202 S08 PS6 (Practice Exam Questions)

202 S08 PS6 (Practice Exam Questions) - Economics 202...

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Economics 202 Problem Set 6 (Practice Exam Questions) 1. A firm must sell its output at a price of $10. Its MC = $10, AFC = $7, and AC = $12. This firm should A. definitely increase output. B. definitely decrease output. C. definitely keep output the same. D. shut down. E. Not enough information is given to answer this question. 2. In the long run, profit maximizing monopolists make A. zero economic profits. B. positive economic profits. C. negative economic profits. D. positive or zero economic profits. E. positive, zero, or negative economic profits. 3. A monopoly’s market demand curve is given by P = 34 – 4Q and MR = 34 – 8Q. The total cost of the firm is given by TC = 100 + 4Q + Q 2 while MC = 4 + 2Q. In the short run, if this firm behaves optimally A. it makes a positive economic profit. B. it makes a negative economic profit but should stay open. C. it makes a negative economic profit and should shut down. D. None of the above. 4. A monopoly’s supply curve is A. more elastic than is the supply curve of a perfectly competitive industry. B. the same as the market supply curve since the monopoly is the industry. C. vertical in the short run. D. less elastic than is the supply curve of a perfectly competitive industry. E. A and B. F. C and D. G. None of the above. 5. A perfectly competitive firm is currently producing an output where MR = $10, AVC = $8, AFC = $3, and MC = $11. In order to maximize profit, this firm should A. shut down. B. decrease output. C. increase output. D. keep output unchanged. 6. In your role as a consultant, you determine the optimal output for a PC firm. Then, you are informed that the figures you used inadvertently excluded the firm’s fire insurance premium. The optimal output when you take into account the fire insurance premium will be __________ the optimal output you initially calculated. A. lower than B. higher than C. the same as D. cannot be determined without the cost data.
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7. Use the following table which shows the TR and TVC schedules of a hypothetical monopoly for the next question. TR
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202 S08 PS6 (Practice Exam Questions) - Economics 202...

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