Assignment -
Quantity - 0, 1, 2, 3, 4, 5, 6
TFC - 45, 45, 45, 45, 45, 45
TVC - 0, 20, 35, 45, 75, 120, 180
USE THE ABOVE INFORMATION FOR THE FOLLOWING 5 QUESTIONS
1. Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit.
When the market price is P = $14,
What is the profit maximizing level of output?
What is total revenue at this level of output?
What is the total cost at this level of output?
What is the profit at this level of output?
2. Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit.
When the market price is P = $18,
What is the profit maximizing level of output?
What is total revenue at this level of output?
What is the total cost at this level of output?
What is the profit at this level of output?
3. Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit.
When the market price is P = $44,
What is the profit maximizing level of output?
What is total revenue at this level of output?
What is the total cost at this level of output?
What is the profit at this level of output?
4. Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit.
When the market price is P = $53,
What is the profit maximizing level of output?
What is total revenue at this level of output?
What is the total cost at this level of output?
What is the profit at this level of output?
5. Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit.
When the market price is P = $70,
What is the profit maximizing level of output?
What is total revenue at this level of output?
What is the total cost at this level of output?
What is the profit at this level of output?
6. If we know average total cost and the amount of output, then we can always calculate total cost byA) adding average total cost and the amount of output.
B) subtracting the amount of output from average total cost.
C) multiplying average total cost by the amount of output.
D) dividing average total cost by the amount of output.
7. In the short run, as output increases,A) the difference between average total cost and average variable cost decreases.
B) the difference between total cost and average variable cost decreases.
C) marginal cost eventually decreases.
D) All of the above are correct.
8. If marginal cost is between average variable cost and average total cost, thenA) both average variable cost and average total cost are increasing.
B) both average variable cost and average total cost are decreasing.
C) average variable cost is increasing and average total cost is decreasing.
D) average variable cost is decreasing and average total cost is increasing.
9. Diminishing marginal returns impliesA) decreasing average variable costs.
B) decreasing marginal costs.
C) increasing marginal costs.
D) decreasing average fixed costs.
10. In the short run when the marginal product of labor ________, the marginal cost of an additional unit of output ________.A) rises; rises
B) falls; falls
C) rises; falls
D) falls; doesn't change
11. If marginal cost is above average variable cost, thenA) average variable cost is increasing.
B) marginal cost must be decreasing.
C) average variable cost is constant.
D) average variable cost is decreasing.
12. The formula for AVC isA) q/TVC.
B) TVC/q.
C) ΔTVC/Δq.
D) Δq/ΔTVC.
13. In the short run,A) all firms that earn a loss will shut down.
B) if current firms are earning a profit, new firms will enter the industry.
C) firms act to minimize losses or maximize profits.
D) All of the above are correct.
14. In the short run, firms earning a profit will want to ________ their profits while firms suffering losses will want to ________ their losses.A) maximize; maximize
B) maximize; minimize
C) minimize; maximize
D) minimize; minimize
15. If a firm's economic profit is $0, then it must be true thatA) TR equals TC.
B) TR equals TVC.
C) TR equals TFC.
D) TFC is zero.
16. A profit-maximizing strategy becomes a loss minimization strategy when a firm in a perfectly competitive industry is producing whereA) AVC < P < ATC.
B) P > ATC.
C) P = ATC.
D) MR = MC < P.
17. A firm will choose to operate rather than shut down as long asA) price is greater than or equal to AFC.
B) AFC is greater than AVC.
C) price is greater than or equal to AVC.
D) AVC is greater than MC.
18. Economic profit isA) (P-ATC)q.
B) (P+ATC)q.
C) P(q-ATC).
D) Pq/ATC.
19. You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet Shop operates in a perfectly competitive industry. This firm is currently producing at a point where market price equals its marginal cost. The Shop's total revenue exceeds its total variable cost, but is less than its total cost. You should advise the firm toA) cease production immediately because it is incurring a loss.
B) lower its price so that it can sell more units of output.
C) produce in the short run to minimize its loss, but exit the industry in the long run.
D) raise its price until it breaks even.
