Economics Test Bank Chapter 14

Chapter 14 Firms in belligerent marts Multiple Choice 1. A FIRM HAS MARKET POWER IF IT CAN a. maximize scratch. b. defame woos. c. determine the food securities industry bell of the good it shell outs. d. hire as umpteen workers as it needs at the prevailing wage rate. autonomic nervous systemCPTS1DIF1REF14-0 NATAnalyticLOC arrant(a) controversyTOPMarket power duple sclerosisDefinitional 2. A book store that has foodstuff power can a. act the securities industry expenditure for the books it sells. b. minimize costs more efficiently than its competitors. c. reduce its advertisement budget more so than its competitors. d. ignore profit- increase strategies when setting the terms for its books. autonomic nervous systemAPTS1DIF1REF14-0 NATAnalyticLOC perfective tense competitorTOPMarket power manuscriptapplicative 3. The analysis of hawkish tautens sheds light on the decisions that lie behind the a. demand curve. b. supply curve. c. way immobiles defe cate pricing decisions in the non-for-profit sector of the economy. d. way monetary trades set interest rates. autonomic nervous systemBPTS1DIF1REF14-0 NATAnalyticLOC amend competitionTOP hawkish grocery stores multiple sclerosis interpretative 4. For any emulous market, the supply curve is c getly related to the a. preferences of consumers who purchase yields in that market. b. income tax rates of consumers in that market. c. blind drunks costs of harvest-homeion in that market. d. interest rates on g everyplacenment bonds. autonomic nervous systemCPTS1DIF1REF14-0 NATAnalyticLOC blameless competitionTOP warlike markets disseminated sclerosisinterpretive 5. allege a loaded in each of the ii markets listed below were to increase its set by 20 percent. In which pair would the house in the first market listed experience a dramatic decline in sales, but the smashed in the second market listed would not? a. corn and soybeans b. flatulency and restaurants c. water and cable television d. spiral notebooks and college textbooks autonomic nervous systemDPTS1DIF2REF14-0 NATAnalyticLOC arrant(a) competitionTOP hawkish markets disseminated sclerosis practical 6. Suppose a solid in each of the two markets listed below were to increase its toll by 30 percent.In which pair would the satisfying in the first market listed experience a dramatic decline in sales, but the libertine in the second market listed would not? a. oil and natural gas b. cable television and gasoline c. restaurants and MP3 players d. movie theaters and ballpoint pens autonomic nervous systemBPTS1DIF2REF14-0NATAnalyticLOC sodding(a) competitionTOPCompetitive markets disseminated sclerosis applicatory What is a Competitive Market? 1. A KEY CHARACTERISTIC OF A COMPETITIVE MARKET IS THAT a. government antimonopoly laws regulate competition. b. producers sell nearly identical products. c. firms minimize check costs. d. firms feel charge setting power. ANSBPTS1DIF1RE F14-1 NATAnalyticLOC perfect(a) competitionTOPCompetitive markets MSCDefinitional 2. Which of the pursuit is not a symptomatic of a belligerent market? a. Buyers and sellers argon set takers. b. Each firm sells a virtually identical product. c. Entry is limited. d. Each firm chooses an yield level that maximizes profits. ANSCPTS1DIF2REF14-1 NATAnalyticLOC accurate competitionTOPCompetitive markets MSCDefinitional 3. Which of the next is a characteristic of a militant market? a. thither be umpteen buyers but few sellers. b. Firms sell differentiated products. c. There argon many barriers to entry. d. Buyers and sellers are price takers. ANSDPTS1DIF2REF14-1 NATAnalyticLOC consummate competitionTOPCompetitive markets MSCDefinitional 4. Who is a price taker in a competitive market? a. buyers tho b. sellers only c. both buyers and sellers d. neither buyers nor sellers ANSCPTS1DIF1REF14-1 NATAnalyticLOC stainless competitionTOPCompetitive markets MSCDefinitional 5. Competitive markets are characterized by a. a small number of buyers and sellers. b. unique products. c. the interdependence of firms. d. innocent entry and exit by firms. ANSDPTS1DIF1REF14-1 NATAnalyticLOC consummate(a) competitionTOPCompetitive markets MSCDefinitional 6. A market is competitive if (i) firms look at 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. a. (i) and (ii) only b. (i) and (iii) only c. (ii) and (iii) only d. (i), (ii), and (iii) ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 7. A firm that has little ability to influence market prices operates in a a. competitive market. b. strategic market. c. issue market. d. power market. ANSAPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCDefinitional 8. In a competitive market, the actions of any single buyer or seller testament a. arrive a negligible impact on the market price. b. abide little effect on market equilibrium measuring rod but pass on adjoin market equilibrium price. c. affect fringy receipts and medium taxation but not price. d. adversely affect the profitability of more than one firm in the market. ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 9. In a competitive market, the actions of any single buyer or seller entrust a. discourage entry by competitors. b. influence the profits of separate firms in the market. c. have a negligible impact on the market price. d. None of the to a higher place is invent. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 10. Because the goods offered for sale in a competitive market are largely the same, a. there allow for be few sellers in the market. b. there testament be few buyers in the market. c. only a few buyers will have market power. d. seller s will have little reason to charge less than the going market price. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 11. Which of the following is not a characteristic of a abruptly competitive market? a. Firms are price takers. b. Firms have difficulty projecting the market. c. There are many sellers in the market. d. Goods offered for sale are largely the same. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 12. Which of the following is not a characteristic of a perfectly competitive market? a. Firms are price takers. b. Firms can freely enter the market. c. Many firms have market power. d. Goods offered for sale are largely the same. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 3. Free entry means that a. the government pays any entry costs for individual firms. b. no legal barriers prevent a firm from entering an industry. c. a fi rms borderline cost is zero. d. a firm has no fixed costs in the short run. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 14. Which of the following industries is most likely to exhibit the characteristic of free entry? a. nuclear power b. municipal water and sewer c. dairy farming d. airport surety ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCapplicative 15. Which of the following industries is most likely to exhibit the characteristic of free entry? a. cable television b. major planet radio c. mineral mining d. t-shirt silkscreening ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCApplicative 16. Which of the following industries is least likely to exhibit the characteristic of free entry? a. restaurants b. municipal water and sewer c. soybean farming d. selling running apparel ANSBPTS1DIF2REF14-1NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCApplicative 17. Which of the following industries is least likely to exhibit the characteristic of free entry? a. selling running apparel b. wheat farming c. yoga studios d. satellite radio ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCApplicative 8. When buyers in a competitive market take the selling price as given, they are said to be a. market entrants. b. monopolists. c. free riders. d. price takers. ANSDPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCDefinitional 19. When firms are said to be price takers, it implies that if a firm raises its price, a. buyers will go elsewhere. b. buyers will pay the higher price in the short run. c. competitors will also raise their prices. d. firms in the industry will exercise market power. ANSAPTS1DIF2REF14-1NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 20. Which of the following statements best reflects a price-taking firm? a. If the fir m were to charge more than the going price, it would sell none of its goods. b. The firm has an fillip to charge less than the market price to earn higher taxation enhancement. c. The firm can sell only a limited amount of getup at the market price before the market price will fall. d. damage-taking firms maximize profits by charging a price above borderline cost. ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 1. 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 gross. 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 wholes of outfit as it wants to at the market price. d. either of the above are correct. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 22. In a competitive market, no single producer can influence the market price because a. many other sellers are offering a product that is ssentially identical. b. consumers have more influence over the market price than producers do. c. government intervention prevents firms from influencing price. d. producers agree not to change the price. ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 23. A competitive firm would benefit from charging a price below the market price because the firm would achieve (i) higher middling gross. (ii) higher profits. (iii) get jibe costs. a. (i) only b. (ii) and (iii) only c. (i), (ii), and (iii) d. None of the above is correct. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 24. Which of the following characteristics of competitive markets is necessary for firms to be price takers? (i) There are many sellers. (ii) Firms can freely enter or exit the market. (iii) Goods offered for sale are largely the same. a. (i) and ( ii) only b. (i) and (iii) only c. (ii) only d. (i), (ii), and (iii) ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 25. Suppose a firm in a competitive market reduces its rig by 20 percent. As a result, the price of its output is likely to a. increase. b. remain unchanged. c. decrease by less than 20 percent. d. decrease by more than 20 percent. