Test Review Econ Pt. 3
Refer to the table. The profit maximizing output for this firm is: a. 8. b. 7. c. 5. d. 6.
b. 7.
A baker wants to establish a pie factory. The cost of leasing the factory is $1,000 per day. The profit-maximizing quantity of pies is 1,000 pies a day. Each pie sells for $3 and costs only $2.10 to make. Which of the following is a correct conclusion based on this data? a. At the profit-maximizing quantity, the baker's producer surplus is -$200. b. The baker should not enter the industry. c. The baker will enjoy profits of $900 per day. d. The baker will enjoy profits of $3,000 per day.
b. The baker should not enter the industry.
A firm's total profit is equal to the marginal cost of production multiplied by the quantity produced. a. true b. false
b. false
What is the firm's profit-maximizing level of output? a. 120 b. 20 c. 170 d. 80
c. 170
Refer to the table. What are the fixed costs of production for this firm? a. $4 b. $30 c. $34 d. $50
b. $30
The marginal cost of the fifth unit of output is: a. $90. b. $70. c. $300. d. $450.
b. $70
Refer to the table. What is the profit of producing 10 barrels of oil? a. $194 b. $80 c. $180 d. $154
b. $80
The marginal revenue for the fifth unit of output is: a. $70. b. $90. c. $450. d. $20.
b. $90
Use the figure. At a price of $20, the firm earns profit of: a. $225. b. $75. c. $300. d. $0, because P = MC at P = $20.
b. $75.
Refer to the figure. Assuming that price equals marginal cost, the profit of producing eight barrels of oil is: a. $160. b. $240. c. $400 d. It cannot be determined from the information given.
a. $160.
At the profit-maximizing level of output in this diagram, the firm's price is: a. $6. b. $12. c. $14. d. $10.
a. $6.
Refer to the figure. What is the optimal number of cans of pineapple for this firm to produce? a. 120,000 b. 90,0000 c. 160,000 d. 50,000
a. 120,000
Restaurants in tourist's areas will close during the off-season if their: a. AVC is greater than their TR. b. AFC is less than their TR. c. ATC is less than their TR. d. AFC is greater than their TR
a. AVC is greater than their TR.
A firm should exit an industry if: a. P - AC < 0. b. P - AC > 0. c. P - AC = 0. d. P < MC.
a. P - AC < 0.
Refer to the figure. How much profit is the firm making at the profit-maximizing quantity? a. The firm is not making a profit—it is making a loss of $220. b. a profit of $200 c. The firm is not making a profit—it is making a loss of $200. d. The firm is not making a profit—it is making a loss of $320.
a. The firm is not making a profit—it is making a loss of $220.
A firm pays a monthly lease of $10,000 and generates $8,000 of revenue a month. Which of the following is TRUE? a. This firm will exit the industry in the long run. b. Firms will enter the industry. c. The recoverable costs are less than the difference between revenues and variable costs. d. The recoverable costs are less than operating profit.
a. This firm will exit the industry in the long run.
Refer to the figures. This industry is a(n): a. constant cost industry. b. decreasing cost industry. c. quadratic cost industry. d. increasing cost industry.
a. constant cost industry.
Refer to the figures. The market is characterized by demand curve D 2 and supply curve S 1. The firms in the industry are earning ________, which will cause the ______________. a. profit; supply curve to shift to S2 b. profit; supply curve to shift to S2 and the demand curve to shift to D1 c. losses; supply curve to shift to S2 and the demand curve to shift to D1 d. losses; demand curve to shift to D1
a. profit; supply curve to shift to S2
A competitive firm maximizes profits when price equals marginal cost. a. true b. false
a. true
A firm should exit an industry if price is less than average cost. a. true b. false
a. true
A firm will continue to produce additional output, as long as marginal revenue is greater than marginal cost. a. true b. false
a. true
A firm's profit-maximizing quantity does not depend on its fixed costs. a. true b. false
a. true
A firm's short-run supply curve is its marginal cost curve. a. true b. false
a. true
Programs such as Steam distribute more and more video games. Purchasers buy the game and download it immediately to their computer. If the entire system is automated, estimate the marginal cost of producing and selling video games this way (ignore electricity costs). a. None of the answers is correct. b. the price of the game c. zero d. proportional to the cost to make the game
c. zero
Refer to the figure. Assuming that price equals marginal cost, the total cost of producing eight barrels of oil is: a. It cannot be determined from the information given. b. $60. c. $400. d. $240.
d. $240.
Refer to the table. The change in profit from producing the second barrel of oil is ________, and the marginal cost from producing the seventh barrel of oil is ________. a. $140; $20 b. $140; $140 c. $100; $20 d. $60; $140
d. $60; $140
A firm should exit the industry if which of the following conditions apply? a. Lifetime expected profit is positive. b. TR > TC c. Prices are low now but expected to rise. d. P < AC
d. P < AC
Refer to the set of four panels in the figure. Which panel shows the typical shape of the average cost curve in a competitive market? a. Panel C b. Panel D c. Panel B d. Panel A
d. Panel A
A constant cost industry is one in which: a. there are only a limited number of suppliers, all with equal costs of production. b. market price is always equal to marginal cost in the industry. c. costs are constant across all firms in the industry. d. an increase in overall industry output does not lead to an increase in overall industry costs.
d. an increase in overall industry output does not lead to an increase in overall industry costs.
A firm earning zero economic profits: a. will shut down immediately. b. will not be earning enough to cover all payments to capital and labor. c. may continue to operate in the short run but will always shut down in the long run if zero economic profits continue. d. is earning just "normal profits."
d. is earning just "normal profits."
