Chapter 16 Cheng Cheng

When the firm is maximizing its profit, the markup over marginal cost amounts to A. $50.00. B. $16.67. C. $66.66. D. $33.33.

A. $50.00

Efficient scale is reached A. beyond 133.33 units. B. between 100 and 133.33 units. C. at 133.33 units. D. at 100 units.

A. beyond 133.33 units

Suppose ATC = $18 when Q = 12. Then the A. firm is in a long-run equilibrium when it produces 12 units of output. B. firm is in a long-run equilibrium when it produces 16 units of output. C. best the firm can do is earn a profit of $48. D. best the firm can do is sustain a loss of $24.

A. firm is in a long-run equilibrium when it produces 12 units of output.

In order to maximize its profit, the firm will choose to produce A. less than 100 units of output. B. 100 units of output. C. more than 133.33 units of output. D. between 100 and 133.33 units of output.

B. 100 units of output

The firm's profit-maximizing level of output is A. 16 units. B. 12 units. C. 8 units. D. 24 units

B. 12 units.

Suppose that average total cost is $18 when Q=12. What is the profit-maximizing price and resulting profit? A. P=$12, profit=$0 B. P=$18, profit=$0 C. P=$18, profit=$72 D. P=$18, profit=$24

B. P=$18, profit=$0

Monopolistic competition differs from perfect competition because in monopolistically competitive markets A. all firms can eventually earn economic profits. B. each of the sellers offers a somewhat different product. C. strategic interactions between firms are important. D. there are barriers to entry.

B. each of the sellers offers a somewhat different product.

Suppose you were to add the ATC curve to the diagram to show the firm in a situation of long-run equilibrium. You would draw the ATC curve A. with its minimum at the point (Q = 12, P = $18). B. tangent to the demand curve at the point (Q = 12, P = $18) C. with its minimum at the point (Q = 12, P = $12). D. tangent to the demand curve at the point (Q = 16, P = $16).

B. tangent to the demand curve at the point (Q = 12, P = $18)

In order to maximize profit, the firm will charge a price of A. $8 B. $16 C. $18 D. $12

C. $18

If the ATC=20 at the profit-maximizing level of output, which of the following will occur in the long run in this industry? A. This firm will continue to earn positive economic profits. B. This firm will incur losses C. Firms will exit this industry. D. Firms will enter this industry.

C. Firms will exit this industry.

Which of the following is a characteristic of monopolistic competition? A. patents B. identical product C. ownership of a key resource by a single firm D. free entry

D. Free Entry

In response to the situation represented by the figure, we would expect Answers: A. new firms to enter the market. B. some of the firms that are currently in the market to exit. C. this firm's profit to move from its current value toward a positive value. D. None of the above are correct.

D. None of the above are correct