Question 1

The marginal revenue curve of a firm coincides with the average revenue curve under perfect competition.

Accepted Answer

A) True 
 B)False

Question 2

If barriers to entry exist in a market, then:

Accepted Answer

A)  the costs of entry and exit are relatively low.
B)  there will be few close substitutes of the product in the market.
C)  firms will be incurring losses in both the short and long runs.
D)  firms will tend to have relatively less monopoly power.
E)  the existing firms will quit the market in the long run due to mounting losses.F) A) and C)
G) B) and E)

Question 3

A producer can raise profit by expanding output if:

Accepted Answer

A)  marginal revenue is equal to marginal cost.
B)  marginal revenue is less than marginal cost.
C)  marginal revenue is negative.
D)  marginal cost is negative.
E)  marginal revenue is greater than marginal cost.F) None of the above
G) C) and D)

Question 4

Why does a monopolist face the market demand curve?

Accepted Answer

A)  Presence of a large number of substitutes
B)  Presence of large number of buyers in the market
C)  Barred entry of any new firm in the market
D)  Produces a homogeneous product
E)  Consumers have perfect knowledge of the marketF) C) and E)
G) C) and D)

Question 5

A perfectly competitive firm charges a price which is greater than its marginal cost.

Accepted Answer

A) True 
 B)False

Question 6

Scenario 8.1 Jane left her job at Siemens and started her own boutique.She used to earn $50, 000 annually at Siemens.She took a loan of $10, 000 and used $20, 000 from her personal savings to begin her venture.She agreed to repay the loan with 10% interest.Her business is bringing in $80, 000 annually.She has rent and labor expenses of $15, 000.Also assume that Jane could have used her own money i.e.$20, 000 to buy stocks in Intel which would have returned 5% to her last year.
Refer to Scenario 8.1.Compute Jane's economic profit.

Accepted Answer

A)  $13, 000
B)  $14, 000
C)  $20, 000
D)  $15, 000
E)  $10, 000F) B) and D)
G) C) and D)

Question 7

Goodspeed Automobiles manufactures 100 disc brake cylinders.At this output level, its marginal revenue is equal to its marginal cost.If the revenue per unit of output is $500 and the per unit cost is $350, its profit is:

Accepted Answer

A)  $20, 000.
B)  $15, 000.
C)  $45, 000.
D)  $25, 000.
E)  $10, 000.F) C) and D)
G) A) and D)

Question 8

Graphically, total revenue is represented by the:

Accepted Answer

A)  triangle formed under the demand curve.
B)  rectangle formed under the demand curve at a given price and quantity combination.
C)  rectangle formed under the average-total-cost curve at a given ATC and quantity combination.
D)  line segment between the demand and average-total-cost curves at any level of output.
E)  the line segment between the horizontal axis and the average-total-cost curves at any level of output.F) B) and C)
G) All of the above

Question 9

In general, the two extreme cases of market structure models are represented by

Accepted Answer

A)  monopolistic competition and oligopoly.
B)  oligopoly and monopoly.
C)  oligopoly and perfect competition.
D)  perfect competition and monopoly.
E)  perfect monopoly and oligopolistic competition.F) B) and D)
G) C) and D)

Question 10

Entry of new firms to the industry lowers the economic profit of the existing firms.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is true of marginal cost?

Accepted Answer

A)  Marginal cost is the cost per unit of output produced.
B)  Marginal cost is the change in total cost divided by the change in total output.
C)  Marginal cost curve is negatively sloped at the profit-maximizing level of output.
D)  Marginal cost is equal to total cost divided by the quantity of output.
E)  Marginal cost initially increases with an increase in output but subsequently declines.F) A) and C)
G) C) and D)

Question 12

Under oligopoly market structure, the rival firms take complete independent decisions.

Accepted Answer

A) True 
 B)False

Question 13

Graphically, profit per unit of output can be found by:

Accepted Answer

A)  the triangle formed under the demand curve.
B)  the rectangle formed under the demand curve at a given price and quantity combination.
C)  the rectangle formed under the average-total-cost curve at a given ATC and quantity combination.
D)  the line segment between the demand and average-total-cost curves at any level of output.
E)  the line segment between the horizontal axis and the average-total-cost curves at any level of output.F) A) and C)
G) C) and E)

Question 14

A monopolist faces the least price elastic demand curve because:

Accepted Answer

A)  the consumers have only one place to buy the good.
B)  the monopolist produces a standardized product.
C)  the monopolist undertakes a huge expenditure to produce the product.
D)  the monopolist supplies an insignificant portion of the market.
E)  the monopolist produces an absolutely necessary good having close substitutes.F) A) and B)
G) A) and C)

Question 15

When economic profit is greater than zero, accounting profit is called normal profit.

Accepted Answer

A) True 
 B)False

Question 16

The following graph shows the demand and cost curves of an imperfectly competitive firm.MC and ATC represent the marginal cost curve and the average cost curve respectively. Figure 8.1  In Table 8.1, in order to maximize profits, the firm should increase output until the ____ unit of output.

