Reduce revenues will rise by more than costs from

 reduce; revenues will rise by more than costs from
producing less output, increasing the firm's
profit Incorrect
 reduce; total revenues exceed total costs Incorrect
 expand; revenues will rise by more than costs from
selling additional units of output, increasing the firm's
profit ( True Answer )Correct
 leave output unchanged; selling additional units of
output will cause marginal revenue to increase by a
smaller amount than marginal cost Incorrect
452 To maximize profits, a firm should produce where:
 MR = MC . ( True Answer )Correct
 TR/Q = TC/Q . Incorrect
 P = AVC . Incorrect
 ATC < P < AVC . Incorrect
45
3
Figure 8.2

Reference: Ref 8-4
(Figure 8.2) The total revenue curve for a perfectly competitive firm is
represented by curve:
 A. Incorrect
 B . ( True Answer )Correct
 C . Incorrect
 D . Incorrect
454 Which of the following statements is TRUE of price-taker firms?
I. ? TR/ ? Q = P = MR
II. Price takers must lower their price to sell additional units of output
because demand curves slope downward.
III. If a price taker decides to increase output, the market price will
decrease.
IV. Examples of price takers include McDonald's, Burger King,
Wendy's, and SONIC Drive-in.
 II and III Incorrect
 I, II, III, and IV Incorrect
 I only ( True Answer )Correct
 II and IV Incorrect
455 Figure 8.3
Reference: Ref 8-5

(Figure 8.3) The graph depicts the market for walnuts?a perfectly
competitive market. Which of the following statements is TRUE?
I. The demand curve facing a walnut grower is perfectly elastic at
$1.00.
II. If a walnut grower sold 80,000 pounds of walnuts, his total revenue
would equal $138,400.
III. If a walnut grower sold one more pound of walnuts, his total
revenue would increase by $1.73.
�
 I, II, and III Incorrect
 II only Incorrect
 II and III ( True Answer )Correct
 I only Incorrect
45
6
Figure 8.4
Reference: Ref 8-6
(Figure 8.4) In a perfectly competitive market with 5,000 firms, the
equilibrium price and quantity are $0.70 and 3.0 million units. The
demand curve facing a firm in this market is represented by:
 panel (a). Incorrect
 panel (b). Incorrect
 panel (c). ( True Answer )Correct