Use the following to answer questions 1-3:

Table: Competitive Firm

Quantity (Units) Total Revenue ($) Total Cost ($)

0 0 50
1 90 80
2 180 120
3 270 170
4 360 230
5 450 300
6 540 380
7 630 470
8 720 570

1. (Table: Competitive Firm) The marginal cost of the fifth unit of output is:
A) $70.
B) $90.
C) $450.
D) $300.

2. (Table: Competitive Firm) Refer to the table. The fixed cost for this firm is:
A) $80.
B) $90.
C) $50.
D) $100.

3. (Table: Competitive Firm) The marginal revenue for the fifth unit of output is:
A) $70.
B) $90.
C) $450.
D) $20.

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Use the following to answer question 4:

Figure: Price Floor

4. (Figure: Price Floor) Refer to the figure. How much unemployment results from the
imposition of a price floor set at $10?
A) 100 units
B) 310 units
C) 50 units
D) 210 units

Use the following to answer question 5:

Figure: Minimum Wage

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 5. (Figure: Minimum Wage) Refer to the figure. At a minimum wage of $8, firms are
willing to hire ________ workers.
A) 45
B) 25
C) 35
D) more than 45

Use the following to answer question 6:

Figure: Price Ceiling

6. (Figure: Price Ceiling) Refer to the figure. When a price ceiling of $10 is instituted by the
government, consumers are able to buy how many units of the product?
A) 290 units
B) 310 units
C) 270 units
D) 40 units

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7. Figure: Profit Maximizing Output

Use the figure. The profit-maximizing output for this firm is:
A) 40.
B) 3.
C) 6.
D) 9.

8. When a price ceiling is in effect, quantity ______ will be greater than quantity ______,
creating a ______.
A) supplied; demanded; surplus
B) demanded; supplied; shortage
C) supplied; demanded; shortage
D) demanded; supplied; surplus

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Use the following to answer question 9:

Figure: Price Ceiling of Ps

9. (Figure: Price Ceiling of Ps) Refer to the figure. Suppose a price ceiling of Ps is imposed.
As a result:
A) The quantity supplied in the market is Qs.
B) Buyers' willingness to pay for the good is Pd.
C) The quantity demanded in the market is Qd.
D) All of the answers are correct.

Use the following to answer question 10:

Figure: Costs

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10. (Figure: Costs) Use the figure. At a price of $20, the firm earns profit of:
A) $75.
B) $300.
C) $225.
D) $0, because P = MC at P = $20.

11. At zero economic profits, a competitive firm:

A) has an incentive to leave the industry to make higher profit elsewhere.
B) is making a normal profit; its revenues are just sufficient to cover all costs of
production, including opportunity costs.
C) is unable to pay its opportunity costs of production but will remain in business to
minimize losses.
D) will benefit, in the form of higher profits, by raising its prices above average cost.

12. Deadweight loss is:

A) necessary to ensure that resources are channeled to their highest-valued use.
B) the loss to the economy from firms going out of business due to competition.
C) usually offset by deadweight gains.
D) the total of lost consumer and producer surplus when not all mutually profitable
gains from trade are exploited.

13. When price floors are in effect, goods and services:

A) are still allocated efficiently.
B) are not necessarily supplied by their lowest-cost producer.
C) do not necessarily flow to their highest-valued use.
D) are neither necessarily supplied by their lowest-cost producer nor do they flow to
their highest-valued use.

14. A market is considered perfectly competitive if:

I. there is a lot of product differentiation among sellers.
II. there are many sellers, each small relative to the total market.
III. the product sold is similar across sellers.
IV. there are only a few buyers.
A) I and II only
B) I, II, and III only
C) II and III only
D) II, III, and IV only

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 15. Firms in a perfectly competitive industry maximize profits by:
A) eliminating the competition.
B) producing a higher quality good and setting a price higher than the competition.
C) setting a price equal to the market price.
D) setting a price less than the market price and undercutting the competition.

16. Which statement is NOT an effect of a price ceiling?

A) surpluses
B) misallocation of resources
C) loss of gains from trade
D) wasteful lineups

17. If the minimum wage is lowered and closer to the market level, the:
A) gains from trade would decrease, compared to a higher minimum wage.
B) gains from trade would increase, compared to a higher minimum wage.
C) lost gains from trade would increase, compared to a higher minimum wage.
D) deadweight loss would increase, compared to a higher minimum wage.

Use the following to answer question 18:

Figure: Government Price Controls

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18. (Figure: Government Price Controls) Refer to the figure. The government enacts a price
control causing a shortage of 15 units of the good. Therefore, the ________ is set at
________.
A) price floor; $31
B) price floor; $17
C) price ceiling; $10
D) price ceiling; $17

19. When marginal cost is rising, the average total costs:

A) could be rising or falling.
B) must be rising.
C) must be falling.
D) must be constant.

20. Total cost in economics incorporates:

A) implicit and explicit cost.
B) implicit cost only.
C) explicit cost only.
D) neither explicit nor implicit cost.

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