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

c. no change in the product’s market price.

a. a decrease in the product’s market price.

b. an increase in the product’s market price.

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

141.) Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit soldby the typical firm in this market?

d. The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm.

142.) Perfectly competitive markets are characterized by

b. conditions that allow firms to determine how much they wish to produce, without influencing the marketprice.

a. conditions that discourage new firms from entering the market.

c. conditions that presume that each firm produces a unique product.

d. conditions that force firms to advertise their product heavily, to compete with other producers.

143.) Refer to Table 14-16. For this firm, when output is equal to 12 units, average revenue is

c. always greater than marginal revenue.

144.) Consider a firm that operates in a perfectly competitive market. Currently the firm is producing 50 units of outputand at that output level, marginal revenue is $6. Suppose that the firm increases output by 50%. Total revenue will be

d. the same since price will fall by 50%.

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

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

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

c. total revenue exceeds total cost.

d. total cost exceeds total revenue.

147.) At the profit-maximizing level of output,

c. marginal revenue equals marginal cost.

a. marginal revenue equals average total cost.

b. marginal revenue equals average variable cost.

d. average revenue equals average total cost.

148.) Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generallyconsidered to be competitive, Mr. McDonald maximizes his profit by choosing

c. the quantity at which market price is equal to Mr. McDonald's marginal cost of production.

a. to produce the quantity at which average variable cost is minimized.

b. to produce the quantity at which average fixed cost is minimized.

d. the quantity at which market price exceeds Mr. McDonald's marginal cost of production by the greatest amount.

149.) Robin owns a horse stables and riding academy and gives riding lessons for children at “pony camp.” Her businessoperates in a competitive industry. Robin gives riding lessons to 20 children per month. Her monthly total revenue is$4,000. The marginal cost of pony camp is $200 per child. In order to maximize profits, Robin should

c. continue to give riding lessons to 20 children per month.

a. give riding lessons to more than 20 children per month.

b. give riding lessons to fewer than 20 children per month.

d. We do not have enough information to answer the question.

150.) Refer to Table 14-7. If the firm is currently producing 14 units, what would you advise the owners?

c. continue to operate at 14 units

a. decrease quantity to 13 units

b. increase quantity to 15 units

d. increase quantity to 16 units

152.) Refer to Table 14-9. If the firm’s marginal cost is $5, it should

b. increase production to maximize profit.

a. reduce fixed costs by lowering production.

c. decrease production to maximize profit.

d. maintain its current level of production to maximize profit.

156.) Which of the following statements best expresses a firm’s profit-maximizing decision rule?

a. If marginal revenue is greater than marginal cost, the firm should increase its output.

b. If marginal revenue is less than marginal cost, the firm should shut down in the short run.

c. If marginal revenue equals marginal cost, the firm should produce exactly one more unit of output.

157.) A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

d. price is above or below marginal cost.

a. average revenue is greater than average total cost.

b. average revenue is equal to marginal cost.

c. marginal cost is greater than average total cost.

158.) Susan quit her job as a teacher, which paid her $36,000 per year, in order to start her own catering business. Shespent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She alsoborrowed $12,000 from her bank at 10 percent interest, which she also spent on equipment. For the past several monthsshe has spent $1,000 per month on ingredients and other variable costs. Also for the past several months she has earned$4,500 in monthly revenue. In the short run, Susan should

c. continue to operate her business, but in the long run she will probably face competition from newly enteringfirms.

a. shut down her business, and in the long run she should exit the industry.

b. continue to operate her business, but in the long run she should exit the industry.

d. continue to operate her business, and she is also in long-run equilibrium.

163.) In a perfectly competitive market, the market supply curve is

b. the horizontal sum of all the individual firms' supply curves.

a. the marginal cost curve above average total cost for a representative firm.

c. the vertical sum of all the individual firms’ supply curves.

164.) In the short run for a particular market, there are 300 firms. Each firm has a marginal cost of $30 when it produces200 units of output. $30 is above every firm's average variable cost. One point on the market supply curve is

d. quantity = 60,000; price = $30.

a. quantity = 300; price = $30.

b. quantity = 600,000; price = $90,000.

c. quantity = 100,000; price = $30.

165.) Refer to Figure 14-12. If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in acompetitive market, the figure in panel (b) most likely reflects

b. perfectly elastic long-run market supply.

a. perfectly inelastic long-run market supply.

c. the entry of firms into the industry when some resources used in production are available only in limitedquantities.

d. the fact that zero profits cannot be sustained in the long run.

