A perfectly competitive firm maximizes profits or minimizes losses in the short-run by producing at the output level at which:
a. marginal revenue equals marginal cost.
b. total revenue equals total cost.
c. total revenue is at a maximum.
d. none of these.
QUESTION 2When economists look at the percentage change in quantity demanded generated by a change in income, they are looking at:
a. price elasticity of demand.
b. income elasticity of demand.
c. price elasticity of supply.
d. cross elasticity of demand.
e. cross elasticity of supply.
QUESTION 3A perfectly competitive firm in the short-run can earn:
a. positive economic profits.
b. negative economic profits.
c. zero economic profits.
d. all of these are possible
QUESTION 4If a consumer's purchases of a product increases as income increases, this good is classified as a(n):
a. superior good.
b. inferior good.
c. substitute good.
d. complementary good.
e. normal good.
QUESTION 5In the short run, a perfectly competitive firm's most profitable level of output is where:
a. total revenue minus total cost is at a maximum.
b. marginal cost equals marginal revenue.
c. Both of the above.
d. Neither of the above.
QUESTION 6If we measure the income elasticity of a good as 1.8, this means this good is a(n):
a. luxury good.
b. substitute good.
c. complementary good.
d. inferior good.
e. good from the food group.
QUESTION 7A perfectly competitive firm in the short-run maximizes its profit by producing the output where:
a. marginal cost equals price.
b. marginal cost equals marginal revenue.
c. total revenue minus total cost is at a maximum.
d. all of these.
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