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Microeconomics - multiple choice questions- part 3

Customer Question

If the loss-minimizing output for a perfectly competitive firm is zero,
then, at all other output levels,
a) price must be greater than average variable cost
b) the marginal cost curve must slope downward
c) marginal cost is less than marginal revenue
d) total revenue is less than variable cost
e) total revenue is less than average variable cost

A perfectly competitive firm that should not shut down in the short run
will maximize profit where
a) VC = 0
b) FC = 0
c) AFC = MC
d) P = MC
e) ATC = 0

Claude's Copper Clappers sells clappers for 40 each in a perfectly
competitive market. At its present rate of output, Claude's marginal cost
is 39 dollars, average variable cost is 45, and average total cost is 60. To
improve his profit/loss situation, Claude should
a) increase output
b) reduce output but not to zero
c) maintain the present rate of output
d) shut down
e) raise the price

Claude's Copper Clappers sells clappers for 60 each in a perfectly
competitive market. At its present rate of output, Claude's marginal cost
is 65, average variable cost is 25, and average total cost is 62. To
improve his profit/loss situation, Claude should
a) increase output
b) reduce output but not to zero
c) maintain the present rate of output
d) shut down
e) raise the price

Suppose a price-taking firm produces 400 units at its optimal output
level. At that output rate marginal cost is 200, average total cost is 240,
and average variable cost is 170. What can you determine about the
market price that would force the firm to shut down in the short run?
a) it equals 200
b) it is between 170 and 240
c) it is less than 170
d) it is between 170 and 200
e) it equals 240

The significance of the minimum point on the average variable cost curve
is that
a) it is the profit-maximizing level
b) it is the selling price
c) it is the point of indifference between producing at a loss or shutting
down
d) if the firm produces one more unit, its AVC will be less than MC
e) it shows the amount of total cost

The perfectly competitive firm's short-run supply curve is the same as the
a) supply curve of all other firms in the industry
b) upward-sloping portion of its marginal cost curve
c) upward-sloping portion of its marginal cost curve at or above
minimum average variable cost
d) upward-sloping portion of its average variable cost curve
e) market demand curve

Which of the following is not a condition of long-run equilibrium for
perfectly competitive firms?
a) price is equal to marginal cost
b) price is equal to minimum short-run average total cost
c) price is equal to minimum long-run average cost
d) price is equal to marginal revenue
e) economic profit is positive

Economic profits in a competitive industry are signals that
a) attract new firms into the industry
b) prevent firms from adopting newer technologies
c) encourage existing firms to continue to operate inefficiently
d) indicate that business conditions are improving
e) cause the industry's resources to be used in lower valued uses

Patent laws
a) reduce incentive to innovate by restricting market entry
b) reduce incentive to innovate by making it difficult to use the patnented
innovation
c) increase incentive to innovate by restricting entry into a market
d) increase incentive to innovate by giving a firm premanent and exclusive
production rights
e) give a firm the right to provide a wide variety of goods or services

The demand curve a monopolist faces
a) is more elastic than a perfectly competitive firm's demand curve
b) is the market demand curve
c) is as eleastic as a perfectly competitive firm's demand curve
d) is not affected by the prices of complements
e) will not shift in response to a change in consumer tastes

Which of the following is true of marginal revenue for a monopolist that
charges a single price?
a) P = MR because there are no close subsititutes for the monopolist's
product
b) P > MR because the monopolist must decrease price on all units sold in
order to sell an additional unit
c) P
Submitted: 9 years ago.
Category: Homework
Expert:  skywalker replied 9 years ago.
If the loss-minimizing output for a perfectly competitive firm is zero,
then, at all other output levels,
a) price must be greater than average variable cost
b) the marginal cost curve must slope downward
c) marginal cost is less than marginal revenue
d) total revenue is less than variable cost
e) total revenue is less than average variable cost

If loss minimizing level of output is zero the we can say that revenues are not even cover the variable costs t total revenue< total costs
The answer is D


A perfectly competitive firm that should not shut down in the short run
will maximize profit where
a) VC = 0
b) FC = 0
c) AFC = MC
d) P = MC
e) ATC = 0

If a firm does not close in S.R will maximize its profit where price is equal to Marginal cost
The answer is D


Claude's Copper Clappers sells clappers for 40 each in a perfectly
competitive market. At its present rate of output, Claude's marginal cost
is 39 dollars, average variable cost is 45, and average total cost is 60. To
improve his profit/loss situation, Claude should
a) increase output
b) reduce output but not to zero
c) maintain the present rate of output
d) shut down
e) raise the price

When price is bigger then miimum level of Avergae cost then it is logical to produce
If price is less then ATC but greater than AVC then in short run firm cover its variable costs so that it can continue to produce
If price is less than AVC then it should close immediately
P< AVC
40<45
So that it is not logical for firm to continue to produce
Firm can not rise price unless he is out of competitive market
The answer is d



Claude's Copper Clappers sells clappers for 60 each in a perfectly
competitive market. At its present rate of output, Claude's marginal cost
is 65, average variable cost is 25, and average total cost is 62. To
improve his profit/loss situation, Claude should
a) increase output
b) reduce output but not to zero
c) maintain the present rate of output
d) shut down
e) raise the price
ascwe know from the previous question if P<ATC   (60<62) but greater than AVC (60>25)then firm can cover its variable costs easily so that firm does not shut down.
But if increase the output then more output will cause more cost so that it is not logial to have higher output (MR<MC , 60<65)
So that the answer is C