166.) Entry into a market by new firms will increase the

d. marginal cost of producing the good.

167.) Suppose that the organic-produce industry is composed of a large number of small firms. In recent years, these firmshave suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will

c. cause the market supply to decline and the price of organic produce to rise.

a. shift the demand curve outward so that price will rise to the level of production cost.

b. cause the remaining firms to collude so that they can produce more efficiently.

d. cause firms in the organic-produce industry to suffer long-run economic losses.

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

a. total revenue is equal to variable cost.

b. total revenue is equal to fixed cost.

c. total revenue is equal to total cost.

169.) Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in makingwedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost ofmaking a wedding cake is $200. In order to maximize profits, Laura should

a. make more than 20 wedding cakes per month.

b. make fewer than 20 wedding cakes per month.

c. continue to make 20 wedding cakes per month.

d. We do not have enough information to answer the question.

170.) Refer to Table 14-8. In order to maximize profits, the firm will produce

c. 5 units of output because marginal revenue equals marginal cost.

a. 1 unit of output because marginal cost is minimized.

b. 4 units of output because marginal revenue exceeds marginal cost.

d. 7 units of output because total revenue is maximized.

174.) Refer to Figure 14-2. If the market price is Pa, in the short run the firm will earn

b. negative economic profits but will try to remain open.

c. negative economic profits and will shut down.

microeconomics midterm exam study guide pt.2

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

125.)
A firm that has little ability to influence market prices operates in a

a. competitive market.

b. strategic market.

c. thin market.

d. power market.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

126.)
Free entry means that

a. the government pays any entry costs for individual firms.

b. government-funded research lowers the costs of patents and other barriers to entry.

c. a firm's marginal cost is zero.

d. no legal barriers prevent a firm from entering an industry.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

127.) When buyers in a competitive market take the selling price as given, they are said to be

a. market entrants.

b. monopolists.

c. free riders.

d. price takers.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

128.)
Why does a firm in a competitive industry charge the market price?

a. If a firm charges less than the market price, it loses potential revenue.

b. If a firm charges more than the market price, it loses all its market power.

c. The firm can only sell limited number of units of output, so it wants to sell at the market price in order tolower its costs.

d. All of the above are correct.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

129.) Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to

a. increase.

b. remain unchanged.

c. decrease by less than 20 percent.

d. decrease by more than 20 percent.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

130.) Which of the following statements regarding a competitive market is not correct?

a. There are many buyers and many sellers in the market.

b. Because of firm location or product differences, some firms can charge a higher price than other firms andstill maintain their sales volume.

c. Price and average revenue are equal.

d. Price and marginal revenue are equal.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

131.) Which of the following firms is the closest to being a perfectly competitive firm?

a. the New York Yankees

b. Apple, Inc.

c. DeBeers diamond wholesalers

d. a wheat farmer in Kansas

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microeconomics midterm exam study guide pt.2

125.)
A firm that has little ability to influence market prices operates in a

126.)
Free entry means that

127.) When buyers in a competitive market take the selling price as given, they are said to be

128.)
Why does a firm in a competitive industry charge the market price?

129.) Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to

130.) Which of the following statements regarding a competitive market is not correct?

131.) Which of the following firms is the closest to being a perfectly competitive firm?

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

133.) Refer to Table 14-1.
The price and quantity relationship in the table is most likely a demand curve faced by a firm in a

134.) Refer to Table 14-2.
This firm maximizes total revenue by producing

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microeconomics midterm exam study guide pt.2

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

126.) Free entry means that

127.) When buyers in a competitive market take the selling price as given, they are said to be

128.) Why does a firm in a competitive industry charge the market price?

129.) Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to

130.) Which of the following statements regarding a competitive market is not correct?

131.) Which of the following firms is the closest to being a perfectly competitive firm?

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

133.) Refer to Table 14-1. The price and quantity relationship in the table is most likely a demand curve faced by a firm in a

134.) Refer to Table 14-2. This firm maximizes total revenue by producing

Access all questions and much more by creating a free account

Similar Resources on Wayground

Popular Resources on Wayground

Discover more resources for Other

125.)
A firm that has little ability to influence market prices operates in a

126.)
Free entry means that

128.)
Why does a firm in a competitive industry charge the market price?

133.) Refer to Table 14-1.
The price and quantity relationship in the table is most likely a demand curve faced by a firm in a

134.) Refer to Table 14-2.
This firm maximizes total revenue by producing