Exhibit 8-17 Marginal revenue and cost per unitcurves If the price of the firm\'

Question

Exhibit 8-17 Marginal revenue and cost per unitcurves



If the price of the firm's product in Exhibit 8-17 is $15 per unit,the firm should:

A)stay in operation for the time being even though it is making apure economic loss.
B)shut down permanently.
C)continue to operate because it is earning a positive economicprofit.
D)shut down temporarily.

Exhibit 11-9 A labor market



If the labor market shown in Exhibit 11-9 is competitive, the wagerate and number of workers employed will be determined atpoint:

A)A.
B)C.
C)Y.
D)Z.
E)X.

Which of the following is a distinction between perfectlycompetitive and monopolistic competition?

A)Perfectly competitive firms may make either economic profits orlosses in the short run, but monopolistically competitive firmsalways earn an economic profit.
B)Perfectly competitive firms must compete with rival sellers;monopolistically competitive firms do not confront rivalsellers.
C)Monopolistically competitive firms can raise their price withoutlosing sales; perfectly competitive firms must lower their price inorder to sell more of their product.
D)Perfectly competitive firms confront a perfectly elastic demandcurve; monopolistically competitive firms face a downward-slopingdemand curve.

16.

A technological advance that increases labor productivitywill:

A)lower wages.
B)decrease the demand for labor as MP falls.
C)increase the demand for labor as MP rises.
D)decrease the supply of labor as fewer workers are needed.
E)decrease the demand for labor as fewer workers are needed.

17.

The marginal approach to profit maximization means that a firmshould produce until:

A)price equals average total cost.
B)marginal revenue equals marginal cost.
C)marginal cost becomes negatively sloped.
D)marginal revenue equals zero.
E)marginal revenue equals price.

18.

A kink in the demand curve facing an oligopolist is causedby:

A)rapidly rising marginal revenues.
B)the belief that competitors will follow price increases but notmatch price decreases.
C)excessive advertising.
D)the tendency of competitors to follow price reductions but notprice increases.

19.

Consider a firm with the following cost information: ATC = $15,AVC = $12, and MC = $14. If we know that this firm has decided toproduce Q = 20 by following the rule to maximize profits orminimize losses, then the price of the output is:

A)$15.
B)$20.
C)$14.
D)$12.

Because a competitive firm is a price taker, it faces a demandcurve that is:

A)relatively inelastic.
B)perfectly inelastic.
C)perfectly elastic.
D)relatively elastic.

A monopolist faces a downward-sloping demand curve because:

Explanation / Answer

You are missing graphs for the first two questions. You canreply to this or PM me with the graphs and i can help you do thefirst couple problems. But ill explain the other problems now
15. Perfectly competitive firms confront a perfectly elasticdemand curve as individual firms cannot change the outcome of themarket. Monopolistically competitive firms face a downward slopingdemand curve because it is the only seller and if the monopolistwants to sell more they will have to lower prices. D is youranswer

17. If marginal revenue is greater than marginal cost,marginal profit is positive, and if marginal revenue is less thanmarginal cost, marginal profit is negative. When marginal revenueequals marginal cost, marginal profit is zero. Since total profitincreases when marginal profit is positive and total profitdecreases when marginal profit is negative, it must reach a maximumwhere marginal profit is zero - or where marginal cost equalsmarginal revenue. So the answer is B
18. The motivation behind this kink is the idea that inan oligopolistic or monopolistically competitive market, firms willnot raise their prices because even a small price increase willlose many customers. However, even a large price decrease will gainonly a few customers because such an action will begin a price warwith other firms. The curve is therefore more price-elastic forprice increases and less so for price decreases. So the answer isB
19. A firm will try to maximize profit by producing at pointP=MC=MR since MC = 14 P will = 14 as well. C is your answer
20. As firms get more and more numerous in an industry,the demand curve each sees gets more and more elastic. When thereare a great many sellers in the market, a change of output by anyone of them has an insignificant effect on price. To each firm thedemand curve will look perfectly flat--the firm will seem able tosell whatever amount it wants at a fixed price. In this case, eachfirm is a price taker and sells in a perfectly competitivemarket So the answer is A
21. Because it is the only seller, the monopolist faces adownward-sloping demand curve, the industry demand curve. Thedownward-sloping demand curve means that if the monopolist wants tosell more, it must lower its price. C

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