Microeconomic Principles multiple choice questions QUESTION 1 A firm in a compet
ID: 1194102 • Letter: M
Question
Microeconomic Principles multiple choice questions
QUESTION 1
A firm in a competitive market has the following cost structure: If the firm's fixed cost of production is $3, and the market price is $10, how many units should the firm produce to maximize profit?
1 unit
2 units
3 units
4 units
QUESTION 2
Competitive markets are characterized by
a small number of buyers and sellers.
unique products.
the interdependence of firms.
free entry and exit by firms.
QUESTION 3
A competitive firm is currently producing a quantity of output at which marginal revenue exceeds marginal cost. In order to increase its profit, the firm should
increase the price of the good that it produces and sells.
increase its quantity of output.
decrease its total cost.
decrease its average total cost.
QUESTION 4
Suppose that a firm in a competitive market has the following cost curves:
Refer to Figure 14-1. If the market price falls below $4.50, the firm will earn
positive economic profits in the short run.
negative economic profits in the short run but remain in business.
negative economic profits in the short run and shut down.
zero economic profits in the short run.
QUESTION 5
A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its
opportunity costs.
fixed costs.
variable costs.
total costs.
1 unit
2 units
3 units
4 units
Explanation / Answer
1 3 units should be produced by firms to maximize profits.
2 free entry and exit of firms.
3 increase the price of good that it sells.
5 total cost