Deck 8: Supply

Question 1

The market supply curve:

A)Is the horizontal summation of individual firm's ATC curves.
B)Is the summation of the individual firm's AVC curves for every level of output.
C)Is the prices firms choose to sell in a competitive market.
D)The horizontal summation of individual firm supply curves.
E)None of the above.

Answer 1

The horizontal summation of individual firm supply curves.

Question 2

The law of supply typically holds because:

A)Of decreasing returns to scale.
B)Of economies of scale.
C)As production increases, a firm has to resort to hiring inherently less productive workers.
D)Of diminishing marginal product ensures that a firm's short-run MC is upward sloping.
E)None of the above.

Answer 2

Of diminishing marginal product ensures that a firm's short-run MC is upward sloping.

Question 3

A supply curve:

A)Is derived holding everything constant, except for a firm's technology.
B)Is derived holding everything constant, except for the output price of the good itself.
C)Is derived holding everything constant.
D)All of the above.
E)None of the above.

Answer 3

Is derived holding everything constant, except for the output price of the good itself.

Question 4

Which statement is true?

A)A firm's supply curve is the horizontal summation of its individual total cost curve.
B)A firm's supply indicates the different prices a competitive firm will wish to set, given the quantity it wishes to sell.
C)A firm's supply curve is derived under the assumption of price taking behaviour.
D)All of the above.
E)None of the above.

Question 5

If a firm's marginal cost is MC = 2 +2q and market price is $10, what is the profit maximizing level of output (assuming the firm produces a positive quantity)?

A)2
B)4
C)6
D)8
E)10

Question 6

If a firm's marginal cost is MC = 5 +2q and market price is $35, what is the profit-maximizing level of output (assuming the firm produces a positive quantity)?

A)1
B)5
C)10
D)15
E)None of the above.

Question 7

Which statement is true?

A)The market supply curve is derived assuming consumers are price takers, but that firms in the market are not price takers.
B)The supply curve for an individual firm is derived assuming the firm itself is a price taker, but this is not true for the derivation of the market supply curve.
C)The supply curves for both an individual firm and for the market are derived assuming all firms are price takers.
D)All of the above.
E)None of the above.

Question 8

If a firm's marginal cost is MC = 20 +2q and market price is $10, what is the profit-maximizing level of output?

A)0
B)8
C)10
D)12
E)5

Question 9

A firm that is producing a positive quantity of output has a profit-maximizing rule that:

A)It will keep producing until MR is less MC for the next until of production.
B)It will keep producing provided MR > 0.
C)It will produce so as to minimize MC.
D)It will stop producing when MR exceeds MC.
E)None of the above.

Question 10

If a firm's marginal cost is MC = 20 +5q and market price is $80, what is the profit-maximizing level of output (assuming the firm produces a positive quantity)?

A)8
B)10
C)12
D)15
E)20