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ECON-1010-D1/D2-Introduction to Microeconomics

ECON-1010-D1/D2-Introduction to Microeconomics

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Suppose that the market in which bakeries compete is a perfectly competitive market. Which one of the following reasons does not explain why it is difficult for a bakery to make an economic profit in the long run?

All bakeries are price takers.

All bakeries produce identical goods.

All bakeries are able to set the market price.

The threat of entry by potential bakeries.

The demand facing each bakery is perfectly elastic.

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In a perfectly competitive industry of 100 firms, the demand curve facing the individual firm

is identical to the industry demand curve.

has unitary elasticity.

is upward sloping.

is 1/100 of the industry demand curve.

is one where P = MR = AR.

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A firm’s marginal cost has a minimum value of $2; its average variable cost has a minimum value of $4; and its average total cost has a minimum value of $5. At what product price will the firm shut down?

none of the above

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Use the figure below to answer the following questions.

Figure 11.4.3

Refer to Figure 11.4.3, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run,

industry output will remain constant.

firms will adopt labour-saving technology.

firms will enter the market.

market demand will increase.

firms that remain in the market will expand production.

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A profit-maximizing firm in a competitive market is currently producing 100 units of output. It has average revenue of $10, and its average total cost is $8. Does the firm have profits or losses?

The firm has a loss of $100.

none of the above

The firm has a profit of $200.

The firm has a loss of $200.

The firm has a profit of $100.

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Use the figure below to answer the following questions.

Figure 11.4.1

Refer to Figure 11.4.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run,

firms that remain in the market will reduce production.

market supply will increase.

firms will enter the market.

market demand will increase.

firms that remain in the market will expand production.

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For any firm operating in any market structure, marginal revenue is defined as

price times quantity of the product sold.

the total amount received by the seller from the sale of a product.

the change in total revenue resulting from the sale of an additional unit of the product.

the change in price resulting from the sale of an additional unit of the product.

total revenue divided by the number of units sold.

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Which of the following expressions is correct for a competitive firm?

Marginal revenue = (Change in total revenue) ÷ (Change in quantity of output)

Profit = Total revenue – Total variable cost

Total revenue = Marginal revenue + Average revenue

none of the above

Average revenue = Total revenue ÷ Marginal revenue

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Use the table below to answer the following questions.

Table 11.2.2

Refer to Table 11.2.2, which gives the total cost schedule for Chip's Pizza Palace, a perfectly competitive firm. If the price of a pizza is $7, what is Chip's profit-maximizing output per hour?

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What are the relationships between price and quantity if ABC Company sells its product in a competitive market?

The quantity of the product that ABC Company produces and sells depends on the price of the product.

ABC Company’s total revenue is equal to the price of its product multiplied by its quantity of output.

none of the above

The price of that product depends on the quantity of the product that ABC Company produces and sells.

ABC Company’s total cost is equal to the price of its product multiplied by its quantity of output.

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