101 practice questions (13-15, 23-25)-1

101 practice questions (13-15, 23-25)-1 - 1. When price is...

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1. When price is below average variable cost, a firm in a competitive market will a. shut down and incur fixed costs. b. shut down and incur both variable and fixed costs. c. continue to operate as long as average revenue exceeds marginal cost. d. continue to operate as long as average revenue exceeds average fixed cost. 2. Which of the following statements regarding a competitive firm is true ? a. Since 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 being able to sell 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. 3. If ABC Company sells its product in a competitive market, then a. the price of that product depends on the quantity of the product that ABC Company produces and sells since ABC Company’s demand curve is downward sloping. b. ABC Company's total revenue must be proportional to its quantity of output. c. ABC Company's total cost must be proportional to its quantity of output. d. ABC Company's total revenue must be equal to its average revenue. 4. If a competitive firm is (i) selling 1,000 units of its product at a price of $9 per unit and (ii) earning a positive Profit, then a. its total cost is less than $9,000. b. its marginal revenue is less than $9. c. its average revenue is greater than $9. d. the firm cannot be a competitive firm since competitive firms can only earn zero profit.
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101 practice questions (13-15, 23-25)-1 - 1. When price is...

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