ECON 380 Short Run Profit-Maximizing Level Multiple Choices Questions

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QUESTION 1
•
If a representative firm with total cost given by TC = 20 + 20 q + 5
2
q operates in a competitive industry where the short-run market
demand and supply curves are given by QD = 1,400 – 40 P and QS = –
400 + 20 P, its short-run profit-maximizing level of output is:
0
1
2
4
6
QUESTION 2
•
In the model of perfect competition, there:
are many firms producing differentiated
products.
are a few firms producing undifferentiated
products.
are a few firms producing differentiated
products.
are many firms producing undifferentiated
products.
is one firm producing a highly differentiated
product.
QUESTION 3
•
In the model of perfect competition, firms maximize profits by
producing where:
the difference between marginal revenue and
marginal cost is maximized.
marginal revenue equals price.
the difference between price and marginal cost
is maximized.
price equals marginal cost.
the difference between price and marginal
revenue is maximized.
QUESTION 4
•
If price is less than the average variable cost of a representative
firm in a competitive industry in short-run:
there will be exit from the industry immediately.
the firms in the industry should shut down and
produce no output.
the firms in the industry are just earning a normal
rate of return.
the firms should produce a level of output in which
marginal cost is equal to price.
the industry is in long-run equilibrium.
QUESTION 5
•
Camel Records produces records according to Q = 4 L – 0.15 L 2.
If labor costs $5 and records sell for $2, the optimal quantity of labor is:
0
2
1
5
1
QUESTION 6
•
If a representative firm with total cost given by TC = 20 + 20 q + 5
2
q operates in a competitive industry where the short-run market
demand and supply curves are given by QD = 1,400 – 40 P and QS = –
400 + 20 P, the number of firms operating in the short run will be:
1
1
2
2
2
QUESTION 7
•
If the perfectly competitive market demand for tanning beds shifts
from Q D,91 = 1,230 – 5 P to Q D,92 = 740 – 5 P and the market supply is
given by QS = –100 + 2 P, then the change in equilibrium quantity will
be:
140
u
n
i
t
s
.
280
u
n
i
t
s
.
–98
u
n
i
t
s
.
–
1
4
0
u
n
i
t
s
.
–
1
5
0
u
n
i
t
s
.
QUESTION 8
•
The following diagram represents the market for paperback
books. In the market for paperback books, producer surplus is:
•
$15.00.
$30.00.
$112.50.
$225.00.
None of the
above
.
QUESTION 9
•
If the demand increases for the product of an increasing-cost
industry:
short-run price goes up, but long-run price
falls.
long-run output goes up, but long-run price
may go up or down.
short-run output goes up, but long-run output
may go up or down.
long-run output goes up, but short-run price
remains constant.
short-run price goes up, and long-run price
goes up.
QUESTION 10
•
A constant-cost industry is one in which:
input prices do not change over time.
technology does not change over time.
input prices and technology do not change as
firms enter or exit the industry.
input prices and technology do not change over
time.
firms have reached the maturity phase of the
industry’s life cycle.
QUESTION 11
•
A representative firm with long-run total cost given by TC = 2,000
+ 20 q + 5 q 2 operates in a competitive industry where the market
demand is given by QD = 10,000 – 40 P. The long-run equilibrium output
of the industry will be:
1,20
0
u
n
i
t
s
.
1,80
0
u
n
i
t
s
.
2,20
0
u
n
i
t
s
.
2,60
0
u
n
i
t
s
.
3,20
0
u
n
i
t
s
.
QUESTION 12
•
A representative firm with short-run total cost given by TC = 50 +
2 q + 2 q 2 operates in a competitive industry where the short-run
market demand and supply curves are given by QD = 1,410 – 40 P and
QS = –390 + 20 P. Its short-run profit-maximizing level of output is:
0
1
2
5
7
QUESTION 13
•
If a representative firm with long-run total cost given by TC =
2,000 + 20 q + 5 q 2 operates in a competitive industry where the market
demand is given by QD = 10,000 – 40 P, in the long-run equilibrium
there will be:
60
98
10
11
12
QUESTION 14
•
If the perfectly competitive market demand for cholesterol-free
cookies shifts from Q D,93 = 1,150 – 5 P to Q D,94 = 1,640 – 5 P, and the
market supply is given by QS = –100 + 2 P, then the change in
equilibrium price will be:
$
$
$
$
$
QUESTION 15
•
Meteor Tie Company produces ties from fabric according to Q =
10 + 4 F – (1/3) F 3. If fabric is free and ties sell for $20, what is Meteor’s
optimal usage of fabric?
0
2
4
6
8
QUESTION 1
•
If the demand increases for the product of an increasing-cost
industry:
short-run price goes up, but long-run price
falls.
long-run output goes up, but long-run price
may go up or down.
short-run output goes up, but long-run output
may go up or down.
long-run output goes up, but short-run price
remains constant.
short-run price goes up, and long-run price
goes up.
QUESTION 2
•
A representative firm with long-run total cost given by TC = 20 +
20 q + 5 q 2 operates in a competitive industry where the short-run
