6. Power Printers Total Costs (per hour) q TC 0 65 1 80 2 95 3 120 4 150 5 200 I
ID: 1205140 • Letter: 6
Question
6. Power Printers Total Costs (per hour)
q TC
0 65
1 80
2 95
3 120
4 150
5 200
If the price of a printer is $50 in this perfectly competitive industry, what is the profit-maximizing rate of output?
7. Which of the following is NOT true in a perfectly competitive market?
a. There is free entry and exit into the industry.
b. Each firm produces a differentiated product.
c. Each firm faces a perfectly elastic demand curve.
d. Price is equal to marginal revenue at every output level for the firm.
8. A perfectly competitive firm should always continue to operate in the short run as long as:
a. P < ATC at the rate of output where MR = MC.
b. P < AVC at the rate of output where MR = MC.
c. MR > AVC at the rate of output where MR = MC.
d. MR > AFC at the rate of output where MR = MC.
9. A firm that makes zero economic profits:
a. Must eventually go bankrupt.
b. Should shut down.
c. Incurs a loss, but should not shut down.
d. Covers all its costs, including a provision for normal profit.
10. A monopoly firm is different from a competitive firm in that:
A. There are many substitutes for the monopolist’s product whereas the competitive firm’s demand curve is perfectly elastic.
B. The monopolist’s demand curve is perfectly inelastic, whereas the competitive firm’s demand curve is perfectly elastic.
C. The monopolist can influence the price in the market, whereas the competitive firm is a price taker.
D. All of the above
Explanation / Answer
The following table shows marginal cost at each level:
In perfect competiton MC=Price.
If price $50 , MC is $50 at 5 units of output.
The answer in bold and italics is the answer
7. Which of the following is NOT true in a perfectly competitive market?
a. There is free entry and exit into the industry.
b. Each firm produces a differentiated product.
c. Each firm faces a perfectly elastic demand curve.
d. Price is equal to marginal revenue at every output level for the firm.
8. A perfectly competitive firm should always continue to operate in the short run as long as:
a. P < ATC at the rate of output where MR = MC.
b. P < AVC at the rate of output where MR = MC.
c. MR > AVC at the rate of output where MR = MC.
d. MR > AFC at the rate of output where MR = MC.
9. A firm that makes zero economic profits:
a. Must eventually go bankrupt.
b. Should shut down.
c. Incurs a loss, but should not shut down.
d. Covers all its costs, including a provision for normal profit.
10. A monopoly firm is different from a competitive firm in that:
A. There are many substitutes for the monopolist’s product whereas the competitive firm’s demand curve is perfectly elastic.
B. The monopolist’s demand curve is perfectly inelastic, whereas the competitive firm’s demand curve is perfectly elastic.
C. The monopolist can influence the price in the market, whereas the competitive firm is a price taker.
D. All of the above
q TC MC 0 65 1 80 15 2 95 15 3 120 25 4 150 30 5 200 50
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