Question

18) The price elasticity of demand faced by an individual wheat farmer would come closest to which following value?

A) 0.00007.

B) 0.7.

C) 1.0.

D) 71.0.

E) 71 000.

Answer: E

Comment: An algorithmic version of this question appears in MyEconLab

Diff: 2

Topic: 9.2b. demand curve for perfectly competitive firm

Skill: Applied

User2: Qualitative

Assume the following total cost schedule for a perfectly competitive firm.

Output	TVC ($)	TFC ($)
0	0	100
1	40	100
2	70	100
3	120	100
4	180	100
5	250	100
6	330	100

TABLE 9-2

47) Refer to Table 9-2. In order to maximize its profits, the firm should continue to produce in the short run even if the market price is less than its ATC as long as the price is greater than or equal to

A) AVC.

B) MC.

C) AFC.

D) TVC.

E) TC

Answer: A

Diff: 2

Topic: 9.3a. profit maximization for perfectly competitive firm

Skill: Applied

User1: Table

User2: Qualitative

48) Refer to Table 9-2. The total cost of producing 6 units of output is

A) $71.67.

B) $100.

C) $230.

D) $330.

E) $430.

Answer: E

Diff: 2

Topic: 9.3a. profit maximization for perfectly competitive firm

Skill: Applied

User1: Table

User2: Quantitative

49) Refer to Table 9-2. If the firm is producing at an output level of 2 units, the ATC is ________ and the AVC is ________.

A) $100; $70

B) $70; $35

C) $50; $50

D) $140; $40

E) $85; $35

Answer: E

Diff: 2

Topic: 9.3a. profit maximization for perfectly competitive firm

Skill: Applied

User1: Table

User2: Quantitative

50) Refer to Table 9-2. This profit-maximizing firm would shut down in the short run if the market price of its output dropped below

A) $35.

B) $40.

C) $70.

D) $90.

E) $100.

Answer: A

Diff: 3

Topic: 9.3a. profit maximization for perfectly competitive firm

51) Refer to Table 9-2. At what price would a profit-maximizing firm earn zero economic profits?

A) $40

B) $70

C) $145

D) $220

E) $430

Answer: B

Comment: An algorithmic version of this question appears in MyEconLab

Diff: 3

Topic: 9.3a. profit maximization for perfectly competitive firm

Skill: Applied

User1: Table

User2: Quantitative

52) Refer to Table 9-2. If the market price were $71, this competitive firm wishing to maximize its profits would

A) produce 2 units of output.

B) produce 6 units of output.

C) produce 5 units of output.

D) not produce because P < minimum of ATC.

E) not produce because P < TFC.

Answer: C

Diff: 3

Topic: 9.3a. profit maximization for perfectly competitive firm

Skill: Applied

User1: Table

User2: Quantitative

Can you help answer these w calculation and explanation?

Skill: Applied

User1: Table

User2: Quantitative

Answer 1

18. Option E

Explanation: A perfectly competitive firm faces a perfectly elastic demand curve.

47. Option A. AVC

Explanation: The short-run shutdown condition is that a firm should shut down if the price is lower than AVC.

48. Option E. $430

Explanation: Total cost = total variable cost + total fixed cost = 330 + 100 = $430.

49. E) $85; $35

Explanation: At 2 units, total cost = $70 + $100 = $170. So, ATC = Total cost/units = $170/2 = $85. AVC = TVC/2 = $70/2 = $35.