# I need help with microeconomics? (cont.)?

12. If a price maker maximizes it profit by producing 100 units of output per hour at a price of \$40, then the marginal cost of producing the 100th unit of output per hour must be:

a. \$40.

b. less than \$40.

c. greater than \$40.

d. not necessarily any one of the above.

13. If a price maker is currently producing an output rate at which MR = \$47 and MC = \$41, then:

a. the firm is earning a positive economic profit.

b. the firm’s profit would fall if it decreased its price.

c. the firm’s profit would rise if it increased production.

d. the firm should increase its price in order to raise its profit.

14. Your firm is currently earning hourly revenue of \$800 selling 50 units of output. At this production rate, MR = \$8, MC = \$8, AFC = \$3, and ATC = \$18. To maximize your profit, you should:

a. shut down.

b. lower you price.

15. If a profit-maximizing price maker’s marginal cost increased, then the company should:

a. increase both price and production.

b. decrease both price and production.

c. increase price and decrease production.

d. decrease price and increase production.

e. change neither price nor production.

16. The demand curve facing a firm that has a patent on a marketable product is:

a. vertical.

b. horizontal.

c. positively sloped.

d. negatively sloped.

17. Suppose the following are data for a price maker.

P: \$10.00 \$9.00 \$8.00 \$7.00 \$6.00 \$5.00 \$4.00

Q: 1 2 3 4 5 6 7

MC: \$4.50 \$5.00 \$5.50 \$6.00 \$6.50 \$7.00 \$7.50

Given that the firm can cover its variable cost, which price maximizes the firm's profit?

a. \$9

b. \$8

c. \$7

d. \$6

18. Given that it can cover its variable cost, then to maximize its profit, a price maker would:

a. raise its price if its marginal revenue exceeds its marginal cost.

b. lower its price if its marginal revenue exceeds its marginal cost.

c. produce an output rate such that marginal revenue exceeds marginal cost by the greatest possible amount.

d. produce an output rate such that average revenue (or, price) exceeds average variable cost by the greatest possible amount.

19. Collusion among firms to raise prices is rare in monopolistically competitive markets because:

a. there are too many firms.

b. entry into the market is too difficult.

c. the firms sell a standardized product.

20. Your company currently sells 3000 units of output per day at a price of \$15 each. You believe that if you reduced the price to \$14, you would sell 3400 units. Your marginal cost is constant at \$8. Based on this, should you reduce the price to maximize your profit? Why?

a. No, because you would realize an economic loss.

b. No, because the added revenue is less than the added cost.

c. Yes, because the added revenue is greater than the added cost.

d. There is not enough information to determine whether the price should be reduced.

21. If an Italian restaurant among many in a large city offers meals that some people believe are better than those offered by its rivals, then that firm:

a. has a monopoly.

b. faces an inelastic demand curve.

c. will earn an economic profit in the long-run.

d. can raise its prices without losing every customer.

22. Which of the following is not a characteristic of both pure competition and monopolistic competition?

a. There are many firms.

b. Entry is relatively easy.

c. Firms produce standardized products.

d. Economic profits are zero in the long-run.

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