Question

Question 1.

A perfectly competitive firm seeking to maximize its profits would want to maximize the difference between?

Select one:

a. either a or d.

b. its marginal revenue and its marginal cost.

c. its total revenue and its total cost.

d. its average revenue and its average cost.

e. its price and its marginal cost.

Question text 2.

A profit-maximizing monopolist sets?

Select one:

a. output where demand equals average total cost.

b. output where marginal cost equals average revenue.

c. output where marginal cost equals marginal revenue.

d. the product price where marginal cost equals marginal revenue.

e. price equal to the highest dollar amount that any customer is willing to pay.

Question 3

An individual perfectly competitive firm?

Select one:

a. may increase its price without losing sales.

b. sells a product that is differentiated from those of its competitors.

c. has no perceptible influence on the market price.

d. is a price maker.

Question 4.

Darlene runs a fruit-and-vegetable stand in a medium-sized community where many such stands operate. Her weekly total revenue equals $3,000. Her weekly total cost of running the stand equals $3,500, consisting of $2,500 of variable costs and $1,000 of fixed costs. An economist would likely advise Darlene to?

Select one:

a. keep the stand open for a while longer because she is covering all of her variable costs and some of her fixed costs.

b. keep the stand open because it is generating an economic profit.

c. keep the stand open for a while longer because she is covering all of her fixed costs and some of her variable costs.

d. shut down as quickly as possible in order to minimize her losses.

Answer 1

Ans.1- (C)

Profit = TR - TC. Profit is maximized when difference between total revenue and total cost is maximized.

Ans.2- (C)

Ans.3- (C)

No firm in a perfectly competitive market has the power to influence market price.

Ans.4- (A)

Keep the stand open until she is able to cover its variable cost. Shut down if unable to cover variable cost.