HW5 - Fill in the blank/Multiple choice
___ of an essential resources can create a barrier to entry by rival firms into a particular market.
-------------------------------- control
___ give exclusive rights to sell or license the use of an invention or creation.
-------------------------------- patent
A competitive firm maximizes profit at an output level of 500 units at a market price of $24. It experiences a loss of $250. What is the value of ATC at the profit maximizing output level?
A) $24 B) $23.50 C) $24.50 D) Cannot be determined from the given info -------------------------------- ATC = (Revenue - Loss)/Q C) $24.5
For a perfectly competitive firm, marginal revenue is:
A) Greater price B) Less than price C) Equal to price D) At first greater than price but eventually will be less than price _________________________________________ C) Equal to Price MR = Change in TR / Change in Q MR = p -> p = R/x
A producer would decide to produce in a competitive market in which she will earn zero profit in the long run because:
A) In the short run her profit is positive. B) The zero profit in the long run is, in fact, zero accounting profit, and only matters on the books. C) The producer has a high cost of exiting this market, and counting that cost, it's better for her to continue operating a zero profit. D) At zero profit, her revenue will cover all her costs, both explicit and implicit (opportunity cost). -------------------------------- D) At zero profit, her revenue will cover all her costs, both explicit and implicit (opportunity cost).
In a perfectly competitive market, the price of the product is:
A) Independently set by each competing firm B) Set by the market leader and then copied by other firms C) Jointly set after a meeting of all firms in the market D) Set by market supply and demand -------------------------------- D) Set by market supply and demand. In a perfectly competitive market structure, a single firm doesn't have any significant market power and therefore the industry produces a socially optimal level of output because no one can influence the market prices.
Which of the following can be considered a perfectly competitive market?
A) International market for coffee beans B) Market for U.S. treasury bonds C) Market for fast food D) Market for cars -------------------------------- A) International market for coffee beans
The price of a competitive firm's product is $50 per unit. The firm currently has marginal cost equal to $40. To maximize profits this firm:
A) Should increase its output B) Should reduce its output C) Should keep its output the same D) Needs more information to determine if it should adjust its output -------------------------------- A) Should increase its output By definition, if you increase it's output you increase the denominator and therefore decrease the marginal cost.
