Question :
21) Refer to Figure 9-5. The figure shows the cost : 1245263
21) Refer to Figure 9-5. The figure shows the cost structure of a firm in a perfectly competitive market. If the firm’s fixed cost increases by $1,000 due to a new environmental regulation, what happens to its profit-maximizing output level?
A) It increases.
B) It decreases.
C) It remains the same.
D) It could increase, decrease or remain constant, depending on whether the firm is able to cut costs somewhere else.
22) Refer to Figure 9-5. What is the minimum price the firm requires to produce output?
A) $20
B) $14
C) $5
D) It cannot be determined
23) Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC) and average total cost (ATC). Which of the following equations is equal to a firm’s profit?
A) P – ATC
B) (P × Q) – TC
C) (P × Q) – (P × ATC)
D) P – TC
24) Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC) and average total cost (ATC). Which of the following equations is equal to a firm’s average profit?
A) P – ATC
B) (P – ATC) × Q
C) (P × Q) – TC
D) P – TC
25) If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then
A) marginal revenue is less than price.
B) average total cost is at a minimum.
C) total revenue equals total cost.
D) price exceeds average total cost.
26) What is always true at the quantity where a firm’s average total cost equals average revenue?
A) The firm’s revenue is maximized.
B) The firm’s profit is maximized.
C) The firm breaks even.
D) Marginal cost equals marginal revenue.
27) Profit is the difference between
A) marginal revenue and marginal cost.
B) total revenue and variable cost.
C) total revenue and total explicit cost.
D) total revenue and total cost.
Table 9-3
Quantity
Total Cost
Average Total Cost
Marginal Cost
0
$10.00
—–
—–
1
15.00
$15.00
$5.00
2
17.50
8.75
2.50
3
22.50
7.50
5.00
4
30.00
7.50
7.50
5
40.00
8.00
10.00
6
52.50
8.75
12.50
7
67.50
9.64
15.00
8
85.00
10.63
17.50
9
105.00
11.67
20.00
Arnie sells basketballs in a perfectly competitive market. Table 9-3 summarizes Arnie’s output per day (Q), total cost (TC), average total cost (ATC) and marginal cost (MC).
28) Refer to Table 9-3. What price (P) will Arnie charge and how much profit will he earn if the market price of basketballs is $12.50?
A) Price and profit cannot be determined from the information given.
B) P = $12.50; profit = $52.50
C) P = $12.50; profit = $22.50
D) P = $20; profit = $75.00.
29) Refer to Table 9-3. What will Arnie’s output be and how much profit will he earn if the market price of basketballs is $5.00?
A) Q = 1; profit = -$10.
B) Q = 3; profit = -$7.50
C) Q = 0; profit = -$10.00
D) Price and profit cannot be determined from the information given.
30) A firm will break even when
A) P = ATC.
B) P > ATC.
C) P < AVC.
D) P = AVC.
