Financial & Econ Management

A firm that has total fixed costs of $2,000 sells its output for $25 per unit and has an average variable cost of $20. If the firm's cost and revenue curves are linear and output is equal to 600 units, what is the firm's degree of operating leverage?

3

Refer to the monopoly market graph. The monopolist can maximize profit by producing

4 units of ouput

A firm that has total fixed costs of $40,000 sells its output for $250 per unit and has an average variable cost of $150. If the firm's cost and revenue curves are linear, how much output must the firm produce to break even?

400

The responsiveness or sensitivity of a firm's profits to changes in output is measured by a firm's.

Degree of operating leverage

Breakeven analysis identifies the

Level of output where economic profit is equal to zero

The value of the inputs owned and used by a firm is an explicit cost.

False

The vertical difference between ATC and AVC is AFC.

True

Total variable cost is equal to total cost minus total fixed cost

True

The demand curve faced by a perfectly competitive firm is horizontal.

True

Refer to the monopoly market graph. The monopolist can maximize profit by charging

$60 per week

Refer to the monopoly market graph. If the monopolist is maximizing profit, the profit is equal to

$80

A firm that has total fixed costs of $40,000 sells its output for $250 per unit and has an average variable cost of $150. If the firm's cost and revenue curves are linear and output is equal to 500 units, what is the firm's degree of operating leverage?

5

Which of the following short-run cost curves decline continuously?

Average Fixed Cost

A perfectly competitive firm's demand curve is above its marginal revenue curve.

False

A perfectly competitive firm's marginal revenue curve is downward sloping.

False

Commodities that sell for the same price are referred to as homogeneous.

False

Cost-variable-profit analysis is used to determine the profit-maximizing level of output.

False

Monopoly is a market structure in which there is only one buyer of a product for which there are no close substitutes

False

The average fixed cost curve is U-shaped.

False

The degree of operating leverage is equal to the ratio of the firm's total fixed cost to total variable cost.

False

Marginal revenue is equal to price for which one of the following types of market structure?

Perfect Competition

Which of the following is an implicit cost of production?

Rent that could have been earned on a building owned and used by the firm.

An increase in operating leverage results from the substitution of fixed costs fee variable costs.

True

Breakeven output is equal to total fixed divided by the contribution margin per unit.

True

In the short-run, if a firm shuts down it avoids its variable cost but not its fixed.

True

Refer to the above diagram. If the market price is 35, then a profit-maximizing competitive firm with these short-run unit cost curves

Will produce output and will make economic losses.

If a firm sells its output on a market that is characterized by many sellers and buyers, a homogeneous product, and perfect knowledge, then the firms is

a perfect competitor