1) If MC > MR for a profit maximizing firm

A.marginal profit is positive.

B.there are losses.

C.output should be reduced.

D.the total profit curve has yet to peak.

E.none of the other answers is correct.

2) The ATC and AVC curves get closer to each other as output increase because

A.AFC approaches zero as output increases.

B.fixed costs are being spread over a larger and larger output.

C.some costs do not change as output increases.

D.all of the above are true.

3)A factor that raises marginal cost will raise average cost, but a factor that raises average cost will not necessarily raise marginal cost.

True

False

4) Allie's Donuts produces about 600 dozen donuts per day. Due to bad weather, there is a shortage of wheat and the price of flour has risen 20 percent. Which of the cost curves for Allie's will shift up?

A.marginal cost, average variable cost, average total cost, and average fixed cost

B.marginal cost, average variable cost, and average total cost only

C.marginal cost only

D.marginal cost and average total cost only

5) Marginal fixed cost is always

A.negative.

B.positive.

C.declining.

D.zero.

6) Which of the following will shift the ATC curve (everything else equal)?

A.output is increased

B.the price of the product rises

C.technical change raises MPP of one input

D.increasing returns to scale

7) If MC is greater than MR, total profit must be negative.

True

False

8) In 1975, there was a great surplus of tankers on the world's oceans. As a result, Exxon was able to rent a tanker and the services of its crew from a Japanese ship owner for one year at a cost of $900,000. Salaries of the sailors are the responsibility of the ship owner, and wages for the crew of this tanker were $2 million per year. Japanese unions require crews be paid even if the ship does not sail. For the Japanese, this deal obviously

A.was irrational.

B.maximized profits.

C.increased losses.

D.was a mistake.

9) If production of a good generates a positive externality, which of the following will hold?

A.Left to themselves markets will produce too little.

B.MSC will exceed MSB at the market output.

C.Market price will exceed the MSB at the market output level.

D.None of the above

10) If marginal social cost is greater than marginal private cost at a given level of output, society would benefit if output were smaller than the equilibrium market level.

True

False