Chapter 21 Flashcards
A firm that produces at that output at which marginal cost = marignal revenue
- all the time
- most of the time
- some of the time
- on rare occasions
- none of the time
all the time
A consultant has advised Consolidated Fish, Inc. that it should cut back its production in order to increase its profits. We can conclude from this that
- CF’s total cost must be greater than its total revenues
- CF’s marginal cost must be greater than the price of its product
- fixed cost are not being covered and CF should shut down
- CF’s costs are increasing at a rate less than its revenues
CF’s marginal cost must be greater than the price of its product
To find the output at which the firm maximizes its profits you MUST know the firm’s
- ATC
- AVC
- AFC
- MC
MC
To maximize profits, a firm should produce at an output up to the point where
- the difference between price and marginal cost is at its maximum
- total cost equals total revenue
- price equals marginal cost
- total revenue equals variable cost
price equals marginal cost
When MC > MR, the firm should
- keep production unchanged
- increase production
- decrease production
- shut down
- go out of business
decrease production
If marginal cost is equal to marginal revenue
- the firm should expand output
- the firm should contract output
- the firm should hold output constant
- there is no way to determine if the firm should expand output, contract ouput or hold output constant
the firm should hold output constant
Marginal analysis is useful to a firm that seeks to
- maximize its profits, but not minimize its loses
- minimize its losses but not maximize its profits
- both maximize its profits and minimize its losses
- neither maximize its profits nor minimize its losses
both maximize its profits and minimize its losses
Which statement is true?
- The minimum point on the firm’s marginal cost curve is the shutdown point
- The minimum point on the firm’s marginal cost curve is the break–even point.
- The minium point on the firm’s average variable cost curve is the shutdown point
- The minimum point on the firm’s average total cost curve is the shutdown point
The minimum point on the firm’s average variable cost curve is the shutdown point
The lowest point on the firm’s long-run supply curve is
- the shutdown point
- the breakeven point
- between the shutdown point and the break even point
- none of the choices are the lowest point on the firm’s long run supply
The break even point
The minimum possible average total cost of a computer repair shop is $40.00 and the minimum possible average variable cost is $30.00. If you operate this shop, you will shut it down immediately if the equilibrium price of computer repairs falls below:
- $40.00
- $35.00
- $30.00
- $20.00
- $10.00
$30.00
Total revenue divided by output equals:
- marginal cost
- average total cost
- price
- average variable cost
- none of the choices are correct
Price
The lowest point on a firms short-run supply curve is
- breakeven point
- shutdown point
- most profitable output point
- lowest point on the marginal cost curve
shutdown point
The firm’s long run supply curve runs along its ________________curve
- ATC
- AVC
- MC
- MR
MC
Which curve tells us the output at which a firm is producing at peak efficiency
- AFC
- AVC
- ATC
- Demand
ATC
The firm’s break even point occurs at an output of:
- less than 44
- 44
- between 44 and 58
- about 58
- over 60
about 58
The firm’s shutdown point occurs at an output of
- less than 40
- 44
- 58
- 63
- 73
44
The firm’s most profitable output is at:
- 44
- 58
- 63
- 75
- 87
63
A company is operating most efficiently when it is at
- the break-even point
- the shutdown point
- both the break even and shutdown point
- neither the break even nor the shutdown point
the break even point
We say that a business is operating at peak efficiency when its ________________________ is held to a minimum:
- average total cost
- average variable cost
- marginal cost
- price
average total cost
A firm will go out of business if price is below:
- marginal cost
- marginal revenue
- average total cost
- average fixed cost
- average variable cost
average total cost
In the short run if price is below average variable cost the firm will
- go out of business
- stay in business
- shut down
- operate
shut down
If the firm operates in the short run and goes out of business in the long run, than the price must be:
- must be between the shurtdown point and the break even point
- above the break even point
- below the shutdown point
- may be anywhere
must be between the shutdown point and the break even point
Which statement is true?
- A firms will always produce at an output corresponding to the minium point of itsi ATC curve
- Efficiency and profit maximizaiton occur at the same output
- A firm will operate in the short run if total revenue is greater than variable costs
- The rule for maximizing profits is different than the rule for minimizing losses
a firm will operate in the short run if total revenue is greater than variable cost
If price is between the shutdown and break even points, in the short run the firm will __________________ and in the long run the firm will ___________________
- operate; go out of business
- operate; stay in business
- shut down; go out of business
- shut down; stay in busines
operate; go out of business
If price is above the break-even point, in the short run the frim will __________; and in the long run the firm will:
- shut down; stay in business
- shut down; go out of business
- operate; go out of business
- operate; stay in business
operate; stay in business
