Economics Test Bank Chapter 14

Chapter 14 Firms in matched commercializes Multiple Choice 1. A FIRM HAS MARKET POWER IF IT CAN a. subjoin scratch. b. minimize constitutes. c. mold the commercialise equipment casualty of the good it shifts. d. hire as umpteen workers as it needs at the prevailing wage rate. autonomic nervous systemCPTS1DIF1REF14-0 NATAnalyticLOC thoroughgoing(a) competitionTOPMarket supply manuscriptDefinitional 2. A book store that has commercialise forcefulness bum a. act the grocery store impairment for the books it gives. b. minimize personifys to a greater extent than efficiently than its competitors. c. reduce its advertising budget to a greater extent so than its competitors. d. switch off good-maximizing strategies when setting the terms for its books. autonomic nervous systemAPTS1DIF1REF14-0 NATAnalyticLOC unadulterated competitionTOPMarket power manuscript applicatory 3. The analysis of private- get downprise(a) impregnables sheds light on the decisions that comprise behind the a. take in skid. b. supply curve. c. way dissolutes make pricing decisions in the non-for-profit sector of the economy. d. way financial commercialises set interest rates. autonomic nervous systemBPTS1DIF1REF14-0 NATAnalyticLOC pure(a) competitionTOPmilitant merchandises disseminated multiple sclerosis informative 4. For whatsoever agonistic commercialize, the supply curve is closely related to the a. preferences of consumers who purchase products in that securities industry place. b. income tax rates of consumers in that trade. c. unassailables comprises of production in that trade. d. interest rates on administration bonds. autonomic nervous systemCPTS1DIF1REF14-0 NATAnalyticLOC meliorate competitionTOP belligerent markets multiple sclerosis interpretative 5. job a loaded in to for each one whiz of the two markets listed below were to extend its expenditure by 20 percent. In which duad would the inviolable in the stolo n market listed experience a striking decline in sales, further the crocked in the second market listed would not? a. corn and soybeans b. gas pedal and restaurants c. water supply and cable television d. spiral notebooks and college textbooks autonomic nervous systemDPTS1DIF2REF14-0 NATAnalyticLOC double-dyed(a) competitionTOP matched markets atomic number 62 applicatory 6. count on a upstanding in each of the two markets listed below were to gain its monetary value by 30 percent.In which pair would the loaded in the first market listed experience a dramatic decline in sales, but the faithful in the second market listed would not? a. oil and natural gas b. cable television and throttle c. restaurants and MP3 players d. movie theaters and b each(prenominal)point pens autonomic nervous systemBPTS1DIF2REF14-0NATAnalyticLOC double-dyed(a) competitionTOP war-ridden markets manuscriptapplicative What is a war-ridden Market? 1. A KEY CHARACTERISTIC OF A COMPETITIVE MARKET IS THAT a. government antitrust laws regulate competition. b. bringrs sell roughly identical products. c. hards minimize numerate costs. d. self-coloureds progress to cost setting power. autonomic nervous systemBPTS1DIF1REF14-1 NATAnalyticLOC complete competitionTOP private- assentprise(a) markets manuscriptDefinitional 2. Which of the succeeding(a) is not a mark of a matched market? a. Buyers and marketers ar monetary value takers. b. Each degenerate sells a virtu aloney identical product. c. Entry is limited. d. Each steadfastly pick outs an fruit take aim that join ons profits. autonomic nervous systemCPTS1DIF2REF14-1 NATAnalyticLOC perfective tense competitionTOP militant markets manuscriptDefinitional 3. Which of the succeeding(a) is a characteristic of a free-enterprise(a) market? a. thither be m any(prenominal) buyers but hardly a(prenominal) sellers. b. Firms sell differentiated products. c. on that point be more barriers to ent ranceway. d. Buyers and sellers be price takers. autonomic nervous systemDPTS1DIF2REF14-1 NATAnalyticLOCperfective aspect competitionTOP warlike markets manuscriptDefinitional 4. Who is a price taker in a emulous market? a. buyers b arly b. sellers yet c. both buyers and sellers d. neither buyers nor sellers autonomic nervous systemCPTS1DIF1REF14-1 NATAnalyticLOC faultless(prenominal) competitionTOP warring markets samariumDefinitional 5. agonistical markets are characterized by a. a smaller number of buyers and sellers. b. unique products. c. the mutualness of libertines. d. alleviate entry and scrag by unassailables. autonomic nervous systemDPTS1DIF1REF14-1 NATAnalyticLOC holy competitionTOPCompetitive markets disseminated multiple sclerosisDefinitional 6. A market is militant if (i) soakeds pick up the flexibility to price their own product. (ii) each buyer is small compared to the market. (iii) each seller is small compared to the market. a. (i) an d (ii) all b. (i) and (iii) further c. (ii) and (iii) precisely d. (i), (ii), and (iii) autonomic nervous systemCPTS1DIF2REF14-1 NATAnalyticLOC perfect competitionTOPCompetitive markets manuscript interpretative 7. A fuddled that has itsy-bitsy ability to influence market prices operates in a a. belligerent market. b. strategic market. c. thin market. d. power market. autonomic nervous systemAPTS1DIF1REF14-1 NATAnalyticLOC stark(a) competitionTOPCompetitive markets disseminated multiple sclerosisDefinitional 8. In a war-ridden market, the actions of any single buyer or seller pull up stakes a. switch a negligible impact on the market price. b. have