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8.
A)
B)
C)
D)
12. The
a.
b.
c.
d.
13.
a.
b.
c.
d.
14. A firms average total cost is $60, its average variable cost is
$30, and its total fixed cost is $600.
Its output is
A) 20 units.
B) 30 units.
C) 40 units.
D) 50 units.
15. In the above table, between what two levels of output does one first
observe the law of diminishing
returns?
A) 0 and 1000
B) 1000 and 3000
C) 3000 and 4000
D) 4000 and 4500
Use the information for a competitive firm in the table below to answer
questions 24 through 25.
Quantity
0
1
2
3
4
5
6
7
8
9
Total Revenue
$ 0
9
18
27
36
45
54
63
72
81
Total Cost
$ 10
14
19
25
32
40
49
59
70
82
28. In the above figure, if the price is P1, the firm maximizes its profit by producing
A) nothing.
B) where MC equals ATC.
C) where MC equals P1.
D) where ATC equals P1.
29. In the above figure, if the price is P1, the firm is
A) making an economic profit.
B) incurring an economic loss.
C) breaking even.
D) shut down.
30. Consider the perfectly competitive firm in the above figure. The profit maximizing
level of output
for the firm is equal to
A) 0 units.
B) 14 units.
C) 17 units.
D) 19 units.
31. Consider the perfectly competitive firm in the above figure. At the profit
maximizing level of
output, the firm is earning
A) an economic loss equal to $119.
B) an economic loss equal to $114.
C) an economic loss equal to $102.
D) a normal profit.
profits.
32) The average total cost curves for Plant 1, ATC0, and Plant 2, ATC1,
are shown in the figure above. Over what output range is it efficient to
operate Plant 1?
A) 0-20.
B) 0-25.
C) 20-25.
D) Greater than 25.
33) The average total cost curves for Plant 1, ATC0, and Plant 2, ATC1,
are shown in the figure above. The long-run average cost curve goes
through points
A) C, D, G
B) A, C, E
C) A, B, D, G
D) A, B, D, E, F
34. Which of the following costs do not vary with the amount of output
a firm produces?
a. marginal costs and average fixed costs
b. total fixed costs
c. average fixed costs
d. total fixed costs and average fixed costs
35. In a perfectly competitive market, if a firm finds it is producing
at a level of output such that MR < MC, it will
a. increase output.
b. decrease output.
c. not change its behavior
d. buy more new machines.
P > ATC.
MR = P.
P > AVC.
MR > ATC.
39. If General Motors doubles the quantity of all the inputs needed to
produce automobiles and the quantity produced increases from 100,000 to
200,000 each month that would be an example of
A) increasing marginal returns.
B) constant returns to scale.
C) constant marginal returns to all returns.
D) zero returns to scale.
40. Increasing marginal returns to labor might occur at low levels of
labor input (or when the firm has a small number of workers) because of
A) increasing average costs.
B) differing factor proportions.
C) increasing specialization of tasks.
D) decreasing use of machinery and increasing use of technology.
41. Which of the following statements is true?
A) Only the marginal variable can affect the average variable.
B) Only the average variable can affect the marginal variable.
C) Both the marginal and average variables can influence each other.
D) The marginal and the average variables are not related to each other.
42. If economic profits are earned in a competitive market, then in the
LR
a. additional firms will enter the market.
b. the market supply curve will shift to the right.
c. equilibrium price will fall as more firms enter.
d. all of the above.
43. In the short run, a rise in United Airlines variable costs can be
due to
a. a rise in its wage rates.
b. a rise in its office insurance fees.
c. a rise in the costs of acquiring new airplanes (capital stocks).
d. a rise in total costs.
44. A firm that must sell all of its goods at the prevailing market
price, ___.
a. is a competitive firm.
b. is a monopoly.
c. faces a downward-sloping demand curve.
d. has a fixed supply.
45. In perfect competition, a decline in industry demand will affect
individual firms ____.
a. MR and ATC
b. MC
c. MR
d. ATC
e. AVC
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