micro ch 14 practice

In the long-run if firms are identical and there is free entry and exit in the market, all firms in the market operate at their efficient scale.* 0/4 T F

T

22. Which of the following expressions is correct for a competitive firm?* 4/4 A Profit= (Quantity of output) x (Price - Average total cost) B Marginal revenue = ( Change in total revenue)/ ( Quantity of output) C Average cost = Total variable cost/Quantity of output D Average revenue = (Marginal revenue) x (Quantity of output)

A Profit= (Quantity of output) x (Price - Average total cost)

. When firms are said to be price takers, it implies that if a firm raises its price,* 4/4 A buyers will go elsewhere B buyers will pay the higher price in the short run C competitors will also raise their prices D firms in the industry will exercise market power

A buyers will go elsewhere

If a competitive firm is (i) selling 1,000 units of its product at a price of $9.00 per unit and (ii) earning a positive profit, then* 0/4 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 since competitive firms can only earn zero profit

A its total cost is less than $9,000

Changes in the output of a perfectly competitive firm, without any change in the price of the product, will change the firm's* 0/4 A total revenue B marginal revenue C average revenue D All of the above are correct

A total revenue

25. Free entry means that* 0/4 A there are no costs of en into an industry B no legal barriers prevent a firm from entering an industry C a firm's marginal cost is zero D a firm has no fixed costs in the short run.

B no legal barriers prevent a firm from entering an industry

Suppose that in a competitive market price is $2.50. What is marginal revenue for the last unit sold by the typical firm in the market?* 0/4 A Less than $2.50 B More that 2.50 C $2.50 D The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm in the market?

C $2.50

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 firm's total revenue if it instead produced and sold 4 units of output? A $4.00 B $8.00 C $32.00 D $64.00

C $32.00

If a firm in a perfectly competitive market triples the number of units of output sold, then total revenue will* 0/4 A more than triple B less than triple C exactly triple D Any of the above nay be true depending on the firm's labor productivity

C exactly triple

In calculating accounting profit, accountants typically don't include* 0/4 A long-run costs B sunk costs C explicit costs of production D opportunity costs that do not involve an outflow of money

D opportunity costs that do not involve an outflow of money

Because the goods offered for sale in a competitive market are largely the same,* 0/4 A there will be few sellers in the market B there will be fewer buyers in the market C buyers will have market power D sellers will have little reason to charge less than the going market price

D sellers will have little reason to charge less than the going market price

1. The only requirement for a market to be perfectly competitive is for the market to have many buyers and sellers. T F

F

2. For a competitive firm, marginal revenue equals the price of the good it sells.* 4/4 T F

F

5. If marginal cost exceeds marginal revenue at a firm's current level of output, the firm can increase profit if it increases its level of output. T F

F

6. A competitive firm's short-run supply curve is the portion of its marginal-cost curve that lies above its average -total-cost-curve. T F

F

8. In the short run, if the price that a firm receives for a good is above its average variable costs but below its average total costs of production, the firm will temporarily shut down.* 0/4 T F

F

A competitive firm's long-run supply curve is the portion of its marginal-cost curve that lies above its average-variable-cost curve. T F

F

In the long run, perfectly competitive firms earn small but positive economic profits T F

F

The short-run market supply curve is more elastic than the long-run market supply curve.* 0/4 True False

False

10. In the long run, if the price firms receive for their output is below their average total cost of production, some firms will exit the market T F

T

11. In the short run, the market supply curve for a good is the sum of the qualities supplied by each firm at each price. F T

T

3. If a competitive firm sells three times the amount of output, its total revenue also increases by a factor of three. T F

T

4. A firm maximizes profit when it produces output up to the point where marginal cost equals marginal revenue.* 4/4 T F

T

9. In a competitive market, both buyers and sellers are price takers T F

T

If the price of a good rises above the minimum average total cost of production, positive economic profits will cause new firms to enter the market, which drives the price back down to the minimum average total cost of production.* 0/4 T F

T