ECON 101 Quiz 3 Group A
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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) A perfectly competitive firm's economic profit is maximized at the output level such that
1)
A) marginal revenue equals marginal cost.
B) total revenue equals total variable cost.
C) marginal revenue is equal to total revenue.
D) total revenue equals total cost and marginal cost.
Answer: A
2) Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. If the
market price is 4 cents per page, what is Fast Copy's profit maximizing level of output?
A) 32 pages per hour
B) 64 pages per hour
C) 48 pages per hour
D) 16 pages per hour
2)
Answer: C
3) Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. If the
market price is 4 cents per page, what is Fast Copy's economic profit?
A) zero
B) between $0.51 and $1.00 per hour
C) between 0 and $0.50 per hour
D) more than $1.00 per hour
Answer: B
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3)
4) Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. The
current market price is 4 cents per page. With no change in demand and technology, in the long
run, the price will
A) fall to 1 cent per page.
B) rise to 5 cents per page.
C) remain unchanged.
D) fall to 2 cents per page.
4)
Answer: D
5) In the short run, a perfectly competitive firm might
5)
A) set its price above marginal cost.
B) set its price above marginal revenue.
C) continue production even though it is incurring an economic loss.
D) adjust the size of its fixed inputs.
Answer: C
6) For a perfectly competitive firm, no matter how much the firm produces, price ALWAYS equals
A) marginal product.
B) marginal revenue.
C) average total cost.
D) minimum average total cost.
6)
Answer: B
7) In a perfectly competitive market, if a firm finds it is producing at a level of output such that its
marginal cost is greater than its price, it will
A) be maximizing profits.
B) decrease its output to increase its profit.
C) increase its output to increase its profit.
D) immediately shut down for the short run.
7)
Answer: B
8) Individual firms in perfectly competitive industries are price takers (they cannot influence the
market price) because
8)
A) firms decide together on the best prices to charge.
B) the government sets all prices.
C) each individual firm is too small to affect the market price.
D) buyers set prices.
Answer: C
9) Which of the following is a short-run decision for a firm?
A) whether to increase or decrease its number of machines
B) whether to produce or shut down
C) whether to enter or exit an industry
D) None of the above are short-run decisions.
Answer: B
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