market demand and supply curves are given by QD = 1,400 – 40 P and
QS = –400 + 20 P. If it continues to operate in the long run, its profitmaximizing level of output is:
1
2
4
5
6
QUESTION 3
•
The following diagram represents the market for paperback
books. In the market for paperback books, producer surplus is:
•
$15.00.
$30.00.
$112.50.
$225.00.
None of the
above
.
QUESTION 4
•
If the perfectly competitive market supply of pork bellies shifts
from Q S,93 = 250 + 50 P to Q S,94 = 400 + 40 P, and the market demand
is given by QD = +10,000 – 200 P, then the change in equilibrium
quantity will be:
200
u
n
i
t
s
.
100
u
n
i
t
s
.
0
u
n
i
t
s
.
–
1
0
0
u
n
i
t
s
.
–
2
0
0
u
n
i
t
s
.
QUESTION 5
•
If a representative firm with long-run total cost given by TC =
2,000 + 20 q + 5 q 2 operates in a competitive industry where the market
demand is given by QD = 10,000 – 40 P, the long-run equilibrium output
of the individual firm’s will be:
1
2
3
3
4
QUESTION 6
•
If a representative firm with long-run total cost given by TC =
2,000 + 20 q + 5 q 2 operates in a competitive industry where the market
demand is given by QD = 10,000 – 40 P, in the long-run equilibrium
there will be:
60
98
10
11
12
QUESTION 7
•
In the model of perfect competition, firms maximize profits by
producing where:
the difference between marginal revenue and
marginal cost is maximized.
marginal revenue equals price.
the difference between price and marginal cost
is maximized.
price equals marginal cost.
the difference between price and marginal
revenue is maximized.
QUESTION 8
•
If a representative firm with total cost given by TC = 20 + 20 q + 5
2
q operates in a competitive industry where the short-run market
demand and supply curves are given by QD = 1,400 – 40 P and QS = –
400 + 20 P, its short-run profit-maximizing level of output is:
0
1
2
4
6
QUESTION 9
•
If a representative firm with long-run total cost given by TC = 50 +
2 q + 2 q 2 operates in a competitive industry where the short-run
market demand and supply curves are given by QD = 1,410 – 40 P and
QS = –390 + 20 P, its long-run profit-maximizing level of output is:
0
1
2
5
7
QUESTION 10
•
If the perfectly competitive market demand for cholesterol-free
cookies shifts from Q D,93 = 1,150 – 5 P to Q D,94 = 1,640 – 5 P, and the
market supply is given by QS = –100 + 2 P, then the change in
equilibrium price will be:
$
$
$
$
$
QUESTION 11
•
Meteor Tie Company produces ties from fabric according to Q =
10 + 4 F – (1/3) F 3. If fabric is free and ties sell for $20, what is Meteor’s
optimal usage of fabric?
0
2
4
6
8
QUESTION 12
•
A representative firm with short-run total cost given by TC = 50 +
2 q + 2 q 2 operates in a competitive industry where the short-run
market demand and supply curves are given by QD = 1,410 – 40 P and
QS = –390 + 20 P. Its short-run profit-maximizing level of output is:
0
1
2
5
7
QUESTION 13
•
If a representative firm with total cost given by TC = 20 + 20 q + 5
2
q operates in a competitive industry where the short-run market
demand and supply curves are given by QD = 1,400 – 40 P and QS = –
400 + 20 P, the number of firms operating in the short run will be:
1
1
2
2
2
QUESTION 14
•
If the perfectly competitive market demand for gym shoes is given
by QD = 100 – P and the market supply is given by QS = 10 + 2 P, then
the equilibrium price and quantity will be:
P = 50 and
Q=
50.
P = 40 and
Q=
90.
P = 40 and
Q=
60.
P = 30 and
Q=
70.
P = 25 and
Q=
75.
QUESTION 15
•
Total surplus in a market is a measure of:
social welfare created by the market.
profits that accrue to the owners of firms in a
particular market.
the rebates that consumers receive when they
purchase certain goods or services.
excess inventory that remains at the end of a
season.
planned inventory that a firm carries from one
year to the next.
QUESTION 16
•
If price is above the average variable cost but below the average
total cost of a representative firm in a competitive industry:
there will be entry to the industry over time.
there will be exit from the industry over time.
the firms in the industry are just earning a
normal rate of return.
the firms in the industry are earning a
supranormal rate of return.
the industry is in long-run equilibrium.
QUESTION 17
•
The following diagram represents the market for paperback
books. In the market for paperback books, total surplus is:
•
$15.00.
$30.00.
$112.50.
$225.00.
None of the
above
.
QUESTION 18
•
If the perfectly competitive market supply of pork bellies shifts
from Q S,93 = 250 + 50 P to Q S,94 = 400 + 40 P, and the market demand
is given by QD = +10,000 – 200 P, then the change in equilibrium price
will be:
$
$
$
–
–
QUESTION 19
•
Camel Records produces records according to Q = 4 L – 0.15 L 2.
If labor costs $5 and records sell for $2, the optimal quantity of labor is:
0
2
1
5
1
QUESTION 20
•
Toy Productions makes toy trucks from steel according to Q = 50
+ 100 S – 0.5 S 2. If steel costs $49 and toy trucks sell for $7, the
optimal level of steel usage is:
5
4
1
9
1
QUESTION 21
•
Producer surplus is defined as:
the difference between the price the consumer
actually pays for a product and the consumer’s
reservation price.
the profit that the firm earns on each unit of a product
sold.
the profit that the firm earns after taxes.
the difference between the price received by the
producer and the producer’s reservation price.
the difference between the price paid by the consumer
and the price received by the consumer.
QUESTION 22
•
If labor produces output according to Q = 8 L 1/2, labor costs $10,
and output sells for $100, then the optimal level of L is:
8
1
1
2
1
QUESTION 23
•
A decreasing-cost industry is one in which:
input prices fall over time.
technology deteriorates over time.
input prices and technology do not change
over time.
firms are in the growth phase of the industry’s
life cycle.
input prices fall or technology improves as
firms enter the industry.
QUESTION 24
•
In the model of perfect competition, firms produce a:
standardized product with considerable control
over price.
differentiated product with considerable
control over price.
standardized product with no control over
price.
differentiated product with no control over
price.
standardized or differentiated product with
some control over price.
QUESTION 25
•
A constant-cost industry is one in which:
input prices do not change over time.
technology does not change over time.
input prices and technology do not change as
firms enter or exit the industry.
input prices and technology do not change over
time.
firms have reached the maturity phase of the
industry’s life cycle.
QUESTION 26
•
If the perfectly competitive market demand for tanning beds shifts
from Q D,91 = 1,230 – 5 P to Q D,92 = 740 – 5 P and the market supply is
given by QS = –100 + 2 P, then the change in equilibrium quantity will
be:
140
u
n
i
t
s
.
280
u
n
i
t
s
.
–98
u
n
i
t
s
.
–
1
4
0
u
n
i
t
s
.
–
1
5
0
u
n
i
t
s
.
QUESTION 27
•
Paul’s Pizza Parlor bakes pizza pies according to Q = 3 L – 0.3 L
2
. If labor costs $6 and pizza sells for $10, the optimal amount of labor
is:
6
5
4
3
2
QUESTION 28
•
If a representative firm with long-run total cost given by TC = 50 +
2 q + 2 q 2 operates in a competitive industry where the market demand
is given by QD = 1,410 – 40 P, the long-run equilibrium output of the
industry will be:
49
53
57
61
65
QUESTION 29
•
If a representative firm with long-run total cost given by TC = 50 +
2 q + 2 q 2 operates in a competitive industry where the market demand
is given by QD = 1,410 – 40 P, in the long-run equilibrium there will be:
60
98
10
11
12
QUESTION 30
•
If the demand increases for the product of a constant-cost
industry:
long-run output goes up, but long-run price
may go up or down.
short-run output goes up, but long-run output
may go up or down.
short-run price goes up, but long-run price
remains constant.
long-run output goes up, but short-run price
remains constant.
long-run price goes up, but short-run price
may go up or down.
QUESTION 31
•
In the model of perfect competition, there are:
high barriers to entry and no nonprice
competition.
low barriers to entry and some advertising and
product differentiation.
very high barriers to entry and some advertising
and product differentiation.
high barriers to entry and some advertising and
product differentiation.
low barriers to entry and no nonprice
competition.
QUESTION 32
•
In a competitive market the equilibrium price is determined:
at the intersection of the firm’s demand and the
market supply curves.
at the intersection of the market demand and
supply curves.
at the intersection of the firm’s demand and
marginal cost curves.
so as to cover the costs of the potential firms.
so as to cover the costs of the firms currently in
the industry.
QUESTION 33
•
In the model of perfect competition, there:
are many firms producing differentiated
products.
are a few firms producing undifferentiated
products.
are a few firms producing differentiated
products.
are many firms producing undifferentiated
products.
is one firm producing a highly differentiated
product.
QUESTION 34
•
If the demand increases for the product of a decreasing-cost
industry:
short-run price goes up, but long-run price
falls.
long-run output goes up, but long-run price
may go up or down.
short-run output goes up, but long-run output
may go up or down.
long-run output goes up, but short-run price
remains constant.
long-run price goes up, but short-run price
may go up or down.
QUESTION 35
•
A representative firm with long-run total cost given by TC = 2,000
+ 20 q + 5 q 2 operates in a competitive industry where the market
demand is given by QD = 10,000 – 40 P. The long-run equilibrium output
of the industry will be:
1,20
0
u
n
i
t
s
.
1,80
0
u
n
i
t
s
.
2,20
0
u
n
i
t
s
.
2,60
0
u
n
i
t
s
.
3,20
0
u
n
i
t
s
.

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Explanation & Answer:
35 Multiple Choices Questions

Tags:
marginal cost

competitive industry

Supply Curves

Short Run Market Demand

Profit Maximizing Level of Output

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