Garvey AP Questions 3

True statements about the theory of the firm in the short run and long run include which of the following?

I. All input quantities are fixed in the short run.

II. All input quantities are variable in the long run.

III. At least one input quantity is fixed in the short run.

• I only

• II only

• III only

• I and II only

• II and III only

Which of the following statements about firm's production function are true?

I. When total product is at its maximum marginal product is zero.

II. When total product rises, marginal product is rising

III. When marginal product is greater than average product, average product is rising.

IV. When marginal product is less than average product, average product is falling.

• I and II only

• II and III only

• II and IV only

• I, III, and IV only

• I, II, III, and IV

For a perfectly competitive firm, if the market price is $8, then

• marginal revenue is greater than $8

• marginal revenue is less than $8

• marginal revenue is equal to $8

• average revenue is greater than $8

• average revenue is less than $8

A firm’s short-run marginal cost curve will eventually increase because of

• more efficient production.

• economies of scale.

• diseconomies of scale.

• Diminishing marginal returns

• increasing marginal returns

Assume that in the short run at the profit- maximizing output, the price is lower than average variable cost. The perfectly competitive firm should

• increase its price

• decrease its price

• increase its output

• decrease its output

• shut down

Assume that a perfectly competitive firm is operating where marginal revenue is greater than marginal costs. To increase total profits, the firm should

• increase production

• decrease production

• increase price

• decrease price

• do nothing

If the average variable cost of producing five units of a product is $100 and the average variable cost of producing six units is $125, then the marginal cost of producing the sixth unit is

• 25

• 125

• 250

• 500

• 750

Which of the following is true of a pure monopolist’s demand curve?

• It is perfectly inelastic

• It is perfectly elastic

• It coincides with its marginal revenue curve

• It lies below its marginal revenue curve

• It lies above its marginal revenue curve

Average fixed cost is shown as the vertical distance between

• marginal cost and average variable cost.

• marginal cost and average total cost.

• average variable cost and average total cost

• average total cost and the horizontal axis

• marginal cost and the horizontal axis

The presence of both allocative and productive efficiency is possible in which of the following market structures?

I. Perfectly competitive

II. Monpolistic

III. Oligopolistic

IV. Monopolistically competitive

• I only

• II only

• III only

• I and IV only

• II and IV only