Microecon - Chapter 9 Concept Check Quiz

Profits when a competitive firm shuts down are -$7,250 and -$250 when the firm continues to produce. This firm will minimize losses by A. shutting down B. continuing to produce C. either shutting down or continuing to produce D. decreasing production

B. continuing to produce

In a perfectly competitive market, the long-run market supply curve is A. upward sloping B. horizontal at the market price C. vertical at the profit maximizing output level D. downward sloping

B. horizontal at the market price

Converse, an apparel company, has been fairly successful selling denim-colored sportswear. Lydia sees an opportunity for profit and enters the market. After producing her profit maximizing level of output, she finds that her average total cost per unit is $40, her average variable cost per unit is $30, and the market price is $35. In the short run, Lydia should A. shut down her denim-colored college sportswear business and go back to college B. stay in business even though she is suffering a loss C. expand production since she is making a positive economic profit D. be happy with the fact that she is breaking even

B. stay in business even though she is suffering a loss

To maximize profits, firms expand output until A. MR = MC B. MR > MC C. MR < MC D. either where MR > MC or MR < MC

A. MR = MC

Firms producing an identical product in a competitive market are producing at a level of output that maximizes profit. The current market price is $4.50 per unit and the firms are producing at a long-run average cost of $3.50 per unit. Over the long-run one should expect A. entry of new firms into this market B. exit of firms from this market C. no change in the number of firms in this market D. the whole market to collapse, and every firm leave.

A. entry of new firms into this market

The price of a competitive firm's product is $50 per unit. The firm currently has marginal cost equal to $40. To maximize profits this firm A. should increase its output B. should reduce its output C. should keep its output the same D. needs more info to determine if it should adjust its output

A. should increase its output

A competitive firm maximizes profit at an output level of 500 units, market is $24, and ATC is $24.50. At what range of AVC values for an output level of 500 would the firm choose not to shut down? A. AVC > $24 B. AVC = $24 C. AVC < $24 D. cannot be determined from given info

C. AVC < $24

Which of the following types of firm most closely fits the description of a competitive firm? A. new car manufacturers: General Motors, Ford, Chrysler, Toyota, etc. B. local grocery stores C. corn farmers D. the local electric utility

C. corn farmers

For a perfectly competitive firm, marginal revenue is A. greater than price B. less than price C. equal to price D. at first greater than price but eventually will be less than price

C. equal to price

If competitive firms experience a loss, over the long run there will be a(n) A. increase in market supply to reduce the market price B. increase in market supply to increase the market price C. decrease in market supply to reduce the market price D. decrease in market supply to increase the market price

D. decrease in market supply to increase the market price

In a perfectly competitive market, the price of the product is A. independently set by each competing firm B. set by the market leader and then copied by other firms C. jointly set after a meeting of all firms in the market D. set by market supply and demand

D. set by market supply and demand