20. You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet Shop operates in a perfectly competitive industry. This firm is currently producing at a point where market price equals its marginal cost. The market price is less than its average variable cost. You should advise the firm toA) cease production immediately because it is not covering its variable costs of production.
B) lower its price so that it can sell more units of output.
C) produce in the short run to minimize its loss, but exit the industry in the long run.
D) raise its price until it breaks even.
21. The shutdown point for a perfectly competitive firm is theA) lowest point on the ATC curve.
B) point at which a firm's long-run supply curve ends.
C) lowest point on the AVC curve.
D) lowest point on the marginal cost curve.
22. A firm that is earning positive profits in the short run has an incentive to ________ its scale of operation in the long run.A) expand
B) contract
C) not change
D) encourage another firm to expand
23. A firm can minimize its losses by shutting down when ________ are less than ________ costs.A) variable costs; fixed
B) fixed costs; variable
C) revenues; variable
D) operating profits; sunk
24. The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $4.00 and its AFC is $3.00. What should Taste Freeze do?A) Continue to produce because price exceeds AVC
B) Shut down and produce zero sandwiches because price is less than ATC
C) Decrease production so that AVC will decrease
D) Increase production so that AFC will decrease
25. Refer to Figure A, see attached picture. In which of the following price ranges will the firm continue to operate but at a loss?
A) $5-$6
B) $6-$7
C) $7-$8
D) $8-$9
26. Refer to Figure A. The firm's shut down point is at a price ofA) $5
B) $6
C) $7
D) $8
27. Refer to Figure A. Suppose demand for wheat is initially D2. If consumer incomes increase, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat and individual profit maximizing firms will produce ________ bushels of wheat.A) D3; increase; 15
B) D1; increase; 10
C) D3; decrease; 7
D) D1; decrease; 0
28. Refer to Figure A. Suppose demand for wheat is initially D2. If the price of rice (a substitute for wheat) falls, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat and individual profit maximizing firms will produce ________ bushels of wheat.A) D3; increase; 15
B) D1; increase; 13
C) D3; decrease; 10
D) D1; decrease; 0
29. Refer to Figure A. If demand for wheat is D2, then a profit maximizing firm will produce ________ units and earn a profit of ________.A) 13; $0
B) 7; $0
C) 13; $91
D) 15; $30
30. Refer to Figure A. If demand for wheat is D3, then a profit maximizing firm will produce ________ units and earn ________.A) 15; positive profits
B) 9; positive profits
C) 12; negative profits
D) 13; exactly a normal return
31. Refer to Figure A. If demand for wheat is D3, then in the long runA) the firm will shut down.
B) the firm will exit the industry.
C) new firms will enter the industry and the current firms will expand production.
D) None of the above is correct.
32. Refer to Figure A. If demand for wheat is D1, then a profit maximizing firm will produce ________ units and earn ________.A) 0; negative profits
B) 5; zero profits
C) 10; negative profits
D) 12; positive profits
33. Refer to Figure A. If demand for wheat is D1, then in the long runA) the firm will increase its price and output.
B) the firm will exit the industry.
C) new firms will enter the industry and the current firms will expand production.
D) firms will increase their output so that their average fixed cost per unit falls. 34. Suppose a monopolist faces the following demand curve:
P = 200 - 6Q
Marginal cost of production is constant and equal to $20, and there are no fixed costs.
What is the monopolist's profit-maximizing level of output?
What price will the profit-maximizing monopolist charge?
How much profit will the monopolist make if she maximizes her profit?
What would be the value of consumer surplus in this monopoly market?
How much consumer surplus would there be if this market was perfectly competitive?
What is the value of the deadweight loss when the market is a monopoly?
35. Suppose a monopolist faces the following demand curve:
P = 420 - 4Q
Marginal cost of production is constant and equal to $36, and there are no fixed costs.
What is the monopolist's profit-maximizing level of output?
What price will the profit-maximizing monopolist charge?
How much profit will the monopolist make if she maximizes her profit?
What would be the value of consumer surplus in this monopoly market?
How much consumer surplus would there be if this market was perfectly competitive?
What is the value of the deadweight loss when the market is a monopoly?
