Question 1

Economic profit is equal to total revenue minus explicit costs.

Accepted Answer

A) True 
 B)False

Question 2

A firm pays a monthly lease of $10,000 and generates $8,000 of revenue a month. Which of the following is TRUE?

Accepted Answer

A)   Firms will enter the industry.
B)   This firm will exit the industry in the long run.
C)   The recoverable costs are less than the difference between revenues and variable costs.
D)   The recoverable costs are less than operating profit.

Question 3

To maximize profit, a firm in a competitive market increases output until:

Accepted Answer

A)   P = TC.
B)   P = AR.
C)   P = MC.
D)   P = AC.

Question 4

Stating that TR = TC is equivalent to stating that:

Accepted Answer

A)   MR = MC.
B)   P = AC.
C)   P = Average fixed cost.
D)   MR = P.

Question 5

Firms will enter an industry when the:

Accepted Answer

A)   price rises above the minimum of the marginal cost curve.
B)   price rises above the minimum of the average total cost curve.
C)   marginal cost rises above the minimum of the average total cost curve.
D)   average cost rises above the minimum of the marginal cost curve.

Question 6

Whenever marginal cost is greater than the average total cost:

Accepted Answer

A)   marginal cost is falling.
B)   average cost is falling.
C)   average cost is constant.
D)   average cost is rising.

Question 7

Fewer potential sellers make a firm-level demand curve ______ in the ______.

Accepted Answer

A)   flatter; short run
B)   flatter; long run
C)   steeper; short run
D)   steeper; long run

Question 8

A firm earning zero economic profits:

Accepted Answer

A)   will shut down immediately.
B)   may continue to operate in the short run but will always shut down in the long run if zero economic profits continue.
C)   is earning just "normal profits."
D)   will not be earning enough to cover all payments to capital and labor.

Question 9

Give two reasons why an industry might be an increasing cost industry and use examples to demonstrate your reasons.

Accepted Answer

Some resources used in production may be...

Question 10

Figure: Profits  How much profit is the firm making at the profit-maximizing quantity?

Accepted Answer

A)   a profit of $300
B)   a profit of $70
C)   The firm is not making a profit-it is making a loss of $300.
D)   The firm is not making a profit-it is making a loss of $70.

Question 11

Graphically illustrate the maximum profit of a firm in a competitive market, and on the same graph depict how the profit-maximizing quantity would change as the price changes.

Accepted Answer

At P₁, profit-maximizing firm would prod...

Question 12

Firms are profitable when price is:

Accepted Answer

A)   greater than average cost.
B)   equal to average cost.
C)   less than average cost.
D)   zero.

Question 13

Use the following to answer questions:
Figure: Costs 
-(Figure: Costs)  Use the figure. At a price of $20, which statement is FALSE?

Accepted Answer

A)   AC = $15
B)   Profit = (20 - 15) 15
C)   Average profit = $5
D)   MC < AC

Question 14

Which of the following statements is TRUE?

Accepted Answer

A)   Accounting profit is usually smaller than economic profit.
B)   Unlike implicit costs, explicit costs require monetary outlays.
C)   Knowledge about explicit costs is more useful for making business decisions than knowledge about implicit costs.
D)   Implicit costs equal explicit costs for for-profit firms.

Question 15

Economic profit differs from accounting profits because of its inclusion of:

Accepted Answer

A)   explicit costs.
B)   incidental costs.
C)   potential costs.
D)   implicit costs.

Question 16

Use the following to answer questions:
Figure: Industry Firms 
-(Figure: Industry Firms)  Refer to the figures. This industry is a(n) :

Accepted Answer

A)   increasing cost industry.
B)   decreasing cost industry.
C)   constant cost industry.
D)   quadratic cost industry.

Question 17

Use the following to answer questions:
Figure: Two-Firm Industry 
-(Figure: Two-Firm Industry)  Refer to the figures. At a market price of $25, the total quantity supplied in the industry is:

Accepted Answer

A)   32 units.
B)   45 units.
C)   15 units.
D)   25 units.

Exam 11: Costs and Profit Maximization Under Competition

A firm earning zero economic profits:

Correct Answer
verified

Graphically illustrate the maximum profit of a firm in a competitive market, and on the same graph depict how the profit-maximizing quantity would change as the price changes.

Correct Answer
verified
At P₁, profit-maximizing firm would prod...
View Answer

Firms are profitable when price is:

Correct Answer
verified

Economic profit differs from accounting profits because of its inclusion of:

Correct Answer
verified

Figure: Profits How much profit is the firm making at the profit-maximizing quantity?

Correct Answer
verified

Fewer potential sellers make a firm-level demand curve in the .

Correct Answer
verified

Give two reasons why an industry might be an increasing cost industry and use examples to demonstrate your reasons.

Correct Answer
verified
Some resources used in production may be...
View Answer

Stating that TR = TC is equivalent to stating that:

Correct Answer
verified

To maximize profit, a firm in a competitive market increases output until:

Correct Answer
verified

Economic profit is equal to total revenue minus explicit costs.

Correct Answer
verified

A firm pays a monthly lease of $10,000 and generates $8,000 of revenue a month. Which of the following is TRUE?

Correct Answer
verified

Use the following to answer questions: Figure: Industry Firms -(Figure: Industry Firms) Refer to the figures. This industry is a(n) :

Correct Answer
verified

Use the following to answer questions: Figure: Two-Firm Industry -(Figure: Two-Firm Industry) Refer to the figures. At a market price of $25, the total quantity supplied in the industry is:

Correct Answer
verified

Use the following to answer questions: Figure: Costs -(Figure: Costs) Use the figure. At a price of $20, which statement is FALSE?

Correct Answer
verified

Which of the following statements is TRUE?

Correct Answer
verified

Firms will enter an industry when the:

Correct Answer
verified

Whenever marginal cost is greater than the average total cost:

Correct Answer
verified

Exam 11: Costs and Profit Maximization Under Competition

A firm earning zero economic profits:

Correct AnswerverifiedShow Answer

Graphically illustrate the maximum profit of a firm in a competitive market, and on the same graph depict how the profit-maximizing quantity would change as the price changes.

Correct Answerverified At P1, profit-maximizing firm would prod...View AnswerShow Answer

Firms are profitable when price is:

Correct AnswerverifiedShow Answer

Economic profit differs from accounting profits because of its inclusion of:

Correct AnswerverifiedShow Answer

Figure: Profits How much profit is the firm making at the profit-maximizing quantity?

Correct AnswerverifiedShow Answer

Fewer potential sellers make a firm-level demand curve ______ in the ______.

Correct AnswerverifiedShow Answer

Give two reasons why an industry might be an increasing cost industry and use examples to demonstrate your reasons.

Correct AnswerverifiedSome resources used in production may be...View AnswerShow Answer

Stating that TR = TC is equivalent to stating that:

Correct AnswerverifiedShow Answer

To maximize profit, a firm in a competitive market increases output until:

Correct AnswerverifiedShow Answer

Economic profit is equal to total revenue minus explicit costs.

Correct AnswerverifiedShow Answer

A firm pays a monthly lease of $10,000 and generates $8,000 of revenue a month. Which of the following is TRUE?

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Industry Firms -(Figure: Industry Firms) Refer to the figures. This industry is a(n) :

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Two-Firm Industry -(Figure: Two-Firm Industry) Refer to the figures. At a market price of $25, the total quantity supplied in the industry is:

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Costs -(Figure: Costs) Use the figure. At a price of $20, which statement is FALSE?

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

Firms will enter an industry when the:

Correct AnswerverifiedShow Answer

Whenever marginal cost is greater than the average total cost:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
At P₁, profit-maximizing firm would prod...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Fewer potential sellers make a firm-level demand curve in the .

Correct Answer
verified

Correct Answer
verified
Some resources used in production may be...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified