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Firms in Competitive Markets 3391
36.
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 and
still maintain their sales volume.
c.
Price and average revenue are equal.
d.
Price and marginal revenue are equal.
37.
Which of the following statements regarding a competitive market is not correct?
a.
There are many buyers and many sellers in the market.
b.
Firms can freely enter or exit the market.
c.
Price equals average revenue.
d.
Price exceeds marginal revenue.
38.
One of the defining characteristics of a perfectly competitive market is
a.
a small number of sellers.
b.
a large number of buyers and a small number of sellers.
c.
a similar product.
d.
significant advertising by firms to promote their products.
39.
Which of the following firms is the closest to being a perfectly competitive firm?
a.
a hot dog vendor in New York
b.
Microsoft Corporation
c.
Ford Motor Company
d.
the campus bookstore
40.
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
41.
Firms that operate in perfectly competitive markets try to
a.
maximize revenues.
b.
maximize profits.
c.
equate marginal revenue with average total cost.
d.
All of the above are correct.
42.
A seller in a competitive market can
a.
sell all he wants at the going price, so he has little reason to charge less.
b.
influence the market price by adjusting his output.
c.
influence the profits earned by competing firms by adjusting his output.
d.
All of the above are correct.
43.
A seller in a competitive market
a.
can sell all he wants at the going price, so he has little reason to charge less.
b.
will lose all his customers to other sellers if he raises his price.
c.
considers the market price to be a “take it or leave it” price.
d.
All of the above are correct.
44.
In a perfectly competitive market,
a.
no one seller can influence the price of the product.
b.
price exceeds marginal revenue for each unit sold.
c.
average revenue exceeds marginal revenue for each unit sold.
d.
All of the above are correct.
45.
For a firm in a competitive market, an increase in the quantity produced by the firm will result in
a.
a decrease in the product’s market price.
b.
an increase in the product’s market price.
c.
no change 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.
46.
If Bradley’s Butcher Shop sells its product in a competitive market, then
a.
the price of that product depends on the quantity of the product that Bradley’s Butcher Shop
produces and
sells because the firm’s demand curve is downward sloping.
b.
Bradley’s Butcher Shop's total cost must be a constant multiple of its quantity of output.
c.
Bradley’s Butcher Shop's total revenue must be proportional to its quantity of output.
d.
Bradley’s Butcher Shop's total revenue must be equal to its average revenue.
47.
Changes in the output of a perfectly competitive firm, without any change in the price of the
product, will change the
firm's
a.
total revenue.
b.
marginal revenue.
c.
average revenue.
d.
All of the above are correct.
48.
If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will
a.
more than triple.
b.
less than triple.
c.
exactly triple.
d.
Any of the above may be true depending on the firm’s labor productivity.
49.
When a competitive firm doubles the quantity of output it sells, its
a.
total revenue doubles.
b.
average revenue doubles.
c.
marginal revenue doubles.
d.
profits must increase.
50.
If a firm in a competitive market doubles its number of units sold, total revenue for the firm will
a.
more than double.
b.
double.
c.
increase but by less than double.
d.
may increase or decrease depending on the price elasticity of demand.
3398 Firms in Competitive Markets
Table 14-1
Quantity
Price
0
$5
1
$5
2
$5
3
$5
4
$5
5
$5
6
$5
7
$5
8
$5
9
$5
51.
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
a.
monopoly.
b.
concentrated market.
c.
competitive market.
d.
strategic market.
52.
Refer to Table 14-1. Over which range of output is average revenue equal to price?
a.
1 to 5 units
b.
3 to 7 units
c.
5 to 9 units
d.
Average revenue is equal to price over the entire range of output.
53.
Refer to Table 14-1. Over what range of output is marginal revenue declining?
a.
1 to 6 units
b.
3 to 7 units
c.
7 to 9 units
d.
Marginal revenue is constant over the entire range of output.
54.
Refer to Table 14-1. If the firm doubles its output from 3 to 6 units, total revenue will
a.
increase by less than $15.
b.
increase by exactly $15.
c.
increase by more than $15.
d.
Total revenue cannot be determined from the information provided.
3400 Firms in Competitive Markets
Table 14-2
The table represents a demand curve faced by a firm in a competitive market.
Price
Quantity
$3
0
$3
1
$3
2
$3
3
$3
4
$3
5
55.
Refer to Table 14-2. This firm maximizes total revenue by producing
a.
1 units.
b.
3 units.
c.
5 units.
d.
as many units as possible.
56.
Refer to Table 14-2. For this firm, the average revenue from selling 3 units is
a. $12.
b.
$4.
c.
$3.
d.
