ECON 5370 FINAL EXAM WITH COMPLETE
SOLUTIONS 100% VERIFIED
At the break-even point where economic profit is zero, the owner(s) of the firm makes
only normal profit. - ANSWER True
At the profit maximizing output, marginal profit (Mπ) is necessarily zero. - ANSWER True
Average (Aπ = Tπ/Q = P-ATC) is positive when Tπ > 0. - ANSWER True
When marginal profit is negative, additional output reduces total profit. - ANSWER True
Assuming a downsloping demand curve and non-zero marginal cost, total profit (Tπ)
maximization requires MR = 0. - ANSWER False
(Correct Answer) Assuming a downsloping demand curve and non-zero marginal cost,
total profit (Tπ) maximization requires MR = MC. TR is maximized when MR = dTR/dQ = 0.
Therefore when MC > 0, the profit maximizing output is less than the revenue maximizing
output.
In the short-run, a firm will minimize loss by closing-down if price falls short of average
variable cost. - ANSWER True
In the break-even analysis, a higher average variable cost (AVC) will result in a higher
break-even output. - ANSWER True
When the firm produces, total profit will be maximized or total loss is minimized where
marginal Profit is zero or where marginal revenue equals marginal cost. - ANSWER True
Marginal profit (Mπ) equals total profit (Tπ) divided by quantity (Q). - ANSWER False
, (Correct Answer) (i) Marginal profit (Mπ) is the change in total profit from selling an
additional unit of output, (ii) Marginal profit (Mπ) is marginal revenue minus marginal
cost, and (iii) Marginal profit (Mπ) is zero when total profit is at the maximum or loss is at
the minimum .
Average profit (Aπ) is zero when total profit is zero. - ANSWER True
A purely competitive seller meets the following conditions: (i) MR = MC at the profit
maximizing
output., (ii) a price taker, (iii) P = MC at the profit maximizing output, (iv) zero economic
profit in
the long-run, (v) no non-price competition. - ANSWER True
Under perfect competition, firms tend to make normal profit in the long-run. - ANSWER
True
The demand curve to a purely competitive seller is the same as the market demand
curve. - ANSWER True
In the short-run, a competitive firm which seeks to maximize profit or minimize loss will
produce
where P = MC, MR = MC, or Mπ = 0. - ANSWER True
In the short-run, a firm should close down if total revenue is lower than total variable
cost for all
output levels. - ANSWER True
For a perfectly competitive firm in the long-run equilibrium, price equals minimum ATC
and MC. - ANSWER True
In the short-run, a competitive firm which seeks to maximize profit will produce that
SOLUTIONS 100% VERIFIED
At the break-even point where economic profit is zero, the owner(s) of the firm makes
only normal profit. - ANSWER True
At the profit maximizing output, marginal profit (Mπ) is necessarily zero. - ANSWER True
Average (Aπ = Tπ/Q = P-ATC) is positive when Tπ > 0. - ANSWER True
When marginal profit is negative, additional output reduces total profit. - ANSWER True
Assuming a downsloping demand curve and non-zero marginal cost, total profit (Tπ)
maximization requires MR = 0. - ANSWER False
(Correct Answer) Assuming a downsloping demand curve and non-zero marginal cost,
total profit (Tπ) maximization requires MR = MC. TR is maximized when MR = dTR/dQ = 0.
Therefore when MC > 0, the profit maximizing output is less than the revenue maximizing
output.
In the short-run, a firm will minimize loss by closing-down if price falls short of average
variable cost. - ANSWER True
In the break-even analysis, a higher average variable cost (AVC) will result in a higher
break-even output. - ANSWER True
When the firm produces, total profit will be maximized or total loss is minimized where
marginal Profit is zero or where marginal revenue equals marginal cost. - ANSWER True
Marginal profit (Mπ) equals total profit (Tπ) divided by quantity (Q). - ANSWER False
, (Correct Answer) (i) Marginal profit (Mπ) is the change in total profit from selling an
additional unit of output, (ii) Marginal profit (Mπ) is marginal revenue minus marginal
cost, and (iii) Marginal profit (Mπ) is zero when total profit is at the maximum or loss is at
the minimum .
Average profit (Aπ) is zero when total profit is zero. - ANSWER True
A purely competitive seller meets the following conditions: (i) MR = MC at the profit
maximizing
output., (ii) a price taker, (iii) P = MC at the profit maximizing output, (iv) zero economic
profit in
the long-run, (v) no non-price competition. - ANSWER True
Under perfect competition, firms tend to make normal profit in the long-run. - ANSWER
True
The demand curve to a purely competitive seller is the same as the market demand
curve. - ANSWER True
In the short-run, a competitive firm which seeks to maximize profit or minimize loss will
produce
where P = MC, MR = MC, or Mπ = 0. - ANSWER True
In the short-run, a firm should close down if total revenue is lower than total variable
cost for all
output levels. - ANSWER True
For a perfectly competitive firm in the long-run equilibrium, price equals minimum ATC
and MC. - ANSWER True
In the short-run, a competitive firm which seeks to maximize profit will produce that
