Question 1

A producer can raise profit by expanding output if:

Accepted Answer

A)  marginal revenue is equal to marginal cost.
B)  marginal revenue is less than marginal cost.
C)  marginal revenue is negative.
D)  marginal cost is negative.
E)  marginal revenue is greater than marginal cost.

Question 2

When a firm incurs negative economic profit, it should:

Accepted Answer

A)  hire more laborers to make the business activity profitable.
B)  transfer the resources from current use to other alternative uses.
C)  purchase additional raw materials to produce more output.
D)  transfer the resources from alternative uses to the current activity.
E)  continue to operate with the same resources.

Question 3

Assume that a firm's marginal revenue curve intersects the rising portion of the marginal cost curve at 100 units of output.At this output level, a profit-maximizing firm's total cost is $1, 000.If the price of the product is $10 per unit, the firm will earn an economic profit of:

Accepted Answer

A)  zero.
B)  $400.
C)  more than zero but less than $100.
D)  $100.
E)  more than $100.

Question 4

A monopolistically competitive firm faces a relatively steeper demand curve than a perfectly competitive firm.

Accepted Answer

A) True 
 B)False

Question 5

Identify the characteristics of a monopoly firm.

Accepted Answer

A)  Barred entry and homogeneous product
B)  Unique product and large number of sellers
C)  Standardized product and price taker
D)  Barred entry and price taker
E)  Barred entry and price maker

Question 6

Assume that a firm is producing an output level such that marginal revenue equals marginal cost.One can correctly conclude that the firm is producing a level of output which is:

Accepted Answer

A)  equal to the profit maximizing level of output.
B)  equal to revenue maximizing level of output.
C)  less than the profit maximizing level of output.
D)  zero.
E)  greater than the profit maximizing level of output.

Question 7

A downward-sloping demand curve is faced by firms:

Accepted Answer

A)  under perfect competition
B)  under perfect competition and monopoly
C)  in all market structures except monopoly
D)  in all market structures except monopolistic competition
E)  in all market structures except perfect competition

Question 8

In general, the number of firms is lesser in monopolistic competition compared to oligopoly.

Accepted Answer

A) True 
 B)False

Question 9

Scenario 22.1 Jane left her job at Siemens and started her own boutique.She used to earn $50, 000 annually at Siemens.She took a loan of $10, 000 and used $20, 000 from her personal savings to begin her venture.She agreed to repay the loan with 10% interest.Her business is bringing in $80, 000 annually.She has rent and labor expenses of $15, 000.Also assume that Jane could have used her own money i.e.$20, 000 to buy stocks in Intel which would have returned 5% to her last year.
Refer to Scenario 22.1 and calculate Jane's accounting profit.

Accepted Answer

A)  $50, 000.
B)  $65, 000.
C)  $80, 000.
D)  $64, 000.
E)  $35, 000.

Question 10

Profit of a firm is maximized when:

Accepted Answer

A)  marginal revenue is maximum.
B)  marginal revenue is greater than marginal cost.
C)  marginal revenue is equal to marginal cost.
D)  marginal cost is minimum.
E)  marginal revenue is less than marginal cost.

Question 11

Accounting profit does not include:

Accepted Answer

A)  explicit cost.
B)  sunk cost.
C)  fixed cost.
D)  opportunity cost.
E)  variable cost.

Question 12

In economic theory, we assume that the goal of the firm is to:

Accepted Answer

A)  maximize sales revenue.
B)  maximize market share.
C)  maximize the benefits it provides to its customers.
D)  maximize the profit.
E)  maximize the sales volume.

Question 13

The following graph shows the marginal revenue (MR) and marginal cost (MC) curves of an imperfectly competitive firm. Figure 22.2  Refer to Figure 22.2.If the current production level is 90 and the firm wishes to maximize profit, it should:

Accepted Answer

A)  leave the current production level unchanged.
B)  decrease the quantity produced to 75.
C)  decrease the quantity produced to 50.
D)  decrease the quantity produced to 35.
E)  increase production until MR = MC.

Question 14

If barriers to entry exist in a market, then:

Accepted Answer

A)  the costs of entry and exit are relatively low.
B)  there will be few close substitutes of the product in the market.
C)  firms will be incurring losses in both the short and long runs.
D)  firms will tend to have relatively less monopoly power.
E)  the existing firms will quit the market in the long run due to mounting losses.

Question 15

The primary goal of any business firm is to maximize social welfare.

Accepted Answer

A) True 
 B)False

Question 16

A(n) ____ may offer products that are either differentiated or identical.

Accepted Answer

A)  monopolistically competitive firm
B)  monopolist
C)  oligopolistic firm
D)  perfectly competitive firm
E)  monopsonist

Question 17

The greater the differentiation among products of the monopolistically competitive firms, the less price-elastic is the demand.

Accepted Answer

A) True 
 B)False

Question 18

A perfectly competitive firm charges a price which is greater than its marginal cost.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is true of marginal revenue?

Accepted Answer

A)  Marginal revenue equals total revenue divided by quantity.
B)  Marginal revenue is the slope of the supply curve of a firm.
C)  Marginal revenue is the slope of the total cost curve when profit is maximized.
D)  Marginal revenue equals the change in total revenue divided by the change in the quantity.
E)  Marginal revenue equals the income earned by selling the stocks on the margin.

