Pennsylvania State University - ECON 102 Homework 04. All the correct Answers Indicated after Review for the 100% Score.

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Pennsylvania State University - ECON 102 Homework 04 =================================================================== Please follow instructions carefully with regards to the fill-in-the-bla... nk problems =================================================================== For next five problems, you'll be filling in the blanks. Enter numbers only and do NOT enter in dollar signs. Keep in mind that you might have to enter in a negative number. To do this, you will have to enter in a minus sign (-) in front of the number. Question 1 0 / 4 pts Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit. When the market price is P = $14, What is the profit maximizing level of output? What is total revenue at this level of output? What is the total cost at this level of output? What is the profit at this level of output? Question 2 0 / 4 pts Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit. When the market price is P = $18, What is the profit maximizing level of output? What is total revenue at this level of output? What is the total cost at this level of output? What is the profit at this level of output? Question 3 4 / 4 pts Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit. When the market price is P = $44, What is the profit maximizing level of output? What is total revenue at this level of output? What is the total cost at this level of output? What is the profit at this level of output? Question 4 4 / 4 pts Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit. When the market price is P = $53, What is the profit maximizing level of output? What is total revenue at this level of output? What is the total cost at this level of output? What is the profit at this level of output? Question 5 4 / 4 pts Examine the table above, which gives information about the costs of a perfectly competitive firm. You are hired to determine the profit-maximizing quantity for the firm at different prices. For each price listed, you must find the output level, total revenue, total cost, and profit. When the market price is P = $70, What is the profit maximizing level of output? What is total revenue at this level of output? What is the total cost at this level of output? What is the profit at this level of output? Question 6 0 / 2 pts In the short run, as output increases, Correct Answer the difference between average total cost and average variable cost decreases. the difference between total cost and average variable cost decreases. marginal cost eventually decreases. You Answered All of the above are correct. Question 7 0 / 2 pts Marginal cost is ________ average variable cost when ________. You Answered equal to; average total cost is minimized less than; total cost is maximized greater than; average fixed cost is minimized Correct Answer equal to; average variable cost is minimized. Question 8 2 / 2 pts The formula for AVC is 2 / 2 pts If the marginal cost curve is below the average variable cost curve, then average variable costs are increasing. Correct! average variable costs are decreasing. marginal cost must be decreasing. average variable costs could either be increasing or decreasing. Question 10 2 / 2 pts Because marginal cost is always ________ in the short run, total variable cost always ________ when output increases. Correct! positive; increases positive; decreases negative; increases negative; decreases Question 11 2 / 2 pts The marginal cost curve intersects the ________ at its minimum. average variable cost curve average total cost curve average fixed cost curve Correct! [A] and [B] are both correct. Question 12 2 / 2 pts In the short run where total variable cost is ________ at a(n) ________ rate, marginal cost is positive and decreasing. increasing; increasing Correct! increasing; decreasing decreasing; increasing decreasing; decreasing Question 13 0 / 2 pts In the short run, all firms that earn a loss will shut down. if current firms are earning a profit, new firms will enter the industry. Correct Answer firms act to minimize losses or maximize profits. You Answered All of the above are correct. Question 14 2 / 2 pts In the short run, firms earning a profit will want to ________ their profits while firms suffering losses will want to ________ their losses. maximize; maximize Correct! maximize; minimize minimize; maximize minimize; minimize Question 15 0 / 2 pts You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet Shop operates in a perfectly competitive industry. This firm is currently producing at a point where market price equals its marginal cost. The market price is less than its average variable cost. You should advise the firm to Correct Answer cease production immediately because it is not covering its variable costs of production. lower its price so that it can sell more units of output. You Answered produce in the short run to minimize its loss, but exit the industry in the long run. raise its price until it breaks even. Question 16 2 / 2 pts A firm suffering economic losses decides whether or not to produce in the short run on the basis of whether Correct! revenues cover variable costs. revenues from operating are sufficient to cover fixed costs. revenues from operating are sufficient to cover fixed plus variable costs. Firms suffering economic losses will always shut down. Question 17 2 / 2 pts A firm that is earning positive profits in the short run has an incentive to ________ its scale of operation in the long run. Correct! expand contract not change encourage another firm to expand Question 18 2 / 2 pts