Chapter 14 example #20741

For any competitive market, the supply curve is closely related to the A. preferences of consumers who purchase products in that market. B. income tax rates of consumers in that market. C. firms' costs of production in that market. D. interest rates on government bonds.

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not? A. restaurants and MP3 players B. electricity and natural gas C. corn and satellite radio D. rice and soybeans

A key characteristic of a competitive market is that A. government antitrust laws regulate competition. B. producers sell nearly identical products. C. firms minimize total costs. D. firms have price setting power.

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. Entry is limited. D. Each firm chooses an output level that maximizes profits.

Competitive markets are characterized by A. a small number of buyers and sellers. B. unique products. C. the interdependence of firms. D. free entry and exit by firms.

Because the goods offered for sale in a competitive market are largely the same, A. there will be few sellers in the market. B. there will be few buyers in the market. C. only a few buyers will have market power. D. sellers will have little reason to charge less than the going market price.

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 security

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 wants to at the market price. D. All of the above are correct.

Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML does not A. choose the quantity of butter to produce. B. set marginal revenue equal to marginal cost to maximize profit. C. have any fixed costs of production. D. choose the price at which it sells its butter.

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.

Which of the following statements is correct? A. For all firms, marginal revenue equals the price of the good. 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.

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.

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.

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.

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then A. a one-unit increase in output will increase the firm's profit. B. a one-unit decrease in output will increase the firm's profit. C. total revenue exceeds total cost. D. total cost exceeds total revenue.

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald 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. *the quantity at which market price is equal to Mr. McDonald's marginal cost of production. D. the quantity at which market price exceeds Mr. McDonald's marginal cost of production by the greatest amount.

Kate is a professional opera singer who gives voice lessons. The vocal-music industry is competitive. Kate hires a business consultant to analyze her financial records. The consultant recommends that Kate give fewer voice lessons. The consultant must have concluded that Kate's A. total revenues exceed her total accounting costs. B. marginal revenue exceeds her total cost. C. marginal revenue exceeds her marginal cost. D. marginal cost exceeds her marginal revenue.

Robin owns a horse stables and riding academy and gives riding lessons for children at "pony camp." Her business operates in a competitive industry. Robin gives riding lessons to 20 children per month. Her monthly total revenue is $4,000. The marginal cost of pony camp is $200 per child. In order to maximize profits, Robin should A. give riding lessons to more than 20 children per month. B. give riding lessons to fewer than 20 children per month. C. continue to give riding lessons to 20 children per month. D. We do not have enough information to answer the question.

Which of the following statements best expresses a competitive firm's profit maximizing decision rule? A. If marginal revenue is greater than marginal cost, the firm should increase its output. B. If marginal revenue is less than marginal cost, the firm should shut down in the short run. C. If marginal revenue equals marginal cost, the firm should produce exactly one more unit of output. D. All of the above are correct

In order to maximize profits in the short run, a firm in perfect competition should produce where A. marginal revenue exceeds marginal cost by the greatest amount. B. marginal cost is minimized. C. average total cost is minimized. D. marginal cost equals marginal revenue.

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as A. average revenue is greater than average total cost. B. average revenue is equal to marginal cost. C. marginal cost is greater than average total cost. D. price is above or below marginal cost.

Mrs. Smith operates a business in a competitive market. The current market price is $8.10. At her profit- maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should A. shut down her business in the short run but continue to operate in the long run. B. continue to operate in the short run but shut down in the long run. C. continue to operate in both the short run and long run. D. shut down in both the short run and long run.

The firm will make the most profits if it produces the quantity of output at which A. marginal cost equals average cost. B. profit per unit is greatest. C. marginal revenue equals total revenue. D. marginal revenue equals marginal cost.

A firm in a competitive market currently produces and sells 500 doorknobs for a price of $10 per doorknob. Which of the following events would decrease the firm's average revenue? A. The firm increases its output above 500 doorknobs. B. The firm decreases its output below 500 doorknobs. C. The market price of doorknobs rises above $10. D. The market price of doorknobs falls below $10.

Which of the following expressions is correct for a competitive firm? A. profit = (quantity of output) x (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) x (quantity of output)