Econ Exam 3 - Practice Exams
A monopolist responds to an increase in marginal cost by __________ price and __________ output. A. increasing; decreasing B. increasing; increasing C. decreasing; increasing D. decreasing; decreasing
A
A monopoly: A. producers a produce with no close substitutes B. is composed of a single buyer and several sellers C. is composed of a large number of small firms D. is composed of a small number of large firms
A
A perfectly competitive firm is a: A. price taker B. price searcher C. cost maximizer D. quantity taker
A
Conditions that keep new firms out of a monopoly market are: A. barriers to entry B. terms of sale C. labor market stipulations D. production controls
A
De Beers became a monopoly by: A. establishing control over diamond mines B. use of economies of scale C. use of technological superiority D. ownership of a patent
A
Economic profit is: A. less than accounting profit if implicit costs exist B. always equal to accounting profit C. greater than accounting profit if implicit costs exist D. less than accounting profit if implicit costs are zero
A
If a perfectly competitive gardening shop sells 30 evergreen bushes at $10 per bush, its marginal revenue is: A. $10 B. more than $10 C. less than $10 D. $300
A
Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits. If the price of memory cards is $9, Mikail's output is 3,000 cards a month, and his monthly average total cost is $7, what are his monthly profits? A. $6,000 B. $27,000 C. $21,000 D. $2
A
Wendy has a monopoly the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to sell six, she can charge only $20,000 each. The quantity effect of selling the sixth motor home is: A. $20,000 B. $10,000 C. $15,000 D. $21,000
A
Most electric, gas, and water companies are examples of: A. unregulated monopolies B. natural monopolies C. restricted-input monopolies D. sunk-cost monopolies
B
One government policy for dealing with a natural monopoly is to: A. impose a price floor to eliminate the deadweight loss B. impose a price ceiling to reduce economic profit C. break it up into smaller firms D. impose fines on the monopolist
B
Profit computed without implicit costs is ______ profit. A. explicit B. accounting C. implicit D. economic
B
The average total cost curve has a U shape because the _________ effect is dominant at low levels of output, and the ________ effect is dominated at high levels of output. A. diminishing returns; spreading B. spreading; diminishing returns C. comparative advantage; absolute advantage D. absolute advantage; comparative advantage
B
The demand curve for a perfectly competitive firm is: A. perfectly inelastic B. perfectly elastic C. downward-sloping D. relatively but not perfectly elastic
B
A community college charges lower tuition fees to town residents than to nonresidents. the pricing strategy increase the profits of the community college. Using this information, we can conclude that nonresidents must have a ___________ demand for attending the community college than residents. A. less price-elastic B. greater C. lower D. more price-elastic
A
A firm that is able to use its inputs more efficiently as it increases production in the long run best demonstrates: A. economies of scale B. diseconomies of scale C. labor-intensive production D. capital-intensive production
A
A monopolist or an imperfectly competitive firm practices price discrimination primarily to: A. increase profit B. expand plant size C. lower total costs D. reduce marginal costs
A
A perfectly competitive firm will maximize profits when the: A. marginal revenue equals marginal cost B. marginal revenue is lower tan average variable cost C. price is lower than marginal cost D. price is higher than marginal cost
A
After earning your BA, you have to decide whether to take a job that will pay you $45,000 per year or spend an additional two years earning an MBA. If you decide to pursue a graduate degree, your annual expenses for tuition, books, board, and lodging will be $32,000. You have been offered a scholarship for $10,000 per year, but to pay the remaining $22,000 per year, you would have to cash in savings bonds from your grandparents that have been earning $500 in interest per year. The annual opportunity cost of earning your MBA is: A. $67,500 B. $77,000 C. $99,000 D. $77,500
A
Because business travelers' demand for airline flights is relatively ________, small increases in price will result in relatively _______ decreases in additional business travelers. A. price-inelastic; small B. price-elastic; large C. price-inelastic; large D. price-elastic; small
A
For most restaurants, the average total cost curve _____ at _____ levels of output, then _____ at _____ levels. A. falls; low; rise;high B.rises; low; falls;high C.rises; low; rises;low D. falls;high; falls;low
A
If marginal cost is GREATER THAN average total cost: A. average total cost is increasing B. average total cost is decreasing C. average total cost is unchanged D. marginal cost is decreasing
A
In the perfect competition, the assumption of easy entry and exit implies that in the ________ run all firms in the industry will earn _____ economic profits. A. long; zero B. short; positive C. short; zero D. long; positive
