Question : 7.2  Extending the Reach of the Invisible Hand: From the : 1377391

7.2  Extending the Reach of the Invisible Hand: From the Individual to the Firm

The following figure shows the marginal cost curves of two profit-maximizing firms—firm A and firm B—in a perfectly competitive market.

1) Refer to the figure above. Which of the following statements is true?

A) Firm A produces at a lower marginal cost.

B) For a particular market price, firm A will enjoy a greater producer surplus.

C) Firm B will have a higher reservation value than firm A.

D) The profit-maximizing level of output of firm B will be greater than that of firm A at all prices.

2) Refer to the figure above. Which of the following statements is true?

A) Firm B produces at a higher marginal cost than firm A.

B) At a given market price, firm A will enjoy a greater producer surplus.

C) Firm A will have a higher reservation value for the good than firm B.

D) Firm B will produce a lower quantity than firm A at all prices.

3) If firms in a competitive industry independently operate to maximize profits, the ________ are eventually equalized across the firms.

A) total costs

B) marginal costs

C) profits

D) revenues

4) When two firms in a perfectly competitive market seek to maximize profit in the long run, they eventually end up:

A) producing at a suboptimal level.

B) minimizing total cost of production.

C) earning the same level of profits.

D) producing the same level of output.

5) If price is greater than the average variable cost, a profit-maximizing firm should:

A) contract production until price is equal to marginal cost.

B) expand production until price is equal to marginal cost.

C) contract production until total revenue is equal to total cost.

D) expand production until total revenue is equal to total cost.

6) If a firm faces an average total cost of $100 and sells its product for $115, how much profit does it make when it sells 20 units of the product?

A) $200

B) $115

C) $300

D) $800

The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry.

7) Refer to the figure above. What price does the firm face in the market?

A) $2

B) $4

C) $6

D) $8

8) Refer to the figure above. At what level of output does the firm maximize profits?

A) 0 units

B) 10 units

C) 20 units

D) 30 units

9) Refer to the figure above. What is the revenue of the firm when it sells the profit-maximizing level of output?

A) $40

B) $160

C) $180

D) $240

10) Refer to the figure above. What is the total cost of the firm when it produces the profit-maximizing level of output?

A) $60

B) $120

C) $180

D) $240

11) Refer to the figure above. Which of the following statements is true?

A) The firm maximizes profits if it produces 10 units of the good.

B) If the market price is $10, the firm will suffer losses.

C) If the market price is $2, the firm will make profits.

D) The firm makes maximum profits if it produces 30 units.

12) Refer to the figure above. What is the maximum profit that the firm can make?

A) $30

B) $60

C) $90

D) $180