Question

1. The profit maximizing perfectly competitive will always ____________.

a. produce where revenues are maximized
b. produce at a loss
c. produce the level of output where marginal cost equals marginal revenue
d. produce at a profit

2. Implicit costs ______.

a. are always variable and included in the calculation of economic profit
b. are equal to explicit costs and included in the calculation of economic profit
c. exceed explicit costs and included in the calculation of economic profitc
d. are similar to opportunity costs in the calculation of economic profit

3. Which of the following is an example of a fixed cost that is also a sunk cost for a bakery as of January 15?

a. The electric bill for the coming calendar year.
b. An accountant's fees for tax preparation in April.
c. The cost of a one-year lease on a building, signed January 1.
d. The salary of the baker for the month of February.

Answer 1

Q1.

Ans. Option(C) is the correct option; the profit maxiziming firm in a perfectly competitive market will produce at the level of output where marginal cost is equal to marginal revenue because same price prevails in the market as there are large number of sellers and buyers in the industry and no one can influence the selling proce of the product.

also the product offered by the firms are not differentiated.

and after the level of output where MC=MR the MC>MR with increase in ouput therefore the firm produces at output level where MC=MR only.

Q2.

Ans. Option(D) is correct because implict costs are a type of opputunity costs only as they are the costs of firm's own factors of production and the firm could have also paid in monetary form by using the external factors of production istead of using it's own factors of production.

Q3.

Ans. Option(C) is correct; because the cost of one year of lease signed on january 1 once paid can't be recoverd again.