In the short run, the firm makes zero economic profit when the price is ________ minimum average total cost, makes an economic profit when the price is ________ minimum average total cost, and incurs an economic loss when the price is ________
minimum average total cost. A) equal to; higher than; lower than
B) equal to; lower than; higher than
C) higher than; equal to; lower than
D) lower than; equal to; higher than
Ques. 2John and Sally have identical preferences except that Sally's utility is exactly 10 times John's for each basket of goods. If they have the same income and face the same prices
A) Sally will consume 10 times the amount that John consumes.
B) Sally will receive 1/10 the satisfaction of John.
C) both will consume the same amount of all goods.
D) John and Sally will have equal total utility.
Ques. 3Mel's utility of wealth is 130 units at 3,000, 160 units at 5,000, and 190 units at 9,000. Starting from zero wealth, he must choose between options A and B.
Option A gives him 5,000 for sure. Option B gives him 3,000 with probability 0.4 or 9,000 with probability 0.6. Mel
A) will choose A.
B) will choose B.
C) is indifferent between A and B.
D) needs more information to make a choice.
Ques. 4In the figure above, the firm's economic
A) loss will be greater than 30 per day.
B) loss will be 30 or less per day.
C) profit will be between 0 and 30 per day.
D) profit will be greater than 30.01 per day.
Ques. 5Bob's Books is the only bookstore in town. The figure above shows the demand curve for books and Bob's Books' marginal revenue curve and marginal cost curve.
Bob's Books maximizes its profit and sets the price of a book equal to ________ and has total annual revenue of ________. A) 40; 40,000
B) 30; 60,000
C) 20, 60,000
D) 10; 40,000
Ques. 6Of the following, the best example of firm that might operate in a contestable market is a
A) cable TV company.
B) wheat farmer.
C) ship owner operating on a major waterway.
D) private college operating in a state with many public colleges.
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