Lecture 6: Firms

A competitive firm maximizes profits by producing at the quantity
where marginal revenue equals marginal cost.

• True

• False

A monopolist maximizes profit by producing at the quantity where
marginal revenue equals marginal cost, but a competitive firm, being a
price taker, must maximize revenue.

• True

• False

How many firms are there in a perfect competition?

• 1
• 2-5
• Many

Choose the example that goes best with an oligopoly.

• apples
• cell phone providers
• utilities
• clothing

Which of the following industries is an example of a monopoly?

• utilities/water

• department stores

• auto industry

• commercial airlines

Which is NOT a characteristic of a monopoly?

• Seller sets the market price
• Entry into the market is easy
• Firm sells a unique product
• One seller

According to the "Shutdown Rule" a business must shut down if the Average Revenue (Price) they get for their product is less than the

• Average fixed Cost

• Average Variable cost

• Marginal Cost

when you hire someone to work for
you, your goal and the hired agent’s goal may be different: you may want
to maximize profit, but the agent wants to maximize personal gains. (WHAT KIND OF PROBLEM IS THIS)

• principal-agent problem

• Maxi-gain problem

• You problem

• agent problem

A type of firm that would not normally maximize profit is

• a corporation.

• a firm owned by shareholders.

• an organization pursuing

  the public interest.

• a sole proprietorship.

Should a firm shut down if its weekly revenue is ​$1,000​, its variable cost is ​$900​, and its fixed cost is ​$1,100​, of which ​$150 is avoidable if it shuts​ down? ​ Why? The firm should

• 
  produce because revenue of ​$1,000 is greater than variable costs.

• because revenue of

  ​$1,000 is less than fixed costs

• because revenue of ​$1,000

  is less than avoidable costs