chapter eleven practice quiz

at a price of $20, the firm earns profit of:

$75

if you are one of literally thousands of maple syrup producers and you wanted to increase your maple syrup production from 100 gallons to 110 gallons, what price would you charge?

$96

in the long run, what do you expect this firm's economic profit or loss to be?

0

refer to the figures. at a market price of $20, the total quantity supplied in the industry is:

15 units

at a market price of $25, the total quantity supplied in the industry is:

45 units

the profit-maximizing output for this firm is

6

firms should exit the market if:

price falls below the average cost

the market is characterized by demand curve D2 and supply curve S1. the firms in the industry are earning __, which will cause the __.

profit; supply curve to shift to S2

firms in a perfectly competitive industry maximize profits by:

setting a price equal to the market price

economists study decreasing cost industries in order to explain:

the existence of industry clusters

for a small firm in an extremely competitive industry, marginal revenue is always equal to price because

the firm has no ability to influence the market price

economists call the time after all exit or entry has occured:

the long run

assuming that price equals marginal cost, the profit of producing eight barrels of oil is:

$160

a firm should exit an industry if:

P - AC < 0.

how much profit is the firm making at the profit maximizing quantity

a profit of $300

a firm should always shut down if it is earning negative profits

false

a firm's total profit equal to the marginal cost of production multiplied by the quantity produced

false

average total cost is equal to total cost divided by profit

false

decreasing cost industries have supply curves that slope downward forever.

false

economic profit is equal to total revenue minus explicit costs

false

explicit costs incurred by firms include the firm's opportunity costs

false

firms have less pricing power if their firm-level product is more unique.

false

if p=$20, AC=$26, and Q=100, then profit = $3600

false

firms are profitable when price is:

greater than average cost

firms in competitive industries: i. can only charge a price equal to the market price ii. cannot charge any more than the market price iii. will earn less profit if they charge less than the market price

i, ii, iii

a market is considered perfectly competitive if: i. there is a lot of product differentiation among sellers ii. there are many sellers, each small relative to the total market iii. the product sold is similar across sellers iv. there are only a few buyers

ii and iii only

economic profit differs from accounting profits because of its inclusion of:

implicit costs

firms earn negative profit when price is:

less than average cost

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?

panel a

which panel shows a competitive firm making an economic loss?

panel a

refer to four panels in the figure. which panel shows a competitive firm making zero economic profits?

panel b

which panel shows a competitive firm making positive economic profits

panel c

firm profit is defined as

total revenue minus total cost

a competitive firm maximizes profits when price equals marginal costs

true

a firm should exit an industry if price is less than average cost

true

a firm will continue to produce additional output, as long as marginal revenue is greater than marginal cost

true

a firm's short run supply curve is its marginal cost curve.

true

average cost is equal to total cost divided by quantity

true