13. Firms operating in competitive markets produce output levels where marginal

Question

13. 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. 14. If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's 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 15. If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, 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.

Explanation / Answer

Q13
Answer
Option d
all of the correct
the perfectly competitive firm produces at MC=P=AR=MR
because the demand curve is horizontal

Q14
option d
the firm is price taker so at a given price any quantity can be brought to the firm have infinite elastic demand

Q15
Option b
the firm produces at MC=MR but the MC>MR so the firm should reduce the output to maximize profit or minimize losses.

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