Question 1

Profit

Accepted Answer

A)   Is the difference between total revenue and total cost.
B)   Is the difference between variable costs and fixed costs.
C)   Is always a number greater than zero.
D)   Must be reported to Wall Street quarterly.E) B) and C)
F) C) and D)

Question 2

Maximizing revenue maximizes profits.

Accepted Answer

A) True 
 B)False

Question 3

Refer to Figure 22.3 for a perfectly competitive firm. At a market price of $23, profit per unit is maximized at an output of

Accepted Answer

A)   13 units.
B)   25 units.
C)   31 units.
D)   39 units.E) None of the above
F) C) and D)

Question 4

Suppose the entrepreneur could earn $1,000 as an employee elsewhere. This means the accounting profit is

Accepted Answer

A)   $1,525.
B)   $925.
C)   -$75.
D)   -$1,000.E) B) and C)
F) All of the above

Question 5

The $600 paid in property taxes counts as

Accepted Answer

A)   An implicit cost.
B)   A normal cost.
C)   A variable cost.
D)   An explicit cost.E) None of the above
F) A) and B)

Question 6

What serves as the supply curve for a perfectly competitive firm? Why is this supply curve upward-sloping, or why does it take a higher price to get a firm to produce and sell more output?

Accepted Answer

The supply curve for a perfectly competi...

Question 7

In making an investment decision, an entrepreneur

Accepted Answer

A)   Treats all costs as variable.
B)   Makes a shutdown decision if price is below average variable cost.
C)   Must take account of diminishing returns to fixed factors.
D)   Decides the level of output to produce.E) A) and B)
F) C) and D)

Question 8

Shutting down a firm's operation is equivalent to exiting the industry.

Accepted Answer

A) True 
 B)False

Question 9

A firm's total revenue can be determined by

Accepted Answer

A)   Price times quantity.
B)   Profits minus costs.
C)   Total costs minus variable costs.
D)   Fixed costs minus quantity.E) B) and C)
F) All of the above

Question 10

The primary objective of the producer is to find the rate of output that maximizes profit.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following affects the ATC curve for a firm but not the MC curve?

Accepted Answer

A)   A change in property taxes.
B)   A change in payroll taxes.
C)   A change in profit taxes.
D)   A change in the price of the good.E) B) and D)
F) None of the above

Question 12

When price does not cover average total cost at any rate of output, the firm should shut down in the short run.

Accepted Answer

A) True 
 B)False

Question 13

In defining economic costs, economists emphasize

Accepted Answer

A)   Explicit and implicit costs while accountants recognize only implicit costs.
B)   Explicit and implicit costs while accountants recognize only explicit costs.
C)   Only explicit costs while accountants recognize only implicit costs.
D)   Only explicit costs while accountants recognize explicit and implicit costs.E) All of the above
F) A) and B)

Question 14

The shutdown point occurs where price equals the minimum of

Accepted Answer

A)   MR.
B)   AVC.
C)   AFC.
D)   ATC.E) B) and C)
F) A) and B)

Question 15

If a firm can change market prices by altering its output, then it

Accepted Answer

A)   Has market power.
B)   Faces a horizontal demand curve.
C)   Is a price taker.
D)   Is a competitive firm.E) B) and C)
F) A) and D)

Question 16

The demand curve confronting a competitive firm

Accepted Answer

A)   Equals the marginal revenue curve.
B)   Is horizontal, as is the market demand curve.
C)   Slopes downward, while the market demand curve is horizontal.
D)   Slopes downward, and the marginal revenue curve is below it.E) A) and D)
F) B) and C)

Question 17

An In the News article, "T-Shirt Shop Owner's Lament: Too Many T-Shirt Shops," states that if T-shirt shops are perfectly competitive firms, then each shop

Accepted Answer

A)   Is a price setter.
B)   Has market power.
C)   Confronts a downward-sloping demand curve for its own output.
D)   Is a price taker.E) None of the above
F) C) and D)

Question 18

Megan used to work at the local pizzeria for $15,000 per year but quit to start her own deli. To buy the necessary equipment, she withdrew $20,000 from her inheritance (which paid 8 percent interest) . Last year she paid $25,000 for ingredients and $500 per month rent but had revenue of $50,000. She asked her dad the accountant and her mom the economist to calculate her profit for her.

