Practice Quiz - Chapter 11 - Custom Scholars
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Practice Quiz – Chapter 11

question
A baker wants to establish a pie factory. The cost of leasing the factory is $1,000 per day. The profit-maximizing quantity of pies is 1,000 pies a day. Each pie sells for $3 and costs only $2.10 to make. Which of the following is a correct conclusion based on this data?
answer
The baker should not enter the industry.
question
A firm maximizes profits when:
answer
marginal revenue equals marginal cost.
question
A strawberry farmer has 5,000 pounds of strawberries ready to harvest. The cost of picking and transporting the strawberries to the market is $3,500. If the market pays $0.60 per pound of strawberries, what should the strawberry farmer do?
answer
not pick and sell the strawberries, since doing so would reduce profits by $500
question
At zero economic profits, a competitive firm:
answer
is making a normal profit; its revenues are just sufficient to cover all costs of production, including opportunity costs.
question
Firms should exit the market if:
answer
price falls below the average cost.
question
If marginal cost is less than average cost, average cost is rising.
answer
F
question
If the market price in a competitive market is $10, and a firm's marginal cost (MC) is given by MC = 0.50Q, where Q is units of output, this firm should produce 20 units of output to maximize profit.
answer
T
question
In a competitive, constant cost industry:
answer
the long-run price is constant.
question
In a highly competitive industry, demand for a firm's product is:
answer
perfectly elastic.
question
Marginal cost is the change in total cost from producing an additional unit of output.
answer
T
question
Programs such as Steam distribute more and more video games. Purchasers buy the game and download it immediately to their computer. If the entire system is automated, estimate the marginal cost of producing and selling video games this way (ignore electricity costs).
answer
0
question
The short run is defined as:
answer
the period before entry or exit can occur.
question
To maximize profits, a firm in a highly competitive industry should set its price:
answer
at the market price.
question
Total revenue is equal to:
answer
price X quantity
question
When a firm maximizes profit in the short run, it should consider:
answer
only variable costs.
question
When competitive firms do not have influence over the price of their product, all of the following are true EXCEPT which condition?
answer
The product appeals more strongly to some consumers than others.
question
Which of the following is NOT a key decision that a firm must make?
answer
where to produce
question
Why do technology firms cluster in Silicon Valley?
answer
Costs are lower near other technology firms, but the cluster need not be located there.
1 of 18
question
A baker wants to establish a pie factory. The cost of leasing the factory is $1,000 per day. The profit-maximizing quantity of pies is 1,000 pies a day. Each pie sells for $3 and costs only $2.10 to make. Which of the following is a correct conclusion based on this data?
answer
The baker should not enter the industry.
question
A firm maximizes profits when:
answer
marginal revenue equals marginal cost.
question
A strawberry farmer has 5,000 pounds of strawberries ready to harvest. The cost of picking and transporting the strawberries to the market is $3,500. If the market pays $0.60 per pound of strawberries, what should the strawberry farmer do?
answer
not pick and sell the strawberries, since doing so would reduce profits by $500
question
At zero economic profits, a competitive firm:
answer
is making a normal profit; its revenues are just sufficient to cover all costs of production, including opportunity costs.
question
Firms should exit the market if:
answer
price falls below the average cost.
question
If marginal cost is less than average cost, average cost is rising.
answer
F
question
If the market price in a competitive market is $10, and a firm's marginal cost (MC) is given by MC = 0.50Q, where Q is units of output, this firm should produce 20 units of output to maximize profit.
answer
T
question
In a competitive, constant cost industry:
answer
the long-run price is constant.
question
In a highly competitive industry, demand for a firm's product is:
answer
perfectly elastic.
question
Marginal cost is the change in total cost from producing an additional unit of output.
answer
T
question
Programs such as Steam distribute more and more video games. Purchasers buy the game and download it immediately to their computer. If the entire system is automated, estimate the marginal cost of producing and selling video games this way (ignore electricity costs).
answer
0
question
The short run is defined as:
answer
the period before entry or exit can occur.
question
To maximize profits, a firm in a highly competitive industry should set its price:
answer
at the market price.
question
Total revenue is equal to:
answer
price X quantity
question
When a firm maximizes profit in the short run, it should consider:
answer
only variable costs.
question
When competitive firms do not have influence over the price of their product, all of the following are true EXCEPT which condition?
answer
The product appeals more strongly to some consumers than others.
question
Which of the following is NOT a key decision that a firm must make?
answer
where to produce
question
Why do technology firms cluster in Silicon Valley?
answer
Costs are lower near other technology firms, but the cluster need not be located there.

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