Question 1

A firm enjoys a positive economic profit when:

Accepted Answer

A) the demand curve touches the average cost curve at the profit maximizing level of output. 
B) the marginal revenue curve has a negative intercept in the ordinate axis. 
C) the average revenue curve lies below the average cost curve at the profit maximizing level of output. 
D) the marginal cost is declining at the profit maximizing level of output. 
E) the average revenue curve lies above the average cost curve at the profit maximizing level of output. 
A) the demand curve touches the average cost curve at the profit maximizing level of output. 
B) the marginal revenue curve has a negative intercept in the ordinate axis. 
C) the average revenue curve lies below the average cost curve at the profit maximizing level of output. 
D) the marginal cost is declining at the profit maximizing level of output. 
E) the average revenue curve lies above the average cost curve at the profit maximizing level of output.

Question 2

The table given below reports the marginal revenue and marginal cost of Holmes Detective Agency for each client. Table 22.2
  In Table 22.2, assume that Holmes's total fixed cost is zero.Compute the profit earned by the agency with two clients.

Accepted Answer

A) -$110 
B) $110 
C) $120 
D) -$10 
E) $10 
A) -$110 
B) $110 
C) $120 
D) -$10 
E) $10

Question 3

Marginal revenue of nth unit of output is:

Accepted Answer

A) total revenue of (n+1)th unit minus total revenue of nth unit. 
B) total revenue of nth unit minus total revenue of (n-1)th unit. 
C) total revenue of (n+1)th unit minus total revenue of (n-1)th unit. 
D) the sum of total revenue of (n+1)th unit and nth unit. 
E) the sum of total revenue of (n+1)th unit and (n-1)th unit. 
A) total revenue of (n+1)th unit minus total revenue of nth unit. 
B) total revenue of nth unit minus total revenue of (n-1)th unit. 
C) total revenue of (n+1)th unit minus total revenue of (n-1)th unit. 
D) the sum of total revenue of (n+1)th unit and nth unit. 
E) the sum of total revenue of (n+1)th unit and (n-1)th unit.

Question 4

The table given below shows the total revenue and total cost of producing a commodity. Table 22.1
  In Table 22.1, if the firm produces five units of output, it makes a profit of _____.

Accepted Answer

A) $3, 000 
B) $0. 
C) $3, 000. 
D) $1, 200. 
E) $1, 000. 
A) $3, 000 
B) $0. 
C) $3, 000. 
D) $1, 200. 
E) $1, 000.

Question 5

Steve is about to start up a business in a monopolistically competitive market.Which of the following can he expect?

Accepted Answer

A) He can expect market entry to be difficult as there exist entry barriers. 
B) He can expect to enjoy a huge market power. 
C) He can expect to face a highly inelastic demand curve. 
D) He can expect to find close substitutes of the product he is planning to produce. 
E) He can expect to face an infinitely elastic demand curve. 
A) He can expect market entry to be difficult as there exist entry barriers. 
B) He can expect to enjoy a huge market power. 
C) He can expect to face a highly inelastic demand curve. 
D) He can expect to find close substitutes of the product he is planning to produce. 
E) He can expect to face an infinitely elastic demand curve.

Question 6

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 22.1   Refer to Figure 22.1.At price P1 the firm sells quantity Q1, and total revenue is shown by:

Accepted Answer

A) the rectangle ABCD. 
B) the rectangle ABEF. 
C) the rectangle FECD. 
D) the distance AB. 
E) the distance BC. 
A) the rectangle ABCD. 
B) the rectangle ABEF. 
C) the rectangle FECD. 
D) the distance AB. 
E) the distance BC.

Question 7

A firm maximizes its profit at a level of output, where the additional revenue earned by selling an extra unit of the output is equal to the additional cost borne for producing that extra unit of the output.

Accepted Answer

A) True 
 B)False

Question 8

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. 
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.

Question 9

Which of the following is not true of monopolistic competition?

Accepted Answer

A) There are a large number of buyers and sellers. 
B) The firms produce differentiated products. 
C) There exists free entry and exit of firms. 
D) Each of the firms faces a horizontal demand curve. 
E) Each of the firms act as a minimonopoly in the market. 
A) There are a large number of buyers and sellers. 
B) The firms produce differentiated products. 
C) There exists free entry and exit of firms. 
D) Each of the firms faces a horizontal demand curve. 
E) Each of the firms act as a minimonopoly in the market.

Question 10

The firm will always maximize profit where average total costs are minimized.

