Practice Quiz Chp 8
Econ 355: Microeconomics
- 1.If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth,
- 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.Higher input prices result in
- 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
.JPG "Refer to Figure 8.1. At 67 units of output, profit is")
.JPG "Refer to Figure 8.1. At the profit-maximizing level of output, total revenue is")
.JPG "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?")
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