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q c-22

The document discusses various concepts related to perfectly competitive markets, including equilibrium price, marginal revenue, and cost structures. It poses multiple-choice questions regarding the behavior of firms in such markets, the characteristics of perfect competition, and the implications of different cost scenarios. Key topics include profit maximization, supply curves, and the nature of price takers.

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rxrahman123
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17 views

q c-22

The document discusses various concepts related to perfectly competitive markets, including equilibrium price, marginal revenue, and cost structures. It poses multiple-choice questions regarding the behavior of firms in such markets, the characteristics of perfect competition, and the implications of different cost scenarios. Key topics include profit maximization, supply curves, and the nature of price takers.

Uploaded by

rxrahman123
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1. Equilibrium price is $19 in a perfectly competitive market.

For a perfectly competitive firm, MR = MC


at 120 units of output. At 120 units, ATC is $11, and AVC is $8. The best policy for this firm is to in the
short run. Also, this firm earns _ _if it produces and sells 120 units. Finally, the difference between total
revenue and total fixed cost for this firrm is _ (Show your work)

a. continue to produce; profits; $960; $1, 920

b.continue to produce; losses; $960;$1, 000

c. shut down; losses;$1,200;$2, 900

d. continue to produce; profits; $1, 920;$1, 960

2. Consider the following data: equilibriurn price = $15, quantity of output produced = 10, 000 units,
average total cost = $12, and average variable cost $7. Given this data, total revenue is total cost is and
total fixed cost is (Show your work)

a. $15，000；$12，000；$7， 000

b. $150, 000; $120, 000;$70, 000

c. $15, 000; $12, 000; $5, 000

d. $150, 000; $120, 000; $50, 000

3. When the perfectly competitive firm produces the quantity of output at which marginal revenue
equals marginal cost, it naturally

a. produces the quantity of output at which marginal cost equals price, since for the perfectly
competitive firm price equals marginal revenue.

b. produces the quantity of output at which short-run average total cost equals price, since for the
perfectly competitive firm short-run average total cost equals marginal revenue.

c. earns a profit, since equating marginal revenue and marginal cost guarantees profit

d. takes a loss.

4. A constant-cost industry has a long-run (industry) supply curve that is

a. upward sloping.

b. downward sloping.

c. horizontal.

d. U-shaped.
5. A "price taker" is a firm that

a. does not have the ability to control the price of the product it sells.

b. does have the ability, although limited, to control the price of the product it sells.

c. can raise the price of the product (above the market price) and still sell some units of its product.

d. sells a differentiated product.

6. Which of the following is a characteristic of perfect competition?

a. Many sellers and few buyers

b. Many buyers and few sellers

c. A heterogeneous product

d. Buyers and sellers having all relevant information

7. At the quantity of output for which total revenue equals total cost,

a. economic profit is zero.

b.cost is minimized.

c. cost is maximized.

d. quantity is minimized.

8. For a perfectly competitive firm,

a. the marginal revenue curve and the dernand curve are the same.

b. the marginal revenue curve and the marginal cost curve are the same.

c. the supply curve and the marginal revenue curve are the same.

d. the demand curve and the marginal cost curve are the same.

10. Which of the following is the best example of a homogeneous good?

a. New cars

b. Ice cream

c. Soft drinks

d. Wheat Indicate whether the statement is true or false.


11. A decreasing-cost industry has a long-run supply curve that is upward sloping

. a. True b. False

12. In a perfectly competitive market, the market dermand curve is perfectly elastic

a. True b. False

13. In long-run competitive equilibrium, no firm has an incentive to change its plant size. a. True b. False

14. The perfectly competitive firm will seek to produce the level of output for which

a. average variable cost is at a minimun.

b. average total cost is at a minimum.

c. average fixed cost is at a minimum.

d.marginal cost equals marginal revenue.

15. If a seller is a price taker it means that the seller sells his product at the price

a. he chooses.

b. determined in the market.

c. determined by the biggest firm in the market.

d. determined by the largest consurner in the market.

16. If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing
that unit the firm

a. added more to total costs than it added to total revenue.

b. added more to total revenue than it added to total costs.

c. added an equal amount to both total revenue and total costs.

d. maximized profits or minimized losses.

18. In long-run competitive equilibrium, firms

a. earn positive economic profits.


b. have no incentive to make any changes.

C. earn losses on some units of the good they produce and sell.

d. do not produce the quantity of output at which MR = MC.

19. Which of the assumptions below assures us that economic profit will be zero in long-run equilibrium
for perfectly competitive firms?

a. Buyers and sellers having all relevant information

b. Firms producing heterogeneous goods

c. Too few buyers

d. Easy entry and exit

20.If MR > MC, then

a. profits are being maximized.

b. the firm is producing too much of the good to be maximizing profits.

c. the firm can increase its profits (or minimize its losses) by increasing output.

d.the firm must be incurring losses.

21. Refer to Figure 7-8. What is the total revenue of Firm A at the profit-maximizing (or loss- minimizing)
level of output?

a. $300

b.$700

C.$1, 000

d.$400

22. The perfectly competitive firm's short-run supply curve is the

a.upward-sloping portion of its average total cost curve.

b. horizontal portion of its marginal revenue curve. Curve

. c. portion ofits average variable cost curve that lies above the average fixed cost

d. portion of its marginal cost curve that lies above its average variable cost curve.

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