Accepted Answer

A) True 
 B)False

Question 11

Profit is the difference between:

Accepted Answer

A) total output and total cost. 
B) total revenue and total cost. 
C) total revenue and total sunk cost. 
D) total output and total sunk cost. 
E) total revenue and opportunity cost. 
A) total output and total cost. 
B) total revenue and total cost. 
C) total revenue and total sunk cost. 
D) total output and total sunk cost. 
E) total revenue and opportunity cost.

Question 12

The following table shows the annual income statement of Max Computers. Table 22.3
  Refer to the Table 22.3.The net income of Max Computers is:

Accepted Answer

A) $10, 000 million. 
B) $25, 000 million. 
C) $11, 000 million. 
D) $13, 000 million. 
E) $12, 500 million. 
A) $10, 000 million. 
B) $25, 000 million. 
C) $11, 000 million. 
D) $13, 000 million. 
E) $12, 500 million.

Question 13

A monopolist faces the market demand curve.

Accepted Answer

A) True 
 B)False

Question 14

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 market 
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 market

Question 15

A firm wishing to maximize profits will produce at the level of output where:

Accepted Answer

A) marginal cost is equal to zero. 
B) its total-cost curve intersects its total-revenue curve. 
C) costs are at a minimum. 
D) total revenue exceeds total cost by the largest amount. 
E) marginal revenue exceeds marginal cost by the greatest amount. 
A) marginal cost is equal to zero. 
B) its total-cost curve intersects its total-revenue curve. 
C) costs are at a minimum. 
D) total revenue exceeds total cost by the largest amount. 
E) marginal revenue exceeds marginal cost by the greatest amount.

Question 16

Which of the following characteristics distinguishes oligopoly from other market structures?

Accepted Answer

A) Firms operating in an oligopoly are independent of each other. 
B) Firms operating in an oligopoly are interdependent. 
C) Oligopoly is the simplest of all the other market structures. 
D) An oligopolist does not face a downward-sloping demand curve. 
E) Entry into an oligopolistic market is easier than entry into a monopolistically competitive market. 
A) Firms operating in an oligopoly are independent of each other. 
B) Firms operating in an oligopoly are interdependent. 
C) Oligopoly is the simplest of all the other market structures. 
D) An oligopolist does not face a downward-sloping demand curve. 
E) Entry into an oligopolistic market is easier than entry into a monopolistically competitive market.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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. 
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.

Question 19

Positive economic profit signals that the investors should divert their funds to alternative ventures.

Accepted Answer

A) True 
 B)False

Question 20

The following graph shows the marginal revenue (MR)and marginal cost (MC)curves of an imperfectly competitive firm. Figure 22.2   According to Figure 22.2, the firm is maximizing profit at a quantity of _____ units.

Accepted Answer

A) 10 
B) 35 
C) 50 
D) 75 
E) 90 
A) 10 
B) 35 
C) 50 
D) 75 
E) 90

Exam 43: Profit Maximization

A firm enjoys a positive economic profit when:

The table given below reports the marginal revenue and marginal cost of Holmes Detective Agency for each client. Table 22.2 In Table 22.2, assume that Holmes's total fixed cost is zero.Compute the profit earned by the agency with two clients.

Marginal revenue of nth unit of output is:

The table given below shows the total revenue and total cost of producing a commodity. Table 22.1 In Table 22.1, if the firm produces five units of output, it makes a profit of _____.

Steve is about to start up a business in a monopolistically competitive market.Which of the following can he expect?

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 22.1 Refer to Figure 22.1.At price P1 the firm sells quantity Q1, and total revenue is shown by:

A firm maximizes its profit at a level of output, where the additional revenue earned by selling an extra unit of the output is equal to the additional cost borne for producing that extra unit of the output.

A monopolist faces the least price elastic demand curve because:

Which of the following is not true of monopolistic competition?

The firm will always maximize profit where average total costs are minimized.

Profit is the difference between:

The following table shows the annual income statement of Max Computers. Table 22.3 Refer to the Table 22.3.The net income of Max Computers is:

A monopolist faces the market demand curve.

Why does a monopolist face the market demand curve?

A firm wishing to maximize profits will produce at the level of output where:

Which of the following characteristics distinguishes oligopoly from other market structures?

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

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

Positive economic profit signals that the investors should divert their funds to alternative ventures.

The following graph shows the marginal revenue (MR)and marginal cost (MC)curves of an imperfectly competitive firm. Figure 22.2 According to Figure 22.2, the firm is maximizing profit at a quantity of _____ units.

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Marginal revenue of n^th unit of output is:

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 22.1 Refer to Figure 22.1.At price P₁ the firm sells quantity Q₁, and total revenue is shown by: