ProbSet13-16 - EC201 Spring 2010 Professor Steven Haider...

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EC201: Spring 2010 Professor Steven Haider Problem Sets for Chaps 13-16 NOTE: An answer key follows each of the chapters. In the answer key, each question is assigned a “Topic”, which generally refers to a subtitle of the text. Thus, if you would like additional information about any of the questions, these topics will point you to where to look in the text. Version: 24-Mar-10
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Chapter 13 Page 1 1. Price-takers are individuals in a market who: A) select a price from a wide range of alternatives. B) select the lowest price available in a competitive market. C) select the average of prices available in a competitive market. D) have no ability to affect the price of a good in a market. 2. The marginal revenue received by a firm in a perfectly competitive market: A) is greater than the market price. B) is less than the market price. C) is equal to its average revenue. D) increases with the quantity of output sold. 3. Suppose a perfectly competitive firm can increase its profits by increasing its output. Then it must be the case that the firm's: A) marginal revenue exceeds its marginal cost. B) price exceeds its average variable cost, but is less than average total cost. C) marginal cost exceeds its marginal revenue. D) price exceeds its marginal revenue. 4. Zoe's Bakery determines that P < ATC and P > AVC. Zoe should: A) continue to operate even though she is experiencing an economic loss. B) continue to operate as she is making an economic profit. C) shut down immediately as she is experiencing an economic loss. D) raise the price until she has maximized her profits. Use the following to answer question 5:
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Chapter 13 Page 2 5. (Table: Variable Costs for Lots) During the winter, Alexa runs a snow-clearing service, and snow-clearing is a perfectly competitive industry. Her only fixed cost is $1,000 for a tractor. Her variable costs per cleared lot, shown in the table, include fuel and hot coffee. What is Alexa's shut-down price in the short run? A) $0 B) $15 C) $50 D) $42 HINT: Just consider the quantities in the table: 0, 10, 20, 30, 40, or 50. Use the following to answer question 6: Figure: Total Cost 6. (Figure: Total Cost) In the figure, total cost at the profit-maximizing quantity of bushels when the market price is $14 is $________. A) 3.50 B) 14 C) 56 D) 72
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Chapter 13 Page 3 Use the following to answer questions 7-9: Figure: A Perfectly Competitive Firm in the Short Run 7. (Figure: A Perfectly Competitive Firm in the Short Run) The firm's total revenue from the sale of its most profitable level of output is: A) 0 GLD. B) 0 GHB. C) BH. D) DL. 8. (Figure: A Perfectly Competitive Firm in the Short Run) The firm's total economic profit at its most profitable level of output is: A) 0 GHB. B)
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ProbSet13-16 - EC201 Spring 2010 Professor Steven Haider...

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