Question 20

Assume that a firm's marginal revenue curve intersects the rising portion of its marginal cost curve at 500 units of output.At this output level, a profit-maximizing firm's total cost of production is $1, 000.If the price of the product is $5 per unit, the total revenue earned by the firm will be:

Accepted Answer

A)  $1, 500.
B)  $250.
C)  $500.
D)  $2, 500.
E)  $1, 000.

Exam 43: Profit Maximization

Assume that a firm's marginal revenue curve intersects the rising portion of its marginal cost curve at 500 units of output.At this output level, a profit-maximizing firm's total cost of production is $1, 000.If the price of the product is $5 per unit, the total revenue earned by the firm will be:

Correct Answer
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Assume that a firm's marginal revenue curve intersects the rising portion of the marginal cost curve at 100 units of output.At this output level, a profit-maximizing firm's total cost is $1, 000.If the price of the product is $10 per unit, the firm will earn an economic profit of:

Correct Answer
verified

In economic theory, we assume that the goal of the firm is to:

Correct Answer
verified

The greater the differentiation among products of the monopolistically competitive firms, the less price-elastic is the demand.

Correct Answer
verified

A(n) ____ may offer products that are either differentiated or identical.

Correct Answer
verified

Profit of a firm is maximized when:

Correct Answer
verified

Assume that a firm is producing an output level such that marginal revenue equals marginal cost.One can correctly conclude that the firm is producing a level of output which is:

Correct Answer
verified

A monopolistically competitive firm faces a relatively steeper demand curve than a perfectly competitive firm.

Correct Answer
verified

When a firm incurs negative economic profit, it should:

Correct Answer
verified

In general, the number of firms is lesser in monopolistic competition compared to oligopoly.

Correct Answer
verified

Which of the following is true of marginal revenue?

Correct Answer
verified

A producer can raise profit by expanding output if:

Correct Answer
verified

If barriers to entry exist in a market, then:

Correct Answer
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The following graph shows the marginal revenue (MR) and marginal cost (MC) curves of an imperfectly competitive firm. Figure 22.2 Refer to Figure 22.2.If the current production level is 90 and the firm wishes to maximize profit, it should:

Correct Answer
verified

The primary goal of any business firm is to maximize social welfare.

Correct Answer
verified

Correct Answer
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Accounting profit does not include:

Correct Answer
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Identify the characteristics of a monopoly firm.

Correct Answer
verified

A perfectly competitive firm charges a price which is greater than its marginal cost.

Correct Answer
verified

A downward-sloping demand curve is faced by firms:

Correct Answer
verified

Exam 43: Profit Maximization

Assume that a firm's marginal revenue curve intersects the rising portion of its marginal cost curve at 500 units of output.At this output level, a profit-maximizing firm's total cost of production is $1, 000.If the price of the product is $5 per unit, the total revenue earned by the firm will be:

Correct AnswerverifiedShow Answer

Assume that a firm's marginal revenue curve intersects the rising portion of the marginal cost curve at 100 units of output.At this output level, a profit-maximizing firm's total cost is $1, 000.If the price of the product is $10 per unit, the firm will earn an economic profit of:

Correct AnswerverifiedShow Answer

In economic theory, we assume that the goal of the firm is to:

Correct AnswerverifiedShow Answer

The greater the differentiation among products of the monopolistically competitive firms, the less price-elastic is the demand.

Correct AnswerverifiedShow Answer

A(n) ____ may offer products that are either differentiated or identical.

Correct AnswerverifiedShow Answer

Profit of a firm is maximized when:

Correct AnswerverifiedShow Answer

Assume that a firm is producing an output level such that marginal revenue equals marginal cost.One can correctly conclude that the firm is producing a level of output which is:

Correct AnswerverifiedShow Answer

A monopolistically competitive firm faces a relatively steeper demand curve than a perfectly competitive firm.

Correct AnswerverifiedShow Answer

When a firm incurs negative economic profit, it should:

Correct AnswerverifiedShow Answer

In general, the number of firms is lesser in monopolistic competition compared to oligopoly.

Correct AnswerverifiedShow Answer

Which of the following is true of marginal revenue?

Correct AnswerverifiedShow Answer

A producer can raise profit by expanding output if:

Correct AnswerverifiedShow Answer

If barriers to entry exist in a market, then:

Correct AnswerverifiedShow Answer

The following graph shows the marginal revenue (MR) and marginal cost (MC) curves of an imperfectly competitive firm. Figure 22.2 Refer to Figure 22.2.If the current production level is 90 and the firm wishes to maximize profit, it should:

Correct AnswerverifiedShow Answer

The primary goal of any business firm is to maximize social welfare.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Accounting profit does not include:

Correct AnswerverifiedShow Answer

Identify the characteristics of a monopoly firm.

Correct AnswerverifiedShow Answer

A perfectly competitive firm charges a price which is greater than its marginal cost.

Correct AnswerverifiedShow Answer

A downward-sloping demand curve is faced by firms:

Correct AnswerverifiedShow Answer

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