Test Questions without Answers
Chapter 11. Supply Theory II.
Firm Behaviour
Chapter 11– Question 1
If marginal revenue exceeds marginal cost, a competitive firm should
- shut down temporarily
- expand output
- reduce output
- lower the price of its product
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Chapter 11– Question 2
Which of the following is true
- economic profit minus accounting profit equals explicit costs
- economic profit is below accounting profit
- economic profit is higher than accounting profit
- accounting profit is economic profit minus opportunity costs
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Chapter 11– Question 3
If total fixed costs are $2,000 and total variable costs are $3,000 for 4 units, what is the average total cost of an output level of 4 units?
- 5,000
- 1,250
- 750
- 500
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Chapter 11 –Question 4
If total revenues cover explicit costs, but not implicit costs
- there are accounting and economic profits
- there are accounting profits only
- there are losses
- there are neither economic nor accounting profits
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Chapter 11 –Question 5
A firm has total revenues of $1m. Its total expenses are $700,000. The firm's owner earned a salary of $100,000 in his previous job.
1) What is the firm's economic profit?
2) What is its accounting profit?
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Chapter 11 –Question 6
Equilibrium in an industry of perfect competitors means
- there are no accounting profits
- all firms make economic profits
- there are no economic profits to attract new entrants
- None of the above.
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Chapter 11 – Question 7
The long-run average total cost of producing 20 units is $22 and the long-run average total cost of producing 25 units is $21. This is due to
- economies of scale
- diminishing marginal utility
- constant returns to scale
- increasing returns
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Chapter 11 – Question 8
A firm employs 20 units of labour and pays $20 for each. It employs 20 units of capital and pays $60 for each. The marginal product of capital is twice that of labour. The firm should
- keep its employment of capital and labour at current levels
- substitute capital for labour
- increase labour
- double capital
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Chapter 11 – Question 9
A firm moves from one point on an isoquant curve to another on the same isoquant curve. Which of the following will not happen
- a change in the mix of the inputs
- a change in the quantity of output
- a change in the costs of production
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Chapter 11 – Question 10
What magnitudes are indicated on the x-axis and the y-axis of the following curves:
- the PPF
- the production function
- the isoquant curve
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Chapter 11 – Question 11
Distinguish the following terms
- marginal product
- marginal product revenue
- marginal revenue
- marginal cost
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