Profit-maximizing Output Chapter 10
- 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.
.png "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:")
.png "Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices:")
.png "Refer to the diagram for a purely competitive producer. If product price is P3:")
.png "Refer to the diagram. To maximize profit or minimize losses, this firm will produce:")
.png "Refer to the diagram. At the profit-maximizing output, total variable cost is equal to:")
.png "Refer to the diagram. At the profit-maximizing output, the firm will realize:")
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