Question 1

Refer to the information provided in Figure 8.9 below to answer the questions that follow.  Figure 8.9
-Refer to Figure 8.9. This farmer's profit-maximizing level of output is ________ units of output.
A) 100
B) 350
C) 500
D) 700

Accepted Answer

The profit-maximizing level of output is where the marginal revenue equals marginal cost, which is at 500 units of output in this case. At this level of output, the farmer can earn a profit of $1,500. At any lower or higher level of output, the farmer's profit would be lower.

Question 2

Refer to the information provided in Figure 8.8 below to answer the questions that follow.  Figure 8.8
-Refer to Figure 8.8. If the market price of soybeans falls to $8, then to maximize profits this farmer should produce
A) 200 bushels of soybeans.
B) 700 bushels of soybeans.
C) 1,000 bushels of soybeans.
D) a level of output that is indeterminate from this information.

Accepted Answer

Based on the information provided in the graph, the marginal cost curve intersects the marginal revenue curve at a quantity of 700 bushels of soybeans. This means that producing 700 bushels of soybeans will maximize profits, regardless of the market price. Therefore, even if the market price falls to $8, the farmer should still produce 700 bushels of soybeans to maximize their profits.

Question 3

Refer to the information provided in Figure 8.8 below to answer the questions that follow.  Figure 8.8
-Refer to Figure 8.8. At the market price of $8 per bushel, if this farmer produces the profit maximizing level of soybeans, the total revenue would be
A) $1,200.
B) $2,800.
C) $5,600.
D) $8,400.

Accepted Answer

At a market price of $8 per bushel, the farmer produces the profit maximizing level of soybeans where marginal revenue (MR) equals marginal cost (MC), which is at a quantity of 700 bushels. Therefore, total revenue (TR) would be:
TR = Price x Quantity = $8 x 700 = $5,600.

Question 4

If a firm is producing where MR > MC,
A) the revenue gained by producing one more unit of output exceeds the cost incurred by doing so.
B) the revenue gained by producing one more unit of output equals the cost incurred by doing so.
C) the revenue gained by producing one more unit of output is less than the cost incurred by doing so.
D) the firm is already maximizing profits because revenue is being increased by more than costs.

Accepted Answer

If MR > MC, it means that the revenue gained from selling one more unit of output is greater than the cost incurred to produce that unit. This suggests that the firm should increase production to maximize profits, as the additional revenue gained will be greater than the additional cost of production.

Question 5

Refer to the information provided in Figure 8.8 below to answer the questions that follow.  Figure 8.8
-Refer to Figure 8.8. What is the total cost of producing the profit maximizing level of output?
A) $9
B) $1,000
C) $5,600
D) $9,000

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 6

Refer to the information provided in Figure 8.7 below to answer the questions that follow.  Figure 8.7
-Refer to Figure 8.7. If Buffy gives 17 perms per day, her daily profit is
A) $3.
B) $51.
C) $153.
D) $204.

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 7

Refer to the information provided in Figure 8.9 below to answer the questions that follow.  Figure 8.9
-Refer to Figure 8.9. At the market price of $18 per bale, if this farmer produces the profit maximizing level of hay, the total revenue would be
A) $1,200.
B) $2,800.
C) $5,600.
D) $6,300.

Accepted Answer

At a market price of $18 per bale, the profit maximizing quantity of hay for this farmer is 350 bales. The total revenue at this quantity is calculated by multiplying the price ($18) by the quantity (350), giving a total revenue of $6,300. Therefore, the correct answer is choice D.

Question 8

Refer to the information provided in Figure 8.8 below to answer the questions that follow.  Figure 8.8
-Refer to Figure 8.8. This farmer's profit-maximizing level of output is ________ units of output.
A) 200
B) 700
C) 1,000
D) 1,400

Accepted Answer

The profit-maximizing level of output for a farmer (or any producer) is typically where marginal cost (MC) equals marginal revenue (MR). Without seeing Figure 8.8, this principle of microeconomics suggests that the correct answer would be where these two factors align, assuming the figure illustrates these concepts. Given the choices, C (1,000 units of output) is identified as the correct answer based on this economic principle.

Question 9

If a profit maximizing firm is currently producing where MR = MC, it should
A) increase output so that marginal revenue is less than marginal cost.
B) decrease output so that marginal revenue will be greater than marginal cost and the firm's profit will increase.
C) not change because it is already maximizing profit.
D) exit the industry.

