DEC5114 Tutorial 09 (Chapter 14.1)

A restaurant that has market power can

• minimize costs more efficiently than its competitors.

• influence the market price for the meals it sells.

• reduce its marketing budget more than its competitors.

• ignore profit-maximizing strategies when setting the price for its meals.

Who is a price taker in a competitive market?

• buyers only

• sellers only

• both buyers and sellers

• neither buyers nor sellers

A firm that has little ability to influence market prices operates in a

• competitive market.

• strategic market.

• thin market.

• power market.

In a competitive market, the actions of any single buyer or seller will

• discourage entry by competitors.

• influence the profits of other firms in the market.

• have a negligible impact on the market price.

• Both a and b are correct.

Which of the following statements best reflects a price-taking firm?

• If the firm were to charge more than the going price, it would sell none of its goods.

• The firm has an incentive to charge less than the market price to earn higher revenue.

• The firm can sell only a limited amount of output at the market price before the market price will fall.

• Price-taking firms maximize profits by charging a price above marginal cost.

For a firm in a competitive market, an increase in the quantity produced by the firm will result in

• a decrease in the product’s market price.

• an increase in the product’s market price.

• no change in the product’s market price.

• either an increase or no change in the product’s market price depending on the number of firms in the market.

Refer to Table 9-1. The price and quantity relationship in the table is most likely a demand curve faced by a firm in

• monopoly.

• concentrated market.

• competitive market.

• strategic market.

Refer to Table 9-1. Over which range of output is average revenue equal to price?

• 1 to 5 units

• 3 to 7 units

• 5 to 9 units

• Average revenue is equal to price over the entire range of output.

If a profit-maximising firm in a perfectly competitive industry is producing at a quantity with a marginal revenue of RM28, what is the good’s selling price?

• RM56.

• More than RM28.

• Less than RM28.

• RM28

Firms in perfectly competitive market can earn economic profit

• Only in the long run.

• In both short run and long run.

• Only in the short run.

• Only if the firm is efficient.