A firm will always maximize profit at the level of output where average total costs are minimized.

a. True b. False

7) Suppose Mark invests a sum of $100,000 in a new venture. To fund his investment, Mark withdraws $50,000 from a savings account paying 10% per year and uses the proceeds from a bond that has just matured worth $50,000. If he had reinvested the proceeds from the bond, he could have earned interest at the rate of 5%. Calculate the opportunity cost of capital for Mark in a particular year.

a.$100,000 b.$5,000 c.$10,000 d.$12,500 e.$7,500

8) When revenue is less than total cost but more than variable cost it implies that:

a.the firm is enjoying positive economic profits. b.the firm can cover its variable cost and a part of its fixed costs. c.the firm is earning normal profits. d.the firm is unable to cover its costs and should shut down. e.the firm is able to cover both its fixed and variable costs.

9)When firms leave a perfectly competitive market, then, other things remaining unchanged:

a.both the market supply and the market price will fall. b.both the market demand and the price will increase. c.the market demand will decrease but the market price will rise. d.the market supply will decrease but the market price will rise. e.both the market demand and the market supply will decrease.

10) In the short-run, a perfectly competitive firm can earn normal profits or above normal profit but it cannot incur losses.

a. True b. False

11) The profit of a perfectly competitive firm is maximized at a level of output where its marginal cost is rising.

a. True b. False

12) A firm's total revenue is $400 for 8 units of output, $600 for 12 units of output, and $1,100 for 22 units of output. Evidently this firm is operating in a(n):

a.perfectly competitive market. b.monopolistic market. c.monopsonist market. d.oligopolistic market. e.monopolistically competitive market.

13) In the long-run, the entry of new firms in a competitive market shifts the aggregate supply curve to the left.

a. True b. False