1. Which of the following is true about profit maximization for a perfectly competitive firm?
A)Firms continue to increase prices to gain higher profits
B)A firm maximizes profit differently in the short run and the long run
C)Firms can lower prices to gain higher profits
D)Profit is higher at that level of output than any other

2. Which of the following is true?
A)In the long run, inputs are fixed
B)In the short run, inputs are fixed and variable
C)In the long run, inputs are fixed and variable
D)In the short run, inputs are fixed

3. If total cost is $24 and variable costs are $12 at 6 units of output, average fixed cost is
A)$2
B)$12
C)$4
D)$1

4. The production function represents the
A)All options are incorrect
B)quantity of inputs and costs
C)quantity of inputs and output
D)quantity of output and costs

5. An exporting country will
A)produce when the domestic price is lower than the world price
B)produce at a lower opportunity cost than an importing country
C)all options are correct
D)give up the least amount of resources to produce this good

6. Diseconomies of scale are characterized by
A)more specialization to promote efficiency
B)falling average total cost
C)mismanagement of company resources
D)constant average total cost

7. External economies develop because
A)a new industry advances technology
B)an established industry has many skilled workers available
C)a geological source of comparative advantage is in that climate
D)the new industry attracts new unskilled labor

8. In the long run, if price = $12, ATC = $11, AFC = $2, and AVC = $9, a perfectly
competitive firm would decide to
A)enter the industry
B)exit the industry
C)continue to produce
D)shut down

9. A perfectly competitive firm will produce in the short run as long as
A)the firm receives a price greater than average total cost
B)the cost of producing is less than the cost of not producing
C)the firm receives a price greater than average fixed cost
D)All options are incorrect

10. A unilaterally mandated protectionist policy that limits the quantity of certain imports is a
A)voluntary export restraint
B)tariff
C)quota
D)external economy

11. Marginal revenue is
A)price multiplied by quantity sold
B)the additional revenue a consumer receives from producing one more unit of output
C)never the same as price
D)the additional revenue a firm receives from selling one more unit of output

12. Firms will enter the industry under which of the following conditions
A)Price is less than average total cost
B)Price is greater than average total cost
C)Price is less than average variable cost
D)Price is greater than average variable cost

13. Diminishing returns occurs in the
A)short run because capital is variable
B)long run because capital is variable
C)short run because capital is fixed
D)long run because capital is fixed

14. Division of labor implies
A)each labor unit utilizes cross-training to become efficient at every task
B)each labor unit specializes in a specific task
C)each output becomes more specialized
D)the production function rises, but at a diminishing rate

15. Shutdown occurs under which of the following conditions?
A)Price = $10, ATC = $12, and AFC = $1
B)Price = $8, ATC = $10, and AFC = $2
C)Price = $10, ATC = $10, and ACF = $1
D)Price = $10, ATC = $12 and AFC = $2