ECON 303 Week 7 (Ch. 8)

A firm that sought to "maximize market share" would choose to produce an output level for which marginal revenue was equal to a. marginal cost b. average cost c. price d. zero

d. zero

A firm's marginal revenue is defined as a. the ratio of total revenue to total quantity produced b. the additional output produced by lowering price c. the additional revenue received due to technical innovation d. the additional revenue received when selling one more unit of output

d. the additional revenue received when selling one more unit of output

If a firm's marginal revenue is below its marginal cost, an increase in production will usually a. increase profits b. leave profits unchanged c. decrease profits d. increase marginal revenue

c. decrease profits

If demand is inelastic, marginal revenue will be a. positive b. zero c. negative d. constant

c. negative

Which of the following conditions would result in the short run marginal cost curve not correctly reflecting the supply behavior of a profit maximizing firm? a. the firm is a price taker b. price exceeds average total cost c. the elasticity of demand facing the firm is -3 d. the firm can vary several inputs in the short run

c. the elasticity of demand facing the firm is -3

If the demand curve a firm faces shifts to the right, usually a. it would be impossible to tell whether the marginal revenue curve shifts b. the marginal revenue curve would shift to the left c. the marginal revenue curve would shift to the right d. the marginal revenue curve would not shift

c. the marginal revenue curve would shift to the right

If price is equal to short run average variable cost, this price is known as a. the break even price b. the profit maximizing price c. the shutdown price d. the revenue-maximizing price

c. the shutdown price

In general, micro economic theory assumes that firms attempt to maximize the difference between a. the total revenue and accounting cost b. price and marginal cost c. total revenues and economic costs d. economic costs and average cost

c. total revenues and economic costs

In order to maximize profits, a firm that can sell all it wants without affecting price should produce a. where average variable costs are minimized b. where marginal cost is equal to average variable costs c. where marginal cost is equal to price d. where marginal cost is minimum

c. where marginal cost is equal to price

If an unregulated electric company is a monopolist, faces demand of Q=100-50P, and has constant total costs (constant total cost implies marginal cost=0), then the profit maximizing level of output is a. 50 b. 100 c. 25 d. 12.5

a. 50

If a firm is a price taker, its marginal revenue is a. equal to market price b. less than market price c. greater than market price d. a multiple of market price that may be either greater than or less than one

a. equal to market price

If an unregulated electric company is a monopolist, faces demand of Q=100-50P, and has a constant marginal cost of 1 , the profit maximizing price is a. 0 b. 1 c. 1.5 d. 2

b. 1

If the demand faced by a firm is inelastic, selling one more unit of output will a. increase revenues b. decrease revenues c. keep revenues constant d. increase profits

b. decrease revenues

In order to maximize profits, a firm should produce at the output level for which a. average cost is minimized b. marginal revenue equals marginal cost c. marginal cost is minimized d. price minus average cost is as large as possible

b. marginal revenue equals marginal cost

If a firm wished to maximize total revenues it should produce where a. marginal cost is zero b. marginal revenue is zero c. marginal revenue is equal to marginal cost d. marginal revenue is equal to price

b. marginal revenue is zero

In the economic short run, a firm's profits are equal to a. price minus short run total cost b. price minus short run average cost c. price minus short run average variable d. price minus short run marginal cost

b. price minus short run average cost

A firm's total revenue is equal to a. total quantity produced times marginal cost b. total quantity produced times market price c. marginal revenue times total quantity produced d. market price divided by total quantity produced

b. total quantity produced times market price

It is usually assumed that a perfectly competitive firm;s supply curve is given by its marginal cost curve. In order for this to be true, which of the following additional assumptions are necessary? I. that the firm seek to maximize profits II. that the marginal cost curve be positively sloped III. that the price exceeds average variable cost IV. that price exceeds average total cost

II, II and III, but not IV

In the economic short run, a firm will shut down if the price is less than a. average total cost b. average marginal cost c. average fixed cost d. average variable cost

d. average variable cost

If the demand faced by a firm is elastic, selling one less unit of output will a. increase revenue d. decrease revenue c. keep revenues constant d. decrease price

d. decrease revenue

Suppose that a firm has to pay 10% tax on its total revenue. This has the effect of a. flattening marginal cost b. increasing marginal revenue c. decreasing marginal cost d. decreasing marginal revenue

d. decreasing marginal revenue