1-The demand curve perceived by a perfectly competitive firm a-shows that such a
ID: 1154676 • Letter: 1
Question
1-The demand curve perceived by a perfectly competitive firm
a-shows that such a firm is a price-maker
b-shows economies of scale over a large range of output
c-is horizontal
d-all of the above
2-If a monopolist increases quantity by one unit, but sells the increased output at a slightly lower price
a-because of higher output the marginal revenue curve is above the demand curve
b-the marginal revenue of selling a unit is more than the price of the unit
c-marginal revenue is affected by adding one additional unit sold at the new price
d-all the previous units, which used to sell at a higher price, now sell for more
3-____________refers to the additional revenue gained from selling one more unit
a-marginal revenue
b-economic profit
c-total revenue
d-accounting profit
4-The term __________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product
a-business entity
b-price taker
c-trend setter
d-price setter
5-The fact that a consumer is not required to buy the goods that a given firm produces, as well as the fact that the consumer might want the goods a firm produces, but may choose to buy from other firms instead
a-are two stark realities any business firm must recognize
b-means the firm has reached it shutdown point and should exit
c-will reduce the revenue a firm receives and it should shut down
d-is part of the process to a sustained pattern of profits
6-If a firm’s revenues do not cover its average variable costs, then that firm has reached its ________
a-shutdown point
b-price taking point
c-marginal point
d-opportunity margin
7-Once I’MaPharmaCo. Has received confirmation of the registration for its latest drug patent application, it will have created a monopoly for that product by restricting
a-amount of product advertising
b-demand for the product
c-entry into the market
d-the number of product compliments
8-________ law implies ownership over an idea or concept or image
a-intellectual property
b-patent
c-copyright
d-trademark
9-Kate’s 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate’s costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance, cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should
a-keep the business open in the short-run, but plan to go out of business in the long-run
b-lay-off her staff, break her lease, and close the business down immediately
c-keep the business open in the short-run, and plan to expand the business in the long-run
d-raise her prices above the perfectly competitive level set by the market
10-In order to produce 100 pairs of even gloves, Marcia incurs an average total cost of $2.50 per pair. Marcia’s marginal cost is constant at $1.00 for every pair of gloves produced. The total cost to produce 50 pairs of oven gloves is
a-$250.00
b-$200.00
c-$500.00
d-$300.00
11-Refer to the table below. If the information pertains to the demand curve and the long run average cost curve for an electric company that is a natural monopoly, then what quantity will be produced in this market?
Price
Quantity
LRAC
$12
100
$6.00
$10
200
$5.50
$8
300
$5.33
$7
400
$5.50
$6
500
$6.00
a-200
b-400
c-300
d-100
12-For a pure monopoly to exist,
a-there is a single seller in a particular industry
b-there is only one seller, therefore no industry
c-there are limited sellers in a particular industry
d-there are a few sellers in a given industry
13-Deregulation occurs when a government eliminates or scales back rules relating to all but one of the following. Which one is it?
a-prices that can be charged
b-quantities that can be produced
c-conditions of entry in a certain industry
d-natural monopoly
14-A ____________ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve
a-oligopoly
b-monopoly
c-natural monopoly
d-monopolistic competition
15-Which of the following will present the least amount of concern to a firm that has a monopoly over a particular industry?
a-whether consumers will spend on different products
b-whether consumers will purchase its product
c-barriers to entry and competitors’patent protection
d-the competitive actions of other business firms
16-The US government has registered _____________ on behalf of business firms to protect a particularly distinct element each has selected for its ability to aid consumers to easily _________
a-200,000 patents; license for use
b-200,000 trade secrets; create a natural monopoly
c-1 million copyright licenses; identify the authors of creative works
d-1.9 million trademarks; identify the source of goods
17-Which of the following is most likely to be a monopoly?
a-local bathroom fixtures shop
b-local television broadcaster
c-local fast-food restaurant
d-local electricity distributor
18-In the _________, the perfectly competitive firm will seek out __________
a-short run; the quantity of output where profits are highest
b-long run; methods to reduce production and shut down
c-short run; profits by ignoring the concept of total cost analysis
d-long run; the quantity of output where profits are highest
19-If the quality differences of similar products are mostly imperceptible to the average consumer’s eyes, which of the following will most likely play a major role in influencing the decision of purchasers?
a-geographic origin of products
b-size of competing products
c-purchaser’s opportunity cost
d-price of competing products
20-A monopolist is able to maximize its profits by
a-producing maximum output where price is equal to its marginal cost
b-producing output where MR = MC and charging a price along the demand curve
c-setting the price at the level that will maximize its per-unit profit
d-setting output at MR = MC and setting price at the demand curve’s highest point
21-In a perfectly competitive market setting, which of the following would be a true statement?
a-market price automatically sets itself exactly at equilibrium
b-wage rates trend toward marginal revenue product levels
c-wage rates mirror marginal revenue product levels exactly
d-market price rarely trends towards the equilibrium value
22-Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4?
Q
P
TC
TR
MR
MC
Profit
0
$5
$9
1
$5
$10
2
$5
$12
3
$5
$15
4
$5
$19
5
$5
$24
6
$5
$30
7
$5
$45
a-$5.00
b-$1.00
c-$15.00
d-$20.00
23- Given the data provided in the table below, the total revenue (TR) for production at quantity (Q) level 4 equals?
Q
P
TC
TR
MR
MC
Profit
0
$5
$9
1
$5
$10
2
$5
$12
3
$5
$15
4
$5
$19
5
$5
$24
6
$5
$30
7
$5
$45
a-$15.00
b-$1.00
c-$20.00
d-zero
24-Under perfect competition, any profit-maximizing producer faces a market price equal to its
a-marginal costs
b-total costs
c-average costs
d-variable costs
25-If marginal cost is rising in a competitive firm’s short-run production process and its average variable cost is falling as output is increased, then
a-marginal cost is above average variable cost
b-marginal cost is below average variable cost
c-average fixed cost is constant
d-marginal cost is below average fixed cost
26-If the price that a firm charges is lower than its ___________ of production, the firm will suffer losses
a-average cost
b-variable cost
c-fixed cost
d-marginal cost
27-Refer to the diagram below. Which of the following explains the slope of the total revenue curve illustrated in this graph?
a-total revenue shown as a straight line sloping up indicates a perfectly competitive firm
b-the slope of the total revenue curve is determined by the price of the goods produced
c-at higher levels of output, diminishing returns will cause total cost to slope downward steeply
d-the slope of the total revenue curve is explained by both a and b above
Price
Quantity
LRAC
$12
100
$6.00
$10
200
$5.50
$8
300
$5.33
$7
400
$5.50
$6
500
$6.00
Explanation / Answer
1. c-is horizontal
Perfect Competition is a form of market structure in which there is free entry and exit of firms and firms are selling homogeneous and identical products in the market. Firms under this form of market are price takers rather than price makers. Industry determines the equilibrium price from the demand and supply curve intersection. Sellers can sell any unit of commodity at that price and firms does not have any price control over the commodity. Demand curve of perfectly competitive market is horizontal which shows firms can sell any unit of output at given market price.
2. c-marginal revenue is affected by adding one additional unit sold at the new price
3. a-marginal revenue
Marginal revenue is the additional revenue which firm get by selling an additional unit of output.
4. b- price taker
Under perfectly competitive market, firms are selling identical products and they don't have price control on commodities. Firms are price takers while industry is price maker.
6. a-shutdown point
When firm is not able to cover all its variable cost then it means firm reaches its shut down point.
7. c-entry into the market
Patent right restrict the entry of new firms into the market.
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