If a profit-maximizing firm finds that price exceeds average variable cost and marginal revenue is greater than marginal cost, it should:
a. reduce output, but continue producing in the short run.
b. increase output.
c. shut down.
d. not alter its production level since it is earning a profit.
QUESTION 2If everyone had the same income, then the Lorenz curve would:
a. be the line of income equality.
b. bow down below the line of income equality.
c. be a parallel line lying below the line of income equality.
d. bow up above the line of income equality.
e. be a curve that intersects the line of income equality at its mid-point.
QUESTION 3Fab Tools Inc can produce 150 widgets and 100 axes in a month. Another company AllMyTools Inc can produce 80 widgets and 50 axes per month. Which of the following statements is true?
a. Fab Tools has an absolute advantage in production of both goods.
b. AllMyTools has an absolute advantage in production of both goods.
c. AllMyTools has a comparative advantage in production of axes.
d. Fab Tools has a comparative advantage in production of widgets only.
QUESTION 4If a company is producing at a level of output at which the long-run average-total-cost curve reaches a minimum, then the company:
a. is experiencing economies of scale.
b. is operating at its minimum efficient scale.
c. is experiencing increasing returns to scale.
d. will shut down.
e. is experiencing diseconomies of scale.
QUESTION 5In the short run, a perfectly competitive firm will maximize profit by producing where:
a. MC = MR.
b. MC = ATC.
c. ATC = MR.
d. AVC = MC.
QUESTION 6The 45-degree line splitting the distance between the axes in a Lorenz Curve is the:
a. line of equal share of expenditure.
b. line of equivalent income.
c. line of income equality.
d. line of average income.
e. line of absolute inequality.
QUESTION 7Fab Tools Inc can produce 150 widgets and 100 axes in a month. Another company AllMyTools Inc can produce 180 widgets and 50 axes per month. Which of the following statements is true?
a. Fab Tools has a comparative advantage in the production of widgets.
b. Fab Tools has an absolute advantage in the production of both goods.
c. AllMyTools has a comparative advantage in the production of widgets.
d. AllMyTools has an absolute advantage in the production of both goods.
Quick Reply
