Question : Table 13-3 Quantity Price (dollars) : 1387828

 

 

Table 13-3

 

Quantity

 

Price

(dollars)

Total Revenue

(dollars)

Total Variable Cost

(dollars)

Total Cost

(dollars)

0

$21

  $0

$0

$50

1

20

  20

16

66

2

19

  38

31

81

3

18

  54

45

95

4

17

  68

59

109

5

16

  80

75

125

6

15

  90

93

143

7

14

  98

112

162

8

13

104

140

190

9

12

108

180

230

10

11

110

230

280

 

Table 13-3 shows the demand and cost schedules for a monopolistically competitive firm.

 

17) Refer to Table 13-3.  What are the profit-maximizing/loss-minimizing output level and price?

A) Q = 0 (firm should not produce)

B) Q = 3; P = $18

C) Q = 4; P = $17

D) Q = 5; P = $16 

 

18) Refer to Table 13-3.  What is the amount of the firm’s loss at its optimal output level?

A) $0

B) $41

C) $45

D) $50

 

 

19) Refer to Table 13-3.  What is its average variable cost of production at its optimal output level?

A) $0 (because its optimal output = 0)

B) $15

C) $14.75

D) $29

 

 

20) Refer to Table 13-3.  What is the best course of action for the firm in the short run?

A) It should shut down.

B) It should stay in business because it covers some of its fixed cost.

C) It should increase its sales by lowering its price.

D) It should not cut its price, but it should increase its sales by advertising.

 

21) Refer to Table 13-3.  If this firm continues to produce, what is likely to happen to the product’s price in the long run?

A) It will fall.

B) It will increase

C) It will remain constant.

D) It cannot be determined without information on its long-run demand curve.

 

 

22) Assume price exceeds average variable cost over the relevant range of demand. If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19, then to maximize profits the firm should

A) continue to produce the same quantity.

B) increase output.

C) decrease output.

D) shut down.

 

Figure 13-5

 

 

23) Refer to Figure 13-5.  The candy store represented in the diagram is currently selling Qa units of candy at a price of Pa. Is this candy store maximizing its profit and if it is not, what would you recommend to the firm?

A) Yes, it is maximizing its profit by charging the highest price possible.

B) No, it is not; since its marginal cost is constant, it should produce and sell as much candy as it can. It should sell Qd units at a price of Pd.

C) No, it is not; it should lower its price to Pc and sell Qc units.

D) No, it is not; it should lower its price to Pb and sell Qb units.

 

 

24) Both monopolistically competitive firms and perfectly competitive firms maximize profits

A) by producing where price equals average total cost.

B) by producing where marginal revenue equals average revenue.

C) by producing where marginal revenue is equal to marginal cost.

D) by producing where price equals average variable cost.

 

25) A monopolistically competitive firm maximizes profit in the short run by producing where

A) price is less than marginal cost.

B) price is less than marginal revenue.

C) price is less than average revenue.

D) price is greater than marginal cost.

 

 

26) A monopolistically competitive firm chooses

A) both the quantity of output to produce and the price at which it will sell its output.

B) the price of the product it sells, but market forces determine the quantity it will be able to sell.

C) the quantity of output to produce, but the price of the product it sells is determined collectively by all firms in the industry.

D) the price of the product it sells, but the quantity of output to produce is agreed upon by all firms in the industry.