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSC uninflected 26. The Doris Dairy Farm sells milk to a dairy broker in Prairie du Chien, Wisconsin. Because the market for milk is generally considered to be competitive, the Doris Dairy Farm does not a. choose the quantity of milk to produce. b. choose the price at which it sells its milk. c. have any fixed costs of yield. d. set borderline taxation equal to bare(a) cost to maximize profit. ANSBPTS1DIF2REF14-1NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 27. The Doris Dairy Fa rm sells milk to a dairy broker in Prairie du Chien, Wisconsin. Because the market for milk is generally considered to be competitive, the Doris Dairy Farm does not choose the a. quantity of milk to produce. b. price at which it sells its milk. c. profits it earns. d. tout ensemble of the above are correct. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 28. In a competitive market, a. no single buyer or seller can influence the price of the product. b. there are only a small number of sellers. c. the goods offered by the different sellers are unique. d. chronicle profit is driven to zero as firms freely enter and exit the market. ANSAPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 29. Which of the following statements regarding a competitive market is not correct? a. There are many buyers and many sellers in the market. b. Because of firm location or product differences, some firms can cha rge a higher price than other firms and still maintain their sales volume. c. worth and average receipts are equal. d. outlay and borderline tax revenue are equal. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 30. Which of the following statements regarding a competitive market is not correct? a. There are many buyers and many sellers in the market. b. Firms can freely enter or exit the market. c. Price equals average revenue. d. Price exceeds bare(a) revenue. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 31. One of the defining characteristics of a perfectly competitive market is a. a small number of sellers. b. a large number of buyers and a small number of sellers. c. a similar product. d. significant advertising by firms to promote their products. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCDefinitional 32. Which of the following firms is the closest to being a perfectly competitive firm? a. a importunate dog vendor in New York b. Microsoft Corporation c. Ford Motor Company d. the campus bookstore ANSAPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCApplicative 33. Which of the following firms is the closest to being a perfectly competitive firm? a. the New York Yankees b. Apple, Inc. c. DeBeers diamond wholesalers d. a wheat farmer in Kansas ANSDPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCApplicative 34. Firms that operate in perfectly competitive markets try to a. maximize revenues. b. maximize profits. c. equate fringy revenue with average total cost. d. All of the above are correct. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 35. A seller in a competitive market can a. sell all he wants at the going price, so he has little reason to charge less. b. influence the market price by adjusting hi s output. c. influence the profits earned by competing firms by adjusting his output. d. All of the above are correct. ANSAPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 36. A seller in a competitive market a. can sell all he wants at the going price, so he has little reason to charge less. b. will lose all his customers to other sellers if he raises his price. c. considers the market price to be a take it or leave it price. d. All of the above are correct. ANSDPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 7. In a perfectly competitive market, a. no one seller can influence the price of the product. b. price exceeds marginal revenue for each unit sold. c. average revenue exceeds marginal revenue for each unit sold. d. All of the above are correct. ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 38. For a firm in a competitive market, an increase i n the quantity produced by the firm will result in a. a decrease in the products market price. b. an increase in the products market price. c. no change in the products market price. d. either an increase or no change in the products market price depending on the number of firms in the market. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive 39. If Cathys chocolate Emporium sells its product in a competitive market, then a. the price of that product depends on the quantity of the product that Cathys Coffee Emporium produces and sells because Cathys Coffee Emporiums demand curve is downward sloping. b. Cathys Coffee Emporiums total revenue must be proportional to its quantity of output. c. Cathys Coffee Emporiums total cost must be a constant multiple of its quantity of output. d. Cathys Coffee Emporiums total revenue must be equal to its average revenue. ANSBPTS1DIF3REF14-1 NATAnalyticLOCPerfect competitionTOP substance revenue MS C analytic 40. Changes in the output of a perfectly competitive firm, without any change in the price of the product, will change the firms a. total revenue. b. marginal revenue. c. average revenue. d. All of the above are correct. ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCAnalytical 41.If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will a. more than triple. b. less than triple. c. scarce triple. d. Any of the above whitethorn be true depending on the firms labor productivity. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCAnalytical 42. When a competitive firm doubles the quantity of output it sells, its a. total revenue doubles. b. average revenue doubles. c. marginal revenue doubles. d. profits must increase. ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenueMSCAnalytical 43. If a firm in a competitive market doubles its number of units sol d, total revenue for the firm will a. more than double. b. double. c. increase but by less than double. d. may increase or decrease depending on the price elasticity of demand. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCAnalytical set back 14-1 Quantity Price 0 $5 1 $5 2 $5 3 $5 4 $5 5 $5 6 $5 7 $5 8 $5 9 $5 44. bear on to panel 14-1. The price and quantity relationship in the tabulate is most likely a demand curve faced by a firm in a a. monopoly. b. concentrated market. c. competitive market. d. strategic market. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCAnalytical 45. Refer to send back 14-1.Over which range of output is average revenue equal to price? a. 1 to 5 units b. 3 to 7 units c. 5 to 9 units d. comely revenue is equal to price over the entire range of output. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOP modal(a) revenue MSCAnalytical 46. Refer to plug-in 14-1. Ov er what range of output is marginal revenue declining? a. 1 to 6 units b. 3 to 7 units c. 7 to 9 units d. bare(a) revenue is constant over the entire range of output. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOP fringy revenue MSCAnalytical 47. Refer to get across 14-1. If the firm doubles its output from 3 to 6 units, total revenue will a. increase by less than $15. b. increase by exactly $15. c. increase by more than $15. d. Total revenue cannot be determined from the information provided. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCApplicative Table 14-2 The table represents a demand curve faced by a firm in a competitive market. Price Quantity $4 0 $4 1 $4 2 $4 3 $4 4 $4 5 48. Refer to Table 14-2. A firm operating in a competitive market maximizes total revenue by producing a. 2 units. b. 3 units. c. 4 units. d. as many units as possible. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCApplica tive 49. Refer to Table 14-2. For a firm operating in a competitive market, the average revenue from selling 3 units is a. $12. b. $4. c. $3. d. $1. 25. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPAverage revenue MSCApplicative 50. Refer to Table 14-2. For a firm operating in a competitive market, the marginal revenue from selling the 3rd unit is a. $12. b. $4. c. $3. d. $1. 25. ANSBPTS1DIF3REF14-1NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCApplicative Table 14-3 Quantity Total gross 0 $0 1 $7 2 $14 3 $21 4 $28 51. Refer to Table 14-3. For a firm operating in a competitive market, the price is a. $0. b. $7. c. $14. d. $21. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCApplicative 52.Refer to Table 14-3. For a firm operating in a competitive market, the marginal revenue is a. $0. b. $7. c. $14. d. $21. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCApplicative 53. Refer to Tabl e 14-3. For a firm operating in a competitive market, the average revenue is a. $21. b. $14. c. $7. d. $0. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPAverage revenue MSCApplicative Table 14-4 Quantity Total receipts 0 $0 1 $15 2 $30 3 $45 4 $60 54. Refer to Table 14-4. For a firm operating in a competitive market, the price is a. $45. b. $30. c. $15. d. $0. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCApplicative 55. Refer to Table 14-4. For a firm operating in a competitive market, the marginal revenue is a. $45. b. $30. c. $15. d. $0. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCApplicative 56.Refer to Table 14-4. For a firm operating in a competitive market, the average revenue is a. $45. b. $30. c. $15. d. $0. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPAverage revenue MSCApplicative Table 14-5 Quantity Total Revenue 12 $132 13 $143 14 $154 15 $165 16 $176 57. R efer to Table 14-5.The price of the product is a. $9. b. $11. c. $13. d. $15. ANSBPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCApplicative 58. Refer to Table 14-5. The average revenue when 14 units are produced and sold is a. $9. b. $11. c. $13. d. $15. ANSBPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPAverage revenue MSCAnalytical 59. Refer to Table 14-5. The marginal revenue of the 12th unit is a. $9. b. $10. c. $11 d. The marginal revenue cannot be determined without knowing the total revenue when 11 units are sold. