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Chapter 14(sample exercise)

# Chapter 14(sample exercise) - Chapter 14Firms in...

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Chapter 14—Firms in Competitive Markets Use the information in the table below to answer the following questions. Table 14-1 Quantity Price 1 13 2 13 3 13 4 13 5 13 6 13 7 13 8 13 9 13 1. Refer to Table 14-1 . Over which range of output is average revenue equal to price? a. 1 to 5 b. 3 to 7 c. 5 to 9 d. Average revenue is equal to price over the whole range of output. 2. Refer to Table 14-1 . If the firm doubles its output from 3 to 6 units, total revenue will 3. If a firm in a perfectly competitive market triples the number of units of output sold, then total revenue will 4. Changes in the output of a perfectly competitive firm, without any change in the price of the product, will change the firm's Scenario 14-1 As part of an estate settlement Mary received \$1 million. She decided to use the money to purchase a small business in Anywhere, USA. If Mary would have invested the \$1 million in a risk-free bond fund she could have made \$100,000 each year. She also quit her job with Lucky.Com Inc. to devote all of her time to her new business; her salary at Lucky.Com Inc. was \$75,000 per year. 5. Refer to Scenario 14-1 . What are Mary's opportunity costs of operating her new business? a. \$25,000 b. \$75,000 c. \$100,000 d. \$175,000

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6. Refer to Scenario 14-1 . How large would Mary's accounting profits need to be to allow her to attain zero economic profit? Table 14-2 Quantity Total Revenue Total Cost 0 \$0 \$10 1 9 14 2 18 19 3 27 25 4 36 32 5 45 40 6 54 49 7 63 59 8 72 70 9 81 82 7. Refer to Table 14-2 . At which quantity of output is marginal revenue equal to marginal cost? 8. Refer to Table 14-2 . If the firm finds that its marginal cost is \$5, it should 9. As a general rule, profit-maximizing producers in a competitive market produce output at a point where a. marginal cost is increasing. b. marginal cost is decreasing. c. marginal revenue is increasing. d. price is less than marginal revenue. The graph below depicts the cost structure for a firm in a competitive market. Use the graph to answer the following questions. Figure 14-1 Note: On the above diagram, change the vertical-axis labels from MC 1 to P 1 , MC 2 to P 2 , etc.

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Chapter 14(sample exercise) - Chapter 14Firms in...

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