Ch14 Mutiple choice.docVIP

Chapter 14—Firms in Competitive Markets MULTIPLE CHOICE 1. 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. 2. When a firm in a competitive market produces 10 units of output, it has a marginal revenue of $8.00. What would be the firms total revenue when it produces 6 units of output? a. $4.80 b. $6.00 c. $48.00 d. $60.00 3. If a firm in a competitive market reduces its output by 20 percent, then as a result the price of its output is likely to a. increase. b. remain unchanged. c. decrease by less than 20 percent. d. decrease by more than 20 percent. 4. If ABC Company sells its product in a competitive market, then a. the price of that product depends on the quantity of the product that ABC Company produces and sells. b. ABC Companys total revenue is proportional to its quantity of output. c. ABC Companys total cost is proportional to its quantity of output. d. ABC Companys total revenue is equal to its average revenue. 5. For a competitive firm, a. Total revenue = Average revenue. b. Total revenue = Marginal revenue. c. Total cost = Marginal revenue. d. Average revenue = Marginal revenue. 6. 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. 7. A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as a. average revenue is greater than average total cost. b. average revenue is equal to marginal cost. c. marginal cost is greater than average total cost. d. price is above or below marginal cost. 8. When price is greater than margi