Suppose TC = 10 + (0.1 q2). If there are 100 identical firms in the market, the market supply curve is A) Q = 1000 p. B) Q = 500 p. C) Q = 100 p. D) Q = 10. ANSWER B
Date: September 9th, 2020
An increase in the cost of an input will result in A) a leftward shift in the firm’s supply curve. B) an upward shift of the firm’s marginal cost curve. C) a leftward shift of the market supply curve. D) All of the above. ANSWER D
Date: September 9th, 2020
If a firm is a price taker, then its marginal revenue will always equal A) price. B) total cost. C) zero. D) one. ANSWER A
Date: September 9th, 2020
A firm will shut down in the short run if A) total fixed costs are too high. B) total revenue from operating would not cover all costs. C) total revenue from operating would not cover variable costs. D) total revenue from operating would not cover fixed costs. ANSWER C
Date: September 9th, 2020
The government prefers an ad valorem tax to a specific tax that reduces the monopoly output by the same amount because A) consumers are not harmed by the ad valorem tax. B) the monopoly prefers the ad valorem tax. C) consumers prefer the ad valorem tax. D) the ad valorem tax transfers more revenue from […]
Date: September 9th, 2020
If the government desires to raise a certain amount of revenue by taxing a monopoly, an ad valorem tax will A) generate the same loss of consumer surplus as a specific tax. B) generate a greater loss of consumer surplus than a specific tax. C) generate a smaller loss of consumer surplus than a specific […]
Date: September 9th, 2020
Suppose a firm has the following total cost function: TC = 100 + 4q2. What is the minimum price necessary for the firm to earn profit? Below what price will the firm shut down in the short run? What will be an ideal response? ANSWER AC = 100/q + 4q. This is minimized when […]
Date: September 9th, 2020
Explain why shutting down and going out-of-business are different concepts. What will be an ideal response? ANSWER Shutting down means that the firm seizes production with the option of starting up production any time in the future. Going out-of-business is equal to exiting the industry. This involves reducing the amount of (the fixed input) […]
Date: September 9th, 2020
If a competitive firm finds that it maximizes short-run profits by shutting down, which of the following must be TRUE? A) p < AVC for all levels of output. B) p < AVC only for the level of output at which p = MC. C) p < AVC only if the firm has no fixed […]
Date: September 9th, 2020
The existence of a deadweight loss associated with a monopoly can be seen because A) consumers are willing to pay more for the last unit of output than it costs to produce. B) the cost of the last unit produced is more than consumers are willing to pay for it. C) the producer surplus is […]
Date: September 9th, 2020
