Microeconomic Principles Multiple choise Questions QUESTION 11 If the price faci
ID: 1194014 • Letter: M
Question
Microeconomic Principles Multiple choise Questions
QUESTION 11
If the price facing the firm in the figure above is P3, the firm's fixed cost is area
BP3DE.
AP3DF.
0AFQ4.
0Q4DP3.
ABEF
QUESTION 12
A firm has market power if it can
maximize profits.
minimize costs.
influence the market price of the good it sells.
hire as many workers as it needs at the prevailing wage rate.
QUESTION 13
In the figure above, at an output level of G, average fixed cost is
0DRT.
(CFLK)/T
F.
F-C.
(F)(G)
QUESTION 14
Consider a competitive market with 50 identical firms. Suppose the market demand is given by the equation QD = 200 - 10P and the market supply is given by the equation QS = 10P. In addition, suppose the following table shows the marginal cost of production for various levels of output for firms in this market.
How many units should a firm in this market produce to maximize profit?
1 unit
2 units
3 units
4 units
QUESTION 15
Refer to Table 14-12. At what quantity does Bill maximize profits?
3
6
7
8
QUESTION 16
In a market with 1,000 identical firms, the short-run market supply is the
marginal cost curve above average variable cost for a typical firm in the market.
quantity supplied by the typical firm in the market at each price.
sum of the prices charged by each of the 1,000 individual firms at each quantity.
sum of the quantities supplied by each of the 1,000 individual firms at each price.
QUESTION 17
Mrs. Smith is operating a firm in a competitive market. The market price is $6.50. At her profit-maximizing level of output, her average total cost of production is $7.00, and her average variable cost of production is $6.00. Which of the following statements about Mrs. Smith’s firm is correct?
Mrs. Smith is earning a loss and should shut down in the short run.
Mrs. Smith is earning a loss but should continue to operate in the short run.
Mrs. Smith is earning a profit since the price is above the average variable cost.
Without knowing Mrs. Smith's marginal cost, we cannot determine whether she should stay in business or shut down.
QUESTION 18
In the figure above, total fixed cost at the profit-maximizing output is
0MHU.
LMHG.
LNJG.
0LGU.
MNJH.
QUESTION 19
Suppose a firm operating in a competitive market has the following cost curves:
Refer to Figure 14-3. If the market price is $10, what is the firm’s total cost?
$15
$30
$35
$5
QUESTION 20
In the long run, a firm will enter a competitive industry if
total revenue exceeds total cost.
the price exceeds average total cost.
the firm can earn economic profits.
All of the above are correct.
BP3DE.
AP3DF.
0AFQ4.
0Q4DP3.
ABEF
Explanation / Answer
ques 20) d. all options reiterate the same fact that in the long run a firm will enter a competitive industry if TR>TC or firm earns economic profits. P>ATC or P>TC/Q or PQ>TC or TR>TC.
ques 12) c. if it can influence the prices, i.e., it is not a price-taker.
ques 16) d. sum of quantities supplied by the 1000 firms at each price.
ques 17) b. At eq MC=P, thus here P<ATC implying an overall loss but P>AVC thus there are operating profits. Hence in the short run it should continue to produce as long as there are operating profits.
Note: for the other ques figures are not visible.