Accepted Answer

A)  fifth
B)  sixth
C)  seventh
D)  eighth
E)  ninthF) A) and B)
G) A) and E)

Question 17

The table given below shows the total revenue and total cost of producing a commodity. Table 8.1
 In Table 8.1, the marginal revenue from the sixth unit of output is:

Accepted Answer

A)  $1, 700.
B)  $1, 600.
C)  $1, 500.
D)  $1, 300.
E)  $1, 200.F) A) and B)
G) All of the above

Question 18

In monopolistic competition there are no brands, all the producers produce only identical, generic products.

Accepted Answer

A) True 
 B)False

Question 19

The table given below shows the total revenue and total cost of producing a commodity. Table 8.1
 In Table 8.1, in order to maximize profits, the firm should produce ____ units of output.

Accepted Answer

A)  five
B)  six
C)  seven
D)  eight
E)  nineF) None of the above
G) A) and B)

Question 20

In general, the number of firms is lesser in monopolistic competition compared to oligopoly.

Accepted Answer

A) True 
 B)False

Exam 12: Profit Maximization

Graphically, profit per unit of output can be found by:

Correct Answer
verified

A monopolist faces the least price elastic demand curve because:

Correct Answer
verified

Why does a monopolist face the market demand curve?

Correct Answer
verified

The following graph shows the demand and cost curves of an imperfectly competitive firm.MC and ATC represent the marginal cost curve and the average cost curve respectively. Figure 8.1 In Table 8.1, in order to maximize profits, the firm should increase output until the ____ unit of output.

Correct Answer
verified

In general, the number of firms is lesser in monopolistic competition compared to oligopoly.

Correct Answer
verified

The marginal revenue curve of a firm coincides with the average revenue curve under perfect competition.

Correct Answer
verified

The table given below shows the total revenue and total cost of producing a commodity. Table 8.1 In Table 8.1, in order to maximize profits, the firm should produce ____ units of output.

Correct Answer
verified

In general, the two extreme cases of market structure models are represented by

Correct Answer
verified

Goodspeed Automobiles manufactures 100 disc brake cylinders.At this output level, its marginal revenue is equal to its marginal cost.If the revenue per unit of output is $500 and the per unit cost is $350, its profit is:

Correct Answer
verified

Entry of new firms to the industry lowers the economic profit of the existing firms.

Correct Answer
verified

In monopolistic competition there are no brands, all the producers produce only identical, generic products.

Correct Answer
verified

A perfectly competitive firm charges a price which is greater than its marginal cost.

Correct Answer
verified

The table given below shows the total revenue and total cost of producing a commodity. Table 8.1 In Table 8.1, the marginal revenue from the sixth unit of output is:

Correct Answer
verified

Correct Answer
verified

Graphically, total revenue is represented by the:

Correct Answer
verified

Which of the following is true of marginal cost?

Correct Answer
verified

If barriers to entry exist in a market, then:

Correct Answer
verified

A producer can raise profit by expanding output if:

Correct Answer
verified

Under oligopoly market structure, the rival firms take complete independent decisions.

Correct Answer
verified

When economic profit is greater than zero, accounting profit is called normal profit.

Correct Answer
verified

Exam 12: Profit Maximization

Graphically, profit per unit of output can be found by:

Correct AnswerverifiedShow Answer

A monopolist faces the least price elastic demand curve because:

Correct AnswerverifiedShow Answer

Why does a monopolist face the market demand curve?

Correct AnswerverifiedShow Answer

The following graph shows the demand and cost curves of an imperfectly competitive firm.MC and ATC represent the marginal cost curve and the average cost curve respectively. Figure 8.1 In Table 8.1, in order to maximize profits, the firm should increase output until the ____ unit of output.

Correct AnswerverifiedShow Answer

In general, the number of firms is lesser in monopolistic competition compared to oligopoly.

Correct AnswerverifiedShow Answer

The marginal revenue curve of a firm coincides with the average revenue curve under perfect competition.

Correct AnswerverifiedShow Answer

The table given below shows the total revenue and total cost of producing a commodity. Table 8.1 In Table 8.1, in order to maximize profits, the firm should produce ____ units of output.

Correct AnswerverifiedShow Answer

In general, the two extreme cases of market structure models are represented by

Correct AnswerverifiedShow Answer

Goodspeed Automobiles manufactures 100 disc brake cylinders.At this output level, its marginal revenue is equal to its marginal cost.If the revenue per unit of output is $500 and the per unit cost is $350, its profit is:

Correct AnswerverifiedShow Answer

Entry of new firms to the industry lowers the economic profit of the existing firms.

Correct AnswerverifiedShow Answer

In monopolistic competition there are no brands, all the producers produce only identical, generic products.

Correct AnswerverifiedShow Answer

A perfectly competitive firm charges a price which is greater than its marginal cost.

Correct AnswerverifiedShow Answer

The table given below shows the total revenue and total cost of producing a commodity. Table 8.1 In Table 8.1, the marginal revenue from the sixth unit of output is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Graphically, total revenue is represented by the:

Correct AnswerverifiedShow Answer

Which of the following is true of marginal cost?

Correct AnswerverifiedShow Answer

If barriers to entry exist in a market, then:

Correct AnswerverifiedShow Answer

A producer can raise profit by expanding output if:

Correct AnswerverifiedShow Answer

Under oligopoly market structure, the rival firms take complete independent decisions.

Correct AnswerverifiedShow Answer

When economic profit is greater than zero, accounting profit is called normal profit.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified