Firms in Competitive Markets 3431
25. Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning?
a. $0.50
b. $7.50
c. $10
d. There is insufficient data to determine the firm’s profit.
3432 Firms in Competitive Markets
Table 14-8
Suppose that a firm in a competitive market faces the following revenues and costs:
Quantity
Total Revenue
Total Cost
0
$0
$3
1
$6
$5
2
$12
$8
3
$18
$12
4
$24
$17
5
$30
$23
6
$36
$30
7
$42
$38
26. Refer to Table 14-8. The firm should not produce an output level beyond
a. 4 units.
b. 5 units.
c. 6 units.
d. 7 units.
Firms in Competitive Markets 3433
27. Refer to Table 14-8. The firm will produce a quantity greater than 3 because at 3 units of
output, marginal cost
a. is greater than marginal revenue.
b. equals marginal revenue.
c. is less than marginal revenue.
d. is minimized.
28. Refer to Table 14-8. In order to maximize profits, the firm will produce
a. 1 unit of output because marginal cost is minimized.
b. 4 units of output because marginal revenue exceeds marginal cost.
c. 5 units of output because marginal revenue equals marginal cost.
d. 7 units of output because total revenue is maximized.
3434 Firms in Competitive Markets
Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs:
Quantity
Total Revenue
Total Cost
0
$0
$5
1
$8
$9
2
$16
$14
3
$24
$20
4
$32
$27
5
$40
$35
6
$48
$44
7
$56
$54
8
$64
$65
9
$72
$72
29. Refer to Table 14-9. If the firm produces 3 units of output,
a. marginal cost is $4.
b. total revenue is greater than variable cost.
c. marginal revenue is less than marginal cost.
d. the firm is maximizing profit.
Firms in Competitive Markets 3435
30. Refer to Table 14-9. At which quantity of output is marginal revenue equal to marginal cost?
a. 3 units
b. 5 units
c. 7 units
d. 9 units
31. Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where
marginal revenue is equal to
a. $6.
b. $7.
c. $8.
d. $9.
3436 Firms in Competitive Markets
32. Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where
marginal cost is equal to
a. $6.
b. $7.
c. $8.
d. $9.
33. Refer to Table 14-9. If the firm’s marginal cost is $11, it should
a. increase production to maximize profit.
b. increase the price of the product to maximize profit.
c. advertise to attract additional buyers to maximize profit.
d. reduce production to increase profit.
Firms in Competitive Markets 3437
34. Refer to Table 14-9. If the firm’s marginal cost is $5, it should
a. reduce fixed costs by lowering production.
b. increase production to maximize profit.
c. decrease production to maximize profit.
d. maintain its current level of production to maximize profit.
Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:
Total Revenue
Total Cost
$0
$3
$7
$5
$14
$9
$21
$15
$28
$23
$35
$33
$42
$45
$49
$59
35. Refer to Table 14–10. The marginal cost of producing the 4th unit is
a. $7.
b. $8.
c. $10.
d. $23.
3438 Firms in Competitive Markets
36. Refer to Table 14-10. At which level of production will the firm maximize profit?
a. 3 units
b. 4 units
c. 5 units
d. 6 units
37. Refer to Table 14–10. If the firm produces the profit-maximizing level of production, how much
profit will the firm earn?
a. $2
b. $4
c. $6
d. $8
Firms in Competitive Markets 3439
38. Refer to Table 14-10. Which level of production in the table has the lowest average variable
cost?
a. 1 unit
b. 2 units
c. 3 units
d. 4 units
39. Refer to Table 14–10. At which level of output in the table is average variable cost equal to $6?
a. 2 units
b. 3 units
c. 4 units
d. 5 units
3440 Firms in Competitive Markets
40. Refer to Table 14–10. This firm should continue to produce and sell units as long as the
marginal cost of production is less than or equal to
a. $3.
b. $5.
c. $7.
d. $9.
Firms in Competitive Markets 3441
Table 14–11
Suppose that a firm in a competitive market faces the following prices and costs:
Price
Quantity
Total Cost
$6
0
$4
$6
1
$6
$6
2
$9
$6
3
$13
$6
4
$18
$6
5
$24
$6
6
$31
41. Refer to Table 14-11. In order to maximize profits, the firm should stop producing after it makes
the
a. first unit.
b. second unit.
c. fourth unit.
d. fifth unit.
3442 Firms in Competitive Markets
42. Refer to Table 14-11. Marginal revenue equals marginal cost when the firm produces
a. 2 units.
b. 3 units.
c. 4 units.
d. 5 units.
43. Refer to Table 14–11. The marginal revenue from producing the 3rd unit equals
(i) $6.
(ii) the price.
(iii) the marginal cost.
a. (i) only
b. (i) and (ii) only
c. (iii) only
d. (i), (ii), and (iii)
Firms in Competitive Markets 3443
44. Refer to Table 14–11. The marginal revenue from producing the 5th unit equals
(i) $6.
(ii) the price.
(iii) the marginal cost.
a. (i) only
b. (i) and (ii) only
c. (iii) only
d. (i), (ii), and (iii)
45. Refer to Table 14–11. If the firm is producing 3 units of output, it should produce
a. more units of output because its marginal revenue is greater than its marginal cost.
b. fewer units of output because its marginal revenue is less than its marginal cost.
c. more units of output because its marginal revenue is less than its marginal cost.
d. fewer units of output because its marginal revenue is greater than its marginal cost.
3444 Firms in Competitive Markets
Table 14-12
Bill’s Birdhouses
COSTS
REVENUES
Quantity
Produced
Total
Cost
Marginal
Cost
Quantity
Demanded
Price
Total
Revenue
Marginal
Revenue
0
$0
—
0
$80
—
1
$50
1
$80
2
$102
2
$80
3
$157
3
$80
4
$217
4
$80
5
$285
5
$80
6
$365
6
$80
7
$462
7
$80
8
$582
8
$80
46. Refer to Table 14-12. What is the marginal cost of the 5th unit?
a. $55
b. $60
c. $68
d. $80
47. Refer to Table 14-12. What is the marginal cost of the 8th unit?
a. $0
b. $72.75
c. $120
d. $502
Firms in Competitive Markets 3445
48. Refer to Table 14–12. What is the total revenue from selling 4 units?
a. $80
b. $137
c. $320
d. $480
49. Refer to Table 14–12. What is the total revenue from selling 7 units?
a. $80
b. $382
c. $540
d. $560
50. Refer to Table 14-12. What is the marginal revenue from selling the 1st unit?
a. $30
b. $50
c. $80
d. $160
3446 Firms in Competitive Markets
51. Refer to Table 14-12. What is the marginal revenue from selling the 5th unit?
a. $12
b. $68
c. $80
d. $480
52. Refer to Table 14-12. What is the average revenue when 4 units are sold?
a. $0
b. $68
c. $80
d. $400
53. Refer to Table 14-12. At what quantity does Bill maximize profits?
a. 3
b. 6
c. 7
d. 8
Firms in Competitive Markets 3447
54. Refer to Table 14-12. What is Bill’s economic profit at the profit-maximizing output level?
a. $25
b. $75
c. $115
d. $225
Table 14–13
Diana’s Dress Emporium
COSTS
REVENUES
Quantity
Produced
Total
Cost
Marginal
Cost
Quantity
Demanded
Price
Total
Revenue
Marginal
Revenue
0
$100
—
0
$120
—
1
$150
1
$120
2
$202
2
$120
3
$257
3
$120
4
$317
4
$120
5
$385
5
$120
6
$465
6
$120
7
$562
7
$120
8
$682
8
$120
55. Refer to Table 14-13. What is the marginal cost of the 1st unit?
a. $50
b. $75
c. $80
d. $150
3448 Firms in Competitive Markets
56. Refer to Table 14-13. What is the marginal cost of the 8th unit?
a. $0
b. $100
c. $120
d. $140
57. Refer to Table 14–13. In order to maximize profits, how many units should Diana’s Dress
Emporium produce?
a. 5
b. 6
c. 7
d. 8
58. Refer to Table 14-13. What is Diana’s economic profit at the profit maximizing point?
a. $78
b. $243
c. $278
d. $375
Firms in Competitive Markets 3449
Table 14-14
The following table presents cost and revenue information for Bob’s bakery production and sales.
Quantity
Total Cost
Marginal Cost
Price
Total Revenue
Marginal
Revenue
0
$5.00
—
$3.25
—
1
$5.50
$3.25
2
$6.50
$3.25
3
$8.00
$3.25
4
$10.00
$3.25
5
$12.50
$3.25
6
$15.50
$3.25
7
$19.00
$3.25
8
$23.00
$3.25
59. Refer to Table 14–14. What is Bob’s total fixed cost?
a. $0
b. $3
c. $5
d. $9
60. Refer to Table 14-14. What is the total revenue from selling 5 units?
a. $2.50
b. $3.25
c. $12.50
d. $16.25
3450 Firms in Competitive Markets
61. Refer to Table 14–14. What is the marginal revenue of the 4th unit?
a. $2.00
b. $3.25
c. $10.00
d. $13.00
62. Refer to Table 14–14. At what quantity will Bob maximize his profit?
a. 5 units
b. 6 units
c. 7 units
d. 8 units
63. Refer to Table 14–14. When Bob produces and sells the profit-maximizing quantity, how much
profit does he earn?
a. $0.25
b. $2.75
c. $4.00
d. $5.25