1. Assume a perfectly competitive firm is maximizing a profit at some output at which long -run a verage total cost is at a minimum then a) The firm is earning an economic profit b) There is no tendency for the firms industry to expand or contract c) allocative but not procedures efficiency is being achieved d)other firms will enter this industry

2. If a profit seeking competitive firm is producing its profit -maximizing output and its total fixed costs fall by 25 percent the firm should: a) use more labor and less capital to produce a larger out put b) not change its output c) reduce its output d) increase its output

3. If the monopolist firm in the diagram lowers price from P1 to P2 it will a) lose P1 P2 ba bin revenue from the price cut but increase revenue by Q1bc Q2 from the increase in sales b) lose P1P2ca in revenue from the piece cut but increase revenue by Q1acQ2 from increase in sales c) incur a decline in total revenue because it is operating on the elastic segment of the demand curve d) incur an increase in total revenue because it is operating on the inelastic segment of the demand curve

4. When compact disc (CD) players first came on the market they sold for over $1,000 .Nw a good CD player can be purchased for $ 100 .these facts imply that : A) the CD industry was once competitive but is now monopolistic b) fewer firms produce CD players than was the case five or ten years ago c) the deman curve for CD players has shifted leftward d) the CD player industry is a decreasing -cost industry.