1. Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?
Answer: The firm will not sell any output.
Answer: The firm will not sell any output.
The firm's profits will increase.
The firm's revenue will increase.
The firm will sell more output than its
competitors.
2. Perfect competition is characterized by all of the following except
Answer: heavy advertising by individual sellers.
homogeneous products.
sellers are price takers
a horizontal demand curve for individual sellers
3. The demand curve for an individual seller's product in perfect competition is
the same as market demand.
downward sloping.
vertical.
Answer: horizontal.
4. Which of the following is not true for a firm in perfect competition?
Profit equals total revenue minus total cost.
Price equals average revenue.
Answer: Average revenue is greater than marginal revenue.
Marginal revenue equals the change in total revenue from selling one more unit.
5. A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The price of each good is $10. Calculate the firm's short-run profit or loss.
Answer: loss of $6,000
profit of $6,000
profit of $30,000
There is insufficient information to answer the question.
6. For a perfectly competitive firm, at profit maximization
market price exceeds marginal cost.
total revenue is maximized.
Answer: marginal revenue equals marginal cost.
production must occur where average cost is minimized.
2. Perfect competition is characterized by all of the following except
Answer: heavy advertising by individual sellers.
homogeneous products.
sellers are price takers
a horizontal demand curve for individual sellers
3. The demand curve for an individual seller's product in perfect competition is
the same as market demand.
downward sloping.
vertical.
Answer: horizontal.
4. Which of the following is not true for a firm in perfect competition?
Profit equals total revenue minus total cost.
Price equals average revenue.
Answer: Average revenue is greater than marginal revenue.
Marginal revenue equals the change in total revenue from selling one more unit.
5. A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The price of each good is $10. Calculate the firm's short-run profit or loss.
Answer: loss of $6,000
profit of $6,000
profit of $30,000
There is insufficient information to answer the question.
6. For a perfectly competitive firm, at profit maximization
market price exceeds marginal cost.
total revenue is maximized.
Answer: marginal revenue equals marginal cost.
production must occur where average cost is minimized.