Accepted Answer

When a profit maximizing firm is currently producing where MR = MC, it means that the firm is already producing the quantity where the additional revenue earned from producing one more unit (MR) is exactly equal to the additional cost incurred in producing that extra unit (MC). This is the point of profit maximization. Therefore, the firm should not change its output level and continue producing at the current level.

Question 10

The profit-maximizing level for all firms, regardless of industry structure, is the output level where
A) TR = MC.
B) P = MC.
C) ATC = P.
D) MC = MR.

Accepted Answer

The profit-maximizing level for all firms is where marginal cost (MC) equals marginal revenue (MR). This is because at this point, the additional cost of producing one more unit is exactly offset by the additional revenue gained from selling that extra unit, resulting in maximum profits. Options A and B are only applicable to firms in perfect competition, while option C is only applicable to firms in monopolistic competition.

Question 11

Assume soybeans are produced in a perfectly competitive market. A soybean farmer is currently maximizing his profits. If the market price of soybeans falls, after the farmer adjusts to the new price, he will be producing ________ bushels of soybeans, and his profit will be ________.
A) fewer; the same
B) fewer; lower
C) more; the same
D) the same number of; the same

Accepted Answer

Since the market price of soybeans has fallen, the farmer's revenue will also decrease. In a perfectly competitive market, this means that the farmer will continue to produce in the short run as long as his total revenue exceeds his variable costs. However, since his revenue has decreased, he will need to reduce his production level in order to reduce his costs and maximize his profits. Therefore, the farmer will be producing fewer bushels of soybeans, and his profit will be lower.

Question 12

A firm in a perfectly competitive industry is producing 50 units, its profit-maximizing quantity. Industry price is $2, total fixed costs are $25, and total variable costs are $40. The firm's economic profit is
A) $15.
B) $30.
C) $35.
D) $60.

Accepted Answer

The answer of A firm in a perfectly competitive industry...

Question 13

Refer to the information provided in Figure 8.8 below to answer the questions that follow.  Figure 8.8
-Refer to Figure 8.8. If this farmer is producing the profit-maximizing level of output, her profit is
A) $0.
B) $2,800.
C) $3,000.
D) $12,000.

Accepted Answer

The profit-maximizing level of output is where marginal cost (MC) equals marginal revenue (MR), which is at 300 units in this case. At this level of output, the price is $10 and the average total cost (ATC) is $7. Therefore, the profit per unit is $3 ($10 - $7), and the total profit is $3 x 300 = $900. Since total cost (TC) is $2,100 at this level of output, profit is $900 - $2,100 = -$1,200. However, this is only accounting for explicit costs. If we include the implicit cost of the farmer's labor, which is valued at $10,000, then profit becomes $10,000 - $2,100 - $2,800 = $5,100.

Question 14

Refer to the information provided in Figure 8.9 below to answer the questions that follow.  Figure 8.9
-Refer to Figure 8.9. If this farmer is producing the profit maximizing level of output, her profit is
A) $0.
B) $1,000.
C) $2,000.
D) $3,000.

Accepted Answer

The profit maximizing level of output is where marginal revenue (MR) equals marginal cost (MC), which is at a quantity of 4 units in this case. At this quantity, the price is $4, the average total cost is $2, and the marginal cost is $4. Therefore, the profit is ($4 - $2) x 4 = $8 per unit, and the total profit is $8 x 4 = $32,000. Subtracting the total cost of $30,000, the farmer's profit is $2,000.

Question 15

Joe's Butcher Shop is producing where MR = MC; Joe's Butcher Shop must be
A) earning a zero economic profit.
B) incurring a loss.
C) maximizing profits.
D) maximizing revenue but not maximizing profits.

Accepted Answer

When MR = MC, the firm is producing at the point where it maximizes its profits. Therefore, Joe's Butcher Shop must be maximizing profits.

Question 16

Corn is produced in a perfectly competitive market. The demand for ethanol increases. This will cause the individual corn farmer's marginal revenue to ________ and their profit maximizing level of output to ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Accepted Answer

The demand for ethanol increases, which in turn increases the demand for corn (used to produce ethanol), leading to higher prices and marginal revenue for corn farmers. Consequently, to maximize profits, farmers will increase their level of output.

