MBA 701 EXAM REVISION QUESTIONS AND
CORRECT ANSWERS.
A perfectly competitive firm maximizes profits at the level of output such that market
price______________________ marginal cost
Equals
A perfectly competitive firm maximizes profits at a point where P ________ MC over the
range where MC is _________.
Equals; increasing
For a perfectly competitive firm, marginal revenue is equal to the market
________________.
Price
When price (P) exceeds minimum average variable cost (AVC), each unit of output sold
generates ___________ revenue than the cost per unit of the variable inputs.
more
Define the competitive firm's demand.
a. Df = P = TR
b. Df = P = MC
c. Df = P = Supply
d. Df = P = MR
d.
To maximize profits, a perfectly competitive firm should produce in the range of increasing
marginal cost where P = MC and
a. P ≤ AVC
b. MR < MC
, c. P ≥ AVC
d. MR > MC
c.
Explanation: A perfectly competitive firm should produce in the range of increasing marginal
cost (IMC), where the price (P) equals the marginal cost (MC) to maximize profits. This occurs
at the point where the marginal revenue (MR) equals marginal cost (MC), and the firm will
produce at any output level above this point. The IMC range is the area where producing one
more unit leads to higher profit margins, and output prices remain low enough for demand to be
relatively inelastic. By focusing on efficient production and optimizing the output level, the firm
can maximize its profits in the competitive market.
In perfect competition, profit equals
a. Costs - Revenues
b. RevenuesCostsRevenuesCosts
c. Revenues - Costs
d. Revenues × Costs
c.
A perfectly competitive firm's short-run supply curve is its marginal cost above the
minimum point of the _______ curve.
a. average total cost (AC)
b. average fixed cost (AFC)
c. average variable cost (AVC)
c.
In perfect competition, profits are maximized at a level of output such that
a. the vertical distance between the revenue line and the cost curve is greatest.
b. the vertical distance between the revenue line and the cost curve is smallest.
CORRECT ANSWERS.
A perfectly competitive firm maximizes profits at the level of output such that market
price______________________ marginal cost
Equals
A perfectly competitive firm maximizes profits at a point where P ________ MC over the
range where MC is _________.
Equals; increasing
For a perfectly competitive firm, marginal revenue is equal to the market
________________.
Price
When price (P) exceeds minimum average variable cost (AVC), each unit of output sold
generates ___________ revenue than the cost per unit of the variable inputs.
more
Define the competitive firm's demand.
a. Df = P = TR
b. Df = P = MC
c. Df = P = Supply
d. Df = P = MR
d.
To maximize profits, a perfectly competitive firm should produce in the range of increasing
marginal cost where P = MC and
a. P ≤ AVC
b. MR < MC
, c. P ≥ AVC
d. MR > MC
c.
Explanation: A perfectly competitive firm should produce in the range of increasing marginal
cost (IMC), where the price (P) equals the marginal cost (MC) to maximize profits. This occurs
at the point where the marginal revenue (MR) equals marginal cost (MC), and the firm will
produce at any output level above this point. The IMC range is the area where producing one
more unit leads to higher profit margins, and output prices remain low enough for demand to be
relatively inelastic. By focusing on efficient production and optimizing the output level, the firm
can maximize its profits in the competitive market.
In perfect competition, profit equals
a. Costs - Revenues
b. RevenuesCostsRevenuesCosts
c. Revenues - Costs
d. Revenues × Costs
c.
A perfectly competitive firm's short-run supply curve is its marginal cost above the
minimum point of the _______ curve.
a. average total cost (AC)
b. average fixed cost (AFC)
c. average variable cost (AVC)
c.
In perfect competition, profits are maximized at a level of output such that
a. the vertical distance between the revenue line and the cost curve is greatest.
b. the vertical distance between the revenue line and the cost curve is smallest.
