For next five problems, you’ll be filling in the blanks.

For next five problems, you’ll be filling in the blanks. Enter numbers only and do NOT enter in dollar signs.Keep in mind that you might have to enter in a negative number. To do this, you WILL have to enter in a minus sign (-) in front of the number.

1.

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Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit.

When the market price is P = $14,

What is the profit maximizing level of output? 

What is total revenue at this level of output? 

What is the total cost at this level of output? 

What is the profit at this level of output? 

2.

Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit.

When the market price is P = $18,

What is the profit maximizing level of output? 

What is total revenue at this level of output? 

What is the total cost at this level of output? 

What is the profit at this level of output? 

3.

Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit.

When the market price is P = $44,

What is the profit maximizing level of output? 

What is total revenue at this level of output? 

What is the total cost at this level of output? 

What is the profit at this level of output? 

4.

Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit.

When the market price is P = $53,

What is the profit maximizing level of output? 

What is total revenue at this level of output? 

What is the total cost at this level of output? 

What is the profit at this level of output? 

5.

Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit.

When the market price is P = $70,

What is the profit maximizing level of output? 

What is total revenue at this level of output? 

What is the total cost at this level of output? 

What is the profit at this level of output? 

6.

In the short run, as output increases,

A) the difference between average total cost and average variable cost decreases.B) the difference between total cost and average variable cost decreases.C) marginal cost eventually decreases.D) All of the above are correct.

7.

The explanation for why marginal cost is positive and rising in the short run is ________ marginal product of labor in the production process.

A) a zeroB) a constantC) an increasingD) a diminishing

8.

If marginal cost is above average variable cost, then

A) average variable cost is increasing.B) marginal cost must be decreasing.C) average variable cost is constant.D) average variable cost is decreasing.

9.

The marginal cost curve intersects the average variable cost curve at the ________ value of the average variable cost curve.

A) maximumB) minimumC) zeroD) average

10.

If marginal cost is between average variable cost and average total cost, then

A) both average variable cost and average total cost are increasing.B) both average variable cost and average total cost are decreasing.C) average variable cost is increasing and average total cost is decreasing.D) average variable cost is decreasing and average total cost is increasing.

11.

The formula for MC is

A) TVC/q.B) q/TVC.C) ΔTVC/q.D) ΔTVC/Δq.

12.

Because marginal cost is always ________ in the short run, total variable cost always ________ when output increases.

A) positive; increasesB) positive; decreasesC) negative; increasesD) negative; decreases

13.

Assume firms break even in an industry. New firms ________ attracted to the industry and current ones ________ exiting it.

A) are not; are notB) are not; areC) are; are notD) are; are

14.

Firms that are “breaking even” are

A) earning zero economic profits.B) earning less than a normal rate of return.C) shutting down in the short run.D) All of the above are correct.

15.

A profit-maximizing strategy becomes a loss minimization strategy when a firm in a perfectly competitive industry is producing where

A) AVC < P < ATC.B) P > ATC.C) P = ATC.D) MR = MC < P.

16.

A firm will choose to operate rather than shut down as long as

A) price is greater than or equal to AFC.B) AFC is greater than AVC.C) price is greater than or equal to AVC.D) AVC is greater than MC.

17.

Economic profit is

A) (P‐ATC)q.B) (P+ATC)q.C) P(q-ATC).D) Pq/ATC.

18.

You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet Shop operates in a perfectly competitive industry. This firm is currently producing at a point where market price equals its marginal cost. The Shopʹs total revenue exceeds its total variable cost, but is less than its total cost. You should advise the firm to

A) cease production immediately because it is incurring a loss.B) lower its price so that it can sell more units of output.C) produce in the short run to minimize its loss, but exit the industry in the long run.D) raise its price until it breaks even.

19.

You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet Shop operates in a perfectly competitive industry. This firm is currently producing at a point where market price equals its marginal cost. The market price is less than its average variable cost. You should advise the firm to

A) cease production immediately because it is not covering its variable costs of production.B) lower its price so that it can sell more units of output.C) produce in the short run to minimize its loss, but exit the industry in the long run.D) raise its price until it breaks even.

20.

