ECO 304K Study Guide - Midterm Guide: Perfect Competition, W. M. Keck Observatory, Demand Curve

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ECO 304K Full Course Notes

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Section i: multiple choice: a profit maximizing firm is in perfectly competitive markets for its labor and its output. At a wage of , the firm hires 19 workers. If the firm hired another worker, the firm"s costs would increase by less than . If the mp of the 19th worker is 2, the price of the firm"s output is at least . Which of the following statements must be true: the monopolist"s total revenue would decrease if it dropped its price below. The mr of y = 15 is less than . Avc mc atc 33 6 4 8 9 q $ 12 practice mt #2. Answer questions #3 and #4 based on the picture above: determine which of the following is true based on the costs of one perfectly competitive firm producing a good in continuous quantities picture above:

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14. Here are several statements about the demand and output of a monopoly producer: 1. For a monopolist, the change in total revenue brought about by producing an extra unit of output is always less than the current price of that output. II. A monopolist will maximize profit at the output where marginal revenue is as high as possible above marginal cost III. A monopoly firm will maximize profit by producing where demand is inelastic Which of the above statements are true? A) I only B) II only C) III only D) I and II E) I and III F) II and III G) I and II and III ) none of the statements are true

14. Which of the following statements about monopoly firms are correct? I. Monopoly firms will produce the quantity of output where the marginal cost of the last unit of) that amount of output is just equal to the marginal revenue from selling the last unit of) that amount of output. II. Monopoly firms will never produce a quantity of output that falls in the elastic section of the demand curve faced by that monopolist. III. A profit maximizing monopolist will always produce an output level at which the marginal willingness-to-pay of consumers is greater than the marginal cost of production. Which of the above statements are true? (A) I only (B) II only (C) III only (D) I and II (E) I and III (F) II and III (G) I and II and III (H) none of the above

Which of the following statements is/are TRUE?

If the market price falls below the Average Fixed Costs (AFC) of production then the firm will minimize losses by "shutting down" production.
A firm will earn an economic profit if it sells output at a market price that exceeds the Average Variable Costs (AVC) of production.
At the current level of production (Q), if the Marginal Revenue is (MR) is equal to $25 and the Marginal Cost is (MC) is equal to $20, the perfectly competitive firm should decrease its level of production.

(i) Only Statement (1) is TRUE.

(ii) Only Statements (2) and (3) are TRUE.

(iii) Only Statement (3) is TRUE.

(iv) Only Statements (1) and (3) are TRUE.

(v) None of the Statements is TRUE.

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ECO 304K Study Guide - Midterm Guide: Perfect Competition, W. M. Keck Observatory, Demand Curve

ECO 304K Full Course Notes

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