quiz7 - QUIZ 7 VERSION 1 1) The conditions for a perfectly...

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QUIZ 7 VERSION 1 1) The conditions for a perfectly competitive market include which one of the following? A) Firms can control prices. B) Firms must employ the newest technologies to remain competitive. C) Profits are zero in the short run. D) New entrants cannot threaten existing firms. E) Firms behave as price takers. 2) Under perfect competition the market demand curve is typically A) a rectangular hyperbola. B) downward sloping. C) infinitely elastic. D) upward sloping. E) identical to the competitive firm's demand curve. 3) A firm's average revenue is defined as A) the change in total revenue resulting from the sale of an additional unit of the product. B) price times quantity of the product sold. C) total revenue divided by the number of units sold. D) the change in price resulting from the sale of an additional unit of the product. E) the total amount received by the seller from the sale of a product. 4) A firm in a perfectly competitive industry will maximize profits by adjusting A) average total cost until it equals price. B) price until marginal revenue equals marginal cost. C) output until marginal revenue equals marginal cost. D) price until average revenue equals average total cost. E) output until average revenue equals short-run average total cost. 5) A price-taking firm in the short run should not produce A) when marginal revenue equals average total cost. B) if average revenue does not at least equal average variable cost. C) when marginal revenue equals marginal cost. D) if it is incurring a loss. E) if average revenue does not at least equal average total cost. 6) Suppose that in a perfectly competitive industry, the market price of the product is $12. Firm A is producing the output level at which average total cost equals marginal cost, both of which are $10. To maximize its profits, firm A should A) increase its advertising. B) reduce output. C) change the price of the product. D) expand output. E) leave output unchanged. 7) If a perfectly competitive market is in short-run equilibrium and each firm has P > SRATC , then A) new firms will enter the market because existing firms are earning economic profits. B) the market supply curve will become less elastic. C) individual firms in the industry will increase their output. D) existing firms will continue to earn economic profits in the long run. E) price will fall in the short run as it is too high and firms are making economic profits.
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Assume the following total cost schedule for a perfectly competitive firm. Output TVC TFC 0 0 100 1 40 100 2 70 100 3 120 100 4 180 100 5 250 100 6 330 100 TABLE 1 8) If the market price were $71, the competitive firm depicted in Table 1 would produce A) 6 units of output. B) would not produce because
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This note was uploaded on 11/08/2011 for the course ECON 1B03 taught by Professor Hannahholmes during the Fall '08 term at McMaster University.

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quiz7 - QUIZ 7 VERSION 1 1) The conditions for a perfectly...

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