1

Given the following cost information for a price-taking firm, what is the maximum amount of profit that can be earned if the price is $60?

Quantity	0	1	2	3	4	5	6
Total Cost	50	100	130	150	190	250	330

a) Profit = $30

b) Profit = $40

c) Profit = $50

d) Profit = $300

2

Given the following cost information for a price-taking firm, what is the profit-maximizing quantity given a market price of $40?

Quantity	0	1	2	3	4	5	6	7	8
AVC		100	75	60	50	48	50	54.3	62.5

a) Quantity = 5

b) Quantity = 6

c) Quantity = 7

d) Quantity = 8

e) None of these answers

3

Suppose a price-taking firm has the following total costs. What is the profit-maximizing quantity the firm should produce assuming the price of the good is 60?

Quantity	0	1	2	3	4	5	6	7	8
Total Cost	200	300	370	420	460	510	570	650	750

a) Quantity = 0

b) Quantity = 2

c) Quantity = 4

d) Quantity = 6

e) Quantity = 8

4

A price-taking firm sells 2,000 units at a price of $7 each. If their AFC = $5 and their AVC = $3, how much profit will it make?

a) Profit = 4,000

b) Profit = 14,000

c) Profit = -2,000

d) Profit = 8,000

e) None of these answers

5

Suppose a price-taking firm has total fixed costs of $200 and the following marginal costs:

Quantity	1	2	3	4	5	6	7
MC	50	30	60	80	100	140	200

If the market price of the good is $140, how much profit will this firm earn?

a) Profit = $60

b) Profit = $180

c) Profit = $640

d) Profit = $500

6

Given the following total variable cost information for a price-taking firm, what is the maximum amount of profit the firm can earn given a market price of $100?

Quantity	0	1	2	3	4	5	6	7	8
TVC	0	200	350	450	560	700	900	1140	1400

a) Less than -TFC

b) Equal to -TFC

c) Greater than -TFC

d) Not enough information

7

Assume there are 50 identical firms in a perfectly competitive (price-taking) market. Assume EACH firm has the cost structure given below.

Quantity	0	1	2	3	4	5	6	7
Total Cost	200	240	270	320	390	490	620	780

If the market price of the good is $100, what will be the total quantity produced in the market?

a) Quantity = 4900

b) Quantity = 400

c) Quantity = 5000

d) Quantity = 250

e) Quantity = 500

8

Suppose an industry is composed of 50 price-taking firms, each one possessing the cost structure given below:

Quantity	0	1	2	3	4	5	6
Total Costs	100	150	180	240	320	420	550

Also assume the market demand curve contains the following points:

Quantity Demanded	250	200	150	100	50	0
Price	0	30	60	80	100	130

What is the equilibrium price in this market?

a) Price = 30

b) Price = 60

c) Price = 80

d) Price = 100

e) Price = 130

9

As quantity increases for a price-taking firm

a) Total revenue may increase or decrease

b) Marginal revenue decreases

c) Total revenue will increase

d) Marginal revenue will increase

10

In a perfectly competitive (price-taking) market, which of the following is false?

a) Firms will produce the quantity where marginal revenue equals marginal cost

b) The market price will equal marginal revenue

c) As prices increase, each firm will be willing to produce more

d) Firms will choose the price that maximizes their profit