04 Jun Question 11. When a profit-maximizing firm is at its s
Question
11. When a profit-maximizing firm is at its short-run optimum point, a. the average cost of the product is at its lowest possible point whether a profit is being made or not. b. the firm will be shut down if its price is less than the average fixed cost. c. the profit per unit of output will be at its maximum possible level. d. all the above will be true. e. none of the above will be true.
12. If a firm is producing where its SMC = price and the LMC is less that LAC, then it would do better in the long run by a. increasing output with its existing plant until LMC equals price. b. increasing plant size until LMC and SMC are identical and equal to price. c. decreasing plant size until LAC, SAC, and price are equal. d. doing nothing because it is already at the long-run profit maximizing point.
13. The competitive firm maximizes its profit by operating where a. average costs are at a minimum. b. total revenue is at a maximum. c. profit per unit is at a maximum. d. marginal cost equals price.
When answering the next 4 questions (14-17), refer to the graph below:
14. Assume that price is $10. The profit maximizing level of output for the firm is a. 0A. b. 0E. c. 0F. d. 0G.
15. At the profit maximizing level of output at a price of $10 the firm a. is making economic profit. b. is losing money. c. is making zero economic profit. d. none of the above.
16. When producing the profit-maximizing level of output at a price of $10, a. total fixed costs are 0A. b. total profits equal DC. c. average cost equals CG/0G. d. all of the above.
17. If price fell to $8, a. the firm would decrease production to 0F and would be operating at a loss. b. the firm would decrease production to 0F and would be earning a normal return. c. the firm would decrease production to 0E where it would break even. d. the firm would shut down.
18. Assume price is $10. The profit maximizing level of output for the firm is a. 0A where marginal cost just covers AVC. b. 0B where average profit per unit is the greatest. c. 0C where marginal cost equals the $10 price. d. 0K where average cost equals avenge revenue and the firm earns a normal rate of return.
19. At the profit maximizing level of output, when price is $10, a. the firm X is earning economic profit. b. profits per unit are the greatest. c. average variable cost equals ZC. d. all of the above.
20. At output level 0C, profit per unit is equal to a. GZ. b. ZV. c. ED. d. GC.
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