Q: Which equation correctly represents profit for a firm?

$$\text{Profit} = (P - ATC) \times Q$$

Question 1

Which of the following best describes the three components of the seller's problem in microeconomics?

Accepted Answer

How to make the product, what is the cost of making the product, and how much can the seller get for the product in the market.

Question 2

In a perfectly competitive market, which of the following is NOT a defining characteristic?

Accepted Answer

Sellers produce differentiated products.

Question 3

Suppose a bakery can only hire more workers in the short run, but cannot buy more ovens. What is the oven considered in this scenario?

Accepted Answer

A fixed factor of production.

Question 4

If the marginal cost of producing the third widget is $$3, and the market price is 4$$, what is the producer surplus from selling the third widget?

Accepted Answer

$1

Question 5

A hotel owner faces an average total cost (ATC) of $$75 per room per night. During the off-season, she is offered 70 $$for a room. If her average variable cost (AVC) is $60, what should she do in the short run?

Accepted Answer

Accept the offer, because price covers AVC and contributes to fixed costs.

Question 6

Which equation correctly represents profit for a firm?

Accepted Answer

$$	ext{Profit} = (P - ATC) 	imes Q$$

Question 7

If a firm’s total cost is given by $$TC = 9 + Q^2$, what is the formula for average total cost (ATC)?

Accepted Answer

$$ATC = \frac{9}{Q} + Q$$

Question 8

In the short run, a firm will shut down production if:

Accepted Answer

The market price falls below average variable cost (AVC).

Question 9

Which of the following best describes the law of diminishing returns?

Accepted Answer

As more of a variable input is added to a fixed input, the additional output from each new worker eventually decreases.

Question 10

A firm in a perfectly competitive market faces a market price of $$10. Its marginal cost (MC) is 10 at 50 $$units and $12 at 51 units. How many units should the firm produce to maximize profit?

Accepted Answer

50 units

Question 11

If the price elasticity of supply is greater than 1, supply is said to be:

Accepted Answer

Elastic

Question 12

Which of the following is an example of an implicit (opportunity) cost?

Accepted Answer

The income a business owner forgoes by not working elsewhere.

Question 13

In the long run, if firms in a perfectly competitive market are earning positive economic profits, what will happen?

Accepted Answer

New firms will enter the market, increasing supply and driving profits toward zero.

Question 14

Suppose a firm’s marginal cost (MC) curve is given by $$MC = 2Q. If $$the market price is $$10$$, how much will the firm produce in the short run?

Accepted Answer

$$Q = 5$$

Question 15

Which of the following statements about producer surplus is correct?

Accepted Answer

Producer surplus is the area above the supply (MC) curve and below the market price.

Question 16

If a firm’s total cost is $$TC = 9 + Q^2$ and the market price is 10$, what is the firm’s profit-maximizing output?

Accepted Answer

$$Q = 5$$

Question 17

Which of the following best explains why the long-run supply curve in a perfectly competitive market is horizontal?

Accepted Answer

Firms can enter and exit freely, so economic profits are driven to zero and price remains constant at the minimum ATC.

Question 18

A farmer can earn $$50,000 by growing corn or 40$$,000 by growing soybeans. What is the economic profit from growing corn?

Accepted Answer

$10,000

Question 19

Which of the following is true about economies of scale?

Accepted Answer

Average total cost decreases as output increases.

Question 20

If a government introduces a subsidy to an industry in a perfectly competitive market, what is the likely long-run effect?

Accepted Answer

Firms will enter the industry, increasing supply and driving profits back to zero.

Producers, Supply, and Producer Surplus: Foundations of Firm Behavior in Competitive Markets

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