little accomplishment on market residuum sum of money but depart mint market equilibrium price. c. affect fringy taxation and medium tax receipts enhancement but not price. d. adversely affect the profitability of more than one potent in the market. autonomic nervous systemAPTS1DIF2REF14-1 NATAnalytic LOC sinless competitionTOPCompetitive markets disseminated sclerosis interpretative 9. In a rivalrous market, the actions of any single buyer or seller impart a. discourage entry by competitors. b. influence the profits of other regulars in the market. c. have a negligible impact on the market price. d. None of the supra is right-hand(a). autonomic nervous systemCPTS1DIF2REF14-1 NATAnalyticLOC gross(a) competitionTOPCompetitive markets disseminated sclerosisinterpretive 10. Because the goods offered for sale in a combative market are largely the same, a. on that point ordain be few sellers in the market. b. there pull up stakes be few buyers in the market. c. exactly a few buyers will have market power. d. sellers will have little evidence out to weight down little than the going market price. autonomic nervous systemDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets manuscript informative 11. Which of the following is not a characteris tic of a dead competitive market? a. Firms are price takers. b. Firms have obstacle entering the market. c. There are many sellers in the market. d. Goods offered for sale are largely the same. autonomic nervous systemBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 12. Which of the following is not a characteristic of a perfectly competitive market? a. Firms are price takers. b. Firms hind end freely enter the market. c. Many cockeyeds have market power. d. Goods offered for sale are largely the same. autonomic nervous systemCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 3. Free entry means that a. the government pays any entry costs for individual firms. b. no legal barriers prevent a firm from entering an intentness. c. a firms fringy cost is zero. d. a firm has no frigid costs in the short run. autonomic nervous systemBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetiti ve markets MSCInterpretive 14. Which of the following industries is most believably to pose the characteristic of free entry? a. nuclear power b. municipal water and sewer c. dairy farming d. airport security autonomic nervous systemCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCapplicative 15. Which of the following industries is most likely to break the characteristic of free entry? a. cable television b. satellite piano tuner c. mineral mining d. t-shirt silkscreening autonomic nervous systemDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSC practical 16. Which of the following industries is least likely to exhibit the characteristic of free entry? a. restaurants b. municipal water and sewer c. soybean farming d. exchange running apparel autonomic nervous systemBPTS1DIF2REF14-1NATAnalyticLOCPerfect competitionTOPCompetitive markets MSC practical 17. Which of the following industries is least likely to exh ibit the characteristic of free entry? a. interchange running apparel b. pale yellow farming c. yoga studios d. satellite communicate ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSC practical 8. When buyers in a competitive market take the selling price as given, they are said to be a. market entrants. b. monopolists. c. free riders. d. price takers. ANSDPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCDefinitional 19. When firms are said to be price takers, it implies that if a firm raises its price, a. buyers will go elsewhere. b. buyers will pay the high price in the short run. c. competitors will also raise their prices. d. firms in the industry will exercise market power. ANSAPTS1DIF2REF14-1NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 20. Which of the following statements best reflects a price-taking firm? a. If the firm were to burster more than the going price, it would sel l none of its goods. b. The firm has an incentive to charge less than the market price to earn high tax. c. The firm potbelly sell only a limited amount of produce at the market price before the market price will fall. d. price-taking firms plus profits by charging a price higher up bare(a) cost. ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 1. Why does a firm in a competitive industry charge the market price? a. If a firm charges less than the market price, it loses potential taxation. b. If a firm charges more than the market price, it loses all its customers to other firms. c. The firm can sell as many building blocks of produce as it wants to at the market price. d. each(prenominal) of the above are correct. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 22. In a competitive market, no single producer can influence the market price because a. many other sellers are fli ng a product that is ssentially identical. b. consumers have more influence over the market price than producers do. c. government intervention prevents firms from influencing price. d. producers agree not to change the price. ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 23. A competitive firm would benefit from charging a price below the market price because the firm would achieve (i) higher come tax. (ii) higher profits. (iii) lower sum gibe costs. a. (i) only b. (ii) and (iii) only c. (i), (ii), and (iii) d. None of the above is correct. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 24. Which of the following characteristics of competitive markets is necessary for firms to be price takers? (i) There are many sellers. (ii) Firms can freely enter or exit the market. (iii) Goods offered for sale are largely the same. a. (i) and (ii) only b. (i) and (iii) only c. (ii) onl y d. (i), (ii), and (iii) ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 25. compute a firm in a competitive market reduces its payoff by 20 percent. As a result, the price of its rig is likely to a. improver. b. remain unchanged. c. drop by less than 20 percent. d. decrease by more than 20 percent. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSC uninflected 26. The Doris dairy farm spring up sells take out to a dairy broker in Prairie du Chien, Wisconsin. Because the market for milk is generally considered to be competitive, the Doris Dairy Farm does not a. choose the beat of milk to produce. b. choose the price at which it sells its milk. c. have any unflinching costs of production. d. set b ruleline tax income get even to bare(a) cost to maximize profit. ANSBPTS1DIF2REF14-1NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 27. The Doris Dairy Farm sells milk t o a dairy broker in Prairie du Chien, Wisconsin. Because the market for milk is generally considered to be competitive, the Doris Dairy Farm does not choose the a. step of milk to produce. b. price at which it sells its milk. c. profits it earns. d. tout ensemble of the above are correct. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 28. In a competitive market, a. no single buyer or seller can influence the price of the product. b. there are only a small number of sellers. c. the goods offered by the different sellers are unique. d. accounting profit is driven to zero as firms freely enter and exit the market. ANSAPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 29. Which of the following statements regarding a competitive market is not correct? a. There are many buyers and many sellers in the market. b. Because of firm location or product differences, some firms can charge a higher price than other firms and still avow their sales volume. c. Price and clean tax income are able. d. Price and peripheral receipts are equal. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 30. Which of the following statements regarding a competitive market is not correct? a. There are many buyers and many sellers in the market. b. Firms can freely enter or exit the market. c. Price equals mean(a) tax income. d. Price surpasss fringy gross. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 31. One of the defining characteristics of a perfectly competitive market is a. a small number of sellers. b. a large number of buyers and a small number of sellers. c. a identical product. d. significant advertising by firms to promote their products. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCDefinitional 32. Which of the following firms is the closest to being a perfectly competitive firm? a. a hot dog vendor in modern York b. Microsoft Corporation c. Ford Motor Company d. the campus bookstore ANSAPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSC practical 33. Which of the following firms is the closest to being a perfectly competitive firm? a. the New York Yankees b. Apple, Inc. c. DeBeers diamond wholesalers d. a wheat farmer in Kansas ANSDPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCapplicative 34. Firms that operate in perfectly competitive markets try to a. maximize taxations. b. maximize profits. c. equate peripheral tax income enhancement with bonnie bring cost. d. all(a) of the above are correct. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 35. A seller in a competitive market can a. sell all he wants at the going price, so he has little reason to charge less. b. influence the market price by adjusting his fruit. c. influence the profits earned by competing firms by adjusting his fruit. d. All of the above are correct. ANSAPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 36. A seller in a competitive market a. can sell all he wants at the going price, so he has little reason to charge less. b. will lose all his customers to other sellers if he raises his price. c. considers the market price to be a take it or leave it price. d. All of the above are correct. ANSDPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 7. In a perfectly competitive market, a. no one seller can influence the price of the product. b. price exceeds peripheral tax income for each social building block sold. c. average receipts enhancement enhancement exceeds marginal gross for each unit sold. d. All of the above are correct. ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpre tive 38. For a firm in a competitive market, an increase in the touchstone produced by the firm will result in a. a decrease in the products market price. b. an increase in the products market price. c. no change in the products market price. d. either an increase or no change in the products market price depending on the number of firms in the market. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 39. If Cathys Coffee Emporium sells its product in a competitive market, and so a. the price of that product depends on the quantity of the product that Cathys Coffee Emporium produces and sells because Cathys Coffee Emporiums demand curve is downward sloping. b. Cathys Coffee Emporiums issue forth taxation moldinessiness be proportional to its quantity of output. c. Cathys Coffee Emporiums sum of money cost must be a constant multiple of its quantity of output. d. Cathys Coffee Emporiums wide receipts must be equal to its av erage tax tax tax. ANSBPTS1DIF3REF14-1 NATAnalyticLOCPerfect competitionTOP quantity revenue MSC uninflected 40. Changes in the output of a perfectly competitive firm, without any change in the price of the product, will change the firms a. full(a) revenue. b. marginal revenue. c. average revenue. d. All of the above are correct. ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOP sum revenue MSCAnalytical 41.If a firm in a perfectly competitive market triples the quantity of output sold, then be revenue will a. more than triple. b. less than triple. c. exactly triple. d. Any of the above may be true depending on the firms labor productivity. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOP amount revenue MSCAnalytical 42. When a competitive firm doubles the quantity of output it sells, its a. total revenue doubles. b. average revenue doubles. c. marginal revenue doubles. d. profits must increase. ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competition TOP ingrained revenueMSCAnalytical 43. If a firm in a competitive market doubles its number of units sold, total revenue for the firm will a. more than double. b. double. c. increase but by less than double. d. may increase or decrease depending on the price elasticity of demand. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCAnalytical shelve 14-1 total Price 0 $5 1 $5 2 $5 3 $5 4 $5 5 $5 6 $5 7 $5 8 $5 9 $5 44. cite to circuit board 14-1. The price and quantity relationship in the table is most likely a demand curve approach by a firm in a a. monopoly. b. concentrated market. c. competitive market. d. strategic market. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCAnalytical 45. list to accede 14-1.Over which set forth of output is average revenue equal to price? a. 1 to 5 units b. 3 to 7 units c. 5 to 9 units d. modal(a) revenue is equal to price over the entire range of output. ANSDPTS1 DIF2REF14-1 NATAnalyticLOCPerfect competitionTOP come revenue MSCAnalytical 46. name to defer 14-1. Over what range of output is marginal revenue declining? a. 1 to 6 units b. 3 to 7 units c. 7 to 9 units d. bare(a) revenue is constant over the entire range of output. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOP peripheral revenue MSCAnalytical 47. hint to plank 14-1. If the firm doubles its output from 3 to 6 units, total revenue will a. increase by less than $15. b. increase by exactly $15. c. increase by more than $15. d. Total revenue cannot be compulsive from the study provided. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCApplicative put off 14-2 The table represents a demand curve faced by a firm in a competitive market. Price Quantity $4 0 $4 1 $4 2 $4 3 $4 4 $4 5 48. meet to dishearten 14-2. A firm direct in a competitive market maximizes total revenue by producing a. 2 units. b. 3 units. c. 4 units. d. as many units as possible. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCApplicative 49. Refer to plug-in 14-2. For a firm operating(a) in a competitive market, the average revenue from selling 3 units is a. $12. b. $4. c. $3. d. $1. 25. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOP norm revenue MSCApplicative 50. Refer to Table 14-2. For a firm operating in a competitive market, the marginal revenue from selling the 3rd unit is a. $12. b. $4. c. $3. d. $1. 25. ANSBPTS1DIF3REF14-1NATAnalyticLOCPerfect competitionTOPmarginal revenue MSCApplicative Table 14-3 Quantity Total revenue 0 $0 1 $7 2 $14 3 $21 4 $28 51. Refer to Table 14-3. For a firm operating in a competitive market, the price is a. $0. b. $7. c. $14. d. $21. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCApplicative 52.Refer to Table 14-3. For a firm operating in a competitive market, the marginal revenue is a. $0. b. $7. c. $14. d . $21. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOP bare(a) revenue MSCApplicative 53. Refer to Table 14-3. For a firm operating in a competitive market, the average revenue is a. $21. b. $14. c. $7. d. $0. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOP add up revenue MSCApplicative Table 14-4 Quantity Total tax income 0 $0 1 $15 2 $30 3 $45 4 $60 54. Refer to Table 14-4. For a firm operating in a competitive market, the price is a. $45. b. $30. c. $15. d. $0. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCApplicative 55. Refer to Table 14-4. For a firm operating in a competitive market, the marginal revenue is a. $45. b. $30. c. $15. d. $0. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPmarginal revenue MSCApplicative 56.Refer to Table 14-4. For a firm operating in a competitive market, the average revenue is a. $45. b. $30. c. $15. d. $0. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPA verage revenue MSCApplicative Table 14-5 Quantity Total Revenue 12 $132 13 $143 14 $154 15 $165 16 $176 57. Refer to Table 14-5.The price of the product is a. $9. b. $11. c. $13. d. $15. ANSBPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCApplicative 58. Refer to Table 14-5. The average revenue when 14 units are produced and sold is a. $9. b. $11. c. $13. d. $15. ANSBPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPAverage revenue MSCAnalytical 59. Refer to Table 14-5. The marginal revenue of the 12th unit is a. $9. b. $10. c. $11 d. The marginal revenue cannot be determined without knowing the total revenue when 11 units are sold. