(b) when price is less than average fixed cost (c) when losses are greater than total fixed cost at all possible outputs (d) when price is less than minimum average variable cost (e) both (c) and (d).

34. A portion of the average total cost curve of Midget Refining Co. is as follows:

Barrels: 2000 2001 2002

Cost per barrel: $40.00 $40.01 $40.02

The marginal cost of barrels 2001 and 2002 is respecuvely (a) 1 cent each (b) $40.0L $40.02 (c) $20.01, $40.04 (d) $60.01, $60.03 (e) $60.02, $60-04.

35. Yellow Brick Co., a price-taking firm, produces bricks under the follo ng short run conditions:

Quantity of bricks 0 1 2 3 4 5 6

Toul Producdon Costs 1 4 6 12 20 30 42 r (in dollars)

The firm would just be indifferent to operating and shutdng down if the price were: (a) SI (b) $2 (c) $7 (d) $5 (e) none of the above.

36. Which of the following is true? (a) if average total cost exceeds marginal cost, average cost is rising (b) if average total cost exceeds marginal cost, mar-ginal cost is rising (c) if average total cost exceeds marginal cost, average total cost must be falling (d) if average total cost is less than marginal cost, marginal cost is constant (e) none of the - is necessarily true.

1*37. Which of the following is untrue in the long "run equilibrium of price-taking firms having idendcal cost curves? (a) MC = MR (b) long run average total cost is minimized (c) it is impossible to increase output without increasing total cost (d) the firm can sell more output by cutting the price (e) none of the above.

lit.

38. Average fixed cost: (a) is always less than average variable cost (b) equals a\erage total cost less average variable cost (c) declines continuously with output (d) both (a) and (b) (e) both (b) and (c).

39. If, when a certain firm produces 500 units of a good, its total variable cost is $800 and its average fixed cost is 50?: per unit, the total cost of producing 500 units will be: (a) $800.50 (b) $1200

[((c) $500 (d) $1050 (e) none of the above.

40. The economists definition of profit maiiih differs from the accountants in that: (a) accoumants include salaries in the profit (b) accountants do not include all opportuirity cost in reckoning cost (c) accountants dont include external benefits in reckoning revenue (d) accoumants dont consider depreciation of machinery (e) accountants dont include all opportunity"cost in reckoning revenue.

41. In long run competitive equilibrium: (a) all firms earn super-normal profits (b) industry demand is somewhat elastic (c) profits are zero (d) industry demand is inelasdc (e) none of the above.

42. If orange growing is competitive and the equilibrium marginal cost per orange is 50 in Farmer Jones grove, then we know: (a) its also 50C for e\ery other orange grower (b) die ai-erage total cost is 50(

(c) marginal revenue must be greater than 50C

(d) profits are 50 per orange (e) none of the above.

43. The long run total cost schedule of Gobbler Farms, a typical firm in the turkex- industry, is as follows:

Number of Turkej-s 5 10 20 30 . 40 50 60 70 Tolal Cost (S) 100 200 280 300 480 750 1200 1500

If there are no barriers to entry and input costs are constant, the long run price of a turkey will be about: (a) $30 (b)$10 (c)$12 (d)$20 (e) $5.

44. The Nut House, a price-taking nut packer, experiences the following average and marginal costs:

S2.50

2 3 SI.60 SI.55

SI .60

5 (i

SI.70 SI.SO

Cans

Cosi Per Can Cost

per Can S1.50 Si.10 Sl.21 S1..45 S1..50 Sl.fi.-

Margmal Cosi S1..50 S0.70 S1.45 Sl5 S2.1M S2.30

If the price of nuts is 70e per can, the firm would: (a) produce 2 cans at a loss of $1.80 (b) shut down because AVC is not covered, experiencing a loss of $1.00 (c) shut down and experience the loss of total fixed costs of unknown size (d) produce ai a of $1.40 (e) none of these.

45. If the price in (44) were $1.45, die firm wxnild: (a) shut down and take a loss of $1.00 (b) produce 3 cans at a loss of 30< (c) produce 3 cans at a of 30?: (d) produce 1 can at a loss of 10«: (e) hire a manager who passed this course.

46. If the price in (44) were $2.10, the firm would:

(a) shut down and take a short run loss (b) produce 5 cans at a of 40« per can (c) produce 5 cans at a 71 of $2.00 (d) both (b) and (c) (e) produce at leat 6 cans because price is still below MC.

47. Diminishing returns in a chair factory means that: (a) adding more workers causes the output of chairs to fall (b) adding more workers means the total cost of making chairs rises (c) each added worker adds fewer and fewer chairs so that the total cost curve of chair producdon becomes increasingly steep (d) the firm would stop hiring workers (e) the of making a chair must be increasing.

48. The short run supply curve of a compeddve industry is best described as: (a) the horizontal sum-madon of the average total cost curves of the firms

(b) the verdcal summation of the firms marginal cost curves above the average total cost (c) the horizontal summation of the firms marginal cost curves lying above average variable cost (d) the horizonul summation of the firms marginal cost curves lying above minimum average total cost (e) the vertical summation ofthe firms marginal cost curves lying above average variable cost.

49. The region of economies of scale is that in which: (a) long run marginal cost is falling (b) long run marginal cost equals long run average total cost

(c) long run average total cost is falling (d) long run total cost is falling (e) the competitive firm maximizes its profits.

50. Joe Crusher, a price-taking auto wrecker, has retained you to advise him on the number of cars he should crush. You discover that his cost curves appear approximately as follows:

Cars Crushed A\g. Total Cost Marginal Cost

If the going price of a car crush is $65, youll tell Joe to crush: (a) cars for a profit of $455 (b) 6 cars for a profit of $25 (c) 7 cars for a profit of $56 (d) 7 cars for a profit of $42 (e) none of the above.

