Refer to the information provided in Figure 8.8 below to answer the questions that follow.
1) Refer to Figure 8.8. If this farmer is producing the pro?t-maximizing level of output, her pro?t is
A) $0. B) $2,800. C) $3,000. D) $12,000.
Refer to the information provided in Figure 9.7 below to answer the questions that follow
2) Refer to Figure 9.7. In which of the following price ranges will the ?rm continue to operate but at a loss?
A) $5-$6 B) $6-$7 C) $7-$8 D) $8-$9
3) Refer to Figure 9.7. The ?rm's shut down point is at a price of
A) $5 B) $6 C) $7 D) $8
4) Refer to Figure 9.7. Suppose demand for wheat is initially D2. If the price of rice (a substitute for wheat) falls, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat and individual pro?t maximizing ?rms will produce ________ bushels of wheat.
A) D1; increase; 13 B) D1; decrease; 0 C) D3; increase; 15 D) D3; decrease; 10
5) Refer to Figure 9.7. If demand for wheat is D3, then in the long run
A) the ?rm will exit the industry. B) new ?rms will enter the industry. C) the ?rm will shut down. D) None of the above is correct.
6) Refer to Figure 9.7. If demand for wheat is D1, then in the long run
A) the ?rm will exit the industry. B) new ?rms will enter the industry. C) the ?rm will increase its price and output. D) ?rms will increase their output so that their average ?xed cost per unit falls.
7) The Pampered Pet Shop operates in a perfectly competitive industry and hires you as an economic consultant. The ?rm is currently producing at a point where market price equals its marginal cost. Its total revenue exceeds its total variable cost, but is less than its total cost. You advise the ?rm to
A) lower its price so that it can sell more units of output. B) produce in the short run to minimize its loss, but exit the industry in the long run. C) cease production immediately because it is incurring a loss. D) raise its price until it breaks even.
8) The Taste Freeze Ice Cream Company is a perfectly competitive ?rm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. The ?rm sells 200 ice cream sandwiches. Its AVC is $8.00 and its AFC is $3.00. What should Taste Freeze do?
A) Decrease production so that AVC will decrease.
B) Increase production so that AFC will decrease.
C) Continue to produce because price exceeds AFC.
D) Shut down and produce zero sandwiches because price is less than AVC.
9) The Speedy Typesetting Company, a perfectly competitive ?rm, is currently producing where P = MC and is earning a normal pro?t. The ?rm mainly employs minimum wage workers and the government just increased the minimum wage from $5.85 to $6.55 per hour. In the short run, this ?rm will most likely
A) continue to produce the same amount of output because only its ?xed costs have increased.
B) shut down because it will no longer be earning a normal pro?t.
C) produce more units of output to increase revenue to cover the additional ?xed costs.
D) reduce the amount of output it produces because its cost curves have shifted up.
10) The long-run supply curve in a constant-cost industry is linear and
A) upward-sloping. B) downward-sloping. C) horizontal. D) vertical.