Name: ________________________ Class: ___________________ Date: __________ ID: A Exam 3 Study Guide Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. In a competitive market, the actions of any single buyer or seller will a. have a negligible impact on the market price. b. have little effect on overall production but will ultimately change final product price. c. cause a noticeable change in overall production and a change in final product price. d. adversely affect the profitability of more than one firm in the market. Table 14-1 Quantity Price 1 13 2 13 3 13 4 13 5 13 6 13 7 13 8 13 9 13 ____ 2. Refer to Table 14-1. The price and quantity relationship in the table is most likely that faced by a firm in a a. monopoly. b. concentrated market. c. competitive market. d. strategic market. ____ 3. When buyers in a competitive market take the selling price as given, they are said to be a. market entrants. b. monopolists. c. free riders. d. price takers. ____ 4. Of the following characteristics of competitive markets, which are necessary for firms to be price takers? (i) There are many sellers. (ii) Firms can freely enter or exit the market. (iii) Goods offered for sale are largely the same. a. (i) and (ii) only b. (i) and (iii) only c. (ii) only d. All are necessary. 1
ID: A ____ 5. Suppose a firm in a competitive market received $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? a. $5and50 b. $5 and 100 c. $10 and 50 d. $10 and 100 ____ 6. Total profit for a firm is calculated as a. (marginal revenue) minus (average cost). b. (average revenue) minus (average cost). c. (marginal revenue) minus (marginal cost). d. (price minus average cost) times (quantity of output). ____ 7. 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. Figure 14-1 The graph below depicts the cost structure for a firm in a competitive market. ____ 8. Refer to Figure 14-1. When price falls from P3 to P1, the firm finds that a. fixed cost is higher at a production level of Q1 than it is at Q3. b. it should produce Q1 units of output. c. it should produce Q3 units of output. d. it should shut down immediately. ____ 9. When price is greater than marginal cost for a firm in a competitive market, a. marginal cost must be falling. b. the firm must be minimizing its losses. c. there are opportunities to increase profit by increasing production. d. the firm should decrease output to maximize profit.
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