Question : 31) A firm will make a profit when A) P : 1245264

31) A firm will make a profit when

A) P > AVC.

B) P > ATC.

C) P = ATC.

D) P = MC.

Figure 9-6

Figure 9-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason’s House of Apples.

32) Refer to Figure 9-6. To maximize his profit, Jason should produce the rate of output indicated by point

A) a.

B) b.

C) e.

D) d.

33) Refer to Figure 9-6. Jason is currently producing 20 thousand pounds of apples. To maximize his profit Jason should

A) keep production at 20 thousand pounds.

B) increase production to the output rate indicated by point d.

C) increase production to the output rate indicated by point e.

D) decrease production to the output rate indicated by point a.

34) Refer to Figure 9-6. Which of the following statements is true?

A) Jason should produce where MC equals $3 (point d) where he will minimize his losses.

B) Jason should produce where the distance between MC and his demand curve is greatest (point b).

C) Jason cannot earn a profit from selling any number of apples.

D) Jason should produce where MC equals $3 (point d) where he will maximize his profit.

35) Refer to Figure 9-6. If Jason maximizes his profit he will produce the output rate indicated by point ________ and his average profit will equal ________.

A) d; $3 minus ATC at point d

B) b; $3 minus ATC at point b

C) e; $3 minus ATC at point e

D) a; $3

36) A perfectly competitive firm will maximize its profit at the rate of output where the vertical distance between its total revenue and total cost is the largest. This is the same rate of output where

A) average total cost equals marginal revenue.

B) marginal revenue equals marginal profit.

C) marginal revenue equals marginal cost.

D) marginal revenue equals average revenue.

Figure 9-7

Figure 9-7 illustrates the cost curves of a perfectly competitive firm.

37) Refer to Figure 9-7. If the market price is P1

A) The firm will experience a loss and raise its price to P2. The firm will then break even.

B) The firm will break even by producing a quantity of Q2.

C) The firm will experience a loss since price is less than ATC.

D) The firm may make a profit if it can increase the demand for its product.

38) Refer to Figure 9-7. If the market price is P3 the firm

A) will break even.

B) will make a profit.

C) will earn enough revenue to cover its variable costs but not its fixed costs.

D) will produce a quantity of Q1.

39) Refer to Figure 9-7. If the market price is P2 the firm

A) will break even and produce a quantity of Q2.

B) will make a profit and produce a quantity of Q2.

C) will make a profit and produce a quantity of Q1.

D) will make a profit and produce a quantity of Q3.

Figure 9-8

40) Refer to Figure 9-8. Suppose the firm produces 4,000 units. What does the shaded area labeled A represent?

A) total variable cost

B) profit

C) total fixed cost

D) total revenue