A
Natural monopolies are likely to include all of the following EXCEPT: A. a diamond mining company B. a gas company C. an electricity company D. railways
A
Once diminishing returns have set in, as output increases, the total cost curve: A. gets steeper B. get flattered C. becomes horizontal D. increases at first, and then decreases
A
One of the major differences between a monopolist and a purely competitive firm is that the monopolist has a ________ demand curve, while he purely competitive firm has a ________ demand curve. A. downward-sloping; perfectly elastic B. perfectly inelastic, perfectly elastic C. downward-sloping; perfectly inelastic D. perfectly elastic; downward-sloping
A
Price discrimination leads to a ________ price for consumers with a _______ demand. A. higher; less elastic B. higher; more elastic C. higher; perfectly elastic D. lower; less elastic
A
Sarah's accountant tells her that she made a profit of $43,002 running a pottery studio in Orlando. Sarah's husband, an economist, claims Sarah lost $43,002 running her pottery studio. This means her husband is claiming that she incurred _____ in _____ costs. A. $86,004; implicit B. $43,002; implicit C. $43,002; explicit D. $86,004; explicit
A
Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, we expect that the typical firm is likely to: A. earn an economic profit B. incur an economic loss C. have no change in its economic profit D. have neither an economic profit nor an economic loss
A
Suppose the elasticity of demand for tickets to Broadway shows is 2.0 for men and 0.3 for women. To use price discrimination to increase profits, the producers should charge lower prices to _____ because their demand is _____. A. men; elastic B. men; inelastic C. women; elastic women; inelastic
A
The _______ cost curve is NOT affected by diminishing returns. A. average fixed B. average variable C. average total D. marginal
A
The demand curve facing a monopolist is: A. downward-sloping B. vertical C. horizontal D. upward-sloping
A
The large barriers to entry are a reason a monopoly: A. earns an economic profit in the long run B. produces at the minimum average total cost in the long run C. produces with no fixed costs in the long run D. maximize its profits by producing where P = MC
A
The larger the output, the more output over which fixed cost is distributed. Called the ________ effect, this leads to a _______ average _________ cost. A. spending; lower, fixed B. spending; higher, fixed C. diminishing returns; lower, variable D. diminishing returns; higher, variable
A
The marginal cost curve intersects the average variable cost curve at: A. its lowest point B. it's maximum C. its endpoint D. no point; the curves don't intersect
A
The sum of fixed and variable costs is _________ cost A. total B. marginal C. variable D. average
A
Which of the following is NOT an example of price discrimination? A. a Fourth of July sale B. a coupon in ht newspaper offering a 10% discount on a product C. a higher price for front row seats at a concert than for seats at the back D. a lower price charged to the grandfather who bought his airline ticket to Chicago three weeks in advance and will stay over a Saturday night than to the businesswoman who bought her ticket the day of the flight and will not stay over Saturday night
A
Which of the following is TRUE? A. if price falls below average variable cost, the firm will shut down in the short run B. total revenue and marginal revenue are the same in perfect competition C. economic profit per unit is found by subtracting MC from price D. economic profit is always positive in the long run
A
Which of the following statements is FALSE? A. when the marginal product of labor is upward-sloping, the marginal cost curve is upward-sloping B. the average fixed cost curve is downward-sloping and approaches the horizontal axis C. the marginal cost curve intersects the average variable cost curve at the minimum of average variable cost D. when the marginal cost curve s above the average cost curve, the average cost curve is upward-sloping
A
You own a deli. Which of the following is most likely a fixed input at your deli? A. the dining room B. the bead used to make sandwiches C. the tomato sauce used to make soups D. the employees
A
Zoe's Bakery determines that P < ATC and P > AVC. Zoe should: A. continue to operate even though she is taking an economic loss B. continue to operate, as she is making an economic profit C. shut down immediately, s she is taking an economic loss D. raise the price until she has maximized her profits
A
A monopolist is likely to produce _____ and charge _____ than a comparable perfectly competitive firm: A. more; more B. less; more C. more; less D. less; less
B
A monopolist responds to an increase in demand by __________ price and _________ output. A. increasing; decreasing B. increasing; increasing C. decreasing; increasing D. decreasing; decreasing
B
An input whose quantity CANNOT be changed in the short run is: A. marginal B. fixed C. incremental D. variable
B
