micro10q

micro10q - Micro Chapter 10 Study Guide Questions Multiple...

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Micro Chapter 10 Study Guide Questions Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. For the competitive price searcher, a. price will exceed marginal cost at the profit-maximizing level of output. b. price will equal average total cost in the long run. c. economic profit will be driven to zero in the long run by the entry and exit of firms. d. all of the above are correct. ____ 2. Only undertaking an activity when it adds more to revenue than to cost is the decision rule a profit- maximizing firm will use when deciding upon a. the level of output to produce. b. the amount of advertising to undertake. c. the level of product quality (for example, how many years it is designed to last). d. all of the above. ____ 3. The marginal revenue curve lies below the demand curve for a competitive price searcher because a. in order for a competitive price searcher to sell an extra unit, it must cut the price on all units. The lowered price offsets the additional revenue from the extra unit sold, so the marginal revenue is lower than the price. b. in order for a competitive price searcher to sell an extra unit, it must increase its advertising. The cost of advertising offsets the extra revenue generated by the extra sales, so the marginal revenue is lower than the price. c. whenever a competitive price searcher discovers a profit-maximizing pricing policy, the economic profit it generates attracts new competitors into the industry, driving marginal revenue below the price. d. none of the above. The marginal revenue curve is the demand curve for a competitive price searcher. ____ 4. A competitive price-searcher market is characterized by firms a. being able to choose their price and no barriers preventing firms from entering or leaving the market. b. being able to choose their price and high barriers preventing firms from entering or
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micro10q - Micro Chapter 10 Study Guide Questions Multiple...

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