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If a firm is producing at an output level where the total revenue curve intersects the total cost curve, which of the following is true of the firm?​

Select one:

a.

​Its cost is maximized.

b.

​Its profit is maximized.

c.

​Its profit is zero.

d.

​Its cost is minimized.

e.

​Its revenue is maximized.

Question 17

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A perfectly competitive firm is currently producing at a point where price is $10 and both marginal cost and average variable cost are $7. To maximize profit or minimize loss in the short run, this firm should:​

Select one:

a.

​increase its output.

b.

​reduce its output.

c.

​raise its price.

d.

​shut down.

e.

​lower its price.

Question 18

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Which of the following is likely to shift the market supply curve for corn in the short run?​

Select one:

a.

​A change in the price of corn

b.

​A change in the expectations of consumers about the future price of corn

c.

​A change in the price of pesticides

d.

​A change in the money income of corn consumers

e.

​A change in the number of corn consumers

Question 19

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Which of the following is true for a monopolist that engages in perfect price discrimination?​

Select one:

a.

​Perfect price discrimination allows the monopolist to reap the entire gains from production.

b.

​Perfect price discrimination results in the maximization of consumer surplus.

c.

​Perfect price discrimination restricts the total output produced by the monopolist.

d.

​Perfect price discrimination allows the monopolist to just break even and transfers the gain to consumers.

e.

​Perfect price discrimination creates a deadweight loss.

Question 20

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Tyrell has $50 to spend on good A and good B per week. The price of good A is $5 and that of good B is $4. He buys six units of good A and five units of good B. The marginal utility of the sixth unit of A is 25 units, and the marginal utility of the fifth unit of B is 20 units. Which of the following is true?​

Select one:

a.

​His last dollar spent on good A exceeds the last dollar spent on good B.

b.

​He is maximizing his utility.

c.

He is not maximizing his utility and should buy more of A.​

d.

​He is not maximizing his utility and should buy more of B.

e.

​He is not maximizing his utility because he is not spending all of his income.

Answer 1

16. c. Its profit is zero
(When TR = TC then profit = 0)

17. b. ​reduce its output.
(As P > MC so output should be reduced to maximize the profit.)

18. c. ​A change in the price of pesticides
(A change in price of inputs changes the supply curve)

19. a. Perfect price discrimination allows the monopolist to reap the entire gains from production.
(Under perfect price discrimination, consumer surplus = 0 and there is no deadweight loss so monopolist gets entire profit.)

20. b. ​He is maximizing his utility.
(MU for last dollar spent on each good is equal as 25/5 = 20/4 = 4 so he is maximizing his utility.)