Buffalo Aircraft doubles the amount of all of the inputs it uses—the factory doubles in size and twice as many workers are hired. After this expansion, the number of aircraft produced triples. If the price of inputs is unchanged, this means that Buffalo Aircraft is operating with: A. increasing marginal cost B. economies of scale C. increasing the average total cost D. decreasing the average variable cost
B
Diminishing returns/product to an input occur: A. when all inputs are fixed B. when some inputs are fixed and some are variable C. when all inputs are variable D. only when there are no fixed inputs
B
During the summer, Alex runs a mowing service, and lawn mowing is a perfectly competitive industry. In the short run, Alex will shut down if: A. the total revenues can't cover fixed B. the total revenue can't cover variable costs C. the total revenues can't cover total costs D. the price exceeds the average total cost
B
If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a ________ share of the market, and consumers will consider her strawberries to be ________. Therefore, ________ advertising will take place in this market. A. large; standardize; no B. small; standardized; little or no C. small; differentiated; no D. large; differentiated; extensive
B
If firms are making positive economic profits in the short run, then in the long run: A. the short-run industry supply curve will shift leftward B. firms will enter the industry C. industry output will rise and the price will rise D. firms will leave the industry
B
If the accounting profit for a firm is negative: A. the economic profit must be positive B. the economic profit must be negative C. the firm should produce more D. the firm will not owe any taxes
B
If the government allowed only one airline to serve the entire U.S. market, there would be a _____ loss associated with _____ efficiency in the airline industry. A. marginal; reduced B. deadweight; reduced C. total; increased D. deadweight; increased
B
If the price is greater than average total cost at the profit- maximizing quantity of output in the short run, a perfectly competitive firm will: A. produce at a loss B. produce at a profit C. shut down production D. produce more than the profit-maximizing quantity
B
In perfectly competitive long-run equilibrium: A. all firms make positive economic profits B. all firms produce at the minimum point of their average total cost curves C. the industry supply curve must be upward sloping D. all firms face the same price, but the value of marginal cost will vary directly with firm size
B
In the long run: A. all factors are fixed B. all factors are variable C. production choices are more limited than in the short run D. production is always greater than zero
B
In the short run, a perfectly competitive firm produces output and earns ZERO economic profit if: A. P < ATC B. P = ATC C. P < MC D. P > ATC
B
Marginal revenue: A. is the slope of the average revenue curve B. equals the market price in perfect competition C. is the change in quantity divided by the change in total revenue D. is the price divided by the change in quantity
B
Suppose that the market for haircuts in a community is a perfectly competitive constant-cost industry and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the long run, firms will _______ the market, driving the price of haircuts ______ and the profits of individual firms _________. A. enter; up; back to zero B. enter; down; back to zero C. leave; up; up D. leave; up; back to zero
B
The lowest point on a perfectly competitive firm's short-run supply curve corresponds to the minimum point on the ________ curve. A. ATC B. AVC C. AFC D. MC
B
The marginal product of labor is: A. the change in labor divided by the change in total product B. the slope of the total product of labor curve C. the change in average product divided by the change in the quantity of labor D. the change in output that occurs when capital increases by one unit
B
The total cost curve (or production function) gets steeper as output increases because of: A. increasing returns to the variable input B. decreasing returns to the variable input C. increases in fixed cost D. decreases in overhead costs
B
The total product curve (or production function): A. shows the relation between output and the quantity of a variable input for varying levels of the fixed input B. will become flatter as output increases if there are diminishing returns to the variable input C. will be down-ward sloping if there are diminishing returns to the variable input D. will become horizontal when the marginal product of the variable input is constant
B
When a fine caterer produces 30 catered meals, its marginal cost and average variable cost each equal $10. Therefore, assuming normally shaped cost curves, at 29 meals its marginal cost is _____ $10 and its average variable cost is _____ $10. A. more less; less than B. less than; more than C. more than; more than D. equal to; equal to
B
Which of the following is TRUE? A. profit per unit is price minus MC B. total economic profit is per-unit profit times quantity C. if price is less than ATC, the firm will break even in the short run D. if price is less than marginal cost, the perfectly competitive firm should raise the price and increase output
