Review Chapter 14

A firm has market power if it can

• maximize profits

• minimize costs

• influence the market price of the good it sells

• hire as many workers as it needs at the prevailing wage rate

For any competitive market, the supply curve is closely related to the

• preferences of consumers who purchase products in that market

• income tax rates of consumers in that market

• firms’ costs of production in that market

• interest rates on government bonds

Which of the following is not a characteristic of a competitive market?

• Buyers and sellers are price takers

• Each firm sells a virtually identical product

• Free entry is limited

• Each firm chooses an output level that maximizes profits

Suppose that a firm operating in perfectly competitive market sells 400 units of output at a price of $4 each.  Which of the following statements is correct?

i) Marginal revenue equals $4.

ii) Average revenue equals $100.

iii) Total revenue equals $1,600.

 

• i) only

• iii) only

• i) and iii) only

• i), ii), and iii)

Refer to Table 14-3. What is the total revenue from selling 7 units?

• $120

• $490

• $562

• $840

Refer to Table 14-3. What is the marginal revenue from selling the 3rd unit?

• $55

• $120

• $137

• $140

Refer to Table 14-3. What is the average revenue when 4 units are sold?

• $60

• $120

• $125

• $197

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then

• a one-unit increase in output will increase the firm's profit

• a one-unit decrease in output will increase the firm's profit

• total revenue exceeds total cost

• total cost exceeds total revenue

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

• total revenue is equal to variable cost

• total revenue is equal to fixed cost

• total revenue is equal to total cost

• profit is maximized

When profit-maximizing firms in competitive markets are earning profits,

• market demand must exceed market supply at the market equilibrium price

• market supply must exceed market demand at the market equilibrium price

• new firms will enter the market

• the most inefficient firms will be encouraged to leave the market