Profit-maximizing Output Chapter 10

27 Questions | Total Attempts: 390  Settings  • 1.
Which of the following is not a characteristic of pure competition?
• A.

Price strategies by firms.

• B.

A standardized product.

• C.

No barriers to entry.

• D.

A larger number of sellers.

• 2.
In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.Refer to the information. For a purely competitive firm, total revenue graphs as a:
• A.

Straight, upsloping line.

• B.

Straight line, parallel to the vertical axis.

• C.

Straight line, parallel to the horizontal axis.

• D.

Straight, downsloping line.

• 3.
A purely competitive seller is:
• A.

Both a "price maker" and a "price taker."

• B.

Neither a "price maker" nor a "price taker."

• C.

A "price taker."

• D.

A "price maker."

• 4.
In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.Refer to the information. For a purely competitive firm, marginal revenue graphs as a:
• A.

Straight, upsloping line.

• B.

Straight line, parallel to the vertical axis.

• C.

Straight line, parallel to the horizontal axis.

• D.

Straight, downsloping line.

• 5.
In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.Refer to the information. For a purely competitive firm:
• A.

Marginal revenue will graph as an upsloping line.

• B.

The demand curve will lie above the marginal revenue curve.

• C.

The marginal revenue curve will lie above the demand curve.

• D.

The demand and marginal revenue curves will coincide.

• 6.
If a firm in a purely competitive industry is confronted with an equilibrium price of \$5, its marginal revenue:
• A.

May be either greater or less than \$5.

• B.

Will also be \$5.

• C.

Will be less than \$5.

• D.

Will be greater than \$5.

• 7.
For a purely competitive seller, price equals:
• A.

Average revenue.

• B.

Marginal revenue.

• C.

Total revenue divided by output.

• D.

All of these.

• 8.
The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.
• A.

Perfectly inelastic; perfectly elastic

• B.

Downsloping; perfectly elastic

• C.

Downsloping; perfectly inelastic

• D.

Perfectly elastic; downsloping

• 9.
Refer to the diagram, which pertains to a purely competitive firm. Curve A represents:
• A.

total revenue and marginal revenue.

• B.

Marginal revenue only.

• C.

Total revenue and average revenue.

• D.

Total revenue only.

• 10.
Marginal revenue is the:
• A.

Change in product price associated with the sale of one more unit of output.

• B.

Change in average revenue associated with the sale of one more unit of output.

• C.

Difference between product price and average total cost.

• D.

Change in total revenue associated with the sale of one more unit of output.

• 11.
Refer to the short-run data. The profit-maximizing output for this firm is:
• A.

Above 440 units.

• B.

440 units.

• C.

320 units.

• D.

100 units.

• 12.
A firm reaches a break-even point (normal profit position) where:
• A.

Marginal revenue cuts the horizontal axis.

• B.

Marginal cost intersects the average variable cost curve.

• C.

Total revenue equals total variable cost.

• D.

Total revenue and total cost are equal.

• 13.
The MR = MC rule applies:
• A.

To firms in all types of industries.

• B.

Only when the firm is a "price taker."

• C.

Only to monopolies.

• D.

Only to purely competitive firms.

• 14.
Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at \$10 per unit. Its total fixed costs are \$100 and its average variable cost is \$3 at 20 units of output. This corporation:
• A.

Should close down in the short run.

• B.

Is maximizing its profits.

• C.

Is realizing a loss of \$60.

• D.

Is realizing an economic profit of \$40.

• 15.
Suppose you find that the price of your product is less than minimum AVC. You should:
• A.

Minimize your losses by producing where P = MC.

• B.

Maximize your profits by producing where P = MC.

• C.

Close down because, by producing, your losses will exceed your total fixed costs.

• D.

Close down because total revenue exceeds total variable cost.

• 16.
If a purely competitive firm shuts down in the short run:
• A.

Its loss will be zero.

• B.

It will realize a loss equal to its total variable costs.

• C.

It will realize a loss equal to its total fixed costs.

• D.

It will realize a loss equal to its explicit costs.

• 17.
Answer the question on the basis of the following data confronting a firm:Refer to the data. This firm is selling its output in a(n):
• A.

Monopolistically competitive market.

• B.

Monopolistic market.

• C.

Purely competitive market.

• D.

Oligopolistic market.

• 18.
Answer the question on the basis of the following data confronting a firm:Refer to the data. At the profit-maximizing output, the firm's total revenue is:
• A.

\$48

• B.

\$32.

• C.

\$80.

• D.

\$64

• 19.
In the short run, a purely competitive firm will always make an economic profit if:
• A.

P = ATC.

• B.

P > AVC.

• C.

P = MC.

• D.

P > ATC.

• 20.
Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices:
• A.

Above P1.

• B.

Above P3.

• C.

Above P4.

• D.

Between P2 and P3.

• 21.
Refer to the diagram for a purely competitive producer. If product price is P3:
• A.

The firm will maximize profit at point d.

• B.

The firm will earn an economic profit.

• C.

Economic profits will be zero.

• D.

New firms will enter this industry.

• 22.
Refer to the diagram. To maximize profit or minimize losses, this firm will produce:
• A.

K units at price C.

• B.

D units at price J.

• C.

E units at price A.

• D.

E units at price B.

• 23.
Refer to the diagram. At the profit-maximizing output, total variable cost is equal to:
• A.

0AHE.

• B.

0CFE.

• C.

0BGE.

• D.

ABGH.

• 24.
Refer to the diagram. At the profit-maximizing output, the firm will realize:
• A.

A loss equal to BCFG.

• B.

A loss equal to ACFH.

• C.

An economic profit of ACFH.

• D.

An economic profit of ABGH.

• 25.
Refer to the diagram. The profit-maximizing output:
• A.

Is n.

• B.

Is k.

• C.

Is h.

• D.

Cannot be determined from the information given. Back to top