ECON 14-QUIZ

11. For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the

*a. production of the 100th unit of output increases the firm's profit by $1.

7. If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

*b. a one-unit decrease in output will increase the firm's profit.

15. Suppose that some firms in a competitive industry are earning zero economic profits, while others are experiencing losses. All else equal, in the long run, we would expect the number of firms in the industry to

*b. decrease.

2. The analysis of competitive firms sheds light on the decisions that lie behind the

*b. supply curve.

5. Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8. What would be the firm's total revenue if it instead produced and sold 4 units of output?

*c. $32

3. Which of the following is not a characteristic of a perfectly competitive market?

*c. Many firms have market power.

6. Tom produces commemorative t-shirts in a competitive market. If Tom decides to decrease his output, this will

*c. decrease his revenue, since his output has decreased and the price remains the same.

14. The term shutdown

*c. refers to a short-run decision that a firm might make, whereas the term exit refers to a long-run decision that a firm might make.

8. Which of these curves is the competitive firm's short-run supply curve?

*c. the marginal cost curve above average variable cost

1. If your local gasoline station raised its price by 20 percent, its sales of gasoline would decrease substantially because your local gas station

*d. All of the above are correct.

4. Free entry means that

*d. no legal barriers prevent a firm from entering an industry.