MICRO 10/25

If the market price is $10, how many widgets should this profit-maximizing firm produce?

• 3,000

• 6,000

• 12,000

• 16,000

• 21,000

At market price $6, the profit-maximizing rate of output will result in

• economic profits

• economic losses

• normal profits

• profits that are less than normal

• profits that are greater than normal

A constant-cost, perfectly competitive industry is in long-run equilibrium. If the demand for the good increases, which of the following will occur in the long run?

• The price will remain unchanged.

• The price will increase.

• The price will decrease.

• Economic profits will increase.

• Economic profits will decrease.

A farmer produces peppers in a perfectly competitive market. If the price falls, in the short run the farmer should

• increase production until the new price equals average revenue

• increase production to offset the fall in price

• discontinue production if the new price is less than marginal revenue

• continue to produce only if the new price covers average fixed costs

• continue to produce only if the new price covers average variable costs

Given the cost and demand schedules depicted above, if the firm increased output from q₁ to q₂, it would

• earn a normal profit

• experience an increase in profits

• experience a decline in profits

• increase revenues but not costs

• increase costs but not revenues

The diagram above shows a perfectly competitive firm's short-run cost curves. If the price of the output increases from $8 to $10, the profit-maximizing firm will

• continue producing 15 units because average total cost is a minimum

• continue producing 15 units because average total cost is equal to marginal cost

• increase output to 20 units because this is the output at which price equals average total cost

• increase output to 18 units because this is the output at which price equals marginal cost

• decrease output to 10 units because this is the output at which average variable cost is at a minimum

The allocatively efficient level of output is produced in any market structure when

• firms are experiencing economies of scale

• marginal revenue is equal to zero

• long-run economic profit is equal to zero

• price is equal to marginal cost

• average variable cost is at a minimum

A perfectly competitive firm, earning economic profits, produces and sells 100 units of output at a price of $20 per unit. If its marginal cost of increasing output to a rate of 101 units is $18, which of the following statements is correct?

• The total revenue from selling 101 units is the same as the total revenue from selling 100 units

• The total profit from selling 101 units is $2 greater than the total profit from selling 100 units.

• The total cost of producing 101 units is $2 greater than the total cost of producing 100 units.

• To sell 101 units, the firm must reduce its price below $20.

• To sell 101 units, the firm must raise its price above $20.

A perfectly competitive firm is currently in long-run equilibrium. Its total revenue is $100,000, and the average total cost of production is $100. Which of the following can be concluded from this information?

• The firm’s marginal cost is $1,000, and its profit is positive.

• The firm’s marginal cost is $1,000, and its profit is zero.

• The firm’s output is 1,000 units, and its profit is negative.

• The firm’s output is 1,000 units, and its profit is zero.

• The firm’s output is 1,000 units, and its profit is positive.

Assume that a competitive industry producing a normal good is in long-run equilibrium. If average consumer income decreases, which of the following changes will occur?

• Short-Run Price - Increase, Short-Run Industry Output - Increase, Movement Firms - Enter

• Short-Run Price - Increase, Short-Run Industry Output - Decrease, Movement Firms - Exit

• Short-Run Price - Decrease, Short-Run Industry Output - Increase, Movement Firms - Exit

• Short-Run Price - Decrease, Short-Run Industry Output - Decrease, Movement Firms - Enter

• Short-Run Price - Decrease, Short-Run Industry Output - Decrease, Movement Firms - Exit