1

1. When marginal revenue equals marginal cost,
2. A.economic profit is zero.
3. B.the firm is producing the maximum amount of output possible.
4. C.the firm is minimizing the costs of production.
5. D.the firm is producing the profit-maximizing level of output.
6. E.the firm should be merged with a larger, more profitable company.

QUESTION 2

1. In the short run, if a profit-maximizing firm is incurring losses it will
2. A.shut down.
3. B.go out of business.
4. C.produce if it can cover its fixed costs.
5. D.produce if total revenue exceeds total variable cost.
6. E.produce a positive amount that is less than that which equates marginal revenue with marginal cost.

10 points

QUESTION 3

1. In the short run, a firm attempting to minimize losses
2. A.must leave the industry in order to maximize opportunity costs.
3. B.will produce as long as marginal cost equals marginal revenue.
4. C.will produce as long as total revenue exceeds total variable cost.
5. D.will produce as long as total revenue exceeds total fixed cost.
6. E.will produce as long as competitors continue to produce.

10 points

QUESTION 4

1. This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.
5. According to the table shown, the firm's marginal revenue:
6. A.is constant.
7. B.increases as output increases.
8. C.decreases as output increases.
9. D.increases until the 3^rdunit, then decreases.

10 points

QUESTION 5

1. The marginal-revenue curve facing a firm is equivalent to the market-demand curve in the case of perfect competition.
2. A.True
3. B.False

10 points

QUESTION 6

1. A perfectly competitive firm's profit per unit of output can be determined by the amount by which the demand curve facing the firm lies above the marginal-cost curve at the profit-maximizing output level.
2. A.True
3. B.False

10 points

QUESTION 7

2. Reference: Ref 24-2
4. In the figure above, what are total fixed costs at the profit-maximizing output level?
5. A.$175
6. B.$180
7. C.$270
8. D.$300
9. E.$330

10 points

QUESTION 8

2. Reference: Ref 24-3
4. In the figure above, at the profit-maximizing output level, which of the following is true?
5. A.The firm is making a profit of $10 per unit.
6. B.The firm is making a profit of $45 per unit.
7. C.The firm is losing $35 per unit.
8. D.The firm is losing $10 per unit.
9. E.The firm is breaking even.

10 points

QUESTION 9

2. Reference: Ref 24-3
4. In the figure above, to maximize profits or minimize losses the firm should produce __________ units.
5. A.4
6. B.10
7. C.15
8. D.20
9. E.28

10 points

QUESTION 10

3. According to the graph shown, at point C the firm is earning:
4. A.fewer profits than at point B, and they should produce less.
5. B.higher profits than at point B, and they should produce more.
6. C.fewer profits than at point B, and they should produce more.
7. D.higher profits than at point B, and they should produce less.

10 points

QUESTION 11

1. A perfectly competitive firm should shut down if
2. A.the demand curve facing the firm lies above the minimum point on its ATC curve.
3. B.P is less than MC
4. C.the demand curve facing the firm lies below the minimum point on its AVC curve.
5. D.P is greater than MC
6. E.the demand curve facing the firm lies below the minimum point on its ATC curve but above the minimum point on its AVC curve.