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Class Room Exercise 9

1) The firm should continue producing as long as price is greater than or equal to average variable cost (AVC). 2) The total cost of producing 6 units is $430. 3) If producing 2 units, average total cost (ATC) is $70 and average variable cost (AVC) is $35.

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25 views5 pages

Class Room Exercise 9

1) The firm should continue producing as long as price is greater than or equal to average variable cost (AVC). 2) The total cost of producing 6 units is $430. 3) If producing 2 units, average total cost (ATC) is $70 and average variable cost (AVC) is $35.

Uploaded by

aiperikulusheva
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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EC-120-Chapter-9

Assume the following total cost schedule for a perfectly competitive firm.

Output TVC ($) TFC ($)


0 0 100
1 40 100
2 70 100
3 120 100
4 180 100
5 250 100
6 330 100

1) In order to maximize its profits, the firm should continue to produce in the short run even if
the market price is less than its ATC as long as the price is greater than or equal to
A) AVC. B) MC. C) AFC.
D) TVC. E) TC.

2) The total cost of producing 6 units of output is


A) $71.67. B) $100. C) $230.
D) $330. E) $430.

3) If the firm is producing at an output level of 2 units, the ATC is ________ and the AVC is
________.
A) $100; $70 B) $70; $35 C) $50; $50
D) $140; $40 E) $85; $35

4) If the firm is producing at an output level of 4 units, the ATC is ________ and the AVC is
________.
A) $280; $180 B) $25; $45 C) $70; $45
D) $70; $35 E) $180; $100

5) If the firm is producing at an output level of 6 units, the ATC is ________ and the AVC is
________.
A) $55; $16.67 B) $38.33; $16.67 C) $80; $55
D) $55; $80 E) $71.67; $55
Assume the following total cost schedule for a perfectly competitive firm.

Output TVC ($) TFC ($)


0 0 100
1 40 100
2 70 100
3 120 100
4 180 100
5 250 100
6 330 100

6) This profit-maximizing firm would produce no output in the short run if the market price of its
output dropped below
A) $35. B) $40. C) $70.
D) $90. E) $100.

7) At what price would a profit-maximizing firm earn zero economic profits?


A) $40 B) $70 C) $145
D) $220 E) $430

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly
competitive industry.

8) If the current market price is $6, the profit-maximizing output for this firm is
A) 100 units. B) 200 units. C) 300 units.
D) 400 units. E) 500 units.

9) If the price is $6 and the firm is producing at its profit-maximizing output, then total costs for
the firm are
A) $100. B) $300. C) $1600.
D) $2400. E) $3500.
Consider the following short-run cost curves for a profit-maximizing firm in a perfectly
competitive industry.

10) If the market price is $1, the firm will produce ________ units of output in the short run.
A) 0 B) 100 C) 200
D) 300 E) 400

11) If the market price is $2, the firm will


A) produce zero output and make zero profit.
B) produce zero output and suffer a loss equal to its fixed cost.
C) continue operating in the short run and suffer a loss that is less than its fixed cost.
D) produce 300 units and make a loss equal to total variable cost.
E) produce 200 units and make a loss equal to its total fixed cost.
Consider the following short-run cost curves for a profit-maximizing firm in a perfectly
competitive industry.

12) If the market price is $3.7, the profit-maximizing level of output is


A) more than 1200 units. B) between 900 and 1200 units.
C) 900 units. D) between 0 and 900 units.
E) 0 units.

13) If the market price is $3.7, total revenue is


A) $4230. B) $3330. C) $3420.
D) $810.
E) $0.

14) If the market price is $3.7, at the profit-maximizing level of output the firm's total cost is
A) $4230. B) $3420. C) $3330.
D) $810. E) $0.

15) If the market price is $3.7, at the profit-maximizing level of output the firm's total variable
cost is
A) $0. B) $810. C) $3330.
D) $3420. E) $4230.

16) If the market price is $3.7, at the profit-maximizing level of output the firm's total fixed cost
is
A) $0. B) $810. C) $3330.
D) $3420. E) $4230.

17) If the market price is $3.7, at the profit-maximizing level of output the firm's profit is
A) -$900. B) -$810. C) $3330.
D) $3420. E) $4230.
The diagram below shows the short-run cost curves for 3 perfectly competitive firms in the same
industry.

18) Given that Firms A, B and C are in the same industry, is this industry in long-run
equilibrium?
A) No, because Firm A is not producing at a profit-maximizing level of output.
B) No, because if the industry were in equilibrium, all 3 firms would be earning zero economic
profits.
C) Yes, because all 3 firms are producing at their minimum average total cost.
D) Yes, because P = MC = MR for each of the 3 firms.
E) Yes, because each of the 3 firms is operating at its minimum efficient scale.

19) Which firm or firms is likely to exit this industry?


A) Firm A B) Firm B C) Firm C
D) all of Firms A, B, and C E) none of Firms A, B, and C

20) Which of the following statements about Firms A, B and C is true?


A) Firm A is suffering losses, Firm B is breaking even, and Firm C is earning profits.
B) Firm A is breaking even, Firm B is suffering losses, and Firm C is earning profits.
C) Firm A is earning profits, Firm B is breaking even, and Firm C is suffering losses.
D) Firms A, B and C are breaking even.
E) Firms A, B and C are earning profits.

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