Competition, Monopoly, Game theory pbms

# Competition, Monopoly, Game theory pbms - Page 1 Profit...

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Page 1 Profit maximisation 1. If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth, a. they are more likely to become takeover targets of profit- maximizing firms. b. they are less likely to be replaced by stockholders. c. they are less likely to be replaced by the board of directors. d. they are more likely to have higher profit than if they had pursued that policy explicitly. e. their companies are more likely to survive in the long run. 2. Every firm maximizes profit where a. average revenue equals average cost. b. average revenue equals average variable cost. c. total costs are minimized. d. marginal revenue equals marginal cost. e. marginal revenue exceeds marginal cost by the greatest amount. 3. Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as a. P = MR. b. P = AVC. c. AR = MR. d. P = MC. e. P = AC. 4. Higher input prices result in a. upward shifts of MC and reductions in output. b. upward shifts of MC and increases in output. c. downward shifts of MC and reductions in output. d. downward shifts of MC and increases in output. e. increased demand for the good the input is used for. 5. A firm's producer surplus equals its economic profit when a. average variable costs are minimized b. average fixed costs are minimized c. marginal costs equal marginal revenue d. fixed costs are zero e. total revenues equal total variable costs 6. In a supply-and-demand graph, producer surplus can be pictured as the a. vertical intercept of the supply curve. b. area between the demand curve and the supply curve to the left of equilibrium output. c. area under the supply curve to the left of equilibrium output.

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d. area under the demand curve to the left of equilibrium output. e. area between the equilibrium price line and the supply curve to the left of equilibrium output.
Page 2 7. In the short run, a perfectly competitive profit maximizing firm that has not shut down a. is operating on the downward-sloping portion of its AVC. b. is operating at the minimum of its AVC. c. is operating on the upward-sloping portion of its AVC. d. is not operating on its AVC. e. can be at any point on its AVC. 8. If a competitive firm's marginal cost always falls as output increases then its profit maximizing output a. can be found where the marginal cost curve intersects the marginal revenue curve b. can be zero c. can generate positive economic profits d. can generate positive producer surplus e. can be found where average variable costs are minimized 9. Generally, long-run elasticities of supply are a. greater than short-run elasticities, because existing inventories can be exploited during shortages. b. greater than short-run elasticities, because consumers

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Competition, Monopoly, Game theory pbms - Page 1 Profit...

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