$1.
57.
Refer to Table 14-2. For this firm, the marginal revenue from selling the 3rd unit is
a. $12.
b.
$4.
c.
$3.
d.
$1.
Table 14-3
The table represents a demand curve faced by a firm in a competitive market.
Quantity
Total Revenue
0
$0
1
$13
2
$26
3
$39
4
$52
58.
Refer to Table 14-3. For this firm, the price is
a. $39.
b.
$26.
c.
$13.
d.
$0.
59.
Refer to Table 14-3. For this firm, the marginal revenue is
a. $39.
b.
$26.
c.
$13.
d.
$0.
60.
Refer to Table 14-3. For this firm, the average revenue is
a. $39.
b.
$26.
c.
$13.
d.
$0.
Firms in Competitive Markets 3403
Table 14-4
The table represents a demand curve faced by a firm in a competitive market.
Quantity
Total Revenue
0
$0
1
$5
2
$10
3
$15
4
$20
61.
Refer to Table 14-4. For this firm, the price is
a. $0.
b.
$5.
c.
$10.
d.
$15.
62.
Refer to Table 14-4. For this firm, the marginal revenue is
a. $0.
b.
$5.
c.
$10.
d.
$15.
63.
Refer to Table 14-4. For this firm, the average revenue is
a. $0.
b.
$5.
c.
$10.
d.
$15.
Table 14-5
The table represents a demand curve faced by a firm in a competitive market.
Quantity
Total Revenue
12
$132
13
$143
14
$154
15
$165
16
$176
64.
Refer to Table 14-5. For this firm, the price of the product is
a. $9.
b.
$11.
c.
$13.
d.
$15.
65.
Refer to Table 14-5. For this firm, the average revenue when 14 units are produced and sold is
a. $9.
b.
$11.
c.
$13.
d.
$15.
66.
Refer to Table 14-5. For this firm, the marginal revenue of the 12th unit is
a. $9.
b. $10.
c. $11
d. The marginal revenue cannot be determined without knowing the total revenue when 11 units
are sold.
3406 Firms in Competitive Markets
Table 14-6
The following table presents cost and revenue information for a firm operating in a competitive
industry.
COSTS
REVENUES
Quantity
Produced
Total
Cost
Marginal
Cost
Quantity
Demanded
Price
Total
Revenue
Marginal
Revenue
0
$100
--
0
$120
--
1
$150
1
$120
2
$202
2
$120
3
$257
3
$120
4
$317
4
$120
5
$385
5
$120
6
$465
6
$120
7
$562
7
$120
8
$682
8
$120
67.
Refer to Table 14-6. What is the total revenue from selling 7 units?
a. $120
b. $490
c. $562
d. $840
68.
Refer to Table 14-6. What is the total revenue from selling 4 units?
a. $120
b. $257
c. $317
d. $480
69.
Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit?
a. $55
b. $120
c. $137
d. $140
70.
Refer to Table 14-6. What is the average revenue when 4 units are sold?
a. $60
b. $120
c. $125
d. $197
71.
Which of the following statements is correct?
a.
For all firms, marginal revenue equals the price of the good.
b.
Only for competitive firms does average revenue equal the price of the good.
c.
Marginal revenue can be calculated as total revenue divided by the quantity sold.
d.
Only for competitive firms does average revenue equal marginal revenue.
72.
Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal
revenue of $10 for the last
unit produced and sold. What is the average revenue per unit, and how
many units were sold?
a.
$5 and 50 units
b.
$5 and 100 units
c.
$10 and 50 units
d.
$10 and 100 units
73.
When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80.
When the same
firm produces and sells 200 units of output, what is average revenue?
a.
$40
b.
$80
c.
$160
d. This cannot be determined from the given information.
74.
Which of the following statements regarding a competitive firm is correct?
a.
Because demand is downward sloping, if a firm increases its level of output, the firm will have
to charge a
lower price to sell the additional output.
b.
If a firm raises its price, the firm may be able to increase its total revenue even though it will
sell fewer units.
c.
By lowering its price below the market price, the firm will benefit from selling more units at the
lower price
than it could have sold by charging the market price.
d.
For all firms, average revenue equals the price of the good.
75.
Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800
in total revenue from
the sales. If the firm increases its output to 200 units, the average revenue of
the 200th unit will be
a.
less than $12.
b.
more than $12.
c.
$12.
d. Any of the above may be correct depending on the price elasticity of demand for the product.
76.
Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in
total revenue from
the sales. If the firm increases its output to 200 units, total revenue will be
a. $2,000.
b. $2,400.
c. $4,200.
d. We do not have enough information to answer the question.
