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    tion1. A certain firm manufactures and sells computer chips. Last year it sold 2 million chips at a price of $10 per chip. For last year the firm’sa. accounting profit was $20 million.b. economic profit was $20 million.c. total revenue was $20 million.d. explicit costs was $20 million.2. Total revenue minus only explicit costs is calleda. accounting profit.b. economic profit.c. average total cost.d. implicit profit.3. Jane was a partner at a law firm earning $223000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347000 and incurred explicit costs of $163000. Jane’s economic profit from her first year in her own practice isa. -$39000.b. $124000.c. $163000.d. $184000.4. If Farmer Brown plants no seeds on his farm he gets no harvest. If he plants 1 bag of seeds he gets 5 bushels of wheat. If he plants 2 bags he gets 9 bushels. If he plants 3 bags he gets 12 bushels. A bag of seeds costs $120 and seeds are his only cost. Farmer Brown’s production function exhibitsa. increasing marginal product.b. constant marginal product.c. diminishing marginal product.d. The production function is unrelated to the marginal product.5. The cost of producing an additional unit of output is the firm’sa. marginal cost.b. productivity offset.c. variable cost.d. average variable cost.6. Which of the following is not a property of a firm’s cost curves?a. Marginal cost must eventually rise as a result of diminishing marginal product.b. Average total cost is U-shaped.c. Economies of scale will exist when average total cost falls as output rises.d. Average total cost will cross marginal cost at the minimum of marginal cost.7. Competitive markets are characterized bya. a small number of buyers and sellers.b. unique products.c. the interdependence of firms.d. free entry and exit by firms.8. Which of the following industries is least likely to exhibit the characteristic of free entry?a. restaurantsb. municipal water and sewerc. soybean farmingd. selling running apparel9. For a firm in a competitive market an increase in the quantity produced by the firm will result ina. a decrease in the product’s market price.b. an increase in the product’s market price.c. no change in the product’s market price.d. either an increase or no change in the product’s market price depending on the number of firms in the market.10.
    The average revenue when 14 units are produced and sold is

    Suppose that a firm in a competitive market faces the following revenues and costs:

    The firm will not produce an output level beyond
    Suppose a firm operating in a competitive market has the following cost curves:

    In the short run if the market price is higher than P1 but less than P4 individual firms in a competitive industry will earn.
    Suppose a firm operating in a competitive market has the following cost curves:

    The firm will exit the market for any price on the line segment
    If the market starts in equilibrium at point C in panel (b) a decrease in demand will ultimately lead to

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