Suppose a price-taking firm produces 400 units at its optimal output
level. At that output rate marginal cost is 200, average total cost is 240,
and average variable cost is 170. What can you determine about the
market price that would force the firm to shut down in the short run?
a) it equals 200
b) it is between 170 and 240
c) it is less than 170
d) it is between 170 and 200
e) it equals 240
We know that if price is more than Averge Ttoal cost then it produce
if it is less than ATC but greater then AVC then it produces in the short run
But if it is less then AVC then it should shut doen
Then
If price level is less than 170
Then it is logical to shut down
So that answer is C


The significance of the minimum point on the average variable cost curve
is that
a) it is the profit-maximizing level
b) it is the selling price
c) it is the point of indifference between producing at a loss or shutting
down
d) if the firm produces one more unit, its AVC will be less than MC
e) it shows the amount of total cost
the point where Price is equal to minimum point of average variable cost is the point where irm producing with a loss in short run but he /sh is indifferent between closing or going on
The answer is C



The perfectly competitive firm's short-run supply curve is the same as the
a) supply curve of all other firms in the industry
b) upward-sloping portion of its marginal cost curve
c) upward-sloping portion of its marginal cost curve at or above
minimum average variable cost
d) upward-sloping portion of its average variable cost curve
e) market demand curve
The supply curve of induxtry is the Marginal cost curve but it should be higher than miimum level of average variable cost
So that answer is C


Which of the following is not a condition of long-run equilibrium for
perfectly competitive firms?
a) price is equal to marginal cost
b) price is equal to minimum short-run average total cost
c) price is equal to minimum long-run average cost
d) price is equal to marginal revenue
e) economic profit is positive

In the long run the ouput level equal to where Long run average cost curve is tangent to price line and Margianal cost curve pass through it
Then
Price=Marginal cost
Price= llong run minimum averge cost
P= MR=D
Then also economic profit should be positive
Then
It is not necassry price=minimum short run average cost
The answer is B



Economic profits in a competitive industry are signals that
a) attract new firms into the industry
b) prevent firms from adopting newer technologies
c) encourage existing firms to continue to operate inefficiently
d) indicate that business conditions are improving
e) cause the industry's resources to be used in lower valued uses

If the economic proits are greater than zero then new firms will be courage and they will enter the market
So that answer is a



Patent laws
a) reduce incentive to innovate by restricting market entry
b) reduce incentive to innovate by making it difficult to use the patnented
innovation
c) increase incentive to innovate by restricting entry into a market
d) increase incentive to innovate by giving a firm premanent and exclusive
production rights
e) give a firm the right to provide a wide variety of goods or services


Patent laws firstly restrict entry to market so that innoavations will be necoraged as well as research and developments
So that Answer is C


The demand curve a monopolist faces
a) is more elastic than a perfectly competitive firm's demand curve
b) is the market demand curve
c) is as eleastic as a perfectly competitive firm's demand curve
d) is not affected by the prices of complements
e) will not shift in response to a change in consumer tastes

Which of the following is true of marginal revenue for a monopolist that
charges a single price?
a) P = MR because there are no close subsititutes for the monopolist's
product
b) P > MR because the monopolist must decrease price on all units sold in
order to sell an additional unit
c) P
For a monopolist
It always sells above marginal revenue curve in other words P>MR
Actually there are not enough choices so that I can answer correctly but from a and B
I is obvious the answer is B
But the remaining choices are missing

Customer: replied 9 years ago.
Reply to skywalker's Post: I'm sorry about the error- Expertask must've cut me off when I
was typing the rest of the choices. Let me repeat the last
question and the rest of the questions that I had wanted to
submit.

Which of the following is true of marginal revenue for a
monopolist that charges a single price?
a) P= MR because there are no close substitutes for the
monopolist's product
b) P > MR because the monopolist must decrease price on all
units sold in order to sell an additional unit
c) P < MR because the monopolist must decrease price on all
units sold in order to sell an additional unit.
d) AR = MR because there are no close substitutes for the
monopolist's product
e) P = MR only at the profit-maximizing quantity.

Suppose that a monopolist must choose between two points on
its demand curve; it can sell 100 units for $3, or it can sell 160
for $2. Which of the following is true?
a) the monopolist is facing elastic demand
b) the monopolist is facing unit elastic demand
c) the monopolist is facing inelastic demand
d) the monopolist is facing perfectly elastic demand
e) the elasticity of the demand curve the monopolist faces
cannot be determined with the information given

If a monopolist is producing a rate of output at which market
demand is inelastic,
a) it may or may not be maximizing its short-run profit
b) reducing output would reduce both total revenue and total
cost
c) reducing output would increase both total revenue and total
cost
d) reducing output would increase total revenue and reduce total
cost
e) increasing output will increase its short-run economic profit

Which of the following does a monopoly control, that a perfectly
competitive firm does not control?
a) how much to produce
b) technology
c) what price to charge
d) how many inputs to use
e) plant size

Which of the following is true at the profit-maximizing quantity
for both a perfectly competitive firm and a monopoly?
a) price equals marginal cost
b) price is greater than marginal cost
c) marginal revenue equals marginal cost
d) marginal revenue is less than marginal cost
e) marginal revenue is greater than average revenue

A monopolist earning short-run economic profit determines that
at its present level of output, marginal revenue is $23 and
marginal cost is $30. Which of the following should the firm do
to increase profit?
a) raise price and lower output
b) lower price and lower output
c) raise price and raise output
d) lower price and raise output
e) lower output but leave price unchanged

If a nondiscriminating monopolist is operating at an output level
where price equals average total cost, we can conclude that
a) economic profit is $0
b) the firm is not maximizing profit
c) the firm should go out of business in the long run
d) the firm is not earning its normal profit
e) the firm should shut down in the short run

Which of the following FALSELY describes a nondiscriminating
monopolist at profit maximization?
a) price is greater than marginal cost
b) economic profit is always positive
c) marginal revenue is equal to marginal cost
d) marginal revenue will typically be less than price
e) average total cost will not be at a minimum

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