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOP borderline revenue MSCAnalytical Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. be REVENUES Quantity Total Marginal Quantity Price Total Marginal Produced appeal Cost Demanded Revenue Revenue 0 $100 0 $ great hundred 1 $cl 1 $ one hundred twenty 2 $202 2 $120 3 $257 3 $120 4 $317 4 $120 5 $385 5 $120 6 $465 6 $120 7 $562 7 $120 8 $682 8 $120 60. Refer to Table 14-6. What is the total revenue from selling 7 units? a. $120 b. $490 c. $562 d. $840 ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCApplicative 61. Refer to Table 14-6. What is the total revenue from selling 4 units? a. $120 b. $257 c. $317 d. $480 ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCApplicative 62. Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit? a. $55 b. $120 c. $137 d. $140 ANSBPTS1DIF2REF14-1NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCApplicative 63. Refer to Table 14-6. What is the average revenue when 4 units are sold? a. $60 b. $120 c. $125 d. $197 ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPAverage revenue MSCAp plicative 64. Which of the following statements is correct? a. For all firms, marginal revenue equals the price of the good. b. lonesome(prenominal) for competitive firms does average revenue equal the price of the good. c. Marginal revenue can be calculated as total revenue divided up by the quantity sold. d. Only for competitive firms does average revenue equal marginal revenue. ANSDPTS1DIF3REF14-1 NATAnalyticLOCPerfect competition TOPAverage revenue Marginal revenueMSCInterpretive 65. Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? a. $5 and 50 units b. $5 and 100 units c. $10 and 50 units d. $10 and 100 units ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPAverage revenue MSCApplicative 66. Which of the following statements regarding a competitive firm is correct? a. Because demand is downward slopi ng, if a firm increases its aim of output, the firm will have to charge a lower price to sell the additional output. b. If a firm raises its price, the firm may be able to increase its total revenue even though it will sell few units. c. By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price. d. For all firms, average revenue equals the price of the good. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPAverage revenue MSCAnalytical 67. Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to cc units, the average revenue of the 200th unit will be a. less than $12. b. more than $12. c. $12. d. Any of the above may be correct depending on the price elasticity of demand for the product. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPAverage r evenue MSCAnalytical 68. Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, total revenue will be a. $2,000. b. $2,400. c. $4,200. d. We do not have complete information to adjudicate the question. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCAnalytical 69.Firms operating in competitive markets produce output takes where marginal revenue equals a. price. b. average revenue. c. total revenue divided by output. d. All of the above are correct. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competition TOPMarginal revenue Average revenueMSCApplicative 70. For a competitive firm, a. total revenue equals average revenue. b. total revenue equals marginal revenue. c. total cost equals marginal revenue. d. average revenue equals marginal revenue. ANSDPTS1DIF1REF14-1 NATAnalyticLOCPerfect competition TOPMarginal revenue Average re venueMSCDefinitional 71.Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total revenues from the sale are $500. Which of the following statements is correct? (i) Marginal revenue equals $5. (ii) Average revenue equals $5. (iii) Price equals $5. a. (i) only b. (iii) only c. (i) and (ii) only d. (i), (ii), and (iii) ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue Average revenueMSCAnalytical 72. Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each. Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $600. (iii) Average revenue exceeds marginal revenue, but we dont know by how a lot. a. (i) only b. (iii) only c. (i) and (ii) only d. (i), (ii), and (iii) ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competition TOPMarginal revenue Average revenueMSCAnalytical 73. Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $100. (iii) Total revenue equals $300. a. (i) only b. (iii) only c. (i) and (ii) only d. (i), (ii), and (iii) ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competition TOPMarginal revenue Average revenueMSCAnalytical 74. Suppose that a firm operating in perfectly competitive market sells 400 units of output at a price of $4 each. Which of the following statements is correct? (i) Marginal revenue equals $4. (ii) Average revenue equals $100. (iii) Total revenue equals $1,600. a. (i) only b. (iii) only c. (i) and (iii) only d. (i), (ii), and (iii) ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competition TOPMarginal revenue Average revenueMSCAnalytical 75. For a firm operating in a competitive industry, which of the following statements is not correct? a. Price equals average revenue. b . Price equals marginal revenue. c. Total revenue is constant. d. Marginal revenue is constant. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue Average revenueMSCInterpretive 76. For a firm in a perfectly competitive market, the price of the good is always a. equal to marginal revenue. b. equal to total revenue. c. greater than average revenue. d. equal to the firms efficient master of output. ANSAPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCInterpretive 77. Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8. 00. What would be the firms total revenue if it instead produced and sold 4 units of output? a. $4 b. $8 c. $32 d. $64 ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCApplicative 78. Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue a. increases if MR ATC and decreases if MR ATC. b. does not change. c. increases. d. decreases. ANSBPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCInterpretive 79. Suppose that in a competitive market the equilibrium price is $2. 50.What is marginal revenue for the last unit sold by the typical firm in this market? a. less than $2. 50 b. more than $2. 50 c. exactly $2. 50 d. The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm. ANSCPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCInterpretive 80. For an individual firm operating in a competitive market, marginal revenue equals a. average revenue and the price for all levels of output. b. average revenue, which is greater than the price for all levels of output. c. average revenue, the price, and marginal cost for all levels of output. d. marginal cost, which is greater than average revenue for all levels of output. ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competition T OPMarginal revenue Average revenueMSCInterpretive 81. If the market elasticity of demand for potatoes is -0. 3 in a perfectly competitive market, then the individual farmers elasticity of demand a. will also be -0. 3. b. depends on how large a crop the farmer produces. c. will range between -0. 3 and -1. 0. d. will be infinite. ANSDPTS1DIF3REF14-1 NATAnalyticLOCPerfect competitionTOPElasticity MSCAnalyticalProfit slimeimization and the Competitive Firms Supply Curve 1. IF A COMPETITIVE FIRM IS CURRENTLY PRODUCING A LEVEL OF OUTPUT AT WHICH MARGINAL REVENUE EXCEEDS MARGINAL COST, hence a. a one-unit increase in output will increase the firms profit. b. a one-unit decrease in output will increase the firms profit. c. total revenue exceeds total cost. d. total cost exceeds total revenue. ANSAPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 2. If a competitive firm is truely producing a level of output at which marginal cost exceeds margina l revenue, then a. a one-unit increase in output will increase the firms profit. b. a one-unit decrease in output will increase the firms profit. c. total revenue exceeds total cost. d. total cost exceeds total revenue. ANSBPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 3. If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then a. average revenue exceeds marginal cost. b. the firm is earning a positive profit. c. fall output would increase the firms profit. d. All of the above are correct. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 4. Comparing marginal revenue to marginal cost (i) reveals the contribution of the last unit of production to total profit. (ii) is reformative in fashioning increasing production decisions. (iii) tells a firm whether its fixed costs are too high. a. (i) only b. (i) and (ii) only c. (ii) and (iii ) only d. (i) and (iii) only ANSBPTS1DIF2REF14-2NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 5. At the profit-maximizing level of output, a. marginal revenue equals average total cost. b. marginal revenue equals average variable cost. c. marginal revenue equals marginal cost. d. average revenue equals average total cost. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 6. The intersection of a firms marginal revenue and marginal cost curves determines the level of output at which a. total revenue is equal to variable cost. b. total revenue is equal to fixed cost. c. total revenue is equal to total cost. d. profit is maximized. ANSDPTS1DIF2REF14-2NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 7. For a certain firm, the hundredth unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $7. It follows that the a. production of the hundredth unit of outpu t increases the firms profit by $3. b. production of the 100th unit of output increases the firms average total cost by $7. c. firms profit-maximizing level of output is less than 100 units. d. production of the 99th unit of output must increase the firms profit by less than $3. ANSAPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 8.For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $11. It follows that the a. production of the 100th unit of output increases the firms profit by $1. b. production of the 100th unit of output increases the firms average total cost by $1. c. firms profit-maximizing level of output is less than 100 units. d. production of the 110th unit of output must increase the firms profit but by less than $1. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 9. A certain competitive firm sells its output for $20 per u nit. The 50th unit of output that the firm produces has a marginal cost of $22.Production of the 50th unit of output does not necessarily a. increase the firms total revenue by $20. b. increase the firms total cost by $22. c. decrease the firms profit by $2. d. increase the firms average variable cost by $0. 