Micro Econ, Quiz 9

A market is competitive if (i) firms have 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)

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.

Refer to Table 1. The price and quantity relationship in the table is most likely a demand curve faced by a firm in a a. monopoly. b. concentrated market. c. competitive market. d. strategic market.

Refer to Table 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. Average revenue is equal to price over the entire range of output.

Refer to Table 1. Over what range of output is marginal revenue declining? a. 1 to 6 units b. 3 to 7 units c. 7 to 9 units d. Marginal revenue is constant over the entire range of output.

Refer to Table 1. Over what range of output is marginal revenue declining? a. 1 to 6 units b. 3 to 7 units c. 7 to 9 units d. Marginal revenue is constant over the entire range of output.

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.

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the a. production of the 100th unit of output increases the firm's profit by $1. b. production of the 100th unit of output increases the firm's average total cost by $1. c. firm's profit-maximizing level of output is less than 100 units. d. production of the 101st unit of output must increase the firm's profit by more than $1.

Refer to Table 2. If the firm produces 3 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.

Refer to Table 2. At which quantity of output is marginal revenue equal to marginal cost? a. 3 units b. 5 units c. 7 units d. 9 units

Refer to Table 2. In order to maximize profit, the firm will produce a level of output where both marginal revenue and marginal cost is equal to a. $6. b. $7. c. $8. d. $9.

1. Refer to Table 2. If the firm's 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 attract additional buyers to maximize profit. d. reduce production to increase profit.

Refer to Table 2. If the firm's 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.

When a profit-maximizing firm is earning profits, those profits can be identified by a. P × Q. b. (MC - AVC) × Q. c. (P - ATC) × Q. d. (P - AVC) × Q.

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its profit is a. -$1,600. b. $1,600. c. $3,200. d. $8,000.

In the short run, a firm operating in a competitive industry will shut down if price is a. less than average total cost. b. less than average variable cost. c. greater than average variable cost but less than average total cost. d. greater than marginal cost.

Which of the following statements is correct regarding a firm's decision-making? a. The decision to shut down and the decision to exit are both short-run decisions. b. The decision to shut down and the decision to exit are both long-run decisions. c. The decision to shut down is a short-run decision, whereas the decision to exit is a long-run decision. d. The decision to exit is a short-run decision, whereas the decision to shut down is a long-run decision.

In a competitive market, the current price is $5. The typical firm in the market has ATC = $5.00 and AVC = $4.50. a. In the short run firms will shut down, and in the long run firms will leave the market. b. firms will continue to operate in the short run but leave the market in the long run. c. New firms will likely enter this market to capture any remaining economic profits. d. The firm will earn zero profits in both the short run and long run.

In the long run, a profit-maximizing firm will choose to exit a market when a. average fixed cost is falling. b. variable costs exceed sunk costs. c. marginal cost exceeds marginal revenue at the current level of production. d. total revenue is less than total cost.

A firm that exits its market 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.

The entry of new firms into a competitive market will a. increase market supply and increase market price. b. increase market supply and decrease market price. c. decrease market supply and increase market price. d. decrease market supply and decrease market price.

In the long run, each firm in a competitive industry earns a. zero accounting profits. b. zero economic profits. c. positive economic profits. d. Both a and b are correct.

In the long-run equilibrium of a competitive market, the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of a. average fixed cost for the marginal firm. b. marginal cost of the marginal firm. c. average total cost of the marginal firm. d. average variable cost of the marginal firm.

Mrs. Smith operates a business in a competitive market. The current market price is $7.50. 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.

In the long-run equilibrium of a market with free entry and exit, if all firms have the same cost structure, then a. marginal cost exceeds average total cost. b. the price of the good exceeds average total cost. c. average total cost exceeds the price of the good. d. firms are operating at their efficient scale.