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Which of the following is true about the demand curve confronting a competitive firm?
B) Horizontal, while market demand is downward-sloping.
The average total cost to produce 100 cookies is $0.25 per cookie. The marginal cost is constant at $0.10 for all cookies produced. The total cost to produce 50 cookies is
A) $20
The average variable cost curve slopes upward with a higher rate of output in the short run because of:
B) The shape of the average fixed cost curve.
Technological improvements cause:
A) ATC to shift down.
In a competitive market, economic profits will:
A) Attract profit-maximizing entrepreneurs.
Consider the following statements when answering this question I. If the marginal product of labor falls whenever more labor is used, and labor is the only factor of production used by the firm, than at every output level the firm's short-run average variable cost exceeds marginal cost. II. If labor obeys the law of diminishing returns, and is the only factor of production used by the firm, then at every output level short-run average variable costs exceed marginal costs.
A) I is true, and II is false.
Which of the following statements is false?
A) If the MC curve is rising, the AVC curve must be rising.
For a perfectly competitive firm,
A) MR = P
A competitive market structure includes:
A) Many firms.
Short-run profits are maximized, for a perfectly competitive firm, at the rate of output where:
A) Price is equal to marginal cost.
Which of the following is a short-run decision?
A) The production decision.
The average fixed cost curve
A) always declines with increased levels of output.
The market demand curve in a perfectly competitive market is
A) downward sloping.
The average total cost to produce 100 cookies is $0.25 per cookie. The marginal cost is constant at $0.10 for all cookies produced. For 100 cookies, the average total cost is
A) falling.
If the average variable cost curve is falling,
A) the MC curve must be below it.
Comparing marginal revenue to marginal cost (i) reveals the contribution of the last unit of production to total profit. (ii) is helpful in making profit-maximizing production decisions. (iii) tells a firm whether its fixed costs are too high.
B) (i) and (ii) only
The marginal cost curve intersects the minimum of the curve representing:
B) ATC.
If a perfectly competitive firm wanted to maximize its total revenues, it would produce:
B) As much as it is capable of producing.
Consider the following statements when answering this question I. Whenever a firm's average variable costs are falling as output rises, marginal costs must be falling too. II. Whenever a firm's average total costs are rising as output rises, average variable costs must be rising too.
B) I is false, and II is true.
Which of the following statement is true?
B) Increasing returns to scale cause economies of scale.
Suppose your firm operates in a perfectly competitive market and decides to double its output. How does this affect the firm's marginal profit?
B) Marginal revenue increases but marginal cost remains the same
Profit per unit of output is equal to:
B) Price minus average total cost.
Which of the following is true?
B) The MC curve is eventually upward-sloping.
Which of the following is a production decision?
B) What output the firm should produce in the short run.
When marginal cost exceeds average total cost,
B) average total cost must be rising.
A price-taker firm will not sell any of its product at less than equilibrium price because
B) it can sell all it wants at equilibrium price.
In a short-run production process, the marginal cost is rising and the average variable cost is falling as output is increased. Thus,
B) marginal cost is below average variable cost.
Johnny has a 1.5 cumulative grade point average (GPA). Johnny's cumulative GPA will be better next semester if he (i) performs better than he did last semester. (ii) performs better than his cumulative GPA. (iii) gives an average performance.
B) performs better than his cumulative GPA.
If the marginal cost (MC) curve is rising and is above the average fixed cost (AFC) curve, then
B) the AFC curve is declining, although the MC curve has nothing to do with this.
If the market price for a competitive firm's output doubles then
B) the marginal revenue doubles
Which of the following is probably the worst real-world example of a perfectly competitive market?
B) the market for automobiles
The demand curve facing a perfectly competitive firm is
B) the same as its average revenue curve and its marginal revenue curve.
A market comes close to meeting (but does not perfectly meet) all the assumptions of the theory of perfect competition. It follows that
B) the theory of perfect competition still may be able to predict behavior in the market.
Which of the following characterizes a competitive market?
C) All the firms sell at the equilibrium price for the market.
If a perfectly competitive firm can sell 200 computers at $700 each, in order to sell one more computer, the firm:
C) Can sell the 201st computer at $700.
Consider the following statements when answering this question I. If a firm employs only one variable factor of production, labor, and the marginal product of labor is constant, then the marginal costs of production are constant too. II. If a firm employs only one variable factor of production, labor, and the marginal product of labor is constant, then short-run average total costs cannot rise as output rises.
C) I and II are both true.
Consider the following statements when answering this question; I. A firm's marginal cost curve does not depend on the level of fixed costs. II. As output increases the difference between a firm's average total cost and average variable cost curves cannot rise.
C) I and II are both true.
Which of the following is characteristic of a perfectly competitive market?
C) Zero economic profit in the long run.
Which of the following is not a characteristic of perfect competition?
C) a heterogeneous product
In the theory of perfect competition, the assumptions of many buyers and sellers, the production of a homogeneous product, and the possession of all relevant information by buyers and sellers imply that the perfectly competitive firm
C) has a demand curve that is perfectly elastic.
When the output level increases from Q1 to Q2
C) the change in ATC less than that in AVC.
Marginal revenue, graphically, is
C) the slope of the total revenue curve at a given point.
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.
D) (ii) and (iii) only
Technological improvements cause:
D) All other choices.
In making a production decision, an entrepreneur:
D) Decides the short-run rate of output.
A firm's short-run average cost curve is U-shaped. Which of these conclusions can be reached regarding the firm's returns to scale?
D) The short-run average cost curve reveals nothing regarding returns to scale.
If the marginal cost curve is rising, then which of the following must be true?
D) Total costs must be rising.
In the theory of perfect competition, the market demand curve is __________ and the firm's demand curve is __________.
D) downward sloping; perfectly elastic
Regardless of the market structure, a firm will seek to produce the output level for which
D) marginal cost equals marginal revenue.
Suppose the state legislature in your state imposes a state licensing fee of $100 per year to be paid by all firms that file state tax revenue reports. This new business tax:
E) none of the other choices
For a perfectly competitive firm,
A) the marginal revenue curve and the demand curve are the same.
The average-marginal rule states that if the marginal magnitude is
A) less than the average magnitude, the average magnitude falls.
Which of the following situations is NOT possible?
E) All other choices are possible.
If current output is less than the profit-maximizing output, which must be true?
E) Marginal revenue is greater than marginal cost.