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCAnalytical Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. COSTS REVENUES Quantity Total Marginal Quantity Price Total Marginal Produced Cost Cost Demanded Revenue Revenue 0 $100 0 $120 1 $150 1 $120 2 $202 2 $120 3 $257 3 $120 4 $317 4 $120 5 $385 5 $120 6 $465 6 $120 7 $562 7 $120 8 $682 8 $120 60. Refer to Table 14-6. What is the total revenue from selling 7 units? a. $120 b. $490 c. $562 d. $840 ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCApplicative 61. Refer to Table 14-6. What is the total revenue from selling 4 units? a. $120 b. $257 c. $317 d. $480 ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCApplicative 62. Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit? a. $55 b. $120 c. $137 d. $140 ANSBPTS1DIF2REF14-1NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCApplicative 63. Refer to Table 14-6. What is the average revenue when 4 units are sold? a. $60 b. $120 c. $125 d. $197 ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPAverage revenue MSCApplicative 64. Which of the following statements is correct? a. For all firms, marginal revenue equals the price of the good. b. Only for competi tive 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. ANSDPTS1DIF3REF14-1 NATAnalyticLOCPerfect competition TOPAverage revenue Marginal revenueMSCInterpretive 65. Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? a. $5 and 50 units b. $5 and 100 units c. $10 and 50 units d. $10 and 100 units ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPAverage revenue MSCApplicative 66. Which of the following statements regarding a competitive firm is correct? a. Because demand is downward sloping, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output. b. If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units. c. By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price. d. For all firms, average revenue equals the price of the good. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPAverage revenue MSCAnalytical 67. Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to two hundred units, the average revenue of the 200th unit will be a. less than $12. b. more than $12. c. $12. d. Any of the above may be correct depending on the price elasticity of demand for the product. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPAverage revenue MSCAnalytical 68. Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, total revenue will be a. $2,000. b. $2,400. c. $4,200. d. We do not have decent information to answer the question. ANSBPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPTotal revenue MSCAnalytical 69.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. ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competition TOPMarginal revenue Average revenueMSCApplicative 70. For a competitive firm, a. total revenue equals average revenue. b. total revenue equals marginal revenue. c. total cost equals marginal revenue. d. average revenue equals marginal revenue. ANSDPTS1DIF1REF14-1 NATAnalyticLOCPerfect competition TOPMarginal revenue Average revenueMSCDefinitional 71.Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total revenues from the sale are $500. Which of the following statements is correct? (i) Marginal revenue equals $5. (ii) Average revenue equals $5. (iii) Price equals $5. a. (i) only b. (iii) only c. (i) and (ii) only d. (i), (ii), and (iii) ANSDPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue Average revenueMSCAnalytical 72. Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each. Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $600. (iii) Average revenue exceeds marginal revenue, but we fall apartt know by how much. a. (i) only b. (iii) only c. (i) and (ii) only d. (i), (ii), and (iii) ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competition TOPMarginal revenue Average revenueMSCAnalytical 73. Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $100. (iii) Total revenue equals $300. a. (i) only b. (iii) only c. (i) and (ii) only d. (i), (ii), and (iii) ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competition TOPMarginal revenue Average revenueMSCAnalytical 74. Suppose that a firm operating in perfectly competitive market sells 400 units of output at a price of $4 each. Which of the following statements is correct? (i) Marginal revenue equals $4. (ii) Average revenue equals $100. (iii) Total revenue equals $1,600. a. (i) only b. (iii) only c. (i) and (iii) only d. (i), (ii), and (iii) ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competition TOPMarginal revenue Average revenueMSCAnalytical 75. For a firm operating in a competitive industry, which of the following statements is not correct? a. Price equals average revenue. b. Price equals marginal revenue. c. Total revenue is constant. d. Marginal revenue is constant. ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPM arginal revenue Average revenueMSCInterpretive 76. For a firm in a perfectly competitive market, the price of the good is always a. equal to marginal revenue. b. equal to total revenue. c. greater than average revenue. d. equal to the firms efficient scale of output. ANSAPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCInterpretive 77. Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8. 00. What would be the firms total revenue if it instead produced and sold 4 units of output? a. $4 b. $8 c. $32 d. $64 ANSCPTS1DIF2REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCApplicative 78. Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue a. increases if MR ATC and decreases if MR ATC. b. does not change. c. increases. d. decreases. ANSBPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCInterpretive 79. Suppose that in a competitive market the equilibrium price is $2. 50.What is 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. ANSCPTS1DIF1REF14-1 NATAnalyticLOCPerfect competitionTOPMarginal revenue MSCInterpretive 80. For an individual firm operating in a competitive market, marginal revenue equals a. average revenue and the price for all levels of output. b. average revenue, which is greater than the price for all levels of output. c. average revenue, the price, and marginal cost for all levels of output. d. marginal cost, which is greater than average revenue for all levels of output. ANSAPTS1DIF2REF14-1 NATAnalyticLOCPerfect competition TOPMarginal revenue Average revenueMSCInterpretive 81. If the market elasticity of demand for potatoes is -0. 3 in a perfectly competitive market, then the in dividual farmers elasticity of demand a. will also be -0. 3. b. depends on how large a crop the farmer produces. c. will range between -0. 3 and -1. 0. d. will be infinite. ANSDPTS1DIF3REF14-1 NATAnalyticLOCPerfect competitionTOPElasticity MSCAnalytical make Maximization and the Competitive Firms Supply Curve 1. IF A COMPETITIVE FIRM IS CURRENTLY PRODUCING A direct OF OUTPUT AT WHICH MARGINAL REVENUE EXCEEDS MARGINAL COST, THEN a. a one-unit increase in output will increase the firms profit. b. a one-unit decrease in output will increase the firms profit. c. total revenue exceeds total cost. d. total cost exceeds total revenue. ANSAPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 2. If a competitive firm is electric currently producing a level of output at which marginal cost exceeds marginal revenue, then a. a one-unit increase in output will increase the firms profit. b. a one-unit decrease in output will increase the firms profit. c. total revenue exceeds total cost. d. total cost exceeds total revenue. ANSBPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 3. If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then a. average revenue exceeds marginal cost. b. the firm is earning a positive profit. c. decreasing output would increase the firms profit. d. All of the above are correct. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 4. 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. a. (i) only b. (i) and (ii) only c. (ii) and (iii) only d. (i) and (iii) only ANSBPTS1DIF2REF14-2NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 5. At the profit-maximizing level of output, a. marginal revenue equals average total cost. b. marginal revenue equals average variable cost. c. marginal revenue equals marginal cost. d. average revenue equals average total cost. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 6. The intersection of a firms 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. ANSDPTS1DIF2REF14-2NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 7. For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $7. It follows that the a. production of the 100th unit of output increases the firms profit by $3. b. production of the 100th unit of output increases the firms average total cost by $7. c. firms profit-maximizing leve l of output is less than 100 units. d. production of the 99th unit of output must increase the firms profit by less than $3. ANSAPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 8.For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $11. It follows that the a. production of the 100th unit of output increases the firms profit by $1. b. production of the 100th unit of output increases the firms average total cost by $1. c. firms profit-maximizing level of output is less than 100 units. d. production of the 110th unit of output must increase the firms profit but by less than $1. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 9. A certain competitive firm sells its output for $20 per unit. The 50th unit of output that the firm produces has a marginal cost of $22.Production of the 50th unit of output does not necessarily a. increase the fir ms total revenue by $20. b. increase the firms total cost by $22. c. decrease the firms profit by $2. d. increase the firms average variable cost by $0. 