practice-w8d1.pdfpractice-w8d2.pdfpractice-w8d34.pdf1Practice Questions Week 8 Day 1Multiple ChoiceIdentify the choice that best completes the statement or answers the question. 1. The characteristics of a market that influence the behavior of market participants is (are) known asa. perfect competitionb. market powerc. barriers to entryd. market structuree. monopolistic competition 2. All of the following help define market structure, except one. Which is the exception?a. number of sellersb. barriers to entryc. barriers to exitd. standardization of producte. how firms are organized (i.e., as proprietorships, partnerships, or corporations) 3. All of the following are characteristics of a perfectly competitive market, except one. Which is the exception?a. a large number of sellersb. a standardized productc. no barriers to entryd. sellers can easily exit the markete. an intensive rivalry among the sellers 4. The number of sellers in a market is considered to be large whena. the total exceeds 100b. no single buyer can affect the price through his or her demand for the productc. they cannot be easily countedd. no single seller can affect the price by changing its level of outpute. no seller controls more than 20 percent of the total market supply 5. Firms in a perfectly competitive market cannot influencea. the quantity of the good that they produceb. how much labor to use in productionc. how much capital to employ in productiond. the level of advertising that they usee. the price of the product they sell 6. A perfectly competitive firma. can increase total revenue by raising its priceb. can sell more goods by lowering its pricec. can sell more goods by raising its priced. cannot increase sales or total revenue by changing its pricee. typically tries to offer lower prices than rival firms 7. In a perfectly competitive market, thea. market demand curve is horizontalb. short-run market supply curve is horizontalc. short-run market demand curve slopes upwardd. short-run market supply curve slopes downwarde. market demand curve slopes downward2 8. Ken's Lawn Service Co. operates in a perfectly competitive market. Why doesn't Ken try to increase his revenue by lowering his price below the prevailing market price?a. He can sell as much as he wishes to at the market price.b. He faces a perfectly inelastic demand curve, so a price change will have no impact on revenue.c. Government regulations prevent it.d. If he lowers his price, he will lose all his sales since he faces a horizontal demand curve.e. Agreements with other lawn service companies require him to sell at the market price. 9. If a firm is a price taker, then the demand curve it faces is perfectlya. elastic and above its marginal revenue curveb. elastic and the same as its marginal revenue curvec. elastic and below its marginal revenue curved. inelastic and above its marginal revenue curvee. inelastic and the same as its marginal revenue curve 10. For a perfectly competitive firm,a. marginal revenue equals total revenueb. total revenue always exceeds total costc. price always exceeds average total costd. marginal cost equals average coste. the marginal revenue curve and the demand curve are the same 11. Under perfect competition, the demand curve facing a firm and the firm's marginal revenue curve area. vertical at the firm's chosen output levelb. both vertical, but the demand curve is further to the right than the marginal revenue curvec. both vertical, but the marginal revenue curve is further to the right than the demand curved. both horizontal at the level of the market pricee. both horizontal, but the demand curve is above the marginal revenue curve3 12. Figure 8-1 shows the marginal cost and average total cost curves for a perfectly competitive firm. If the market price is $10, thena. the firm earns $10 profit on each unit soldb. the firm earns $8 profit on each unit soldc. marginal revenue equals $10d. the firm is losing money in the short rune. marginal cost always equals marginal revenue 13. A firm can maximize profits in the short run by producing output wherea. MC = MR and the MC curve crosses the MR curve from above (as long as P>AVC)b. TC = TRc. MR - MC = TR - TCd. MC = MR and the MC curve crosses the MR curve from below (as long as P>AVC)e. TR = TC and the TC curve crosses the TR curve from below4Figure 8-2OutputTotalRevenueTotalCost1 $ 20 $ 402 $ 40 $ 603 $ 60 $ 704 $ 80 $ 805 $100 $ 856 $120 $110 14. Figure 8-2 shows the total revenue and total cost data for a perfectly competitive firm. At what output level will the firm break even?a. 1b. 2c. 3d. 4e. 5 15. In short-run equilibrium, the perfectly competitive firm of Figure 8-3 will producea. zero units of outputb. 200 units of outputc. 275 units of outputd. 475 units of outpute. 575 units of output5 16. In short-run equilibrium, the perfectly competitive firm of Figure 8-3 will chargea. $5b. $7c. $8d. $10e. more than $10 17. If a perfectly competitive firm like the one depicted in Figure 8-3 produces 575 unitsa. its profit will be larger than if it produces only 475b. its profit will be exactly the same as if it produces 475c. its profit will be smaller than if it produces only 475d. it will be forced to shutdowne. its profit will be smaller than if it produced 475 but it will still make a profit.Figure 8-4Output MC1 $ 92 $ 63 $ 114 $ 155 $ 206 $ 28 18. Figure 8-4 shows marginal cost for a firm in a perfectly competitive market. Suppose that the market price is $20. What is the profit-maximizing level of output?a. 0b. 1c. 4d. 5e. 6 19. A perfectly competitive firm produces in a market where the prevailing price is $25. At its current output level of 10,000 units, its average total cost equals $15. The firm is earninga. a total money profit of $100,000b. a total economic profit of $100,000c. a total money profit of $250,000d. a total economic profit of $250,000e. both a total money profit and a total economic profit of $100,000 20. If P > ATC for a perfectly competitive firm, thena. the firm could increase profit by lowering its priceb. the firm could increase profit by raising its pricec. the firm is producing too much outputd. the firm is making a profite. profits are zero in the short runID: A1Practice Questions Week 8 Day 1Answer SectionMULTIPLE CHOICE 1. D 2. E 3. E 4. D 5. E 6. D 7. E 8. A 9. B 10. E 11. D 12. C 13. D 14. D 15. D 16. D 17. C 18. D 19. B 20. D1Practice Questions Week 8 Day 2Multiple ChoiceIdentify
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