MICRO Quiz 4

A seller in a competitive market can a. sell all they want at the going price, so they have little reason to charge less. b. influence the market price by adjusting their output. c. influence the profits earned by competing firms by adjusting their output. d. All of the above are correct.

a. sell all they want at the going price, so they have little reason to charge less.

Bob's Butcher Shop is the only place within 250 miles that sells bison burgers. Assuming that Bob is a monopolist and maximizing his profit, which of the following statements is true? a. The price of Bob's bison burgers will be less than Bob's marginal cost. b. The price of Bob's bison burgers will exceed Bob's marginal cost. c. The price of Bob's bison burgers will equal Bob's marginal cost. d. Costs are irrelevant to Bob because he is a monopolist

b. The price of Bob's bison burgers will exceed Bob's marginal cost.

When new firms have an incentive to enter a competitive market, their entry will a. increase the price of the product. b. drive down profits of existing firms in the market. c. shift the market supply curve to the left. d. increase demand for the product.

b. drive down profits of existing firms in the market.

Suppose that in a competitive market the equilibrium price is $2.50. What is the marginal revenue for the last unit sold by the typical firm in this market? a. Less than $2.50 b. More than $2.50 c. Exactly $2.50 d. The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm.

c. Exactly $2.50

If the distribution of water is a natural monopoly, then a. a single firm cannot serve the market at the lowest possible average total cost. b. allowing for competition among different firms in the water-distribution industry is efficient. c. multiple firms would likely each have to pay large fixed costs to develop their own network of pipes. d. average cost increases as the quantity of water produced increases.

c. multiple firms would likely each have to pay large fixed costs to develop their own network of pipes.

When price is greater than marginal cost for a firm in a competitive market, a. marginal cost must be falling. b. the firm must be minimizing its losses. c. there are opportunities to increase profit by increasing production. d. the firm should decrease output to maximize profit.

c. there are opportunities to increase profit by increasing production.

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which a. total revenue is equal to variable cost. b. total revenue is equal to fixed cost. c. total revenue is equal to total cost. d. profit is maximized.

d. profit is maximized.

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly a. will experience positive profit. b. will experience a price above average total cost. c. does not need a government subsidy to remain in business. d. will experience a loss.

d. will experience a loss.