Exam #2 (pt.1- WS 4)

Question 1

In the short run, a firm will shut down if:

A. MR is greater than minimum AVC
B. MR is less than minimum AVC
C. MR = Py
D. MR is less than minimum ATC

Answer 1

B

Question 2

The output level that maximizes profit is found where:

A. The added revenue from selling an additional unit of output is equal to the additional cost of producing that unit of input
B. The slope of the total cost curve is equal to the slope of the total revenue line
C. MR = MC
D. all of the other answers

Answer 2

D.

Question 3

If Py increases and costs of production remain unchanged, the profit-maximizing firm will:

A. Decrease output because it costs more to produce each unit of output
B. Will increase output until the new MR is equal to the MC
C. Will use the same level of inputs
D. Will produce the same amount of output since the firm is a price taker and cannot affect market prices

Answer 3

B.

Question 4

A profit-maximizing firm will produce where:

A. The additional value of output from using another unit of input is equal to the cost of using that unit of input
B. The difference between total revenues and total costs is largest
C. MR = MC
D. All of the above

Answer 4

D.

Question 5

To find the profit-maximizing level of input use, a firm must know:

A. MRP, Py, and Px
B. MRP, TRP, Py
C. Px, MFC, and TFC
D. ARP, Py, and TRP

Answer 5

A.

Question 6

An increase in a tax on an input will result in:

A. An increase in input use, and an increase in output
B. A decrease in input use, and a decrease in output
C. A decrease in input us, and an increase in output
D. An increase in input use, and a decrease in output

Answer 6

B.

Question 7

The firm’s demand curve for a factor is:

A. MRP in Stage II
B. ARP in Stage II
C. MRP in Stage III
D. TRP in Stage I

Answer 7

A.

Question 8

Perfect competition is an important assumption in economics, because it is used to assume:

A. certeris paribus
B. TC = TFC + TVC
C. the shutdown point will never be reached
D. Prices are fixed

Answer 8

D.

Question 9

The break-even point is:

A. Always calculated from the difference between average cost and average revenue in the short run
B. Always calculated from the difference between total costs and total revenues in the short run
C. Always calculated from the difference between average fixed cost and average revenue in the short run
D. Always greater than the shutdown point in the short run

Answer 9

D.

Question 10

Profit, on a per-unit basis, is calculated as:

A. The difference between average total cost and marginal revenue
B. The difference between marginal cost and product price
C. The difference between average fixed cost and marginal revenue
D. The difference between average variable cost and marginal revenue

Answer 10

A.

Question 11

The pizza restaurant should stay in business as long as:

A. It can cover all of its variable costs, and at least some of the fixed costs
B. It can cover all of its fixed costs, and at least some of the variable costs
C. It can pay the total costs
D. Price is greater than ATC

Answer 11

D.

Question 12

The profit-maximizing level of pizza is found where:

A. MR = MC, and MC cuts MR from below
B. MR = MC and MR cuts MC from below
C. MR = MC and MC cuts MR from above
D. MR = MC and MR cuts MC from above

Answer 12

A.

Question 13

Of the input of Tom listed below, what is most likely to be a fixed cost?
A. Labor
B. Water
C. Sugar
D. Rent on the factory

Answer 13

D.

Question 14

What are the units for TFC?

A. $
B. $/ tortillas
C. tortillas
D. $/mt

Answer 14

A.

Question 15

What are the units of ATC?

A. $
B. $/tortillas
C. tortillas
D. $/mt

Answer 15

B.

Question 16

What are the units for AVC?

A. $
B. $/tortillas
C. Tortillas
D. $/mt

Answer 16

B.

Question 17

The MC for Tom’s Tortillas represents:

A. Additional costs of production for one more tortilla
B. additional costs of production for one more mt of wheat
C. average costs of production for one more mt of wheat
D. average costs of production for one more worker

Answer 17

A.

Question 18

Suppose Tom is earning zero economic profit; Tom:

A. could do better in a different occupation
B. is earning as much as he is worth
C. should shut down immediately
D. didn’t take opportunity costs into account

Answer 18

B.

Question 19

A pineapple grower with positive economic profit might stay in business because:

A. she is making more than she could earn in the next-best alternative
B. she could make more in a factory job
C. neither a nor b
D. both a and b

Answer 19

A.

Question 20

A dairy farmer with negative economic profit might stay in business, because:

A. she prefers farming over other occupations
B. it could be a bad weather year in the short run
C. both a and b
D. neither a nor b

Answer 20

A.

Question 21

For a perfectly competitive firm, prices are:

A. fixed and given
B. variable with output
C. variable with input
D. profitable

Answer 21

A.

Question 22

Perfect competition assumes all except the following:

A. homogeneous product
B. large number of buyers
C. profits
D. perfect information

Answer 22

C.

Question 23

The ATC of producing 4 pizzas is equal to :

a. 7
b. 10
c. 12
d. 13

Answer 23

d.

Question 24

The MC of producing 5 pizzas is equal to:
a. 7
b. 8
c. 12
d. 13

Answer 24

8

Question 25

The profit-maximizing number of pizzas is equal to :

a. 4
b. 5
c. 6
d. 7

Answer 25

c.

Question 26

The AVC of producing 4 pizzas is equal to :

a. 7
b. 10
c. 10.50
d. 13.75

Answer 26

c.

Question 27

The maximum number profits earned is equal to:

a. 10
b. 20
c. 30
d. 40

Answer 27

d.

Question 28

The shutdown point is found at a price equal to:

a. 7
b. 10
c. 12
d. 13

Answer 28

b.

Question 29

The TC of producing 7 pizzas is equal to:

a. 10
b. 45
c. 60
d. 110

Answer 29

d.

Question 30

The TFC of producing 5 pizzas is equal to:

a. 7
b. 10
c. 12
d. 13

Answer 30

b.