Quiz_118 - Answer Total Revenue Quantity(TR 0 0 1 5 2 10 3 15 4 20 5 25 6 30 7 35 8 40 9 45 10 50 Total Cost(TC 3 5 6 8 11 15 21 30 42 60 85 Profit-3 0

Quiz_118 - Answer Total Revenue Quantity(TR 0 0 1 5 2 10 3...

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Unformatted text preview: Answer: Total Revenue Quantity (TR) 0 0 1 5 2 10 3 15 4 20 5 25 6 30 7 35 8 40 9 45 10 50 Total Cost (TC) 3 5 6 8 11 15 21 30 42 60 85 Profit -3 0 4 7 9 10 9 5 -2 -15 -35 Marginal Revenue (MR) -- 5 5 5 5 5 5 5 5 5 5 Marginal Cost (MC) -- 2 1 2 3 4 6 9 12 18 25 The profit-maximizing level of output is 5 units. Diff: 2 Page Ref: 401-402/401-402 Topic: Profit-Maximizing Level of Output Learning Outcome: Micro 13: Explain the relationship between production and profits under perfect competition AACSB: Analytic Skills MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 51) Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC) and average total cost (ATC). Which of the following equations is equal to a firmʹs profit? A) P - TC B) (P × Q) - TC D) P - ATC C) (P × Q) - (P × ATC) 51) Answer: B Diff: 2 Page Ref: 403/403 Topic: Profit Learning Outcome: Micro 13: Explain the relationship between production and profits under perfect competition AACSB: Reflective Thinking 52) Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC) and average total cost (ATC). Which of the following equations is equal to a firmʹs average profit? A) (P × Q) - TC B) P - ATC C) (P - ATC) × Q D) P - TC Answer: B Diff: 2 Page Ref: 403/403 Topic: Profit Learning Outcome: Micro 13: Explain the relationship between production and profits under perfect competition AACSB: Reflective Thinking 16 52) 53) If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then A) marginal revenue is less than price. B) price exceeds average total cost. C) average total cost is at a minimum. D) total revenue equals total cost. 53) Answer: B Diff: 3 Page Ref: 403/403 Topic: Profit-Maximizing Level of Output Learning Outcome: Micro 13: Explain the relationship between production and profits under perfect competition AACSB: Reflective Thinking 54) What is always true at the quantity where a firmʹs average total cost equals average revenue? A) The firmʹs profit is maximized. B) The firm breaks even. C) The firmʹs revenue is maximized. D) Marginal cost equals marginal revenue. 54) Answer: B Diff: 1 Page Ref: 406/406 Topic: Break Even Learning Outcome: Micro 13: Explain the relationship between production and profits under perfect competition AACSB: Reflective Thinking 55) Profit is the difference between A) marginal revenue and marginal cost. C) total revenue and total explicit cost. 55) B) total revenue and total cost. D) total revenue and variable cost. Answer: B Diff: 1 Page Ref: 403/403 Topic: Profit Learning Outcome: Micro 13: Explain the relationship between production and profits under perfect competition AACSB: Reflective Thinking 17 Table 12-2 Quantity 0 1 2 3 4 5 6 7 8 9 Average Total Cost Marginal Cost --------$15.00 $5.00 8.75 2.50 7.50 5.00 7.50 7.50 8.00 10.00 8.75 12.50 9.64 15.00 10.63 17.50 11.67 20.00 Total Cost $10.00 15.00 17.50 22.50 30.00 40.00 52.50 67.50 85.00 105.00 Arnie sells basketballs in a perfectly competitive market. Table 12-2 summarizes Arnieʹs output per day (Q), total cost (TC), average total cost (ATC) and marginal cost (MC). 56) Refer to Table 12-2. What price (P) will Arnie charge and how much profit will he earn if the market price of basketballs is $12.50? A) Price and profit cannot be determined from the information given. B) P = $12.50; profit = $22.50 C) P = $12.50; profit = $52.50 D) P = $20; profit = $75.00. 56) Answer: B Diff: 2 Page Ref: 404-405/404-405 Topic: Profit-Maximizing Level of Output Learning Outcome: Micro 13: Explain the relationship between production and profits under perfect competition AACSB: Analytic Skills 57) Refer to Table 12-2. What will Arnieʹs output be and how much profit will he earn if the market price of basketballs is $5.00? A) Q = 0; profit = -$10.00 B) Q = 1; profit = -$10. C) Q = 3; profit = -$7.50 D) Price and profit cannot be determined from the information given. 57) Answer: C Diff: 3 Page Ref: 404-405/404-405 Topic: Profit-Maximizing Level of Output Learning Outcome: Micro 13: Explain the relationship between production and profits under perfect competition AACSB: Analytic Skills 58) 58) A firm will break even when B) P = ATC. A) P > ATC. C) P = AVC. D) P < AVC. Answer: B Diff: 2 Page Ref: 406/406 Topic: Break Even Learning Outcome: Micro 13: Explain the relationship between production and profits under perfect competition AACSB: Reflective Thinking 18 59) 59) A firm will make a profit when B) P = MC. A) P = ATC. C) P > AVC. D) P > ATC. Answer: D Diff: 2 Page Ref: 406/406 Topic: Profit Learning Outcome: Micro 13: Explain the relationship between production and profits under perfect competition AACSB: Reflective Thinking 60) In the early 2000s, some entrepreneurs took advantage of a reduction in the price of computed tomography (CT) scanning equipment by offering apparently healthy people preventive body scans to provide early detection of diseases. This effort failed to earn the entrepreneurs a profit. Which of the following is one reason for this failure? A) Since the CT scan was a voluntary procedure it was not covered under most medical insurance plans. B) The American Medical Association (AMA) refused to endorse the procedure. C) Few people wanted to devote the time needed for an unnecessary medical procedure. D) The Food and Drug Administration (FDA) published a warning to consumers that the procedure could cause negative side effects. 60) Answer: A Diff: 1 Page Ref: 407/407 Topic: Profit and Loss Learning Outcome: Micro 13: Explain the relationship between production and profits under perfect competition AACSB: Reflective Thinking 61) In the early 2000s, some entrepreneurs took advantage of a reduction in the price of computed tomography (CT) scanning equipment by offering apparently healthy people preventive body scans to provide early detection of diseases. Which of the following is one reason for the failure of this effort to be profitable? A) Negative publicity from ʺfalse positivesʺ that occurred from the CT tests reduced the demand for this service. B) The U.S. Congress passed a law that restricted the ability of the entrepreneurs to offer the body scans. As a result, the industry was not able to reach minimum efficient scale. C) The federal government halted the CT body scans until further tests proved the procedure was safe and effective. D) A lack of publicity resulted in few consumers being aware that the procedure was available. Answer: A Diff: 1 Page Ref: 407/407 Topic: Profit and Loss Learning Outcome: Micro 13: Explain the relationship between production and profits under perfect competition AACSB: Reflective Thinking 19 61) ...
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