200810021150570

200810021150570 - Microeconomics Testbank 1,...

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Microeconomics – Testbank 1, (Hubbard/O’Brien) Chapter 11: Firms in Perfectly Competitive Markets MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If a perfectly competitive seller is producing at an output where price is $8 and the marginal cost is $3.45, then to maximize profits the firm should: A) continue producing at the current output. B) produce a larger output. C) produce a smaller output. D) not enough information is given to answer the question. Answer: B Diff: 2 Page Ref: 362 2) Assuming the tuna fishing industry is perfectly competitive, if as demand for tuna increases, fishing boats have to go farther into the ocean to catch tuna, then the industry is: A) a decreasing - cost industry. B) a fixed - cost industry. C) an increasing - cost industry. D) a constant - cost industry. Answer: C Diff: 3 Page Ref: 375 Refer to Figure 11.1 for the questions below. Figure 11.1 3) At price P4 in the long run, the industry including the firm in figure 11.1 would: A) remain the same size. B) cease to exist. C) have exit of some existing firms. D) have entry of new firms. Answer: D Diff: 3 Page Ref: 369 4) When a competitive firm finds that the market price is below its minimum average variable cost level, it will sell: A) the output where average total costs equal price. B) nothing at all, the firm shuts down. C) the output level where marginal revenue equals marginal cost.
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D) any positive output the entrepreneur decides upon because all of it can be sold. Answer: B Diff: 2 Page Ref: 366 5) If a perfectly competitive seller is producing at an output where price is $114 and the marginal cost is $114, what should the seller do to maximize profits? A) Produce a larger output. B) Produce a smaller output. C) Not enough information is given to answer the question. D) Continue to produce the current output. Answer: D Diff: 2 Page Ref: 362 Refer to Figure 11.1 for the questions below. Figure 11.1 6) At price P2, the firm in figure 11.1 would produce: A) Q5. B) zero. C) Q6. D) Q1. Answer: A Diff: 3 Page Ref: 362 7) In the long run, a perfectly competitive market will: A) supply whatever amount consumers will buy at an economic profit price. B) supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. C) produce only the quantity of output that yields a long run profit for the typical firm. D) all of the above. Answer: B Diff: 2 Page Ref: 373
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Refer to Figure 11.1 for the questions below. Figure 11.1 8) At price P3, the firm in figure 11.1 would: A) make a profit. B) suffer a loss less than fixed costs. C) suffer a loss equal to fixed costs.
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200810021150570 - Microeconomics Testbank 1,...

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