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University of south florida- ECO 2023 HW8  Chapter 12 1)Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity

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University of south florida- ECO 2023

HW8  Chapter 12

1)Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity. Identify the area that represents the loss.  ?2) ?______

A) ?P3caP0 ?B) ?P2 deP1 ?C) ?0P1 bQ1 ?D) ?P3cbP1

2) ?If the market price is $25 in a perfectly competitive market, the marginal revenue from selling the fifth unit is  ?3) ?______

A) ?$5. ?B) ?$12.50. ?C) ?$25. ?D) ?$125.

 

3) ?Assume the market for cage-free eggs is perfectly competitive. All else equal, as farmers find it less profitable to produce and sell cage-free eggs in this market ?4) ?______

A) ?the supply curve will shift to the left and the equilibrium price will increase.

B) ?the demand curve will shift to the left and the equilibrium price will decrease.

C) ?the supply curve will shift to the right, the demand curve will shift to the left, and the equilibrium price will decrease.

D) ?the supply curve will shift to the left, the demand curve will shift to the left, and the equilibrium price will increase.

 

 

 

 

4) ?If a typical firm in a perfectly competitive industry is incurring losses, then ?6) ?______

A) ?some firms will enter in the long run, causing market supply to increase and market price to rise increasing profit for all firms. 

B) ?all firms will continue to lose money.

C) ?some firms will exit in the long run, causing market supply to decrease and market price to fall increasing losses for the remaining firms.

D) ?some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profits for the remaining firms.

 

5) ?A perfectly competitive firm's supply curve is its ?7) ?______

A) ?marginal cost curve.

B) ?marginal cost curve above its minimum average fixed cost.

C) ?marginal cost curve above its minimum average total cost.

D) ?marginal cost curve above its minimum average variable cost.

 

6) ?Assuming a market price of $4, fill in the columns in the following table. What is the profit-maximizing level of production? What are the two ways to determine the profit-maximizing level of production?

Quantity	Total Revenue (TR)	Total Cost (TC)	Profit	Marginal Revenue (MR)	Marginal Cost (MC)
0	0	3	-3
1	4	5	-1	4	2
2	8	6	2	4	1
3	12	9	3	4	3
4	16	14	2	4	5
5	20	20	0	4	6
6	24	28	-4	4	8
7	28	40	-12	4	12

Profit-Maximizing level of production is highlighted.

 

 

 

 

 

 

 

 

 

MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question.

7) ?Which of the following is not true for a firm in perfect competition? ?9) ?______

A) ?Price equals average revenue.

B) ?Average revenue is greater than marginal revenue.

C) ?Profit equals total revenue minus total cost.

D) ?Marginal revenue equals the change in total revenue from selling one more unit. 

 

Figure 12-1

 

 

8) ?Refer to Figure 12-3. If the firm is producing 500 units ?10) ?_____

A) ?it is making a loss.

B) ?it is making a profit.

C) ?it should increase its output to maximize profit.

D) ?it should maintain its output to maximize profit.

 

9) ?If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, the firm ?11) ?_____

A) ?should increase output. ?B) ?should increase price.

C) ?should shut down. ?D) ?is earning a profit.

 

10) ?The perfectly competitive market structure benefits consumers because ?12) ?_____

A) ?firms are forced by competitive pressure to be as efficient as possible.

B) ?firms produce high-quality goods at low prices.

C) ?firms add a much smaller markup over average cost than firms in any other type of market structure. 

D) ?firms do not produce goods at the lowest possible price in the long run.

 

11) ?If a perfectly competitive firm's price is above its average total cost, the firm ?13) ?_____

A) ?should shut down. ?B) ?is breaking even.

C) ?is earning a profit. ?D) ?is incurring a loss.

 

12) ?Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit. This condition is referred to as  ?14) ?_____

A) ?perfectly competitive efficiency.  ?B) ?allocative efficiency. 

C) ?constant returns to scale.  ?D) ?productive efficiency.

 

 

Figure 12-9

 

 

Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.

 

13) ?Refer to Figure 12-9. At price P1, the firm would ?15) ?_____

A) ?break even. ?B) ?lose an amount equal to its fixed cost.

C) ?lose an amount more than fixed cost. ?D) ?lose an amount less than fixed cost.

 

14) ?Refer to Figure 12-9. At price P4, the firm would ?16) ?_____

A) ?lose an amount equal to its fixed cost. ?B) ?lose an amount less than fixed cost.

C) ?shut down. ?D) ?make a profit.

 

15) ?Refer to Figure 12-9. At price P1, the firm would produce ?17) ?_____

A) ?Q1 units  ?B) ?Q3 units. ?C) ?Q5 units. ?D) ?zero units. 

 

16) ?Refer to Figure 12-9. At price P3, the firm would ?18) ?_____

A) ?break even. ?B) ?lose an amount less than fixed cost.

C) ?lose an amount equal to its fixed cost. ?D) ?lose an amount more than fixed cost.

 

17) ?Refer to Figure 12-9. At price P3, the firm would produce ?19) ?_____

A) ?Q2 units  ?B) ?Q3 units. ?C) ?Q4 units. ?D) ?Q5 units. 

 

18) ?Refer to Figure 12-9. Identify the firm's short-run supply curve. ?20) ?_____

A) ?the marginal cost curve ?B) ?the marginal cost curve from a and above

C) ?the marginal cost curve from b and above ?D) ?the marginal cost curve from d and above

 

19) ?Refer to Figure 12-9. At price P4, the firm would produce ?21) ?_____

A) ?Q3 units. ?B) ?Q4 units. ?C) ?Q5 units. ?D) ?Q6 units. 

 

20) ?Refer to Figure 12-9. At price P2, the firm would ?22) ?_____

A) ?break even. ?B) ?lose an amount less than fixed cost.

C) ?lose an amount more than fixed cost. ?D) ?lose an amount equal to its fixed cost.

 

21) ?Refer to Figure 12-9. Identify the short-run shut down point for the firm. ?23) ?_____

A) ?a  ?B) ?b ?C) ?c ?D) ?d

 

22) ?Refer to Figure 12-9. At price P2, the firm would produce ?24) ?_____

A) ?Q2 units. ?B) ?Q3 units. ?C) ?Q4 units. ?D) ?zero units.