Accepted Answer

A)   Dad says she lost $11,000 and Mom says she lost $26,000.
B)   Dad says her profit is $31,000 and Mom says her profit is $16,600.
C)   Dad says her profit is $9,000 and Mom says she lost $6,000.
D)   Dad says her profit is $9,000 and Mom says her profit is $2,400.E) B) and D)
F) B) and C)

Question 19

The demand curve for each perfectly competitive firm is

Accepted Answer

A)   Downward-sloping.
B)   Horizontal.
C)   Vertical.
D)   Upward-sloping.E) B) and C)
F) A) and D)

Question 20

One In the News feature reports that General Motors planned to essentially quit making cars and trucks in the United States for nine weeks from mid-May through July 2009 and Dell planned to close one of its Texas computer-manufacturing plants. Based on these particular news clips, what is the difference between GM's and Dell's decisions?

Accepted Answer

A)   Dell was trying to get rid of excess inventory, and GM was trying to become more efficient.
B)   GM was trying to maximize profits while Dell was trying to minimize losses.
C)   GM's decision to idle plants was a short-run shutdown decision. Dell, by contrast, made a long-run decision to exit a specific market.
D)   There is no difference between GM's and Dell's decisions; both were trying to get rid of excess inventory.E) C) and D)
F) A) and B)

Exam 8: The Business Cycle

Profit

Correct Answer
verified

Suppose the entrepreneur could earn $1,000 as an employee elsewhere. This means the accounting profit is

Correct Answer
verified

Refer to Figure 22.3 for a perfectly competitive firm. At a market price of $23, profit per unit is maximized at an output of

Correct Answer
verified

Maximizing revenue maximizes profits.

Correct Answer
verified

An In the News article, "T-Shirt Shop Owner's Lament: Too Many T-Shirt Shops," states that if T-shirt shops are perfectly competitive firms, then each shop

Correct Answer
verified

The primary objective of the producer is to find the rate of output that maximizes profit.

Correct Answer
verified

If a firm can change market prices by altering its output, then it

Correct Answer
verified

The $600 paid in property taxes counts as

Correct Answer
verified

In making an investment decision, an entrepreneur

Correct Answer
verified

In defining economic costs, economists emphasize

Correct Answer
verified

Shutting down a firm's operation is equivalent to exiting the industry.

Correct Answer
verified

The demand curve for each perfectly competitive firm is

Correct Answer
verified

A firm's total revenue can be determined by

Correct Answer
verified

What serves as the supply curve for a perfectly competitive firm? Why is this supply curve upward-sloping, or why does it take a higher price to get a firm to produce and sell more output?

Correct Answer
verified
The supply curve for a perfectly competi...
View Answer

The demand curve confronting a competitive firm

Correct Answer
verified

When price does not cover average total cost at any rate of output, the firm should shut down in the short run.

Correct Answer
verified

Correct Answer
verified

Which of the following affects the ATC curve for a firm but not the MC curve?

Correct Answer
verified

Correct Answer
verified

The shutdown point occurs where price equals the minimum of

Correct Answer
verified

Exam 8: The Business Cycle

Profit

Correct AnswerverifiedShow Answer

Suppose the entrepreneur could earn $1,000 as an employee elsewhere. This means the accounting profit is

Correct AnswerverifiedShow Answer

Refer to Figure 22.3 for a perfectly competitive firm. At a market price of $23, profit per unit is maximized at an output of

Correct AnswerverifiedShow Answer

Maximizing revenue maximizes profits.

Correct AnswerverifiedShow Answer

An In the News article, "T-Shirt Shop Owner's Lament: Too Many T-Shirt Shops," states that if T-shirt shops are perfectly competitive firms, then each shop

Correct AnswerverifiedShow Answer

The primary objective of the producer is to find the rate of output that maximizes profit.

Correct AnswerverifiedShow Answer

If a firm can change market prices by altering its output, then it

Correct AnswerverifiedShow Answer

The $600 paid in property taxes counts as

Correct AnswerverifiedShow Answer

In making an investment decision, an entrepreneur

Correct AnswerverifiedShow Answer

In defining economic costs, economists emphasize

Correct AnswerverifiedShow Answer

Shutting down a firm's operation is equivalent to exiting the industry.

Correct AnswerverifiedShow Answer

The demand curve for each perfectly competitive firm is

Correct AnswerverifiedShow Answer

A firm's total revenue can be determined by

Correct AnswerverifiedShow Answer

What serves as the supply curve for a perfectly competitive firm? Why is this supply curve upward-sloping, or why does it take a higher price to get a firm to produce and sell more output?

Correct AnswerverifiedThe supply curve for a perfectly competi...View AnswerShow Answer

The demand curve confronting a competitive firm

Correct AnswerverifiedShow Answer

When price does not cover average total cost at any rate of output, the firm should shut down in the short run.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following affects the ATC curve for a firm but not the MC curve?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The shutdown point occurs where price equals the minimum of

Correct AnswerverifiedShow Answer

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The supply curve for a perfectly competi...
View Answer

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