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Gillespie: Foundations of Economics
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Gillespie: Foundations of Economics

Unit 10

Instructions

Choose your answers from a-d by clicking the radio button next to each choice and then press 'Submit' to get your score.

Question 1

If the marginal revenue is less than the marginal cost then to profit maximise a firm should:

a) Reduce output

b) Increase output

c) Leave output where it is

d) Increase costs

Question 2

If the price is less than the average costs but higher than the average variable costs:

a) The firm is making a loss and will shutdown in the short term

b) The firm is making a profit

c) The firm is making a loss but will continue to produce in the short term

d) The firm is making a loss and is making a negative contribution to fixed costs

Question 3

If firms earn normal profits:

a) They will aim to leave the industry

b) Other firms will join the industry

c) The revenue equals total costs

d) No profit is made in accounting terms

Question 4

In the long term a firm will produce provided the revenue covers:

a) Fixed costs

b) Variable costs

c) Total costs

d) Revenue

Question 5

In the short term a firm will produce provided the revenue:

a) Covers fixed costs

b) Covers variable costs

c) Covers total costs

d) Covers revenue

Question 6

The profit per sale is a measure of:

a) Profit

b) Profitability

c) Feasibility

d) Realism

Question 7

The total costs are £2000 and 10 units are produced. The marginal cost of an 11^th unit is £1300. Which of the following is true?

a) The average cost increases from £20 to £30

b) The total costs for 11 units are £700

c) The average cost for 10 units is £1300

d) The average cost for 11 units is £1300

Question 8

Total revenue equals:

a) Price plus quantity

b) Price multiplied by quantity sold

c) Price divided by the quantity sold

d) Price minus quantity sold

Question 9

If marginal revenue equals marginal cost:

a) No profit is being made

b) Total revenue equals total cost

c) Profits are maximised

d) Producing another unit would increase profits

Question 10

Price equals:

a) Total revenue - quantity

b) Total revenue / quantity sold

c) Total quantity sold * quantity sold

d) Total revenue / total cost

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Oxford University Press, Online Resource Centre, Unit 10.