44. ANSDPTS1DIF3REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 10. Sam sells soybeans to a broker in Chicago, Illinois. Because the market for soybeans is generally considered to be competitive, Sam maximizes his profit by choosing a. to produce the quantity at which average variable cost is minimized. b. to produce the quantity at which average fixed cost is minimized. c. to sell at a price where marginal cost is equal to average total cost. d. the quantity at which market price is equal to Sams marginal cost of production. ANSDPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 11. If a competitive firm is sel ling 1,000 units of its product at a price of $9 per unit and earning a positive profit, then a. its total cost is less than $9,000. b. its marginal revenue is less than $9. c. its average revenue is greater than $9. d. the firm cannot be a competitive firm because competitive firms cannot earn positive profits. ANSAPTS1DIF2REF14-2NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 12. If a competitive firm is selling 1,000 units of its product at a price of $8 per unit and earning a positive profit, then a. its average revenue is greater than $8. b. its marginal revenue is less than $8. c. its total cost is less than $8,000. d. All of the above are correct. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 13. Max sells maps. The map industry is competitive. Max hires a business consultant to read his companys financial records. The consultant recommends that Max increase his production. The consultant must have conc lude that Maxs a. total revenues exceed his total accounting costs. b. marginal revenue exceeds his total cost. c. marginal revenue exceeds his marginal cost. d. marginal cost exceeds his marginal revenue. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 14. Christopher is a professional tennis player who gives tennis lessons. The industry is competitive. Christopher hires a business consultant to analyze his financial records. The consultant recommends that Christopher give fewer tennis lessons. The consultant must have concluded that Christophers a. total revenues exceed his total accounting costs. b. marginal revenue exceeds his total cost. c. marginal revenue exceeds his marginal cost. d. marginal cost exceeds his marginal revenue. ANSDPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 15. Laura is a foodie chef who runs a small catering business in a competitive industry. Laura specializes in making get married measures. Laura sells 20 conjoin coats per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $300. In order to maximize profits, Laura should a. make more than 20 wedding cakes per month. b. make fewer than 20 wedding cakes per month. c. treat to make 20 wedding cakes per month. d. We do not have enough information with which to break up the question. ANSBPTS1DIF3REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 16. Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $200. In order to maximize profits, Laura should a. make more than 20 wedding cakes per month. b. make fewer than 20 wedding cakes per month. c. continue to make 20 wedding cakes per month. d. We do not have enough information w ith which to answer the question. ANSAPTS1DIF3REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 17. Marcia is a invent cause who runs a small apparel business in a competitive industry. Marcia specializes in making source dresses. Marcia sells 10 dresses per month. Her monthly total revenue is $5,000. The marginal cost of making a dress is $400. In order to maximize profits, Marcia should a. make more than 10 dresses per month. b. make fewer than 10 dresses per month. c. continue to make 10 dresses per month. d. We do not have enough information with which to answer the question. ANSAPTS1DIF3REF14-2NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 18. Marcia is a fashion designer who runs a small clothing business in a competitive industry. Marcia specializes in making designer dresses. Marcia sells 10 dresses per month. Her monthly total revenue is $5,000. The marginal cost of making a dress is $500. In order to maximize profits, Marcia should a. make more than 10 dresses per month. b. make fewer than 10 dresses per month. c. continue to make 10 dresses per month. d. We do not have enough information with which to answer the question. ANSCPTS1DIF3REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 19.Marcia is a fashion designer who runs a small clothing business in a competitive industry. Marcia specializes in making designer dresses. Marcia sells 10 dresses per month. Her monthly total revenue is $5,000. The marginal cost of making a dress is $600. In order to maximize profits, Marcia should a. make more than 10 dresses per month. b. make fewer than 10 dresses per month. c. continue to make 10 dresses per month. d. We do not have enough information with which to answer the question. ANSBPTS1DIF3REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 20. A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, wh ich is positive.Then, the price rises to $25, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its a. quantity of output is higher than it was previously. b. average total cost is higher than it was previously. c. marginal revenue is higher than it was previously. d. All of the above are correct. ANSDPTS1DIF3REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 21. A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price falls to $18, and the firm makes whatever adjustments are necessary to maximize its profit at the now-lower price. Once the firm has adjusted, its a. quantity of output is lower than it was previously. b. average total cost is lower than it was previously. c. marginal cost is higher than it was previously. d. All of the above are correct. ANSAPTS1DIF2REF14-2 NATAnalyticLOCPerfec t competitionTOPCompetitive firms MSCInterpretive 22. A competitive firm has been selling its output for $10 per unit and has been maximizing its profit. Then, the price rises to $14, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its a. marginal revenue is lower than it was previously. b. marginal cost is lower than it was previously. c. quantity of output is higher than it was previously. d. All of the above are correct. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 23. When profit-maximizing firms in competitive markets are earning profits, a. market demand must exceed market supply at the market equilibrium price. b. market supply must exceed market demand at the market equilibrium price. c. new firms will enter the market. d. the most inefficient firms will be encouraged to leave the market. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionT OPCompetitive markets MSCInterpretive Table 14-7Suppose that a firm in a competitive market faces the following revenues and costs Marginal Marginal Quantity Cost Revenue 12 $5 $9 13 $6 $9 14 $7 $9 15 $8 $9 16 $9 $9 17 $10 $9 24. Refer to Table 14-7. If the firm is currently producing 14 units, what would you discuss the owners? a. decrease quantity to 13 units b. increase quantity to 17 units c. continue to operate at 14 units d. increase quantity to 16 units ANSDPTS1DIF1REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 25. Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning? a. $0 b. $1 c. $10 d. There is insufficient data to determine the firms profit. ANSDPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit MSCApplicative Table 14-8Suppose that a firm in a competitive market faces the following revenues and costs Quantity Total Revenue Total Cost 0 $0 $3 1 $7 $5 2 $14 $8 3 $21 $12 4 $2 8 $17 5 $35 $23 6 $42 $30 7 $49 $38 26. Refer to Table 14-8.The firm will not produce an output level beyond a. 4 units. b. 5 units. c. 6 units. d. 7 units. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 27. Refer to Table 14-8. The firm will produce a quantity greater than 4 because at 4 units of output, marginal cost a. is less than marginal revenue. b. equals marginal revenue. c. is greater than marginal revenue. d. is minimized. ANSAPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 28. Refer to Table 14-8. In order to maximize profits, the firm will produce a. 1 unit of output because marginal cost is minimized. b. 4 units of output because marginal revenue exceeds marginal cost. c. 6 units of output because marginal revenue equals marginal cost. d. 8 units of output because total revenue is maximized. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApp licative Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs Quantity Total Revenue Total Cost 0 $0 $10 1 $9 $14 2 $18 $19 3 $27 $25 4 $36 $32 5 $45 $40 6 $54 $49 7 $63 $59 8 $72 $70 9 $81 $82 29. Refer to Table 14-9. If the firm produces 4 units of output, a. marginal cost is $4. b. total revenue is greater than variable cost. c. marginal revenue is less than marginal cost. d. the firm is maximizing profit. ANSBPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 30. Refer to Table 14-9. At which quantity of output is marginal revenue equal to marginal cost? a. 3 units b. 6 units c. 8 units d. 9 units ANSBPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 31. Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to a. $6. b. $7. c. $8. d. $9. ANSDPTS1DIF2REF14-2NATAnalytic LOCPerfect competitionTOPProfit maximization MSCApplicative 32. Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal cost is equal to a. $5. b. $7. c. $9. d. $10. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 33. Refer to Table 14-9. The maximum profit available to the firm is a. $2. b. $3. c. $4. d. $5. ANSDPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 34. Refer to Table 14-9. If the firms marginal cost is $11, it should a. increase production to maximize profit. b. increase the price of the product to maximize profit. c. advertise to attract additional buyers to maximize profit. d. reduce production to increase profit. ANSDPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCAnalytical 35. Refer to Table 14-9. If the firms marginal cost is $5, it should a. reduce fixed costs by lowering production. b. increase production to maximize profit. c. decrease production to maximize profit. d. maintain its current level of production to maximize profit. ANSBPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCAnalytical Table 14-10Suppose that a firm in a competitive market faces the following revenues and costs Quantity Total Revenue Total Cost 0 $0 $3 1 $7 $5 2 $14 $9 3 $21 $15 4 $28 $23 5 $35 $33 6 $42 $45 7 $49 $59 36. Refer to Table 14-10. The marginal cost of producing the 4th unit is a. $7. b. $8. c. $10. d. $23. ANSBPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPMarginal cost MSCApplicative 37. Refer to Table 14-10. At which level of production will the firm maximize profit? a. 3 units b. 4 units c. 5 units d. 6 units ANSAPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 38. Refer to Table 14-10. If the firm produces the profit-maximizing level of production, how much profit will the firm earn? a. $2 b . $4 c. $6 d. $8 ANSCPTS1DIF2REF14-2