A firm will shut down in the short run if

A) it is suffering a loss.B) fixed costs exceed revenues.C) variable costs exceed revenues.D) total costs exceed revenues.

21.

The shutdown point for a perfectly competitive firm is the

A) lowest point on the ATC curve.B) point at which a firmʹs long-run supply curve ends.C) lowest point on the AVC curve.D) lowest point on the marginal cost curve.

22.

If revenues exceed ________, economic profit is ________.

A) total cost; negativeB) total cost; positiveC) variable cost; negativeD) variable cost; positive

23.

If a firm shuts down in the short run, then

A) its economic profits are zero.B) its losses are equal to its fixed costs.C) its operating profits are positive.D) it must be the case that other firms in the industry are earning positive profits.

24.

The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $4.00 and its AFC is $3.00. What should Taste Freeze do?

A) Continue to produce because price exceeds AVCB) Shut down and produce zero sandwiches because price is less than ATCC) Decrease production so that AVC will decreaseD) Increase production so that AFC will decrease

25.

Refer to Figure A. In which of the following price ranges will the firm continue to operate but at a loss?

A) $5-$6B) $6-$7C) $7-$8D) $8-$9

26.

Refer to Figure A. The firm’s shut down point is at a price of

A) $5B) $6C) $7D) $8

27.

Refer to Figure A. Suppose demand for wheat is initially D2. If consumer incomes increase, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat and individual profit maximizing firms will produce ________ bushels of wheat.

A) D3; increase; 15B) D1; increase; 10C) D3; decrease; 7D) D1; decrease; 0

28.

Refer to Figure A. Suppose demand for wheat is initially D2. If the price of rice (a substitute for wheat) falls, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat and individual profit maximizing firms will produce ________ bushels of wheat.

A) D3; increase; 15B) D1; increase; 13C) D3; decrease; 10D) D1; decrease; 0

29.

Refer to Figure A. If demand for wheat is D2, then a profit maximizing firm will produce ________ units and earn a profit of ________.

A) 13; $0B) 7; $0C) 13; $91D) 15; $30

30.

Refer to Figure A. If demand for wheat is D3, then a profit maximizing firm will produce ________ units and earn ________.

A) 15; positive profitsB) 9; positive profitsC) 12; negative profitsD) 13; exactly a normal return

31.

Refer to Figure A. If demand for wheat is D3, then in the long run

A) the firm will shut down.B) the firm will exit the industry.C) new firms will enter the industry and the current firms will expand production.D) None of the above is correct.

32.

Refer to Figure A. If demand for wheat is D1, then a profit maximizing firm will produce ________ units and earn ________.

A) 0; negative profitsB) 5; zero profitsC) 10; negative profitsD) 12; positive profits

33.

Refer to Figure A. If demand for wheat is D1, then in the long run

A) the firm will increase its price and output.B) the firm will exit the industry.C) new firms will enter the industry and the current firms will expand production.D) firms will increase their output so that their average fixed cost per unit falls.

============================================

For the next two questions, you will be filling in the blanks.

Do not enter in dollar signs or other symbols.

Do NOT put commas in your larger numbers.  For example, suppose the question asks “What is 512 * 16?”  Enter8192 as an answer and do NOT type 8,192

34.

Suppose a monopolist faces the following demand curve:

P = 200 – 6Q

Marginal cost of production is constant and equal to $20, and there are no fixed costs.

What is the monopolist’s profit-maximizing level of output? 

What price will the profit-maximizing monopolist charge

How much profit will the monopolist make if she maximizes her profit? 

What would be the value of consumer surplus in this monopoly market? 

How much consumer surplus would there be if this market was perfectly competitive? 

What is the value of the deadweight loss when the market is a monopoly? 

35.

Suppose a monopolist faces the following demand curve:

P = 250 – 2Q

Marginal cost of production is constant and equal to $10, and there are no fixed costs.

What is the monopolist’s profit-maximizing level of output? 

What price will the profit-maximizing monopolist charge? 

How much profit will the monopolist make if she maximizes her profit? 

What would be the value of consumer surplus in this monopoly market? 

How much consumer surplus would there be if this market was perfectly competitive? 

What is the value of the deadweight loss when the market is a monopoly? 

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