51. Which of the following would not be considered a fixed cost at Wongs Chinese Restaurant? (a) fire insurance (b) employees salaries (c) building rent (d) propert) taxes (e) none of the above.

52. In the rising portion of the typical "U" shaped average total cost curve: (a) marginal cost is positive and falling (b) marginal cost is posidve and rising (c) marginal cost is negative and rising (d) marginal cost is constant (e) marginal cost is indeterminate.

53. Last year the flypaper industry earned rew enues of $400,000 along its unit elastic demand curve. Long run average total cost in this industry is minimized at 50?: per sheet at 1000 sheets per year If these conditions hold, how many firms will ultimately sell in diis indusu-y? (a) 2,000,000 (b) 800 (c) 400 (d) 500 (e) 2000.

54. If the marginal cost of production for a firm is increasing it follows that: (a) average total cost must be decreasing (b) average total cost and average \ari-able cost for a firm must both be decreasing (c) average total cost and average variable cost must be decreasing(d) average variable cost only must be decreasing (e) none of these necessarily follow.

55. If average total cost is decreasing: (a) marginal cost is decreasing (b) marginal cost is increasing (c) marginal cost is below average total cost (d) average \ariable cost is increasing (e) marginal cost is constant

56. A price-taking firm with typical "U shaped" average total and variable cost curves: (a) produces an output at which the difference between marginal cost and marginal is as large as possible (b) operates only at an output at which marginal cost is increasing in long run equilibrium (c) operates at an output in which marginal cost is decreasing in the short run (d) w-ill produce in the short run if price is between marginal cost and average variable cost (e) will maximize the difference between average revenue and marginal revenue.

57. \\ 1 of the following correctly describes thej market supply curve of a competitive industry in thcl short run and the long run respectively? (a) the ver-j deal summation of the firms MC curves lying above min and min AVC (b) the vertical summation of the firms MC curves lying above min AVC and mi» ( ) the horizontal summation of the firms Ml curves lying above min AVC and min (d) dic

horizontal summation of the firms MC curves lying above min and min AVC (e) none of the above.

58. A firms supply curve is likelv to be less elastic in the short run than in the long run because: (a) in tbe short run the only way output can be expanded is by purchasing bodi labor and capital (b) in the shori run the firms libertv- to react is restricted by fixed factors (c) the curve is likely to be steep because capital cannot be varied in the short run (d) more firms can enter the industry in the long run (e) none of the above.

59. A government subsidy of SI per unit for each unit produced by a compedtive industry would after the first unit: (a) shift the TC curve down by more than $1 (b) shift the MC curve down b) $1 (c) shift the curve down by SI (d) shift the A\C curve down by $1 (e) all of die above.

60. A competitive firm that equates AR with MC will: (a) always earn a profit in the short run (b) suffer a loss (c) always make profits provided P exceeds AVC (d) always make a profit in the short run provided P exceeds minimum (e) shut down in the long run.

61. A competitive firm will incur losses if (a) TR exceeds TC (b) P = minimum AVC (c) TFC = 0 (d) P = minimum (e) MR exceeds minimum .

62. If a compedtive firm is currently making a profit at its present output, but finds that P exceeds MC. it should definitely: (a) expand producdon (b) cut back (c) try to make the difference between P and MC as large as possible (d) expand only if .\TC is not rising (e) enter another line of business.

6.3. If short run industry demand increases, the demand curve faced by the competitive firm will: (a) shift to the right (b) shift upward, while remaining perfectly inelastic (c) shift upward while remaining infinitely elastic (d) shift to the left (e) shift in an indeterminate wav depending upon the cost cul es of the firm

64. The short run .supply curve of a price-taking firm is: (a) the same as the market supply curve (b) the entire MC curve (c) the AVC curve above AFC

(d) the MC cur%e lying above A\C (cl that portion of

the MC curve lying .

65. If firms cost curves are "U" shaped, then total variable cost must: (a) increase over dme (b) increase as output increases (c) decrease as output increp.ses

(d) vary from firm to firm (e) none of the above.

66. Profit can be maximized only where: (a) marginal revenue is equal to average total cost (b) marginal revenue is equal to total cost (c) the difference between total revenue and the product of average total cost and output is as large as possible (d) marginal revenue is equal to average revenue (e) marginal revenue is equal to total revenue.

67. An increase in total fixed costs will affect which of the following? (a) marginal cost (b) average variable cost (c) average total cost (d) all of the above

(e) none of the above.

68. A firm in a perfectly compeddve industry faces the following long run total cost schedule:

Quandt) (q) 2 4 6 8 10 12 14 16 Total Cost ($) 50 100140 160 240 360 600 750

Given this data we would expect the long run price of the product to be about: (a) $10 (b) $15 (c) S20 (d)$25 (e)$22.

69. \\ 1 one of the following is not true under perfect compedtion? (a) the firms demand curve is horizontal (b) the firms demand cur\e is also its average revenue curve (c) the firms demand curve is also its marginal revenue curve (d) the firms demand curve is perfecdy inelasdc (e) the firms demand curve is given by the going price.

70(H). At some output(s) the cost curves of the "standard" competidve firm are characterized by all of the following except: (a) AVC and MC both increasing while is decreasing (b) AVC minimized while and MC are both increasing (c) MC, AVC, and . are all decreasing (d) MC is increasing while and AVC are both decreasing (e) is minimized while AVC and .MC are both increasing.

71. If a compedtive firm with standard "U" shaped cost curves is producing in order to minimize short run losses, then which of the following is false a: the output .selected? (a) is rising (b) TC is rising (c) MC < AR (d) AVC is rising (e) MC is rising.

72. The table below gives the cost of producing