All of the following can be used to compute average profit except

			marginal profit minus marginal cost.
			total profit divided by quantity.
			average revenue minus average total cost
			price minus average total cost.

	Points Received:	1 of 1
	Comments:

Question 2.

Question :

Figure 11-1
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Refer to Figure 11-1. If the firm is producing 700 units, what is the amount of its profit or loss?

			loss of $280
			loss equivalent to the area A.
			profit equivalent to the area A.
			There is insufficient information to answer the question.

	Points Received:	1 of 1
	Comments:

Question 3.

Question :

Assume that price is greater than average variable cost. If a perfectly competitive seller is producing at an output where price is $11 and the marginal cost is $14.54, then to maximize profits the firm should

			continue producing at the current output.
			produce a larger level of output.
			produce a smaller level of output.
			not enough information given to answer the question.

	Points Received:	1 of 1
	Comments:

Question 4.

Question :

For a perfectly competitive firm, at profit maximization

			market price exceeds marginal cost.
			total revenue is maximized.
			marginal revenue equals marginal cost.
			production must occur where average cost is minimized.

	Points Received:	1 of 1
	Comments:

Question 5.

Question :

How will an increase in the price of land for housing development affect apple growers who must use land to produce apples?

			Apple growers will experience persistent losses if they do not sell their land to housing developers.
			It raises the opportunity cost of apple production.
			Apple growers will earn higher profit because their land is now more valuable.
			It will raise the price of apples.

	Points Received:	1 of 1
	Comments:

Question 6.

Question :

The Aluminum Company of America (Alcoa) had a monopoly until the 1940s because

			it was a public enterprise.
			it had a patent on the manufacture of aluminum.
			the company had a secret technique for making aluminum from bauxite.
			it had control of almost all available supply of bauxite.

	Points Received:	1 of 1
	Comments:

Question 7.

Question :

Economic efficiency requires that a natural monopoly’s price be

			equal to average total cost where it intersects the demand curve.
			equal to marginal cost where it intersects the demand curve.
			equal to average variable cost where it intersects the demand curve.
			equal to the lowest price the firm can charge and still make a normal profit.

	Points Received:	1 of 1
	Comments:

Question 8.

Question :

A monopoly is characterized by all of the following except

			there are only a few sellers each selling a unique product.
			entry barriers are high.
			there are no close substitutes to the firm’s product.
			the firm has market power.

	Points Received:	1 of 1
	Comments:

Question 9.

Question :

Figure 14-7

Figure 14-7 shows the cost and demand curves for the Erickson Power Company.

Refer to Figure 14-7.Why won’t regulators require that Erickson Power produce the economically efficient output level?

			because there is insufficient demand at that output level
			because at the economically efficient output level, the marginal cost of producing the last unit sold exceeds the consumers’ marginal value for that last unit
			because Erickson Power will earn zero profit
			because Erickson Power will sustain persistent losses and will not continue in business in the long run.

	Points Received:	1 of 1
	Comments:

Question 10.

Question :

If a monopolist’s marginal revenue is $25 a unit and its marginal cost is $25, then

			to maximize profit the firm should increase output.
			to maximize profit the firm should decrease output.
			to maximize profit the firm should continue to produce the output it is producing.
			Not enough information is given to say what the firm should do to maximize profit.

	Points Received:	1 of 1
	Comments:

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