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10-121
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: II
Topic:
Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
214.
Which of the following is true for a purely competitive firm in short-run equilibrium?
215.
Which is necessarily true for a purely competitive firm in short-run equilibrium?
216.
A firm sells a product in a purely competitive market. The marginal cost of the product at
the current output of 1,000 units is $2.50. The minimum
possible average variable cost is
$2.00. The market price of the product is $2.50. To maximize profits or minimize losses, the
firm should
10-122
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D.
shut down.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
D i f f i c u lt y :
02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–
marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: II
Topic:
Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
217.
A firm sells a product in a purely competitive market. The marginal cost of the product at
the current output of 800 units is $3.50. The average
variable cost is $3.00. The market price
of the product is $4.00. To maximize profits or minimize losses, the firm should
218.
A firm sells a product in a purely competitive market. The marginal cost of the product at
the current output of 500 units is $1.50. The average
variable cost is $1.00. The market price
of the product is $1.25. To maximize profits or minimize losses, the firm should
10-123
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: II
Topic:
Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
219.
A firm sells a product in a purely competitive market. The marginal cost of the product at
the current output of 200 units is $4.00. The average
variable cost is $3.50. The market price
of the product is $3.00. To maximize profits or minimize losses, the firm should
220.
A firm sells a product in a purely competitive market. The marginal cost of the product at
the current output is $4.00 and the market price is $4.50.
What should the firm do?
221.
T-Shirt Enterprises is selling in a purely competitive market. It is producing 3,000 units,
selling them for $2.00 each. At this level of output, the
average total cost is 2.50 and the
average variable cost is $2.20. Based on these data, the firm should
10-124
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C.
continue to produce 3,000 units.
D.
increase output to 3,500 units.
222.
Given the accompanying diagram, which level of output should the entrepreneur choose to
maximize profits?
10-125
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D i f f i cu l t y :
02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–
marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: II
Topic:
Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
223.
To maximize profits, the firm whose data is shown in the graph should produce the quantity
10-126
224.
Refer to the accompanying graph. If the market price for the product falls, then which of the
curves would shift?
225.
Output
Average Variable Cost
Average Total Cost
Marginal Cost
10
$5.00
$15.00
$3
12
4.00
13.00
4
14
4.75
11.50
6
16
5.75
9.00
9
20
9.00
12.00
14
The accompanying table shows cost data for a firm that is selling in a purely competitive
market. The firm will produce its output only if the price is
at least equal to what minimum
level?
226.
Output
Average Variable Cost
Average Total Cost
Marginal Cost
10
$5.00
$15.00
$3
12
4.00
13.00
4
14
4.75
11.50
6
16
5.75
9.00
9
20
9.00
12.00
14
The accompanying table shows cost data for a firm that is selling in a purely competitive
market. If the price of the product is $6, what output level
will the firm produce?
10-128
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: II
Topic:
Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
227.
Outpuit
AFC
AVC
ATC
MC
1
$300
$100
$400
$100
2
150
75
225
50
3
100
70
170
60
4
75
73
148
80
5
60
80
140
110
6
50
90
140
140
7
43
103
146
180
8
38
119
156
230
9
33
138
171
290
10
30
160
190
360
The accompanying table shows cost data for a firm that is selling in a purely competitive
market. If the market price for the firm's product is $80, the
firm will
228.
Outpuit
AFC
AVC
ATC
MC
1
$300
$100
$400
$100
2
150
75
225
50
3
100
70
170
60
4
75
73
148
80
10-129
5
60
80
140
110
6
50
90
140
140
7
43
103
146
180
8
38
119
156
230
9
33
138
171
290
10
30
160
190
360
The accompanying table shows cost data for a firm that is selling in a purely competitive
market. If the market price for the firm's product is $180, the
competitive firm will produce
229.
Outpuit
AFC
AVC
ATC
MC
1
$300
$100
$400
$100
2
150
75
225
50
3
100
70
170
60
4
75
73
148
80
5
60
80
140
110
6
50
90
140
140
7
43
103
146
180
8
38
119
156
230
9
33
138
171
290
10
30
160
190
360
The accompanying table shows cost data for a firm that is selling in a purely competitive
market. If the product price is $290, the per-unit economic
profit at the profit-maximizing
output is
10-130
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A. $0.
B. $76.
C. $119.
D. $152.
230.
Outpuit
AFC
AVC
ATC
MC
1
$300
$100
$400
$100
2
150
75
225
50
3
100
70
170
60
4
75
73
148
80
5
60
80
140
110
6
50
90
140
140
7
43
103
146
180
8
38
119
156
230
9
33
138
171
290
10
30
160
190
360
The first table shows cost data for a firm that is selling in a purely competitive market. Now
assume there are 100 identical firms in this industry,
each of which has the same cost data as
the single firm described in the cost table. Now consider the demand curve data for this
industry as shown in
the second table.
Price
Quantity
Demanded
$360
400
290
500
230
600
180
700
140
800
110
900
80
1,000
The equilibrium price in the market will be
231.
A purely competitive firm is currently in short-run equilibrium and its MC exceeds its
ATC at its current output level. It can be concluded that
232.
The Campus Crustacean Company receives $2 per box for its crawfish and is selling
1,600 boxes to maximize its profits. What is the profit per box
of crawfish at this equilibrium
level of output if the average variable cost is $1 per box and total fixed costs are $1,200?
233.
Refer to the accompanying graph. The firm will earn maximum total profits if it produces and
sells quantity
10-133
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: II
Topic:
Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
234.
In the accompanying graph, at what level of output will the firm earn a maximum unit-profit
margin (or profit per unit)?
235.
Consider the purely competitive firm whose data are shown in the accompanying graph. The
firm is earning
236.
Consider the purely competitive firm whose data are shown in the accompanying graph. At its
short-run equilibrium point, the firm is earning
price of its product. If the firm increases its output, then total
revenue will
10-136
239.
10-137
Refer to the accompanying graph for a purely competitive firm. When the firm is in equilibrium
in the short run, its average fixed cost is
240.
Refer to the accompanying graph for a purely competitive firm. When the firm is in equilibrium
in the short run, the amount of economic profit per
unit is
241.
Refer to the accompanying graph for a purely competitive firm operating at a loss in the short
run. Which area in the graph represents the portion of
total costs that the firm can recoup by
continuing to produce rather than shutting down?
10-139
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Blooms: Understand
D i f f i cu l t y :
02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–
marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: II
Topic:
Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
242.
Refer to the accompanying graph for a purely competitive firm operating at a loss in the short
run. Which area in the graph represents the amount of
economic loss for the firm?
10-140
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic:
Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
243.
Refer to the accompanying graph for a purely competitive firm operating at a loss in the short
run. Which of the following changes in its market would
allow the firm to earn positive profits
again?