44. ANSDPTS1DIF3REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 10. Sam sells soybeans to a broker in Chicago, Illinois. Because the market for soybeans is generally considered to be competitive, Sam maximizes his profit by choosing a. to produce the quantity at which average variable cost is minimized. b. to produce the quantity at which average fixed cost is minimized. c. to sell at a price where marginal cost is equal to average total cost. d. the quantity at which market price is equal to Sams marginal cost of production. ANSDPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 11. If a competitive firm is selling 1,000 units of its product at a price of $9 per unit and earning a positive profit, then a. its total cost is less than $9,000. b. its marginal revenue is less than $9. c. its average revenue is greater than $9. d. the firm cannot be a competitive firm because competitive firms cannot earn positive profits. ANSAPTS1DIF2REF14-2NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 12. If a competitive firm is selling 1,000 units of its product at a price of $8 per unit and earning a positive profit, then a. its average revenue is greater than $8. b. its marginal revenue is less than $8. c. its total cost is less than $8,000. d. All of the above are correct. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 13. Max sells uses. The map industry is competitive. Max hires a business adviser to analyze his companys financial records. The consultant recommends that Max increase his production. The consultant must have concluded that Maxs a. total revenues exceed his total accounting costs. b. marginal revenue exceeds his total cost. c. marginal revenue exceeds his marginal cos t. d. marginal cost exceeds his marginal revenue. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 14. Christopher is a professional tennis player who gives tennis lessons. The industry is competitive. Christopher hires a business consultant to analyze his financial records. The consultant recommends that Christopher give fewer tennis lessons. The consultant must have concluded that Christophers a. total revenues exceed his total accounting costs. b. marginal revenue exceeds his total cost. c. marginal revenue exceeds his marginal cost. d. marginal cost exceeds his marginal revenue. ANSDPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 15. Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making marry cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $300. In order to maximize profits, Laura should a. acquit 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 liberal information with which to answer the question. ANSBPTS1DIF3REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 16. Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $200. 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 passable information with which to answer the question. ANSAPTS1DIF3REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 17. Marcia is a fashion designer who run s a small clothing business in a competitive industry. Marcia specializes in making designer dresses. Marcia sells 10 dresses per month. Her monthly total revenue is $5,000. The marginal cost of making a dress is $400. In order to maximize profits, Marcia should a. make more than 10 dresses per month. b. make fewer than 10 dresses per month. c. continue to make 10 dresses per month. d. We do not have affluent information with which to answer the question. ANSAPTS1DIF3REF14-2NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 18. Marcia is a fashion designer who runs a small clothing business in a competitive industry. Marcia specializes in making designer dresses. Marcia sells 10 dresses per month. Her monthly total revenue is $5,000. The marginal cost of making a dress is $500. In order to maximize profits, Marcia should a. make more than 10 dresses per month. b. make fewer than 10 dresses per month. c. continue to make 10 dresses per month. d. We do not hav e enough information with which to answer the question. ANSCPTS1DIF3REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 19.Marcia is a fashion designer who runs a small clothing business in a competitive industry. Marcia specializes in making designer dresses. Marcia sells 10 dresses per month. Her monthly total revenue is $5,000. The marginal cost of making a dress is $600. In order to maximize profits, Marcia should a. make more than 10 dresses per month. b. make fewer than 10 dresses per month. c. continue to make 10 dresses per month. d. We do not have enough information with which to answer the question. ANSBPTS1DIF3REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 20. A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive.Then, the price rises to $25, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its a. quantity of output is higher than it was previously. b. average total cost is higher than it was previously. c. marginal revenue is higher than it was previously. d. All of the above are correct. ANSDPTS1DIF3REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 21. A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price falls to $18, and the firm makes whatever adjustments are necessary to maximize its profit at the now-lower price. Once the firm has adjusted, its a. quantity of output is lower than it was previously. b. average total cost is lower than it was previously. c. marginal cost is higher than it was previously. d. All of the above are correct. ANSAPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 22. A competitive firm has been selling its output for $10 per unit and has been maximizing its profit. The n, the price rises to $14, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its a. marginal revenue is lower than it was previously. b. marginal cost is lower than it was previously. c. quantity of output is higher than it was previously. d. All of the above are correct. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCInterpretive 23. When profit-maximizing firms in competitive markets are earning profits, a. market demand must exceed market supply at the market equilibrium price. b. market supply must exceed market demand at the market equilibrium price. c. new firms will enter the market. d. the most inefficient firms will be encouraged to leave the market. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive markets MSCInterpretive Table 14-7Suppose that a firm in a competitive market faces the following revenues and costs Marginal Marginal Quanti ty Cost Revenue 12 $5 $9 13 $6 $9 14 $7 $9 15 $8 $9 16 $9 $9 17 $10 $9 24. Refer to Table 14-7. If the firm is currently producing 14 units, what would you advise the owners? a. decrease quantity to 13 units b. increase quantity to 17 units c. continue to operate at 14 units d. increase quantity to 16 units ANSDPTS1DIF1REF14-2 NATAnalyticLOCPerfect competitionTOP simoleons maximization MSCApplicative 25. Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning? a. $0 b. $1 c. $10 d. There is insufficient data to determine the firms profit. ANSDPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit MSCApplicative Table 14-8Suppose that a firm in a competitive market faces the following revenues and costs Quantity Total Revenue Total Cost 0 $0 $3 1 $7 $5 2 $14 $8 3 $21 $12 4 $28 $17 5 $35 $23 6 $42 $30 7 $49 $38 26. Refer to Table 14-8.The firm will not produce an output level beyond a. 4 units. b. 5 units. c. 6 units. d. 7 units. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 27. Refer to Table 14-8. The firm will produce a quantity greater than 4 because at 4 units of output, marginal cost a. is less than marginal revenue. b. equals marginal revenue. c. is greater than marginal revenue. d. is minimized. ANSAPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 28. Refer to Table 14-8. In order to maximize profits, the firm will produce a. 1 unit of output because marginal cost is minimized. b. 4 units of output because marginal revenue exceeds marginal cost. c. 6 units of output because marginal revenue equals marginal cost. d. 8 units of output because total revenue is maximized. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs Quantity Total Revenue Total Cost 0 $0 $10 1 $9 $1 4 2 $18 $19 3 $27 $25 4 $36 $32 5 $45 $40 6 $54 $49 7 $63 $59 8 $72 $70 9 $81 $82 29. Refer to Table 14-9. If the firm produces 4 units of output, a. marginal cost is $4. b. total revenue is greater than variable cost. c. marginal revenue is less than marginal cost. d. the firm is maximizing profit. ANSBPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPCompetitive firms MSCAnalytical 30. Refer to Table 14-9. At which quantity of output is marginal revenue equal to marginal cost? a. 3 units b. 6 units c. 8 units d. 9 units ANSBPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 31. Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to a. $6. b. $7. c. $8. d. $9. ANSDPTS1DIF2REF14-2NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 32. Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output whe re marginal cost is equal to a. $5. b. $7. c. $9. d. $10. ANSCPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 33. Refer to Table 14-9. The maximum profit available to the firm is a. $2. b. $3. c. $4. d. $5. ANSDPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 34. Refer to Table 14-9. If the firms marginal cost is $11, it should a. increase production to maximize profit. b. increase the price of the product to maximize profit. c. advertise to guide additional buyers to maximize profit. d. reduce production to increase profit. ANSDPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCAnalytical 35. Refer to Table 14-9. If the firms marginal cost is $5, it should a. reduce fixed costs by lowering production. b. increase production to maximize profit. c. decrease production to maximize profit. d. maintain its current level of production to maximize profit. ANSBPTS1DIF2REF14 -2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCAnalytical Table 14-10Suppose that a firm in a competitive market faces the following revenues and costs Quantity Total Revenue Total Cost 0 $0 $3 1 $7 $5 2 $14 $9 3 $21 $15 4 $28 $23 5 $35 $33 6 $42 $45 7 $49 $59 36. Refer to Table 14-10. The marginal cost of producing the 4th unit is a. $7. b. $8. c. $10. d. $23. ANSBPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPMarginal cost MSCApplicative 37. Refer to Table 14-10. At which level of production will the firm maximize profit? a. 3 units b. 4 units c. 5 units d. 6 units ANSAPTS1DIF2REF14-2 NATAnalyticLOCPerfect competitionTOPProfit maximization MSCApplicative 38. Refer to Table 14-10. If the firm produces the profit-maximizing level of production, how much profit will the firm earn? a. $2 b. $4 c. $6 d. $8 ANSCPTS1DIF2REF14-2