Eco quiz #9a (Modules 24,25,26)
If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand
will be infinite.
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, the average revenue of the 200th unit will be
$12.
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.
(i), (ii), and (iii)
Which of the following is not a characteristic of a competitive market?
Entry is limited.
The entry of new firms into a competitive market will
increase market supply and decrease market price.
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
$2,400
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 don't know by how much.
(i) only
A market is competitive if (i)firms have 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.
(ii) and (iii) only
Suppose a firm in each of the two markets listed below were to increase its price by 30 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?
---NOT oil and natural gas ---NOT movie theaters and ballpoint pens
Why does a firm in a competitive industry charge the market price?
If a firm charges less than the market price, it loses potential revenue. If a firm charges more than the market price, it loses all its customers to other firms. The firm can sell as many units of output as it wants to at the market price. All of the above are correct.
If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then
a one-unit decrease in output will increase the firm's profit.
If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then
a one-unit increase in output will increase the firm's profit.
Who is a price taker in a competitive market?
both buyers and sellers
When firms are said to be price takers, it implies that if a firm raises its price,
buyers will go elsewhere.
The exit of existing firms from a competitive market will
decrease market supply and increase market price.
If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then
decreasing output would increase the firm's profit.
When new firms have an incentive to enter a competitive market, their entry will
drive down profits of existing firms in the market.
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?
exactly $2.50
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
firm's profit-maximizing level of output is less than 100 units.
A certain competitive firm sells its output for $20 per unit. The 50th unit of output that the firm produces has a marginal cost of $22. Production of the 50th unit of output does notnecessarily
increase the firm's average variable cost by $0.44.
A firm has market power if it can
influence the market price of the good it sells
In a competitive market, no single producer can influence the market price because
many other sellers are offering a product that is essentially identical.
At the profit-maximizing level of output,
marginal revenue equals marginal cost.
Free entry means that
no legal barriers prevent a firm from entering an industry.
A key characteristic of a competitive market is that
producers sell nearly identical products.
The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which
profit is maximized.
When market conditions in a competitive industry are such that firms cannot cover their total production costs, then
some firms will exit the market, causing prices to rise until the remaining firms can cover their total production costs.
The analysis of competitive firms sheds light on the decisions that lie behind the
supply curve.
Entry into a market by new firms will increase the
supply of the good