11.Ifacompetitivefirmisselling500unitsofitsproductatapriceof$8perunitandearningapositiveprofit,then
a.itsaveragerevenueisgreaterthan$8.
b.itsmarginalrevenueislessthan$8.
c.itstotalcostislessthan$4,000.
d.Alloftheabovearecorrect.
12.FarmerMcDonaldsellswheattoabrokerinKansasCity,Missouri.Becausethemarketforwheatisgenerallyconsideredtobecompetitive,Mr.McDonaldmaximizeshisprofitbychoosing
a.toproducethequantityatwhichaveragevariablecostisminimized.
b.toproducethequantityatwhichaveragefixedcostisminimized.
c.thequantityatwhichmarketpriceisequaltoMr.McDonald’smarginalcostofproduction.
d.thequantityatwhichmarketpriceexceedsMr.McDonald’smarginalcostofproductionbythegreatestamount.
13.Mr.Rogerssellscoloredpencils.Thecolored-pencilindustryiscompetitive.Mr.Rogershiresabusinessconsultant toanalyzehiscompany’sfinancialrecords.TheconsultantrecommendsthatMr.Rogersincreasehisproduction.
a.totalrevenuesequalhistotaleconomiccosts.
b.marginalrevenueexceedshistotalcost.
c.marginalrevenueexceedshismarginalcost.
d.marginalcostexceedshismarginalrevenue.
14.Kateisaprofessionaloperasingerwhogivesvoicelessons.Thevocal-musicindustryiscompetitive.Katehiresabusinessconsultanttoanalyzeherfinancialrecords.TheconsultantrecommendsthatKategivefewervoicelessons.TheconsultantmusthaveconcludedthatKate’s
a.totalrevenuesexceedhertotalaccountingcosts.
b.marginalrevenueexceedshertotalcost.
c.marginalrevenueexceedshermarginalcost.
d.marginalcostexceedshermarginalrevenue.
15.Lauraisagourmetchefwhorunsasmallcateringbusinessinacompetitiveindustry.Lauraspecializesinmakingweddingcakes.Laurasells20weddingcakespermonth.Hermonthlytotalrevenueis$5,000.Themarginalcostofmakingaweddingcakeis$300.Inordertomaximizeprofits,Laurashould
a.makemorethan20weddingcakespermonth.
b.makefewerthan20weddingcakespermonth.
c.continuetomake20weddingcakespermonth.
d.Wedonothaveenoughinformationtoanswerthequestion.
16.Lauraisagourmetchefwhorunsasmallcateringbusinessinacompetitiveindustry.Lauraspecializesinmakingweddingcakes.Laurasells20weddingcakespermonth.Hermonthlytotalrevenueis$5,000.Themarginalcostofmakingaweddingcakeis$200.Inordertomaximizeprofits,Laurashould
a.makemorethan20weddingcakespermonth.
b.makefewerthan20weddingcakespermonth.
c.continuetomake20weddingcakespermonth.
d.Wedonothaveenoughinformationtoanswerthequestion.
17.Robinownsahorsestablesandridingacademyandgivesridinglessonsforchildrenat“ponycamp.”Herbusinessoperatesinacompetitiveindustry.Robingivesridinglessonsto20childrenpermonth.Hermonthlytotalrevenueis$4,000.Themarginalcostofponycampis$100perchild.Inordertomaximizeprofits,Robinshould
a.giveridinglessonstomorethan20childrenpermonth.
b.giveridinglessonstofewerthan20childrenpermonth.
c.continuetogiveridinglessonsto20childrenpermonth.
d.Wedonothaveenoughinformationtoanswerthequestion.
18.Robinownsahorsestablesandridingacademyandgivesridinglessonsforchildrenat“ponycamp.”Herbusinessoperatesinacompetitiveindustry.Robingivesridinglessonsto20childrenpermonth.Hermonthlytotalrevenueis$4,000.Themarginalcostofponycampis$200perchild.Inordertomaximizeprofits,Robinshould
a.giveridinglessonstomorethan20childrenpermonth.
b.giveridinglessonstofewerthan20childrenpermonth.
c.continuetogiveridinglessonsto20childrenpermonth.
d.Wedonothaveenoughinformationtoanswerthequestion.
19.Robinownsahorsestablesandridingacademyandgivesridinglessonsforchildrenat“ponycamp.”Herbusinessoperatesinacompetitiveindustry.Robingivesridinglessonsto20childrenpermonth.Hermonthlytotalrevenueis$4,000.Themarginalcostofponycampis$250perchild.Inordertomaximizeprofits,Robinshould
a.giveridinglessonstomorethan20childrenpermonth.
b.giveridinglessonstofewerthan20childrenpermonth.
c.continuetogiveridinglessonsto20childrenpermonth.
d.Wedonothaveenoughinformationtoanswerthequestion.
20.Acompetitivefirmhasbeensellingitsoutputfor$20perunitandhasbeenmaximizingitsprofit,whichispositive.Then,thepricerisesto$25,andthefirmmakeswhateveradjustmentsarenecessarytomaximizeitsprofitatthenow-higherprice.Oncethefirmhasadjusted,its
a.quantityofoutputishigherthanitwaspreviously.
b.averagetotalcostishigherthanitwaspreviously.
c.marginalrevenueishigherthanitwaspreviously.
d.Alloftheabovearecorrect.
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