Question 1

In the short run, a firm will maximize profits if it increases output when marginal revenue is greater than marginal cost.

Accepted Answer

A) True 
 B)False

Question 2

A competitive firm should always continue to operate in the short run as long as

Accepted Answer

A)  P 
B)  P 
C)  MR > AVC.
D)  MR > MC.

Question 3

For perfectly competitive firms, marginal revenue always equals price.

Accepted Answer

A) True 
 B)False

Question 4

Businesses that fail to account for implicit costs, like the strawberry farmer, Hiroshi Fujishige, who failed to consider the enormous opportunity of selling his property to Disneyland, will

Accepted Answer

A)  Go out of business immediately.
B)  Make higher-than-normal profits.
C)  Make more money when they shut down.
D)  Have to increase revenues in order to stay in business.

Question 5

The short run is the time period

Accepted Answer

A)  Over which an investment decision can be made.
B)  Necessary so that profits can be earned from production.
C)  In which some costs are fixed.
D)  In which only the amount of capital may be altered.

Question 6

The long run is

Accepted Answer

A)  A period longer than one year.
B)  The period required to produce a unit of the firm's output.
C)  A period long enough for all inputs to be variable.
D)  Approximately one year.

Question 7

The supply curve is upward-sloping (i.e., it takes a higher price to induce greater production)  because of

Accepted Answer

A)  Increasing total costs.
B)  Increasing fixed costs.
C)  Increasing marginal costs.
D)  The decreasing skill level of additional workers.

Question 8

Which of the following is generally a fixed cost?

Accepted Answer

A)  Property taxes on land used in production.
B)  Wages.
C)  Profit taxes.
D)  Utilities.

Question 9

Economic profit is

Accepted Answer

A)  Greater than accounting profit by the amount of implicit cost.
B)  Greater than accounting profit by the amount of explicit cost.
C)  Less than accounting profit by the amount of implicit cost.
D)  Less than accounting profit by the amount of explicit cost.

Question 10

Maximizing revenue maximizes profits.

Accepted Answer

A) True 
 B)False

Question 11

Normal profit is zero when a firm's revenues just cover its economic cost.

Accepted Answer

A) True 
 B)False

Question 12

A firm experiencing economic losses will still continue to produce output in the short run as long as

Accepted Answer

A)  Revenues are greater than total fixed cost.
B)  MR = MC.
C)  Price is above average variable cost.
D)  Price is above average fixed cost.

Question 13

All of the following are ways a business can earn economic profits except

Accepted Answer

A)  Discover new products.
B)  Maximize implicit costs but not explicit costs.
C)  Take above-average risks.
D)  Find new and better methods of production.

Question 14

The difference between the total revenue and total cost curves at a given output is equal to

Accepted Answer

A)  Total profit.
B)  Profit per unit.
C)  Average revenue.
D)  Average total cost.

Question 15

Accounting costs and economic costs differ because

Accepted Answer

A)  Accounting costs exceed economic costs whenever any factor is not paid an explicit wage.
B)  Accounting costs include implicit costs, and economic costs do not.
C)  Economic costs include the opportunity costs of all resources used, while accounting costs include actual dollar outlays.
D)  Accounting costs include explicit costs, and economic costs do not.

Question 16

When a firm minimizes its losses in the short run,

Accepted Answer

A)  It continues to produce only if price exceeds average variable cost.
B)  The firm makes an investment decision.
C)  The firm enters or exits from the market.
D)  It continues to produce only if price exceeds marginal revenue.

Question 17

Refer to the data in Figure 22.1.The shape of the total revenue curve indicates that the price of this good

Accepted Answer

A)  Falls as output rises.
B)  Rises as output rises.
C)  Stays the same as output rises.
D)  Falls at first as output rises, but then rises as output rises.

Question 18

Suppose a firm has an annual budget of $200,000 in wages and salaries, $75,000 in materials, $30,000 in new equipment, $20,000 in rented property, and $35,000 in interest costs on capital.The owner/manager does not choose to pay himself, but he could receive income of $90,000 by working elsewhere.The firm earns revenues of $360,000 per year. What is the economic profit for the firm described above?