You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet Shop operates in a perfectly competitive industry. This firm is currently producing at a point where market price equals its marginal cost. The Shopʹs total revenue exceeds its total variable cost, but is less than its total cost. You should advise the firm to cease production immediately because it is incurring a loss. lower its price so that it can sell more units of output. Correct! produce in the short run to minimize its loss, but exit the industry in the long run. raise its price until it breaks even. Question 19 2 / 2 pts If a firm shuts down in the short run, then its economic profits are zero. Correct! its losses are equal to its fixed costs. its operating profits are positive. it must be the case that its revenues from operating were less than its total costs. Question 20 0 / 2 pts The shutdown point for a perfectly competitive firm is the lowest point on the ATC curve. point at which a firmʹs long-run supply curve ends. Correct Answer lowest point on the AVC curve. You Answered lowest point on the marginal cost curve. Question 21 2 / 2 pts A firm can minimize its losses by shutting down when ________ are less than ________ costs. variable costs; fixed fixed costs; variable Correct! revenues; variable operating profits; sunk Question 22 0 / 2 pts If revenues exceed ________, economic profit is ________. total cost; negative Correct Answer total cost; positive variable cost; negative You Answered variable cost; positive Question 23 2 / 2 pts The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $8.00 and its AFC is $3.00. What should Taste Freeze do? Continue to produce because price exceeds AFC Correct! Shut down and produce zero sandwiches because price is less than AVC Decrease production so that AVC will decrease Increase production so that AFC will decrease Question 24 2 / 2 pts As long as price is sufficient to cover ________, the firm is better off by operating rather than by shutting down. marginal cost average fixed cost Correct! average variable cost marginal revenue Question 25 0 / 2 pts Refer to Figure A. In which of the following price ranges will the firm continue to operate but at a loss? You Answered Question 26 0 / 2 pts Refer to Figure A. The firm's shut down point is at a price of You Answered Question 27 0 / 2 pts Refer to Figure A. Suppose demand for wheat is initially D2. If consumer incomes increase, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat and individual profit maximizing firms will produce ________ bushels of wheat. Correct Answer D3; increase; 15 D1; increase; 10 You Answered D3; decrease; 7 D1; decrease; 0 Question 28 2 / 2 pts Refer to Figure A. Suppose demand for wheat is initially D2. If the price of rice (a substitute for wheat) falls, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat and individual profit maximizing firms will produce ________ bushels of wheat. D3; increase; 15 D1; increase; 13 D3; decrease; 10 Correct! D1; decrease; 0 Question 29 0 / 2 pts Refer to Figure A. If demand for wheat is D2, then a profit maximizing firm will produce ________ units and earn a profit of ________. Correct Answer Question 30 2 / 2 pts Refer to Figure A. If demand for wheat is D3, then a profit maximizing firm will produce ________ units and earn ________. Correct! 15; positive profits 9; positive profits 12; negative profits 13; exactly a normal return Question 31 0 / 2 pts Refer to Figure A. If demand for wheat is D3, then in the long run the firm will shut down. the firm will exit the industry. Correct Answer new firms will enter the industry and the current firms will expand production. You Answered None of the above is correct. Question 32 2 / 2 pts Refer to Figure A. If demand for wheat is D1, then a profit maximizing firm will produce ________ units and earn ________. Correct! 0; negative profits 5; zero profits 10; negative profits 12; positive profits Question 33 2 / 2 pts Refer to Figure A. If demand for wheat is D1, then in the long run the firm will increase its price and output. Correct! the firm will exit the industry. new firms will enter the industry and the current firms will expand production. firms will increase their output so that their average fixed cost per unit falls. For the next two questions, you will be filling in the blanks. Do not enter in dollar signs or other symbols. Do NOT put commas in your larger numbers. For example, suppose the question asks "What is 512 * 16?" Enter 8192 as an answer and do NOT type 8,192 Question 34 0 / 12 pts Suppose a monopolist faces the following demand curve: P = 250 – 2Q Marginal cost of production is constant and equal to $10, and there are no fixed costs. What is the monopolist’s profit-maximizing level of output? What price will the profit-maximizing monopolist charge? How much profit will the monopolist make if she maximizes her profit? What would be the value of consumer surplus in this monopoly market? How much consumer surplus would there be if this market was perfectly competitive? What is the value of the deadweight loss when the market is a monopoly? Suppose a monopolist faces the following demand curve: P = 420 – 4Q Marginal cost of production is constant and equal to $36, and there are no fixed costs. What is the monopolist’s profit-maximizing level of output? What price will the profit-maximizing monopolist charge? How much profit will the monopolist make if she maximizes her profit? What would be the value of consumer surplus in this monopoly market? How much consumer surplus would there be if this market was perfectly competitive? What is the value of the deadweight loss when the market is a monopoly? [Show More]

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