Tackle the Test: Multiple-Choice Questions

1. Question

   A perfectly competitive firm will maximize profit at the quantity at which the firm’s marginal revenue equals

   A.

   price.

   B.

   average revenue.

   C.

   total cost.

   D.

   marginal cost.

   E.

   demand.

   A perfectly competitive firm will maximize profit at the quantity at which the firm’s marginal revenue equals

2. Question

   Which of the following is correct for a perfectly competitive firm?

   
   

   
   

   1. The marginal revenue curve is the demand curve.

      
      
   
   

   2. The firm maximizes profit when price equals marginal cost.

      
      
   
   

   3. The market demand curve is horizontal.

      
      
   
   

   A.

   I only

   B.

   II only

   C.

   III only

   D.

   I and II only

   E.

   I, II, and III

   Which of the following is correct for a perfectly competitive firm?

3. Question

   A firm is profitable if

   A.

   TR < TC.

   B.

   AR < ATC.

   C.

   MC < ATC.

   D.

   ATC < P.

   E.

   ATC > MC.

   A firm is profitable if

4. Question

   If a firm has a total cost of $200, its profit-maximizing level of output is 10 units, and it is breaking even (that is, earning a normal profit), what is the market price?

   A.

   $200

   B.

   $100

   C.

   $20

   D.

   $10

   E.

   $2

   If a firm has a total cost of $200, its profi

5. Question

   What is the firm’s profit if the price of its product is $5 and it produces 500 units of output at a total cost of $1,000?

   A.

   $5,000

   B.

   $2,500

   C.

   $1,500

   D.

   –$1,500

   E.

   –$2,500

   What is the firm’s profit if the price of its product is $5 and it produces 500 units of output at a total cost of $1,000?