Question 1

Economic profits is the difference of total revenue and total costs including the opportunity costs of the resources used in the business.

Accepted Answer

A) True 
 B)False

Question 2

Firms under perfect competition produce:

Accepted Answer

A) homogeneous products. 
B) unique products. 
C) either standardized or differentiated products. 
D) differentiated products. 
E) antique products. 
A) homogeneous products. 
B) unique products. 
C) either standardized or differentiated products. 
D) differentiated products. 
E) antique products.

Question 3

Assume that a firm's marginal revenue curve intersects the rising portion of the marginal cost curve at 100 units of output.At this output level, a profit-maximizing firm's total cost is $1, 000.If the price of the product is $10 per unit, the firm will earn an economic profit of:

Accepted Answer

A) zero. 
B) $400. 
C) more than zero but less than $100. 
D) $100. 
E) more than $100. 
A) zero. 
B) $400. 
C) more than zero but less than $100. 
D) $100. 
E) more than $100.

Question 4

The table given below reports the marginal revenue and marginal cost of Holmes Detective Agency for each client. Table 8.2
  In Table 8.2, 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 5

Assume that a firm's marginal revenue curve intersects the rising portion of its marginal cost curve at 500 units of output.At this output level, a profit-maximizing firm's total cost of production is $1, 000.If the price of the product is $5 per unit, the total revenue earned by the firm will be:

Accepted Answer

A) $1, 500. 
B) $250. 
C) $500. 
D) $2, 500. 
E) $1, 000. 
A) $1, 500. 
B) $250. 
C) $500. 
D) $2, 500. 
E) $1, 000.

Question 6

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 7

The table given below shows the total revenue and total cost of producing a commodity. Table 8.1
  In Table 8.1, 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 8

The equity capital of a privately owned firm includes:

Accepted Answer

A) the owner's own dollars put into the firm. 
B) the cost of raw materials. 
C) the cost of labor resource used in production. 
D) economic rent only. 
E) the value added at each stage of production. 
A) the owner's own dollars put into the firm. 
B) the cost of raw materials. 
C) the cost of labor resource used in production. 
D) economic rent only. 
E) the value added at each stage of production.

Question 9

If a firm's marginal revenue is greater than its marginal cost, then:

Accepted Answer

A) each added unit of output will reduce profits. 
B) the firm is maximizing profit. 
C) more output will add more to revenue than to cost. 
D) more output will add more to cost than to revenue. 
E) less output will add more to revenue than to cost. 
A) each added unit of output will reduce profits. 
B) the firm is maximizing profit. 
C) more output will add more to revenue than to cost. 
D) more output will add more to cost than to revenue. 
E) less output will add more to revenue than to cost.

Question 10

The opportunity cost of going to the movies is the price of entry into the movies.

Accepted Answer

A) True 
 B)False

Question 11

The figure given below shows the cost curves of a firm. Figure 8.3   ATC: Average Total Cost
AVC: Average Variable Cost
MC: Marginal Cost
In Figure 8.3, if the marginal revenue of the firm is constant at $55, calculate the profit earned by the firm?

Accepted Answer

A) $35 
B) $40 
C) $600 
D) $4, 800 
E) $0 
A) $35 
B) $40 
C) $600 
D) $4, 800 
E) $0

Question 12

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 13

The figure given below shows the revenue and cost curves of a firm.MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve. Figure 8.4   Refer to Figure 8.3.The firm suffers a negative profit of:

Accepted Answer

A) 100 units. 
B) 50 units. 
C) 80 units. 
D) 150 units. 
E) 250 units. 
A) 100 units. 
B) 50 units. 
C) 80 units. 
D) 150 units. 
E) 250 units.

Question 14

If marginal revenue is greater than marginal cost, the producer must reduce the level of output to maximize profit.

Accepted Answer

A) True 
 B)False

Question 15

Economic profit is the difference between accounting profit and total fixed cost.

