Question

7. Economists use the three-step method to determine whether a firm is generating economic profits, economic losses, or zero economic profits at the ______.

a.profit-minimizing level of input

b.profit-maximizing level of input

c.profit-minimizing level of output

d.profit-maximizing level of output

8. Economists sometimes call zero economic profit a ______ rate of return.

a.normal

b.natural

c.neutral

d.negative

9.It is not likely that firms will either enter or leave the market ______.

a.at positive economic profits

b.at zero economic profits

c.at economic losses

d.at growing economic profits

10. ______ efficiency means that for the last unit produced, the Marginal Benefit to society = Marginal Cost of production.

a. Productive

b.Marginal

c.Modified

d.Allocative

11. ______ efficiency means that the firm is producing at the lowest possible cost per unit.

a.Marginal

b.Modified

c.Allocative

d.Productive

12. Marginal revenue in a perfectly competitive firm is equal to the price of the good.

a.True

b.False

Answer 1

Ans.7- (D)

Economists use the three-step method to determine whether a firm is generating economic profits, economic losses, or zero economic profits at the profit maximizing level of output.

Ans.8- (A)

Normal rate of return occurs when a firm is earning 0 economic profits.

Ans.9- (B)

At zero economic profits, no firm has any incentive to enter or exit the industry .So, It is not likely that firms will either enter or leave the market

Ans.10- (D)

Ans.11- (C)

Ans.12- True

MR = P = AR for a perfectly competitive firm.