A firm is producing where its marginal costs are at the lowest level. What can one most likely infer from this? a. there is either lost opportunity for further profits by producing more, or the firm should shut-down if it is competitive and price is at that low level. b. It is a price-taker who is producing too much. c. It is a monopolist who is producing the socially optimal quantity. d. The firm is producing rationally.
6. A single-price monopolist sets price a. where MR=demand. b. where supply=demand c. from the demand curve at the quantity for which MC=MR. d. where MR=MC.
7. Assume that the Law of Diminishing Marginal Product applies at the current output level of a competitive firm. The price is $20 and, at the current output level, marginal cost is $16 and average total cost is $20. To maximize profits the firm should: a. produce the current output level, since average revenue (price) = average cost. b. produce more since marginal revenue exceeds marginal cost at current output. c. produce less since marginal revenue is always below average revenue. d. any of the above is possible, without further information.
8. Which of the following statements is true? (i) When a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price. (ii) When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price. (iii) Average revenue is the same as price for both competitive and monopoly firms. a. (i) only b. (iii) only c. (i) and (ii) d. (ii) and (iii)
9. If a firm in a competitive market triples the number of units of output sold, then total revenue will a. more than triple. b. less than triple. c. exactly triple. d. All of the above are potentially true.
10. When a competitive firm makes a decision to shut down, it is most likely that a. marginal cost is above average variable cost. b. marginal cost is above average total cost. c. price is below the minimum of average variable cost. d. fixed costs exceed variable costs.
A firm is producing where its marginal costs are at the lowest level. What can one most likely infer from this? a. there is either lost opportunity for further profits by producing more, or the firm should shut-down if it is competitive and price is at that low level. b. It is a price-taker who is producing too much. c. It is a monopolist who is producing the socially optimal quantity. d. The firm is producing rationally.
6. A single-price monopolist sets price a. where MR=demand. b. where supply=demand c. from the demand curve at the quantity for which MC=MR. d. where MR=MC.
7. Assume that the Law of Diminishing Marginal Product applies at the current output level of a competitive firm. The price is $20 and, at the current output level, marginal cost is $16 and average total cost is $20. To maximize profits the firm should: a. produce the current output level, since average revenue (price) = average cost. b. produce more since marginal revenue exceeds marginal cost at current output. c. produce less since marginal revenue is always below average revenue. d. any of the above is possible, without further information.
8. Which of the following statements is true? (i) When a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price. (ii) When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price. (iii) Average revenue is the same as price for both competitive and monopoly firms. a. (i) only b. (iii) only c. (i) and (ii) d. (ii) and (iii)
9. If a firm in a competitive market triples the number of units of output sold, then total revenue will a. more than triple. b. less than triple. c. exactly triple. d. All of the above are potentially true.
10. When a competitive firm makes a decision to shut down, it is most likely that a. marginal cost is above average variable cost. b. marginal cost is above average total cost. c. price is below the minimum of average variable cost. d. fixed costs exceed variable costs.
Related textbook solutions
Related questions
A monopolist is able to maximize its profits by
| A | Ā |
setting the price at the level that will maximize its per-unit profit. |
| B | Ā |
producing output where MR = MC and charging a price along the demand curve. |
| C | Ā |
setting output at MR = MC and setting price at the demand curve's highest point. |
| D | Ā |
producing maximum output where price is equal to its marginal cost. |
QUESTION 22
For a perfectly competitive firm, profit maximization (or loss minimization) occurs at the level of output at which
| Ā | a. |
MR = MC. |
| Ā | b. |
MR = AVC. |
| Ā | c. |
P = ATC. |
| Ā | d. |
MR = ATC. |
4 points
QUESTION 23
If MR > MC, then
| Ā | a. |
profits are being maximized. |
| Ā | b. |
the firm is producing too much of the good to be maximizing profits. |
| Ā | c. |
the firm can increase its profits (or minimize its losses) by increasing output. |
| Ā | d. |
the firm must be incurring losses. |
4 points
QUESTION 24
If firms are earning zero economic profits, they must be producing at an output level at which
| Ā | a. |
price minus marginal cost. |
| Ā | b. |
total revenue equals total costs, in other words, normal profits. |
| Ā | c. |
price equals average variable cost. |
| Ā | d. |
marginal revenue equals marginal cost. |
| Ā | e. |
none of the above |
4 points
QUESTION 25
In the theory of perfect competition,
| Ā | a. |
the market demand curve is horizontal. |
| Ā | b. |
the single firm faces a horizontal demand curve. |
| Ā | c. |
the single firm faces a downward-sloping demand curve. |
| Ā | d. |
the market demand curve is downward sloping. |
| Ā | e. |
b and d |
