Chapter 12

Refer to the table which shows the short−run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units. If the market price of each camera case is​ $8, what is the profit−maximizing quantity according to the MR​ = MC​ rule? A. 300 units B. 400 units C. 500 units D. 600 units

B. 400 units

Which of the following is a characteristic of an oligopolistic market​ structure? A. Each firm sells a unique product. B. There are few dominant sellers. C. Each firm need not react to the actions of rivals. D. It is easy for new firms to enter the industry.

B. There are few dominant sellers.

The price of a​ seller's product in perfect competition is determined by A. a few of the sellers. B. market demand and market supply. C. the individual seller. D. the individual demander.

B. market demand and market supply.

In a perfectly competitive​ industry, in the long−run equilibrium A. the typical firm is maximizing its revenue. B. the typical firm earns zero profit. C. the typical firm is earning an accounting profit greater than its implicit costs. D. the typical firm is producing at the output where its long−run average total cost is not minimized.

B. the typical firm earns zero profit.

Refer to the diagram to the right which shows the cost and demand curves for a profit−maximizing firm in a perfectly competitive market. If the market price is​ $30, the​ firm's profit maximizing output level is A. 0. B. 130. C. 180. D. 240.

C. 180.

​If, for the last unit of a good produced by a perfectly competitive​ firm, MR​ > MC​, then in producing​ it, the firm A. added more to total costs than it added to total revenue. B. is maximizing marginal profit. C. added more to total revenue than it added to total costs. D. has minimized its losses.

C. added more to total revenue than it added to total costs.

A perfectly competitive firm faces a demand curve that is A. perpendicular to the quantity axis. B. vertical. C. horizontal. D. perfectly inelastic.

C. horizontal.

Refer to the table to the right which shows the short−run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units. If the market price of each camera case is​ $8 and the firm maximizes​ profit, what is the amount of the​ firm's profit or​ loss? A. $0 (it breaks​ even) B. loss of​ $1,000 C. profit of​ $440 D. loss of​ $440

C. profit of​ $440

A very large number of small sellers who sell identical products imply A. a multitude of vastly different selling prices. B. a downward sloping demand curve for each​ seller's product. C. the inability of one seller to influence the price. D. chaos in the market.

C. the inability of one seller to influence the price.

Which of the following is not a characteristic of a monopolistically competitive market​ structure? A. There are no barriers to entry of new firms. B. All sellers sell products that are differentiated. C. There is a large number of independently acting small sellers. D. Each firm must react to actions of other firms.

D. Each firm must react to actions of other firms.

Refer to the diagram to the right which shows cost and demand curves facing a typical firm in a constant−cost perfectly competitive industry. The​ firm's manager suggests that the​ firm's goal should be to maximize average profit. In that​ case, what is the output level and what is the average profit that will achieve the​ manger's goal? A. Q​ = 1,350​ units, average profit​ = $9 B. Q​ = 1,800​ units, average profit​ = $20 C. Q​ = 1,350​ units, average profit​ = $5 D. Q​ = 1,100​ units, average profit​ = $6

D. Q​ = 1,100​ units, average profit​ = $6

Which of the following is not a characteristic of a perfectly competitive market​ structure? a. All firms sell identical products. B. There are no restrictions to entry by new firms. C. There are a very large number of firms that are small compared to the market. D. There are restrictions on exit of firms.

D. There are restrictions on exit of firms.

Which of the following is a characteristic of a​ monopoly? A. The product is not unique. B. It is easy for new firms to enter the market. C. The firm has no control over price. D. There is only one seller in the market.

D. There is only one seller in the market.

Refer to the diagram which shows the cost and demand curves for a profit−maximizing firm in a perfectly competitive market. If the market price is​ $30, should the firm represented in the diagram continue to stay​ open? A. Yes, because it is making a profit. B. No, it should shut down because it is making a loss. C. No, it should shut down because it cannot cover its variable cost. D. Yes, because it is covering part of its fixed cost.

D. Yes, because it is covering part of its fixed cost.

Both individual buyers and sellers in perfect competition A. have the market price dictated to them by government. B. can influence the market price by their own individual actions. C. can influence the market price by joining with a few of their competitors. D. have to take the market price as a given.

D. have to take the market price as a given.