Accepted Answer

A) True 
 B)False

Question 16

Accounting profit is called normal profit when:

Accepted Answer

A) accounting profit is equal to zero. 
B) economic profit is equal to zero. 
C) opportunity cost is equal to zero. 
D) average cost is minimum. 
E) economic profit is equal to accounting profit. 
A) accounting profit is equal to zero. 
B) economic profit is equal to zero. 
C) opportunity cost is equal to zero. 
D) average cost is minimum. 
E) economic profit is equal to accounting profit.

Question 17

Assume that a firm's marginal revenue curve intersects the rising portion of the marginal cost curve at 100 units of output.At this output level, a profit-maximizing firm's total cost is $1, 000.If the price of the product is $3 per unit and the firm produces at the profit-maximizing level, the firm will earn an economic profit equal to:

Accepted Answer

A) -$1, 000. 
B) -$700. 
C) -$400. 
D) -$600. 
E) $200. 
A) -$1, 000. 
B) -$700. 
C) -$400. 
D) -$600. 
E) $200.

Question 18

Suppose that Megabucks Corporation is earning economic profit of $4, 000.If its price is $6 per unit and its ATC is $4 per unit, it must be producing 8, 000 units.

Accepted Answer

A) True 
 B)False

Question 19

The following table shows the annual income statement of Max Computers. Table 8.3
  Refer to the Table 8.3.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 20

Which among the following does not determine the shape of the demand curve under different market structures?

Accepted Answer

A) Number of substitutes in the market 
B) Importance of the good in consumer's budget 
C) Cost structure of the firm 
D) Price-elasticity of demand 
E) The length of time being considered 
A) Number of substitutes in the market 
B) Importance of the good in consumer's budget 
C) Cost structure of the firm 
D) Price-elasticity of demand 
E) The length of time being considered

Exam 12: Profit Maximization

Economic profits is the difference of total revenue and total costs including the opportunity costs of the resources used in the business.

Firms under perfect competition produce:

Assume that a firm's marginal revenue curve intersects the rising portion of the marginal cost curve at 100 units of output.At this output level, a profit-maximizing firm's total cost is $1, 000.If the price of the product is $10 per unit, the firm will earn an economic profit of:

The table given below reports the marginal revenue and marginal cost of Holmes Detective Agency for each client. Table 8.2 In Table 8.2, assume that Holmes's total fixed cost is zero.Compute the profit earned by the agency with two clients.

Assume that a firm's marginal revenue curve intersects the rising portion of its marginal cost curve at 500 units of output.At this output level, a profit-maximizing firm's total cost of production is $1, 000.If the price of the product is $5 per unit, the total revenue earned by the firm will be:

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

The table given below shows the total revenue and total cost of producing a commodity. Table 8.1 In Table 8.1, if the firm produces five units of output, it makes a profit of _____.

The equity capital of a privately owned firm includes:

If a firm's marginal revenue is greater than its marginal cost, then:

The opportunity cost of going to the movies is the price of entry into the movies.

The figure given below shows the cost curves of a firm. Figure 8.3 ATC: Average Total Cost AVC: Average Variable Cost MC: Marginal Cost In Figure 8.3, if the marginal revenue of the firm is constant at $55, calculate the profit earned by the firm?

A firm enjoys a positive economic profit when:

The figure given below shows the revenue and cost curves of a firm.MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve. Figure 8.4 Refer to Figure 8.3.The firm suffers a negative profit of:

If marginal revenue is greater than marginal cost, the producer must reduce the level of output to maximize profit.

Economic profit is the difference between accounting profit and total fixed cost.

Accounting profit is called normal profit when:

Suppose that Megabucks Corporation is earning economic profit of $4, 000.If its price is $6 per unit and its ATC is $4 per unit, it must be producing 8, 000 units.

The following table shows the annual income statement of Max Computers. Table 8.3 Refer to the Table 8.3.The net income of Max Computers is:

Which among the following does not determine the shape of the demand curve under different market structures?

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

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

Profit Maximization

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

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