PHASE 2- HW 7 Flashcards Preview

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Flashcards in PHASE 2- HW 7 Deck (18):
1

The retail trade for clothing would be an example of which market model?

Monopolistic competition

2

In pure competition, the marginal revenue of a firm always equals:

product price

3

Average revenue is: equation

total revenue divided by the quantity of output`

4

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 800 units is $3.50. The minimum possible average variable cost is $3.00. The market price of the product is $4.00. To maximize profit or minimize losses, the firm should:

Select one:
a. continue producing 800 units.
b. produce less than 800 units.
c. produce more than 800 units.
d. shut down.


c. produce more than 800 units.

5

A profit-maximizing firm’s primary goal is to maximize

Select one:
a. the difference between total revenues and total explicit costs.
b. the difference between total revenue and total implicit costs.
c. its total revenues.
d. the difference between total revenues and total explicit and implicit costs

d. the difference between total reveneues and total explicit and implicit costs

6

The Campus Crustacean Company receives $2 per box for its crawfish and is selling 1600 boxes to maximize its profits. What is the per-unit profit on a box of crawfish at the profit-maximizing level of output if the variable cost is $1 per box and fixed costs are $1200?

Select one:
a. $0.25
b. $0.50
c. $1.00
d. $1.25

.25
A

7

A perfectly competitive firm is producing 37 units with a marginal cost of $3. The prevailing price for the output is $5. The firm should
lower price, decrease production, increase production or rasie its price

increase production

8

Which would indicate that a firm is operating under conditions of pure competition and is being productively efficient?

Select one:
a. It is making economic profits in the long run.
b. Marginal cost equals average variable cost.
c. It produces at the minimum average total cost.
d. Its marginal revenue is less than average revenue.

produces at min atc
C

9

Assume a purely competitive increasing-cost industry is in long-run equilibrium. Now suppose that an increase in consumer demand occurs. After all the resulting adjustments have been completed, the new equilibrium price:

Select one:
a. and industry output will be less than the initial price and output.
b. and industry output will be greater than the initial price and output.
c. will be greater, but the new output will be less than initially.
d. will be less, but the new output will be greater than initially.

b. industry output will be greater than initial price and output

10

If there is allocative efficiency in a purely competitive market for a product, the minimum price producers are willing to accept is:

Select one:
a. less than marginal benefit.
b. greater than marginal cost.
c. equal to the amount of efficiency or deadweight losses.
d. equal to the maximum price consumers are willing to pay.

D. equal to max price consumers are willing to pay

11

of the following characteristics, which one applies exclusively to a perfectly competitive firm?

Select one:
a. It seeks to minimize costs.
b. It can sell all it wants to at the prevailing market price.
c. It has a narrow range of prices it can charge for its output.
d. The firm’s only decision is how much price to charge.

b. It can sell all it wants to at the prevailing market price.

12

In the short run, if a firm chooses to operate and produce output, it must be the case that

Select one:
a. it earns a profit.
b. total revenues are greater than or equal to the total cost of fixed and variable factors of production.
c. total revenues are greater than or equal to the cost of fixed factors of production.
d. total revenues are greater than or equal to the cost of variable factors of production

d

13

A purely competitive firm is in short-run equilibrium and its MC exceeds its ATC. It can be concluded that:

Select one:
a. firms will leave the industry in the long run.
b. the firm is realizing an economic profit.
c. the firm is realizing a loss.
d. this is an increasing-cost industry.

b

14

In the short run, if the firm experiences an increase in the cost of a fixed factor of production it will most likely

Select one:
a. increase output.
b. raise its price.
c. decrease output.
d. leave its output decision unchanged

d

15

In a typical graph for a purely competitive firm, the intersection of the total cost and total revenue curves would be:

Select one:
a. a point of maximum economic profit.
b. a point of minimum economic loss.
c. a point where MR = MC.
d. a break-even point.

d`

16

Which is true of normal profits?

Select one:
a. They are necessary to keep a firm in the industry in the long run.
b. They are zero under pure competition in the long run.
c. They are excluded from a firm's costs of production.
d. They are greater than the opportunity cost to the firm.

a

17

Productive efficiency refers to:

Select one:
a. cost minimization, where P = minimum ATC.
b. production, where P = MC.
c. maximizing profits by producing where MR = MC.
d. setting TR = TC.

a

18

When a purely competitive firm is in long-run equilibrium, price is equal to:

Select one:
a. marginal cost, but may be greater or less than average cost.
b. minimum average cost and also to marginal cost.
c. minimum average cost but may be greater or less than marginal cost.
d. marginal revenue but may be greater or less than both average and marginal cost.

b