Question

QUESTION 1

When a firm earns economic profit

1. market share has be capitalized.

2. accounting profits are zero.

3. total revenue has been maximized.

4. other firms enter the market.

QUESTION 2

If a firm’s product becomes a commodity

1. the firm’s strategy has apparently paid off.

2. the firm gains market power.

3. the firm has become a monopoly.

4. the firm looses market power.

QUESTION 3

Fixed costs

1. vary with output

2. vary with price

3. do not vary with output

4. do not vary with price

QUESTION 4

According to economic theory, profits are maximized where

1. total revenue equals total cost.

2. marginal revenue equals marginal cost.

3. where marginal product and average cost are equal.

4. price and average cost are equal.

Answer 1

Solution-

1. When a firm earns economic profit total revenue has been maximized.

The correct option is C. total revenue has been maximized.

2. If a firm’s product becomes a commodity the firm looses market power.

The correct option is D. the firm looses market power.

3. Fixed costs do not vary with output.

The correct option is C. do not vary with output.

4. According to economic theory, profits are maximized where marginal revenue equals marginal cost.

The correct option is B. marginal revenue equals marginal cost.