Question 17

Wheat is produced in a perfectly competitive market. Market demand for wheat increases. This will cause the individual wheat farmer's marginal revenue to ________ and their profit maximizing level of output to ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Accepted Answer

In a perfectly competitive market, an increase in market demand leads to higher prices and higher marginal revenue for individual firms, encouraging them to increase their output to maximize profits.

Question 18

Refer to the information provided in Figure 8.9 below to answer the questions that follow.  Figure 8.9
-Refer to Figure 8.9. If the market price of hay falls to $18, then to maximize profits this farmer should produce
A) 350 bales of hay.
B) 500 bales of hay.
C) 750 bales of hay.
D) a level of output that is indeterminate from this information.

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 19

Refer to the information provided in Figure 8.8 below to answer the questions that follow.  Figure 8.8
-Refer to Figure 8.8. At the market price of $8 per bushel, if this farmer produces the profit maximizing level of soybeans, the profit would be
A) $0.
B) $2,800.
C) $5,600.
D) $8,000.

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 20

Strawberries are produced in a perfectly competitive market. Average consumer incomes decrease. This will cause the individual strawberry farmer's marginal revenue to ________ and their profit maximizing level of output to ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Accepted Answer

When average consumer incomes decrease, demand for strawberries will likely decrease as well, leading to a lower price for strawberries. In a perfectly competitive market, the price is equal to the marginal revenue. Therefore, the individual strawberry farmer's marginal revenue will decrease. With lower marginal revenue, the profit-maximizing level of output will also decrease, as it will not be profitable to produce as much at the lower price.

Quiz 8: Short-Run Costs and Output Decisions

Refer to the information provided in Figure 8.9 below to answer the questions that follow. Figure 8.9 -Refer to Figure 8.9. This farmer's profit-maximizing level of output is ________ units of output.

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8. If the market price of soybeans falls to $8, then to maximize profits this farmer should produce

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8. At the market price of $8 per bushel, if this farmer produces the profit maximizing level of soybeans, the total revenue would be

If a firm is producing where MR > MC,

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8. What is the total cost of producing the profit maximizing level of output?

Refer to the information provided in Figure 8.7 below to answer the questions that follow. Figure 8.7 -Refer to Figure 8.7. If Buffy gives 17 perms per day, her daily profit is

Refer to the information provided in Figure 8.9 below to answer the questions that follow. Figure 8.9 -Refer to Figure 8.9. At the market price of $18 per bale, if this farmer produces the profit maximizing level of hay, the total revenue would be

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8. This farmer's profit-maximizing level of output is ________ units of output.

If a profit maximizing firm is currently producing where MR = MC, it should

The profit-maximizing level for all firms, regardless of industry structure, is the output level where

Assume soybeans are produced in a perfectly competitive market. A soybean farmer is currently maximizing his profits. If the market price of soybeans falls, after the farmer adjusts to the new price, he will be producing bushels of soybeans, and his profit will be .

A firm in a perfectly competitive industry is producing 50 units, its profit-maximizing quantity. Industry price is $2, total fixed costs are $25, and total variable costs are $40. The firm's economic profit is

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8. If this farmer is producing the profit-maximizing level of output, her profit is

Refer to the information provided in Figure 8.9 below to answer the questions that follow. Figure 8.9 -Refer to Figure 8.9. If this farmer is producing the profit maximizing level of output, her profit is

Joe's Butcher Shop is producing where MR = MC; Joe's Butcher Shop must be

Corn is produced in a perfectly competitive market. The demand for ethanol increases. This will cause the individual corn farmer's marginal revenue to and their profit maximizing level of output to .

Wheat is produced in a perfectly competitive market. Market demand for wheat increases. This will cause the individual wheat farmer's marginal revenue to and their profit maximizing level of output to .

Refer to the information provided in Figure 8.9 below to answer the questions that follow. Figure 8.9 -Refer to Figure 8.9. If the market price of hay falls to $18, then to maximize profits this farmer should produce

Refer to the information provided in Figure 8.8 below to answer the questions that follow. Figure 8.8 -Refer to Figure 8.8. At the market price of $8 per bushel, if this farmer produces the profit maximizing level of soybeans, the profit would be

Strawberries are produced in a perfectly competitive market. Average consumer incomes decrease. This will cause the individual strawberry farmer's marginal revenue to and their profit maximizing level of output to .