B
Which of the following statements concerning monopoly is TRUE? A. monopoly firms are always larger than perfectly competitive firms B. a monopoly has no rivals C. berries to entry to not prevent other firms from entering a monopolized industry D. monopolists produce more output than a competitive market with the same demand and cost structure
B
You own a small deli that sells sandwiches, salads, and soup. Which of the following is an implicit cost of the business? A. wages paid to part-time employees B. the job offer you did not accept at a local catering service C. bread, meat, and vegetables used to produce the items on your menu D. your month utility bill
B
A Japanese steel firm sells steel in the United State and in Japan. Since the United States buys steel from a number of sources, the U.S. demand for Japanese steel is more price-elastic than the Japanese demand for Japanese steel. If the Japanese steel firm wishes to maximize its profits, it should: A. charge the same price in both countries (after adjusting for transportation costs). B. charge a higher price in the United States and a lower price in Japan; otherwise it would be accused of unfair trade practices C. charge a lower price in the United States and a higher price in Japan D. figure out which market is more profitable and sell only in that market
C
A curve that shows the quantity of a good or service supplied at various prices after all long-run adjustments to a price change have been completed is a long-run __________ curve: A. marginal revenue B. marginal cost C. industry supply D. production
C
A fixed cost: A) will exist only in the long run. B) depends on the level of output. C) can be positive, even if the firm doesn't produce any output in the short run. D) decreases until the point of diminishing returns is reached.
C
A natural monopoly exists whenever a single firm: A. is owned and operated by the government B. is investor owned but has been granted the exclusive right by the government to operate in a market C. has economies of scale over the entire range of production that is relevant to its market D. has gained control over a strategic input of an important production process
C
A perfectly competitive industry is said to be efficient because the: A. marginal cost of production of the last unit of output is minimized B. product is standardized across firms in the industry C. average total cost of production of the industry output is minimized D. market price of the good is equal to economic profit for all firms in the industry
C
A perfectly competitive small organic farm produces 1,000 cauliflower heads in the short run. Its ATC = $6 and AFC = $2. The market price is $3 per head and is equal to MC. To maximize profits or minimizes losses, this farm should: A. increase output B. reduce output but continue to produce C. shut down D. do nothing; the firm is already maximizing profits
C
Austin's total fixed cost is $3,600 a month at his cupcake bakery. Austin employs 20 workers and pays each worker $600 a month. If labor is his only variable cost, what is Austin's total cost? A. $3,600 B. $1,200 C. $15,600 D. $12,000
C
Economic profits in a perfectly competitive industry encourage firms to ______ the industry, and losses encourage firms to _______ the industry. A. exit; enter B. enter; enter C. enter; exit D. exit; exit
C
In a perfectly competitive industry, the market demand curve is usually: A. perfectly inelastic B. perfectly elastic C. downward-sloping D. relatively elastic
C
In contrast with perfect competition, a monopolist: A. produces more at a lower price B. produces where MR > MC and a perfectly competitively firm produces where P = MC C. may have economic profits in the long run D. earns zero economic profits in the long run
C
In the long run, all costs are: A. fixed B. constant C. variable D. marginal
C
In the model of perfect competition: A. the consumer is at the mercy of powerful firms that can set prices where they prefer B. individual firms can influence the price, but only slightly C. no individual or firm has enough power to affect price D. the price is determined by how many years are left in the product's patent
C
Jacquelyn is a student at a major state university. Which of the following is not an example of an explicit cost of her attending college? A. tuition B. textbooks C. the salary that she could have earned working full-time D. computer lab fees
C
Market structures are categorized by: A. the number and size of the firms B. whether products are differentiated and the extent of advertising C. the number of firms and whether products are differentiated D. the size of the firms and the extent of advertising
C
Profit is the difference between ______ and _______. A. total sales; total revenue B. total profits; total costs C. total revenue; total costs D. marginal costs; marginal revenue
C
Suppose a local floral shop has explicit costs of $200,000 per year and implicit costs of $50,000 per year. If the store earned an economic profit of $50,000 last year, the store's accounting profit equaled: A. $10,000 B. $50,000 C. $100,000 D. $200,000
C
Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles, and you are the only firm providing this service. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for an conceivable level of demand. Your monopoly would result from: A. control od a scarce resource or input B. technological superiority C. increasing returns to scale D. government-set barriers
C
Suppose that you build a new jumbo jet that can carry five times more passengers than any other competitor. You have high fixed costs due to quantity of capital used to build the jets, and average cost is decreasing for all levels of demand. In this case, your monopoly would result from: A. sunk costs B. location C. economies of scale D. government restrictions
C
The ________ is the increase in output that is produced when a firm hires an additional worker. A. average product B. total product C. marginal product D. marginal cost
C
The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as: A. product differentiation B. barrier to entry C. market power D. patents and copyrights
C
The equilibrium price of a guidebook is $35 in the perfectly competitive guidebook industry. Our firm produces 10,000 guidebooks for an average total cost of $38, marginal cost of $30, and average variable cost of $30. Our firm should: A. raise the price of guidebooks, because the firm is losing money B. keep output the same, because the firm is producing at minimum average variable cost C. produce more guidebooks, because the next guidebook produced increases profit by $5 D. shut down, because the firm is losing money
C
The short-run supply curve for a perfectly competitive firm is its: A. demand curve above its marginal revenue curve B. marginal revenue curve to the right of its marginal cost curve C. marginal cost curve above its average variable cost curve D. average total cost curve below its marginal cost curve
C
The total cost curve for a snowmobile dealership shows how ________ cost depends on the quantity of ______. A. total; fixed inputs B. average; variable inputs C. total; output D. marginal; output
C
Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to sell six, she can only charge $20,000 each. The price effect of selling the sixth motor home is: A. $20,000 B. -$15,000 C. -$5,000 D. $25,000
C
When marginal cost is below average variable cost, the average variable cost must be: A. at its minimum B. at its maximum C. falling D. rising
C
Which of the following is TRUE? A. a monopoly firm is a price taker B. MR > P if the demand curve is down-sloping C. MR = MC is a profit-maximizing rule for any firm D. In monopoly P = MC when profits are maximized
C
Which of the following is TRUE? A. monopolies produce too much and charge too much from the standpoint of efficiency B. monopolies usually are economically efficient because they have economic profits with which to work C. monopolies produce too little and charge too much from the standpoint of efficiency D. monopolies cause an efficiency problem but are not associated with a deadweight loss
C
Which of the following statements is NOT characteristic of perfect competition? A. all firms produce the same standardized product B. there are many producers, and each has only a small market share C. there are many produces; one firm has a 25% market share, and all of the remaining firms have a market share of less than 2% each D. there are no obstacles to entry into or exit from the industry
C
You own a deli. Which of the following is a decision most likely to be made in the LONG run at your deli? A. you order more breadsticks B. you order more soft drinks for next week C. you renovate the second floor of your building to increase the size of the dining room D. you advertise for part-time workers
C
An input whose quantity can be changed in the short run is a(n) ________ input. A. marginal B. fixed C. incremental D. variable
D
Consider a perfectly competitive firm in the short run. Assume that it is sustaining economic losses but continues to produce at the profit-maximizing (loss-minimizing) output. Which statement is FALSE? A. marginal cost is less than average total cost B. marginal cost is equal to marginal revenue C. Price is equal to marginal cost D. marginal cost is less than average variable
D
If you had a license for the exclusive right to sell breakfast bagels in your community, your monopoly would result from: A. control of a scarce resource or input B. technological superiority C. increasing returns to scale D. government-set barriers
D
Marginal revenue is a firm's: A. ratio of profit to quantity B. ratio of average revenue to quantity C. price per unit times the number of units sold D. increase in total revenue when it sells an additional unit of output
D
Mr. Porter sells 10 bottles of champagne per week at $50 per bottle. He can sell 11 bottles per week if he lowers the price to $45 per bottle. The quantity and the price effects on total revenue would be, respectively, an increase of ________ and a decrease of __________. A. $450; $500 B. $495; $550 C. $45; $5 D. $45; $50
D
People in the eastern part of Beirut are prevented by border guards from traveling to the western part of Beirut to shop for or sell food. This situation violates the perfect competition assumption of: A. price-setting behavior B. a small number of buyers and sellers C. differentiated goods D. ease of entry and exit
