Test 4 Chapter 10 and 11 - Assignment Essays

question

Which of the following industries most closely approximates competition?

answer

Agriculture

question

The MR=MC rule applies

answer

in both the short run and the long run

question

In which of the following industry structures is the entry of new firms the most difficult

answer

Pure monopoly

question

Suppose that Betty's Beads is a typical firm operating in a perfectly competitive market. Currently Betty's MR=$15, MC=$12, ATC=$10, AVC=$8. Based on this information, we can conclude that in the long run,

answer

Potential new firms will be encouraged by Betty's success to enter the market

question

The MR=MC rule can be restated for a purely competitive seller as P=MC because

answer

Each additional unit of output adds exactly its price to total revenue

question

If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing

answer

Price and average variable cost

question

Which of the following statements is correct?

answer

Economic profits induce firms to enter an industry; losses encourage firms to leave

question

The principal that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the:

answer

Profit-maximizing rule

question

Which of the following distinguishes the short run from the long run in pure competition?

answer

Firms can enter and exit the market in the long run but not in the short run

question

If a purely competitive firm is currently facing a situation where the price of its production is lower than the average variable cost, but it believes that the market demand for its product will increase soon, then

answer

The firm will shut down in the short run, but stay in the industry in the long run if it expects the product price to rise high enough soon

question

Marginal revenue is the:

answer

Change in total revenue associated with the sale of one more unit of output

question

A purely competitive seller is:

answer

A "price taker"

question

If at the MC=MR output, AVC exceeds price:

answer

Some firms should shut down in the short run

question

Which of the following will not hold true for a competitive firm in the long-run equilibrium

answer

P equals AFC

question

DASH Airlines is considering the addition of a flight from Red Cloud to David City. The total cost of the flight would be $1,100, of which $800 are fixed costs already incurred. Expected revenues from the flight are $600. DASH should

answer

Add this flight because marginal revenue exceeds marginal costs and total revenue exceeds total variable cost

question

Which of the following is not a characteristic of pure competition?

answer

Pricing strategies by firms

question

In pure competition, in the long-run, if the market price of the product is higher than minimum average cost of the firms, then

answer

Other firms will enter the industry and the industry supply will increase

question

The profit-maximzing output for this firm is (See graph on page 4)

answer

320 Units

question

Which of the following is correct? (See graph on page 4)

answer

Any level of output between 100 and 400 units will yield an economic profit

question

The equilibrium price in this purely competitive market is (check page 5 for chart):

answer

question

At the equilibrium price, each of the 100 firms in this industry will produce (check 5 page for chart):

answer

6,000 units of output

question

For each of the 100 firms in this industry, marginal revenue and total revenue will be (check page 5 for chart):

answer

$3 and $18,000, respectively

question

If the market price for the firm's product is $12 the competitive firm should produce (check page 6 for chart)

answer

Zero units at a loss of $100

question

If the market price for the firm's product is $32, the competitive firm will produce (check page 6 for chart)

answer

8 units at an economic profit of $16

question

If the market price for the firm's product is $28, the competitive firm will (check page 6 for chart)

answer

Produce 7 units at a loss of $14.00

1 of 25

question

Which of the following industries most closely approximates competition?

answer

Agriculture

question

The MR=MC rule applies

answer

in both the short run and the long run

question

In which of the following industry structures is the entry of new firms the most difficult

answer

Pure monopoly

question

answer

Potential new firms will be encouraged by Betty's success to enter the market

question

The MR=MC rule can be restated for a purely competitive seller as P=MC because

answer

Each additional unit of output adds exactly its price to total revenue

question

If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing

answer

Price and average variable cost

question

Which of the following statements is correct?

answer

Economic profits induce firms to enter an industry; losses encourage firms to leave

question

The principal that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the:

answer

Profit-maximizing rule

question

Which of the following distinguishes the short run from the long run in pure competition?

answer

Firms can enter and exit the market in the long run but not in the short run

question

answer

The firm will shut down in the short run, but stay in the industry in the long run if it expects the product price to rise high enough soon

question

Marginal revenue is the:

answer

Change in total revenue associated with the sale of one more unit of output

question

A purely competitive seller is:

answer

A "price taker"

question

If at the MC=MR output, AVC exceeds price:

answer

Some firms should shut down in the short run

question

Which of the following will not hold true for a competitive firm in the long-run equilibrium

answer

P equals AFC

question

answer

Add this flight because marginal revenue exceeds marginal costs and total revenue exceeds total variable cost

question

Which of the following is not a characteristic of pure competition?

answer

Pricing strategies by firms

question

In pure competition, in the long-run, if the market price of the product is higher than minimum average cost of the firms, then

answer

Other firms will enter the industry and the industry supply will increase

question

The profit-maximzing output for this firm is (See graph on page 4)

answer

320 Units

question

Which of the following is correct? (See graph on page 4)

answer

Any level of output between 100 and 400 units will yield an economic profit

question

The equilibrium price in this purely competitive market is (check page 5 for chart):

answer

question

At the equilibrium price, each of the 100 firms in this industry will produce (check 5 page for chart):

answer

6,000 units of output

question

For each of the 100 firms in this industry, marginal revenue and total revenue will be (check page 5 for chart):

answer

$3 and $18,000, respectively

question

If the market price for the firm's product is $12 the competitive firm should produce (check page 6 for chart)

answer

Zero units at a loss of $100

question

If the market price for the firm's product is $32, the competitive firm will produce (check page 6 for chart)

answer

8 units at an economic profit of $16

question

If the market price for the firm's product is $28, the competitive firm will (check page 6 for chart)

answer

Produce 7 units at a loss of $14.00

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