C. she incorrectly assumes that the demand curve for X is shifting to the left. D. an increase in price causes a movement along the supply curve, not a shift of the curve. E. she mistakenly assumes that the law of demand does not hold for X.
11/15/2017 chapter 12-Amelia Rousseau 3/38 7. 8. 9. 10. A firm sells 10,000 units of X per month at the market price of $10. There are many other firms in this industry producing the same variety of X. With all firms producing an identical product, each firm is a price taker in this market. Farah Mahmood and her friend Daniela Rodriguez, both students of economics, are debating the impact of a recent increase in the demand for X. Farah feels that the demand faced by each firm will shift to the right. This in turn will increase the market price. Daniela meanwhile is not sure how much the price will rise because she thinks that the immediate response to the higher demand will be a rightward shift in each firm's supply curve. There were fifteen other firms producing 10,000 units of X per month at $10. When the demand increased, the equilibrium price went up to $11 and two new firms entered the market for X. In spite of this new entry, the supply of X by each firm increased to 10,500 units per month. Which of the following is most strongly supported by this information? A. The quantity of X demanded at the higher price is 178,500 units. B. When the price increased to $11, each firm was able to cater to a larger share of the market. C. Consumer surplus in the market for X has increased. D. At $10, the quantity of X supplied in the market was 150,000 units. E. Each firm faces a perfectly elastic demand curve at $11. A buyer or seller that is unable to affect the market price is called A. a price taker. B. an independent producer. C. a monopoly. D. a price maker. Refer to the graph to the right of the demand curve facing a firm in the perfectly competitive market for wheat. The fact that the demand curve is horizontal implies which of the following? A. The market demand for wheat is identical to the demand for wheat faced by an individual firm. B. The firm must lower the price of wheat to increase the quantity demanded. C. The marginal revenue from the 7,500 th bushel is greater than the marginal revenue from the 3,000 th bushel. D. The firm can sell any amount of output as long as it accepts the market price of $7.00. Quantity of wheat (bushels per year) Price of wheat (dollars per bushel) 3,000 $7.00 7,500 Which of the following statements is true when the difference between TR and TC is at its maximum positive value? A. MR = MC B. Slope of TR = Slope of TC C. MR = 0. D. Both A and B are true. D
11/15/2017 chapter 12-Amelia Rousseau 4/38 11. 12. Explain why it is true that for a firm in a perfectly competitive market, the profit-maximizing condition MR = MC is equivalent to the condition P = MC.
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- Fall '06