1. Equilibrium price is $10 in a perfectly competitive market. For a perfectly competitive firm, MR = MC at 233 units of output. At 233 units, ATC is $11, and AVC is $9. The best policy for this firm is to __________ in the short run. Also, total fixed cost equals __________ for this firm.

a. continue to produce; $2

b. shut down; $450

c. continue to produce; $466

d. shut down; $2,097

e. continue to produce; $2,097

2. In a perfectly competitive market, if a resource that one firm utilizes is superior to resources used by other firms, and, as a result, lowers unit costs for the firm, that firm is likely to earn __________ in the short run. In time, however, the firm's __________ curve will rise to reflect the superior-quality of the resource it employs and the firm will then earn __________.

a. normal profit; ATC; positive economic profit

b. positive economic profit; ATC; normal profit

c. positive economic profit; marginal revenue; zero profit

d. losses; ATC; positive economic profit

e. none of the above

3. Suppose the demand curve for a monopolistic competitor becomes steeper, but its average total costs do not change. Which of the following is likely to be an effect?

a. The firm will no longer equate MR and MC.

b. Excess capacity will increase.

c. The firm will incur a loss.

d. The firm will no longer be able to maximize profit.

4. In what industry structure is the mutual interdependence of the firms a key characteristic?

a. perfect competition

b. monopolistic competition

c. oligopoly

d. monopoly

5. When price = $15, quantity demanded = 200. When price = $14, quantity demanded = 250. When the firm lowered price from $15 to $14, it discovered that demand is __________ and total revenue __________.

a. elastic; increased

b. elastic; decreased

c. inelastic; increased

d. inelastic; decreased

e. none of the above

6. Which of the following is true?

a. It is possible for total utility to rise as marginal utility falls.

b. Marginal utility is the same as total utility.

c. As marginal utility falls, total utility always falls.

d. a and c

7. Suppose a consumer is purchasing Coke and pretzels in quantities such that she is achieving consumer equilibrium. Then the price of Coke decreases. The consumer will likely __________ her consumption of Coke and the marginal utility of Coke will __________ while the total utility from Coke will __________.

a. increase; increase; increase

b. increase; decrease; decrease

c. increase; decrease; increase

d. decrease; increase; increase

e. decrease; decrease; decrease

8. The average-marginal rule states that if the marginal magnitude is

a. less than the average magnitude, the average magnitude falls.

b. greater than the average magnitude, the average magnitude falls.

c. rising, the average magnitude is necessarily above it.

d. falling, the average magnitude is necessarily below it.

e. c and d

9. A fixed input, X, and a variable input, Y, are used to produce good A. If the marginal physical product (MPP) of Y is constant, it follows that the

a. marginal cost curve is upward sloping.

b. total fixed cost curve is vertical.

c. total variable cost curve is downward sloping.

d. b and c

e. none of the above

10. If the monopoly firm's marginal cost curve is either horizontal or upward sloping, it follows that its marginal revenue curve will cut its marginal cost curve at a __________ level of output than where its demand curve cuts its marginal cost curve. It also follows that if the firm were to produce the quantity of output consistent with where its demand curve cut its marginal cost curve, the firm would be __________.

a. lower; earning profits

b. lower; resource-allocative efficient

c. higher; productive efficient

d. lower; minimizing costs

e. none of the above