# Practice Quiz Chp 8

30 Questions | Total Attempts: 349  Settings  Econ 355: Microeconomics

Related Topics
• 1.
• A.

They are more likely to become takeover targets of profit-maximizing firms

• B.

Their companies are more likely to survive in the long run

• C.

They are more likely to have higher profit than if they had pursued that policy explicitly

• D.

They are less likely to be replaced by stockholders

• E.

Theya re less likely to be replaced by the board of directors

• 2.
At the profit-maximizing level of output, what is true of the total revenue (TR) and total cost (TC) curves?
• A.

They must have the same slope

• B.

They must intersect, with TC cutting TR from below

• C.

They must be tangent to each other

• D.

They must intersect, with TC cutting TR from above

• E.

They cannot be tangent to each other

• 3.
Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as
• A.

AR = MR

• B.

P = MR

• C.

P = MC

• D.

P = AC

• E.

P = AVC

• 4.
Consider the following diagram where a perfectly competitive firm faces a price of \$40.  Refer to Figure 8.1.  The profit-maximizing output is
• A.

79

• B.

67

• C.

54

• D.

60

• E.

30

• 5.
Refer to Figure 8.1.  At 67 units of output, profit is
• A.

Not maximized, and zero

• B.

Maximized and zero

• C.

Maximized and negative

• D.

Maximized and positive

• E.

Not maximized, and negative

• 6.
Refer to Figure 8.1.  At the profit-maximizing level of output, total revenue is
• A.

\$3160

• B.

\$2160

• C.

\$1200

• D.

\$2680

• E.

\$2400

• 7.
If price between AVC and ATC, the best and most practical thing for a perfectly competitive firm to do is to:
• A.

Lower prices to gain revenue from extra volume

• B.

Continue operating, but plan to go out of business

• C.

Shut down immediately, but not liquidate the business

• D.

Shut down immediately and liquidate the business

• E.

Raise prices

• 8.
An improvement in technology would result in
• A.

Upward shifts of MC and reductions in output

• B.

Upward shifts of MC and increases in output

• C.

Increased quality of the good, but little change in MC

• D.

Downward shifts of MC and reductions in output

• E.

Downward shifts of MC and increases in output

• 9.
If a competitive firm's marginal cost curve is U-shaped then
• A.

Its short run supply curve is the upward-sloping portion of the marginal cost curve

• B.

Its short run supply curve is U-shaped too

• C.

Its short run supply curve is the upward-sloping portion of the marginal cost curve that lies above the short run average total cost curve

• D.

Its short run supply curve is the upward-sloping portion of the marginal cost curve that lies above the short run average variable cost curve

• E.

Its short run supply curve is the downward-sloping portion of the marginal cost curve

• 10.
• A.

Upward shifts of MC and reductions in output

• B.

Increased demand for the good the input is used for

• C.

Downward shifts of MC and reductions in output

• D.

Downward shifts of MC and increases in output

• E.

Upward shifts of MC and increases in output

• 11.
In a supply-and-demand graph, producer surplus can be pictured as the
• A.

Vertical intercept of the supply curve

• B.

Area between the equilibrium price line and the supply curve to the left of equilibrium output

• C.

Area between the demand curve and the supply curve to the left of equilibrium output

• D.

Area under the supply curve to the left of equilibrium output

• E.

Area under the demand curve to the left of equilibrium output

• 12.
Refer to Figure 8.2.  At P = \$80, the profit-maximizing output in the short run is
• A.

39

• B.

64

• C.

50

• D.

34

• E.

22

• 13.
Refer to Figure 8.2.  At P = \$80, how much is profit in the short run?
• A.

\$1000

• B.

\$306

• C.

\$88

• D.

\$1024

• E.

\$351

• 14.
Refer to Figure 8.2.  As the competitive industry, not just the firm in question, moves toward long-run equilibrium, what will the price be?
• A.

\$64

• B.

\$71

• C.

\$70

• D.

\$60

• E.

\$80

• 15.
In a constant-cost industry, an increase in demand will be followed by
• A.

An increase in supply that will bring price down to the level it was before the demand shift

• B.

An increase in supply that will bring price down below the level it was before the demand shift

• C.

An increase in supply that will not change price from the higher level that occurs after the demand shift

• D.

A decrease in demand to keep price constant

• E.

No increase in supply

• 16.
In a constant-cost industry, price always equals
• A.

LRAC and minimum LRMC

• B.

LRMC and minimum LRAC

• C.

Minimum LRAC, but not LRMC

• D.

Minimum LRAC and minimum LRMC

• E.

LRMC and LRAC, but not necessarily minimum LRAC

• 17.
Suppose that short-run MC = 10 + 2Q for an individual firm in a competitive market.  If there are 100 identical firms in this market, then the short-run supply curve can be written as
• A.

P = 10 + 0.02Q

• B.

P = 1000 + 2Q

• C.

P = 10 + 200Q

• D.

P = 1000 + 200Q

• 18.
The response of a firm to an increase in input prices in the short run will be to
• A.

Do nothing

• B.

Maintain output constant but change the mix of inputs

• C.

Reduce output as marginal cost rises

• D.

Increase output to increase revenue

• 19.
Suppose that for the individual firm in a competitive market, LRAC = 100 – 20Q + 2Q2. If this is a constant cost industry and demand can be represented as P = 100 – 0.1Q, how much output will the individual firm produce at long-run equilibrium?
• A.

5 units

• B.

50 units

• C.

0 units

• D.

1 unit

• 20.
Suppose that TC = 20 + 10Q + Q2 for a firm in a competitive market and that output, Q, sells for a price, P, of \$90. How much output will the firm produce to maximize profit?
• A.

0

• B.

40

• C.

90

• D.

20

• 21.
Suppose that the short-run production function is Q = 10L. If the wage rate is \$4 per unit of labor, then average variable cost equals
• A.

40Q

• B.

40

• C.

.4Q

• D.

.4

• 22.
Suppose that short-run total cost can be written as TC = 1000 + 100Q – 10Q2 + Q3. Then, AVC is minimized at what level of production?
• A.

AVC is horizontal

• B.

Q = 100

• C.

Q = 5

• D.

Q = 10

• 23.
Output for a simple production process is given by Q = 2KL, where K denotes capital and L denotes labor. The price of capital is \$25 per unit and capital is fixed at 8 units in the short run. The price of labor is \$5 per unit. What is the total cost of producing 80 units of output?
• A.

\$525

• B.

\$200

• C.

\$233

• D.

\$185

• E.

None of the above

• 24.
Suppose a firm’s production function is q= 10X 1/2 in the short run where there are fixed costs of \$500 and X is the variable input whose cost is \$200 per unit. What is the total cost of producing q= 10 units of output?
• A.

\$1000

• B.

\$700

• C.

\$1500

• D.

\$2000

• E.

None of the above

• 25.
In the above diagram profit is maximized at point
• A.

A

• B.

B

• C.

C

• D.

D