Accepted Answer

A)  -$90,000.
B)  $0.
C)  $90,000.
D)  $200,000.

Question 19

Refer to the data in Figure 22.1.The total fixed costs for this firm are approximately

Accepted Answer

A)  $50.
B)  $100.
C)  $600.
D)  $200.

Question 20

Refer to the data in Figure 22.1.The price of this good

Accepted Answer

A)  Is $50 per unit.
B)  Is $1 per unit.
C)  Is $100 per unit.
D)  Varies as output changes.

Exam 8: The Competitive Firm

Economic profit is

Correct Answer
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Correct Answer
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The short run is the time period

Correct Answer
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Refer to the data in Figure 22.1.The shape of the total revenue curve indicates that the price of this good

Correct Answer
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Refer to the data in Figure 22.1.The total fixed costs for this firm are approximately

Correct Answer
verified

All of the following are ways a business can earn economic profits except

Correct Answer
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Refer to the data in Figure 22.1.The price of this good

Correct Answer
verified

Normal profit is zero when a firm's revenues just cover its economic cost.

Correct Answer
verified

For perfectly competitive firms, marginal revenue always equals price.

Correct Answer
verified

A firm experiencing economic losses will still continue to produce output in the short run as long as

Correct Answer
verified

Accounting costs and economic costs differ because

Correct Answer
verified

The difference between the total revenue and total cost curves at a given output is equal to

Correct Answer
verified

Businesses that fail to account for implicit costs, like the strawberry farmer, Hiroshi Fujishige, who failed to consider the enormous opportunity of selling his property to Disneyland, will

Correct Answer
verified

In the short run, a firm will maximize profits if it increases output when marginal revenue is greater than marginal cost.

Correct Answer
verified

Which of the following is generally a fixed cost?

Correct Answer
verified

When a firm minimizes its losses in the short run,

Correct Answer
verified

A competitive firm should always continue to operate in the short run as long as

Correct Answer
verified

The long run is

Correct Answer
verified

The supply curve is upward-sloping (i.e., it takes a higher price to induce greater production) because of

Correct Answer
verified

Maximizing revenue maximizes profits.

Correct Answer
verified

Exam 8: The Competitive Firm

Economic profit is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The short run is the time period

Correct AnswerverifiedShow Answer

Refer to the data in Figure 22.1.The shape of the total revenue curve indicates that the price of this good

Correct AnswerverifiedShow Answer

Refer to the data in Figure 22.1.The total fixed costs for this firm are approximately

Correct AnswerverifiedShow Answer

All of the following are ways a business can earn economic profits except

Correct AnswerverifiedShow Answer

Refer to the data in Figure 22.1.The price of this good

Correct AnswerverifiedShow Answer

Normal profit is zero when a firm's revenues just cover its economic cost.

Correct AnswerverifiedShow Answer

For perfectly competitive firms, marginal revenue always equals price.

Correct AnswerverifiedShow Answer

A firm experiencing economic losses will still continue to produce output in the short run as long as

Correct AnswerverifiedShow Answer

Accounting costs and economic costs differ because

Correct AnswerverifiedShow Answer

The difference between the total revenue and total cost curves at a given output is equal to

Correct AnswerverifiedShow Answer

Businesses that fail to account for implicit costs, like the strawberry farmer, Hiroshi Fujishige, who failed to consider the enormous opportunity of selling his property to Disneyland, will

Correct AnswerverifiedShow Answer

In the short run, a firm will maximize profits if it increases output when marginal revenue is greater than marginal cost.

Correct AnswerverifiedShow Answer

Which of the following is generally a fixed cost?

Correct AnswerverifiedShow Answer

When a firm minimizes its losses in the short run,

Correct AnswerverifiedShow Answer

A competitive firm should always continue to operate in the short run as long as

Correct AnswerverifiedShow Answer

The long run is

Correct AnswerverifiedShow Answer

The supply curve is upward-sloping (i.e., it takes a higher price to induce greater production) because of

Correct AnswerverifiedShow Answer

Maximizing revenue maximizes profits.

Correct AnswerverifiedShow Answer

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