Practice Test 14 - Practice Test 14 Multiple Choice...

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Practice Test 14 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. When buyers in a competitive market take the selling price as given, they are said to be a. market entrants. b. monopolists. c. free riders. d. price takers. Use the information for a competitive firm in the table below to answer the following questions. Table 14-2 Quantity Total Revenue Total Cost 0 $0 $10 1 9 14 2 18 19 3 27 25 4 36 32 5 45 40 6 54 49 7 63 59 8 72 70 9 81 82 ____ 2. Refer to Table 14-2. At which quantity of output is marginal revenue equal to marginal cost? a. 3 b. 6 c. 8 d. All of the above are correct. ____ 3. When managers of firms think at the margin and make incremental adjustments to the level of production, they are naturally led to a level of production where a. average variable cost exceeds marginal cost. b. total cost is less than average revenue. c. costs are minimized. d. profit is maximized. ____ 4. When calculating marginal cost, what must the firm know? a. sunk cost b. variable cost c. fixed cost d. All of the above are correct. ____ 5. The additional revenue a firm in a competitive market receives if it increases its production by one unit equals its a. marginal revenue. b. average revenue. c. price per unit of output. d. All of the above are correct.
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The graph below depicts the cost structure for a firm in a competitive market. Use the graph to answer the fol- lowing questions. Figure 14-2 ____ 6. Refer to Figure 14-2. Which of the following statements best reflects the situation faced by the firm when price falls from P 4 to P 2 ? a. Average total cost is lower than at the previous level of output so it increases production. b. The firm will earn profit equal to (P 4 - P 2 ) Q 2 . c. Marginal revenue is lower than marginal cost at the previous level of output, so it de- creases production. d. Marginal revenue is higher than marginal cost at the previous level of output, so it in- creases production. ____ 7. A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as a. average revenue is greater than average total cost. b. average revenue is equal to marginal cost. c. marginal cost is greater than average total cost. d. price is above or below marginal cost. ____ 8. The short-run supply curve for a firm in a perfectly competitive market is a. likely to be horizontal. b. likely to slope downward. c. determined by forces external to the firm. d. its marginal cost curve (above average variable cost). The figure below depicts the cost structure of a profit-maximizing firm in a competitive market. Use the fig- ure to answer the following questions.
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This note was uploaded on 11/24/2010 for the course ECON 1003 taught by Professor None during the Spring '10 term at University of Florida.

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Practice Test 14 - Practice Test 14 Multiple Choice...

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