D
The break-even price for a perfectly competitive firm is equal to: A. the minimum value of average variable cost B. the marginal revenue, provided that marginal revenue is equal to marginal cost C. the average fixed cost at the given output level D. the minimum value of average total cost
D
The change in total output resulting from a one-unit increase in the quantity of an input used, holding the quants of all other inputs constant, is: A. average cost B. average product C. marginal cost D. marginal product
D
The competitive model assumes all of the following except: A. a large number of buyers B. easy entry to and exit from the market C. standardized product D. patents and copyrights that serve as barriers to entry into the industry
D
The larger the output, the more variable input required to produce additional units. Called the ________ effect, this leads to a ________ average _________ cost
D
The long-run average total cost curve is tangent to an infinite number of short-run _________ cost curves. A. total B. marginal C. average variable D. average total
D
The municipal swimming pool charges lower entrance fees to local residents than to nonresidents. Assuming that this pricing strategy increases the profits of the pool, we can conclude that nonresidents must have a ________ for swimming at the pool than residents. A. greater B. lower C. more elastic D. less elastic
D
The perfectly competitive model assumes all of the following EXCEPT: A. a great number of buyers B. easy entry to and exit from the market C. a standardized product D. that firms attempt to maximize their total revenue
D
The term diminishing returns/products refers to: A. a falling interest rate that can be expected as one's investment in a single asset increases B. a reduction in profits cased by increasing output beyond the optimal point C. a decrease in total output due to the firm hiring uneducated workers D. a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant
D
Which of the following is (are) barrier(s) to entry? A. control of scarce resources B. economies of scale C. patents and copyrights D. control of scarce resources, economies of scale, and patents and copyrights
D
Which of the following is MOST likely to cause firms to exit a perfectly competitive industry? A. consumer tastes and preferences for this product get stronger B. technological advance allows all firms to produce more efficiently C. the price of a key variable input falls D. consumer income falls
D
Which of the following is NOT characteristic of a perfectly competitive industry? A. firms seek to maximize profits B. profits may be positive in the short run C. there are many firms D. products are differentiated
D
Which of the following statements about monopoly equilibrium and perfectly competitive equilibrium is INCORRECT? A. price is greater than marginal cost in monopoly, and price equals marginal cost in perfect competition B. When a monopoly exists, the consumer surplus is less than if the market were perfectly competitive C. monopoly output will be less than the output of a comparable perfectly competitive industry D. in the long run, economic profits are driven to zero in both a monopoly and a perfectly competitive market
D
Which of the following statements about opportunity cost is FALSE? A. Opportunity cost may be larger than the monetary cost B. Opportunity cost includes both explicit and implicit costs C. The real or opportunity cost of something is what you must give up to get it D. Opportunity cost is synonymous with explicit cost
D
Which of the following statements about the differences between monopoly and perfect competition is INCORRECT? A. a monopolist has market power, while a perfect competition does not B. unlike a perfectly competitive firm, a monopoly can make positive economic profits in the long run C. a monopoly will charge a higher price and produce a smaller quantity than a competitive market with the same demand and cost structure D. monopoly profits can continue in the long run because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry
D
You own a lemonade stand in a competitive markets, and as such, you are a price-taking firm. Which of the following events would most likely increase your market power? A. the government abolishes events would most likely increase your market power? B. a coming economy increases the demand for lemonade and attracts entry into the market C. the average total cost curve for firms in the industry is horizontal D. you own exclusive rights to harvest emends from all domestic citrus orchards
D
Zoe's Bakery operates in a perfectly competitive industry and has standard cost curves. The variable costs at Zoe's Bakery increase, so all of the cost curves (except fixed cost) shift upward. The demand for Zoe's pastries does not change, nor does the firm shut down. To maximize profits after the variable cost increase, Zoe's Bakery will _______ its price and _____ its level of production. A. raise; increase B. decrease; increase C. raise; decrease D. do nothing to; decrease
D
