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ECON-1010-D1/D2-Introduction to Microeconomics

ECON-1010-D1/D2-Introduction to Microeconomics

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Use the figure below to answer the following questions.

Figure 11.3.1

Refer to Figure 11.3.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry. In the short run, the firm will

exit from the industry if price is greater than average variable cost.

make an economic profit.

raise the price.

incur an economic loss if price is greater than average variable cost.

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Firm A and firm B both have total revenues of $200,000 and total costs of $250,000; firm A has total fixed costs of $40,000, while firm B has total fixed costs of $70,000. Which of the following statements are true in the short run?

Firm A should shut down.

Firm B should shut down.

Firm A should operate.

Firm B should operate.

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When profit-maximizing firms in a competitive market are earning profits, what must be happening in the market?

The most inefficient firms will be encouraged to leave the market.

none of the above

New firms will enter the market.

Market supply must exceed market demand at the market equilibrium price.

Market demand must exceed market supply at the market equilibrium price.

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If a perfectly competitive firm is producing where its MR=MC, but is operating to the left of the minimum point of its LRAC curve,

it can reduce its average costs by building a larger plant.

its profits will decrease if it builds a larger plant.

it is in a long-run profit maximizing position.

it cannot be optimizing its short-run behaviour.

it can still be in long-run equilibrium as long as P = ATC.

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Use the table below to answer the following questions.

Table 11.2.1

Refer to Table 11.2.1, which gives the total revenue schedule and total cost schedule of a perfectly competitive firm. The marginal cost of increasing production from 4 units to 5 units is

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The Wheeler Wheat Farm sells wheat to a grain broker in Regina, Saskatchewan. Since the market for wheat is generally considered to be competitive, which of the following would the Wheeler Wheat Farm choose to do to maximize its profit?

It would produce the quantity at which market price is equal to the farm’s marginal cost of production.

It would sell its wheat at a price where marginal cost is equal to average total cost.

none of the above

It would produce the quantity at which average fixed cost is minimized.

It would produce the quantity at which average total cost is minimized.

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Suppose you bought a ticket to a football game for $30, and that you place a $35 value on seeing the game. If you lose the ticket, then what is the maximum price you should pay for another ticket?

none of the above

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Use the table below to answer the following questions.

Table 11.2.3

Refer to Table 11.2.3, which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm. Brenda's total fixed cost is

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Use the figure below to answer the following questions.

Figure 11.1.1

Refer to Figure 11.1.1. The firm competes in a perfectly competitive market. The total revenue curve is a straight line because the firm

is a price taker.

has perfect information.

faces constant returns to scale.

has constant marginal cost.

wants to maximize profits.

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A perfectly competitive firm facing a price of $4.00 is currently producing an output level where average variable cost is $2.00, average total cost is $4.00, and marginal cost is $3.00. In order to maximize profits, this firm should

not change output. This firm is at its profit-maximizing position.

increase output.

increase the market price.

decrease output.

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