# What is the lowest price at which this firm might choose to operate?

For a certain firm the 100th unit of output that the firm produces has a ma Show more Question 25.25. For a certain firm the 100th unit of output that the firm produces has a marginal revenue of \$10 and a marginal cost of \$7. It follows that the (Points : 5) production of the 100th unit of output increases the firms profit by \$3. production of the 100th unit of output increases the firms average total cost by \$7. firms profit-maximizing level of output is less than 100 units. production of the 99th unit of output must increase the firms profit by less than \$3. Question 26.26. Table 14-12 Bills Birdhouses COSTS COSTS COSTS REVENUES REVENUES REVENUES REVENUES Quantity Produced Total Cost Marginal Cost Quantity Demanded Price Total Revenue Marginal Revenue 0 \$0 0 \$80 1 \$50 1 \$80 2 \$102 2 \$80 3 \$157 3 \$80 4 \$217 4 \$80 5 \$285 5 \$80 6 \$365 6 \$80 7 \$462 7 \$80 8 \$582 8 \$80 Refer to Table 14-12. What is the marginal cost of the 8th unit? (Points : 5) \$0 \$72.75 \$120 \$502 Question 27.27. A firm in a competitive market has the following cost structure: Output Total Costs 0 \$1 1 \$6 2 \$9 3 \$10 4 \$17 5 \$26 What is the lowest price at which this firm might choose to operate? (Points : 5) \$2 \$3 \$4 \$5 Question 28.28. When total revenue is less than variable costs a firm in a competitive market will (Points : 5) continue to operate as long as average revenue exceeds marginal cost. continue to operate as long as average revenue exceeds average fixed cost. shut down. raise its price. Question 29.29. If marginal cost exceeds marginal revenue the firm (Points : 5) is most likely to be at a profit-maximizing level of output. should increase the level of production to maximize its profit. should reduce its average fixed cost in order to lower its marginal cost. may still be earning a positive accounting profit. Question 30.30. Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1000 units of output. At Q = 1000 the firms marginal cost equals \$15 and its average total cost equals \$11. The firm sells its output for \$12 per unit. Refer to Scenario 14-1. At Q = 999 the firms profits equal (Points : 5) \$4990. \$5000. \$5020. \$5030. Question 31.31. Table 14-14 The following table presents cost and revenue information for Bobs bakery production and sales. Quantity Total Cost Marginal Cost Price Total Revenue Marginal Revenue 0 \$5.00 \$3.25 1 \$5.50 \$3.25 2 \$6.50 \$3.25 3 \$8.00 \$3.25 4 \$10.00 \$3.25 5 \$12.50 \$3.25 6 \$15.50 \$3.25 7 \$19.00 \$3.25 8 \$23.00 \$3.25 Refer to Table 14-14. Suppose that due to a decrease in the market demand for bread the market price of bread drops to \$2.75 per loaf. At this new price what is Bobs profit-maximizing quantity? (Points : 5) 5 units 6 units 7 units 8 units Question 32.32. Which of the following firms is the closest to being a perfectly competitive firm? (Points : 5) a hot dog vendor in New York Microsoft Corporation Ford Motor Company the campus bookstore Question 33.33. Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is (Points : 5) above \$6.30 but less than \$8. above \$6.30. less than \$6.30 but more than \$4.50. less than \$4.50. Question 34.34. For a certain firm the 100th unit of output that the firm produces has a marginal revenue of \$10 and a marginal cost of \$11. It follows that the (Points : 5) production of the 100th unit of output increases the firms profit by \$1. production of the 100th unit of output increases the firms average total cost by \$1. firms profit-maximizing level of output is less than 100 units. production of the 110th unit of output must increase the firms profit but by less than \$1. Question 35.35. A competitive firm would benefit from charging a price below the market price because the firm would achieve (i) higher average revenue. (ii) higher profits. (iii) lower total costs. (Points : 5) (i) only (ii) and (iii) only (i) (ii) and (iii) None of the above is correct. Question 36.36. A competitive firm has been selling its output for \$10 per unit and has been maximizing its profit. Then the price rises to \$14 and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted its (Points : 5) marginal revenue is lower than it was previously. marginal cost is lower than it was previously. quantity of output is higher than it was previously. All of the above are correct. Question 37.37. Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: Refer to Figure 14-8. Which line segment best reflects the long-run supply curve for this firm? (Points : 5) ABCD BC ABC None of the above is correct. We must know the firms average variable cost. Question 38.38. A market is competitive if (i) firms have the flexibility to price their own product. (ii) each buyer is small compared to the market. (iii) each seller is small compared to the market. (Points : 5) (i) and (ii) only (i) and (iii) only (ii) and (iii) only (i) (ii) and (iii) Question 39.39. When a perfectly competitive firm decides to shut down it is most likely that (Points : 5) marginal cost is above average variable cost. marginal cost is above average total cost. price is below the firms average variable cost. fixed costs exceed variable costs. Question 40.40. A firm in a competitive market currently produces and sells 500 doorknobs for a price of \$10 per doorknob. Which of the following events would decrease the firms average revenue? (Points : 5) The firm increases its output above 500 doorknobs. The firm decreases its output below 500 doorknobs The market price of doorknobs rises above \$10. The market price of doorknobs falls below \$10. Question 41.41. Table 14-13 Dianas Dress Emporium COSTS COSTS COSTS REVENUES REVENUES REVENUES REVENUES Quantity Produced Total Cost Marginal Cost Quantity Demanded Price Total Revenue Marginal Revenue 0 \$100 0 \$120 1 \$150 1 \$120 2 \$202 2 \$120 3 \$257 3 \$120 4 \$317 4 \$120 5 \$385 5 \$120 6 \$465 6 \$120 7 \$562 7 \$120 8 \$682 8 \$120 Refer to Table 14-13. What is the marginal cost of the 1st unit? (Points : 5) \$50 \$75 \$80 \$150 Question 42.42. Which of the following is not a characteristic of a perfectly competitive market? (Points : 5) Firms are price takers. Firms can freely enter the market. Many firms have market power. Goods offered for sale are largely the same. Question 43.43. Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect (Points : 5) new firms to enter the market. the market price to rise. its profits to rise. Both b) and c) are correct. Question 44.44. When price is greater than marginal cost for a firm in a competitive market (Points : 5) marginal cost must be falling. the firm must be minimizing its losses. there are opportunities to increase profit by increasing production. the firm should decrease output to maximize profit. Question 45.45. A profit-maximizing firm in a competitive market is able to sell its product for \$7. At its current level of out-put the firms average total cost is \$10. The firms marginal cost curve crosses its marginal revenue curve at an output level of 9 units. The firm experiences a (Points : 5) profit of more than \$27. profit of exactly \$27. loss of more than \$27. loss of exactly \$27. Question 46.46. Table 14-12 Bills Birdhouses COSTS COSTS COSTS REVENUES REVENUES REVENUES REVENUES Quantity Produced Total Cost Marginal Cost Quantity Demanded Price Total Revenue Marginal Revenue 0 \$0 0 \$80 1 \$50 1 \$80 2 \$102 2 \$80 3 \$157 3 \$80 4 \$217 4 \$80 5 \$285 5 \$80 6 \$365 6 \$80 7 \$462 7 \$80 8 \$582 8 \$80 Refer to Table 14-12. What is the marginal revenue from selling the 5th unit? (Points : 5) \$12 \$68 \$80 \$480 Question 47.47. Which of these curves is the competitive firms short-run supply curve? (Points : 5) the average variable cost curve above marginal cost the average total cost curve above marginal cost the marginal cost curve above average variable cost the average fixed cost curve Question 48.48. Suppose a profit-maximizing firm in a competitive market produces rubber bands. When the market price for rubber bands rises above the minimum of its average variable cost but still lies below the minimum of average total cost in the short run the firm will (Points : 5) experience losses but will continue to produce rubber bands. shut down. earn both economic and accounting profits. raise the price of its product. Question 49.49. In the long run all of a firms costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if (Points : 5) price is less than average total cost. price is greater than average total cost. average revenue is greater than average fixed cost. average revenue is greater than marginal cost. Question 50.50. A sunk cost is one that (Points : 5) changes as the level of output changes in the short run. was paid in the past and will not change regardless of the present decision. should determine the rational course of action in the future. has the most impact on profit-making decisions. Show less

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