Assume 300 billion pounds of Ostrich meat is produced per year when the price is 50 cents per pound, and 500 billion pounds when the price is 60 cents per pound. The supply of Ostrich meat, other factors held constant, is:
a. price elastic.
b. price inelastic.
c. income elastic.
d. income inelastic.
QUESTION 2If a firm in a competitive industry is making zero economic profit but still producing, it must be the case that:
a. MC = MR > ATC.
b. MC = MR < ATC.
c. MC = ATC > MR.
d. MC = MR = ATC.
e. this situation is not possible.
QUESTION 3If the quantity of rental units increases by 10 percent when the monthly rental price doubles, the supply of rental units, other factors held constant, is:
a. elastic.
b. inelastic.
c. perfectly elastic.
d. perfectly inelastic.
QUESTION 4Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why?
a. No, average total costs have increased which means the company is not minimizing losses.
b. Yes, because average variable costs are always less than average total costs.
c. No, because the marginal cost of producing the last unit is the same as the marginal revenue.
d. Yes, even though the previous level of output had minimized the average total cost, there was still profit to be earned by producing additional units.
e. No, the previous level of output was the most efficient because it had the lowest average total cost.
QUESTION 5If a tripling of price triples the quantity of a good supplied, the price elasticity of supply for this good is:
a. 3.
b. 300.
c. 1.
d. 1.
e. 3.
QUESTION 6When choosing the production level for tomorrow you find that at an output of 100 units, the total variable costs are 20,000 and the average fixed cost is only 50 . If the market price is 200, you should:
a. b or e.
b. shut down.
c. produce more than 100 units.
d. produce fewer than 100 units.
e. produce where MC = MR.
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