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Chapter #11, 12 and 13 QUIZ 1. In a perfectly competitive industry the market price is $25. A firm is currently producing 10,000 units of output; average total cost is $28, marginal cost is $20, and average variable cost is $20. The firm should C a. Raise price because the firm is losing money. b. Keep output the same because the firm is producing at minimum average variable cost. ___ c. Produce more because the next unit of output increases profit by $5. d. Produce less because the next unit of output decreased profit by $3. e. Shut down because the firm is losing money Questions 2-3 refer to the following figure: The graph shows demand and marginal cost for a perfectly competitive firm. 2. If the firm is producing 100 units of output, increasing output by one unit would ______ the firm's profit by ______. D a. increase, $3. b. ncrease, $2. ____ c. decrease, $1. d. increase, $1. e. decrease, $2. 3. If the firm is producing 300 units of output, decreasing output by one unit would ______ the firm's profit by ______. B a. decrease, $2. b. increase, $2. ___ c. increase, $3. d. decrease, $5. e. increase, $5. 4. A competitive firm will maximize profit by producing the level of output at which: E a. The last unit of output produced adds the same amount to total revenue as to total cost. b. The additional revenue from the last unit of output produced exceeds the additional cost of the last unit by the largest amount.... View Full Document

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