micro chapter 13
Competitive firms that earn a loss in the short run should A. shut down if P < AVC. B. raise their price. C. lower their output. D. All of the above are correct.
a
For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $10 per unit and a marginal cost of $7 per unit. It follows that the A. production of the 100th unit of output increases the firm's profit by $3. B. production of the 100th unit of output increases the firm's average total cost by $7 per unit. C. firm's profit-maximizing level of output is less than 100 units. D. production of the 99th unit of output must increase the firm's profit by less than $3.
a
Which of the following expressions is correct for a competitive firm? A. Profit = quantity of output × (price - average total cost) B. Marginal revenue = change in total revenue ÷ quantity of output C. Average total cost = total variable cost ÷ quantity of output D. Average revenue = marginal revenue × quantity of output
a
A firm that shuts down has to pay A. its variable costs but not its fixed costs. B. its fixed costs but not its variable costs. C. both its variable costs and its fixed costs. D. neither its variable costs nor its fixed costs
b
Laura is a gourmet chef who runs a small catering business in the competitive industry of making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of her last wedding cake was $300 and her marginal cost curve is increasing throughout the entire range of output possibilities. In order to maximize profits, Laura should A. make more than 20 wedding cakes per month. B. make fewer than 20 wedding cakes per month. C. continue to make 20 wedding cakes per month. D. We do not have enough information with which to answer the question.
b
For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the A. average total cost curve. B. average variable cost curve. C. marginal cost curve. D. marginal revenue curve.
c
If a firm in a perfectly-competitive market triples the number of units of output sold, then total revenue will A. more than triple. B. less than triple. C. exactly triple. D. Any of the above may be true depending on the firm's labor productivity.
c
Suppose that in a competitive market the equilibrium price is $2.50 per unit. What is marginal revenue for the last unit sold by a 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
Suppose you bought a ticket to a football game for $30 and that you place a $35 value on seeing the game. If you lose the ticket, then what is the maximum price you should pay for another ticket? A. $5 B. $30 C. $35 D. $65
c
When total revenue is less than total variable costs, a firm in a competitive market will A. continue to operate as long as average revenue exceeds marginal cost. B. continue to operate as long as average revenue exceeds average fixed cost. C. shut down. D. raise its price.
c
Which of the following is not a characteristic of a competitive market? A. Buyers and sellers are price takers. B. Each firm sells a virtually identical product. C. Free entry is limited. D. Each firm chooses an output level that maximizes profits.
c
A competitive firm sells its output for $20 per unit. The 50th unit of output that the firm produces has a marginal cost of $22. Which of following is not necessarily true? A. Production of the 50th unit of output increases the firm's total revenue by $20. B. Production of the 50th unit of output increases the firm's total cost by $22. C. Production of the 50th unit of output decreases the firm's profit by $2. D. Production of the 50th unit of output increases the firm's average variable cost by $0.44.
d
Firms operating in competitive markets produce output levels where marginal revenue equals A. price. B. average revenue. C. total revenue divided by output. D. All of the above are correct.
d
Suppose the elasticity of demand for potatoes is 0.30 and that the potato market is perfectly competitive. The individual potato farmer's elasticity of demand A. will also be 0.30. B. depends on how large a crop the farmer produces. C. will range between 0.30 and 1.00. D. will be infinite.
d
Which of the following statements is correct? A. For all firms, marginal revenue equals the price of the good at all quantities of output. B. Only for competitive firms does average revenue equal the price of the good. C. Marginal revenue can be calculated as total revenue divided by the quantity sold. D. Only for competitive firms does average revenue equal marginal revenue.
d
Why does a firm in a competitive industry charge the market price? A. If a firm charges less than the market price, it loses potential revenue. B. If a firm charges more than the market price, it loses all its customers to other firms. C. The firm can sell as many units of output as it want to at the market price. D. All of the above are correct.
d
A firm has market power if it can
influence the market price of the good it sells
