CHAPTER 14 - ECO111

When a firm has little ability to influence market prices it is said to be in a

• a.

  competitive market.

• b.

  strategic market.

• c.

  thin market.

• d.

  power market.

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

• a.

  have a negligible impact on the market price.

• b.

  have little effect on market equilibrium quantity but will affect market equilibrium price.

• c.

  affect marginal revenue and average revenue but not price.

• d.

  adversely affect the profitability of more than one firm in the market.

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

• a.

  Firms are price takers.

• b.

  Firms can freely enter the market.

• c.

  Many firms have market power.

• d.

  Goods offered for sale are largely the same.

Free entry means that

• a.

  the government pays any entry costs for individual firms.

  y.

• b.

  no legal barriers prevent a firm from entering an industr

• c.

  a firm's marginal cost is zero.

• d.

  a firm has no fixed costs in the short run.

In a competitive market, no single producer can influence the market price because

• a.

  many other sellers are offering a product that is essentially identical.

• b.

  consumers have more influence over the market price than producers do.

• c.

  government intervention prevents firms from influencing price.

• d.

  producers agree not to change the price.

For a competitive firm,

• a.

  total revenue equals average revenue.

• b.

  total revenue equals marginal revenue.

• c.

  total cost equals marginal revenue.

• d.

  average revenue equals marginal revenue.

Suppose that a firm operating in perfectly competitive market sells 100 units of output.  Its total revenues from the sale are $500.  Which of the following statements is correct?

i)

Marginal revenue equals $5.

ii)

Average revenue equals $5.

iii)

Price equals $5.

• a.

  i) only

• b.

  iii) only

• c.

  i) and ii) only

• d.

  i), ii), and iii)

If ABC Company sells its product in a competitive market, then

• a.

  the price of that product depends on the quantity of the product that ABC Company produces and sells since ABC Company’s demand curve is downward sloping.

• b.

  ABC Company's total revenue must be proportional to its quantity of output.

• c.

  ABC Company's total cost must be a multiple of its quantity of output.

• d.

  ABC Company's total revenue must be equal to its average revenue.

When a competitive firm doubles the amount of output it sells, its

• a.

  total revenue doubles.

• b.

  average revenue doubles.

• c.

  marginal revenue doubles.

• d.

  profits must increase.

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue

• a.

  increases if MR < ATC and decreases if MR > ATC.

• b.

  does not change.

• c.

  increases.

• d.

  decreases.