levels of output, (Points : 5)      its losses exceed its fixed costs.

its total revenue is less than its variable costs.

the price of its product is less than its average variable cost.

All of the above are correct.

Question 48. 48. Figure 14-2

Suppose a firm operating in a competitive market has the following cost curves:

Refer to Figure 14-2. If the market price is P1, in the short run the firm will earn (Points : 5)

positive economic profits.

negative economic profits but will try to remain open.

negative economic profits and will shut down.

zero economic profits.

Question 49. 49. In a competitive market the current price is \$7, and the typical firm in the market has ATC = \$7.50 and AVC = \$7.15. (Points : 5)      In the short run firms will shut down, and in the long run firms will leave the market.

In the short run firms will continue to operate, but in the long run firms will leave the market.

New firms will likely enter this market to capture any remaining economic profits.

The firm will earn zero profits in both the short run and long run.

Question 50. 50. When firms are said to be price takers, it implies that if a firm raises its price, (Points : 5)      buyers will go elsewhere.

buyers will pay the higher price in the short run.

competitors will also raise their prices.

firms in the industry will exercise market power.