12) Kevin’s Golf-a-Rama sells golf balls in a perfectly competitive market. At its current level of golf ball production, Kevin has marginal costs equal to $1, and AVC is rising. If the market price of golf balls is $2, Kevin should
A) decrease the level of golf ball production.
B) continue producing the current level of production.
C) increase the production of golf balls.
D) shut down and produce no golf balls.
13) Kevin’s Golf-a-Rama sells golf balls in a perfectly competitive market. At its current level of golf ball production, Kevin has marginal costs equal to $2. If the market price of golf balls is $1, Kevin should
A) decrease the level of golf ball production.
B) continue producing the current level of production.
C) increase the production of golf balls.
D) raise the price of its golf balls.
14) Alex’s Furniture Mart produces and sells tables in a perfectly competitive market. When Alex’s Furniture Mart produces and sells 250 tables, its marginal cost is equal to $200, and AVC is rising. If the market price of tables is equal to $150, Alex’s Furniture Mart should
A) decrease its level of table production.
B) increase its level of table production.
C) continue producing 250 tables.
D) raise the price of its tables.
15) Compact discs are sold in a perfectly competitive market. The current market price of compact discs is $15. If at the current level of production of compact discs you calculate that the marginal cost to your company is also $15, and that AVC is rising, in the short run your company should
A) produce more compact discs.
B) produce fewer compact discs.
C) continue producing the current level of compact discs.
D) raise the price of its compact discs.
16) If a firm in a perfectly competitive market is currently producing the output where price = marginal cost = average total cost, the firm is
A) earning a positive economic profit.
B) earning a zero economic profit.
C) suffering an economic loss.
D) all of the above
17) If a firm in a perfectly competitive market is currently producing the output where price = marginal cost > average total cost, the firm is
A) earning a positive profit.
B) earning a zero profit.
C) suffering an economic loss.
D) all of the above
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18) Figure 6.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $40, the firm’s profit maximizing output level is
A) 500.
B) 650.
C) 900.
D) 1,200.
19) Figure 6.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $40 and the firm is currently producing the profit maximizing output level, its total variable cost is
A) $12,500.
B) $14,300.
C) $19,800.
D) $27,000.
20) Figure 6.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $40 and the firm is currently producing the profit maximizing output level, its total fixed cost is
A) $2,800.
B) $5,200.
C) $7,200.
D) $9,000.
21) Figure 6.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $40 and the firm is currently producing the profit maximizing output level, the firm’s profit is
A) $7,200.
B) $9,000.
C) $27,000.
D) $36,000.
