CFA I - 1. Demand and Supply

Question 1

If the cross-price elasticity between two goods is negative, the two goods are classified as:

Answer 1

complements

Question 2

Normal profit is best described as:

Answer 2

zero economic profic

Question 3

A firm operating in a perfectly competitive market that increases production by 10% is most likely experience:

Answer 3

a 10% in total revenue

Question 4

The marginal revenue per unit sold for a firm doing business under condition of perfect competition is most likely:

Answer 4

equal to average revenue

Question 5

The short term BEP of production for a firm operating under perfect competition will most likely occur when:
a. price is equal to average total cost
b. marginal revenue is equal to marginal cost
c. marginal revenue is equal to average variable cost

Answer 5

price is equal to average total cost.
in perfect competition P=MR
BEP -> MR = AVC

Question 6

The short term shutdown point of production for a firm operating under perfect competition will most likely occur when:
a. price is equal to average total cost;
b. marginal revenue is equal to total cost
c. marginal revenue is equal to average variable cost

Answer 6

marginal revenue is equal to average variable cost.

Question 7

A profit maximum is LEAST likely to occur when:
a. average total cost is minimized
b. marginal revenue equals marginal cost
c. the difference between total revenue and total cost is maximized

Answer 7

average total cost is minimized