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2. A firm finds that at its MR = MC output, its TC = \$1000, TVC = \$800, TFC = \$200, and total revenue is \$900. This firm should: (1 point)
a.
shut down in the short run.
b.
produce because the resulting loss is less than its TFC.
c.
produce because it will realize an economic profit.
d.
liquidate its assets and go out of business.
5. Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everwhere below ATC. Given this, the firm: (1 point)
a.
minimizes losses by producing at the minimum point of its AVC curve.
b.
maximizes profits by producing where MR = ATC.
c.
should close down immediately.
d.
should continue producing in the short run, but leave the industry in the long run
7. If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for \$35, its marginal revenue: (1 point)
a.
may be either greater or less than \$35.
b.
will also be \$35.
c.
will be less than \$35.
d.
will be greater than \$35.
12. Suppose that at 500 units of output marginal revenue is equal to marginal cost. The firm is selling its output at \$5 per unit and average total cost at 500 units of output is \$6. On the basis of this information we: (1 point)
a.
can say that the firm should close down in the short run.
b.
can say that the firm can produce and realize an economic profit in the short run.
c.
cannot determine whether the firm should produce or shut down in the short run.
d.
can assume the firm is not using the most efficient technology.
13. Assume for a competitive firm that MC = AVC at \$12, MC = ATC at \$20, and MC = MR at \$16. This firm will: (1 point)
a.
realize a profit of \$4 per unit of output.
b.
maximize its profit by producing in the short run.
c.
minimize its losses by producing in the short run.
d.
shut down in the short run.
14. Resources are efficiently allocated when production occurs where: (1 point)
a.
marginal cost equals average variable cost.
b.
price is equal to average revenue.
c.
price is equal to marginal cost.
d.
price is equal to average variable cost
18. Economists use the term imperfect competition to describe: (1 point)
a.
all industries which produce standardized products.
b.
any industry in which there is no nonprice competition.
c.
a pure monopoly only.
d.
those markets which are not purely competitive.
20. If total revenue is less than total variable costs at the MR = MC output, a purely competitive firm should: (1 point)
a.
shut down.
b.
produce, but will necessarily realize a loss.
c.
produce and may or may not realize a profit.
d.
increase its output.
21. The MR = MC rule can be restated for a purely competitive seller as P = MC because: (1 point)
a.
each additional unit of output adds exactly its price to total revenue.
b.
the firm's average revenue curve is downsloping.
c.
the market demand curve is downsloping.
d.
the firm's marginal revenue and total revenue curves will coincide.
22. An unregulated pure monopolist will maximize profits by producing that output at which: (1 point)
a.
P = MC.
b.
P = ATC.
c.
MR = MC.
d.
MC = AC
24. The term productive efficiency refers to: (1 point)
a.
any short-run equilibrium position of a competitive firm.
b.
the production of the product-mix most desired by consumers.
c.
the production of a good at the lowest average total cost.
d.
fulfilling the condition P = MC.
26. A natural monopoly occurs when: (1 point)
a.
long-run average costs decline continuously through the range of demand.
b.
a firm owns or controls some resource essential to production.
c.
long-run average costs rise continuously as output is increased.
d.
economies of scale are obtained at relatively low levels of output.