Question 1

We can construct a LRAC curve from a succession of SRAC curves. We call this LRAC curve:

Accepted Answer

A)   the exponential curve
B)   the envelope curve
C)   the expansion curve
D)   the encompass curve

Question 2

Match the correct answer to each of the below statement.
(a) Marginal cost is equal to:
(b) Average Total Cost is equal to:
(c) Average Fixed Cost is equal to:

(a)	Marginal cost is equal to:
(b)	Average Total Cost is equal to:
(c)	Average Fixed Cost is equal to:

Accepted Answer

(a) iii
(...

Question 3

All portions of the MC curves are upward sloping.

Accepted Answer

A) True 
 B)False

Question 4

If all factors are variable and their quality and productivity can be changed, then we must be operating in:

Accepted Answer

A)   the long run
B)   the short run
C)   the very long run
D)   the very short run

Question 5

If a firm sells each unit of its output at the same price, then:

Accepted Answer

A)   price and average revenue are equal
B)   price and marginal revenue are equal
C)   price and total revenue are equal
D)   both answers A and B are correct

Question 6

The traditional profit- maximising theory of the firm has been criticised by some economists because:

Accepted Answer

A)   firms do not know how to maximise profits
B)   firms have other aims
C)   it does not explain monopolistic competition
D)   A and B

Question 7

Total revenue divided by quantity is:

Accepted Answer

A)   normal profit
B)   average revenue
C)   economic profit
D)   marginal revenue

Question 8

Moving along a straight line demand curve, where demand is__________ , marginal revenue is__________ .

Accepted Answer

A)   elastic; equal to one
B)   elastic; negative
C)   inelastic; positive
D)   inelastic; negative

Question 9

Because of asymmetric information and different goals, agents may not always carry out the wishes of their principals. Asymmetric information, in this case, refers to the fact that principals have superior knowledge.

Accepted Answer

A) True 
 B)False

Question 10

A firm which earns normal profit:

Accepted Answer

A)   is covering all its costs including the opportunity costs of being in business
B)   is covering the opportunity costs of being in business, but not its input costs
C)   is covering the cost of its inputs, but not the opportunity costs of being in business
D)   is covering neither the opportunity costs of being in business nor its input costs

Question 11

If a firm produces 400 units of output per month and sells each unit at a price of $90, its total revenue is equal to:

Accepted Answer

A)   $32 000
B)   $36 000
C)   $34 000
D)   $38 000

Question 12

A firm reaping economies of scale is typically also achieving:

Accepted Answer

A)   decreasing returns to scale
B)   decreasing marginal returns to a fixed factor
C)   increasing returns to scale
D)   increasing marginal returns to a fixed factor

Question 13

Economies of scope are reaped when a firm expands the range of different products that it produces, and per unit cost falls.

Accepted Answer

A) True 
 B)False

Question 14

The time period when all factors are fixed is called:

Accepted Answer

A)   the long run
B)   the very long run
C)   the very short run
D)   the short run

Question 15

Marginal revenue is measured by the change in total revenue divided by the change in quantity.

Accepted Answer

A) True 
 B)False

Question 16

A firm that is a price taker:

Accepted Answer

A)   can increase marginal revenue by increasing its price level
B)   can sell as much output as it wants to at the market determined price
C)   can increase its total revenue by increasing its price
D)   could force other firms to lower their prices by dropping its own price level

Question 17

A fundamental criticism of the traditional theory of the firm is that the decision makers in the firm may not even aim to maximise profits in the first place. On which of the following ideas is this criticism based?

Accepted Answer

A)   Owners of firms are not 'rational'.
B)   Shareholders are not the decision makers and have different interests from them.
C)   Shareholders are really utility maximisers.
D)   Many shareholders do not want to maximise profits.

Question 18

If a firm's demand curve is negatively (downward)  sloping and sales increase by one unit, marginal revenue will be:

Accepted Answer

A)   increasing, as a result of the increase in sales
B)   less than the new lower price
C)   equal to the original price
D)   less than the new higher price

Question 19

Along what portion of a downward- sloping demand curve should a profit- maximising firm produce at?

Accepted Answer

A profit- maximising firm should produce...

Question 20

A firm will shut down in the short run if:

Accepted Answer

A)   it is suffering an economic loss
B)   average total costs exceed average total revenues
C)   marginal revenue is zero
D)   variable costs exceed revenues

Exam 4: Background to Supply

If a firm sells each unit of its output at the same price, then:

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A firm which earns normal profit:

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If a firm's demand curve is negatively (downward) sloping and sales increase by one unit, marginal revenue will be:

Correct AnswerverifiedShow Answer

A fundamental criticism of the traditional theory of the firm is that the decision makers in the firm may not even aim to maximise profits in the first place. On which of the following ideas is this criticism based?

Correct AnswerverifiedShow Answer

The traditional profit- maximising theory of the firm has been criticised by some economists because:

Correct AnswerverifiedShow Answer

Marginal revenue is measured by the change in total revenue divided by the change in quantity.

Correct AnswerverifiedShow Answer

Along what portion of a downward- sloping demand curve should a profit- maximising firm produce at?

Correct AnswerverifiedA profit- maximising firm should produce...View AnswerShow Answer

A firm reaping economies of scale is typically also achieving:

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Moving along a straight line demand curve, where demand is__________ , marginal revenue is__________ .

Correct AnswerverifiedShow Answer

Economies of scope are reaped when a firm expands the range of different products that it produces, and per unit cost falls.

Correct AnswerverifiedShow Answer

A firm will shut down in the short run if:

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We can construct a LRAC curve from a succession of SRAC curves. We call this LRAC curve:

Correct AnswerverifiedShow Answer

The time period when all factors are fixed is called:

Correct AnswerverifiedShow Answer

If a firm produces 400 units of output per month and sells each unit at a price of $90, its total revenue is equal to:

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All portions of the MC curves are upward sloping.

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Total revenue divided by quantity is:

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A firm that is a price taker:

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If all factors are variable and their quality and productivity can be changed, then we must be operating in:

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Match the correct answer to each of the below statement. (a) Marginal cost is equal to: (b) Average Total Cost is equal to: (c) Average Fixed Cost is equal to: (a) Marginal cost is equal to: (b) Average Total Cost is equal to: (c) Average Fixed Cost is equal to:

Correct Answerverified(a) iii (...View AnswerShow Answer

Because of asymmetric information and different goals, agents may not always carry out the wishes of their principals. Asymmetric information, in this case, refers to the fact that principals have superior knowledge.

Correct AnswerverifiedShow Answer

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A profit- maximising firm should produce...
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Moving along a straight line demand curve, where demand is , marginal revenue is .

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(a) iii
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