QUESTION 5 For a firm producing at any level of output GREATER THAN the most pro
ID: 1106906 • Letter: Q
Question
QUESTION 5
For a firm producing at any level of output GREATER THAN the most profitable one, a reduction in output decreases total revenue _____ total cost.
by the same amount as
more than
but not
less than
QUESTION 6
In a perfectly competitive industry, the market demand curve is usually:
relatively elastic.
perfectly inelastic.
perfectly elastic.
downward-sloping
QUESTION 7
In a perfectly competitive market:
the price will change to reflect any change in production cost.
in the long run, economic profits are positive.
perfect competition generates prices greater than marginal costs.
D. the existence of profits leads firms to exit the industry, while losses lead firms to enter the industry
QUESTION 8
In perfect competition:
at any price, the more sold, the higher a firm's marginal revenue.
the firm's total revenue curve is a downward-sloping line.
the firm's total revenue curve is nonlinear.
a firm's total revenue is found by multiplying the market price by the firm's quantity of output.
QUESTION 9
In the model of perfect competition:
the consumer is at the mercy of powerful firms that can set prices wherever they prefer.
the price is determined by how many years are left in the product's patent.
individual firms can influence the price, but only slightly.
no individual or firm has enough power to affect price
QUESTION 10
Marginal revenue:
is the slope of the average revenue curve.
is the price divided by the change in quantity.
is the change in quantity divided by the change in total revenue.
D. equals the market price in perfect competition
QUESTION 11
Perfectly competitive firms will:
always attempt to minimize average variable cost.
maximize total revenue by using the marginal decision rule.
increase output up to the point that the marginal benefit of an additional unit of output is greater than the marginal cost.
increase output up to the point that the marginal benefit of an additional unit of output is equal to the marginal cost.
A.by the same amount as
B.more than
C.but not
D.less than
QUESTION 6
In a perfectly competitive industry, the market demand curve is usually:
A.relatively elastic.
B.perfectly inelastic.
C.perfectly elastic.
.downward-sloping
QUESTION 7
In a perfectly competitive market:
A.the price will change to reflect any change in production cost.
B.in the long run, economic profits are positive.
C.perfect competition generates prices greater than marginal costs.
.D. the existence of profits leads firms to exit the industry, while losses lead firms to enter the industry
Explanation / Answer
Answer 5 :For a firm producing at any level of output greater than the most profitable one, a reduction in output will result in a fall in total revenue.But, the reduced cost will be higher than reduced revenue because firm was operating at the level of output which is higher than the most profitable one. Therefore, the answer is (d).
Answer 6 In a perfectlz competitve firm, the market demand directlz depends on the fluctuations in market price. Therefore, the market demand curve is downward sloping. Hence, the answer is (d).
Answer 7 : In the long run, the prices in a perfectly competitive market will reflect the changes in production costs as in case of perfect competiton the average revenue i.e price reflects its production costs only. Hence, the correct answer is (a)
Answer 8 : The total revenue of a perfectly competitive firm is the market price of aggregate quantity sold by it. This is due to the fact that total revenue is the aggregate income generate by a firm by selling its goods/services in the market. Therefore, the answer is (d).
Answer 9 : In case of perfect competition, a large number of firms compete in the market to capture market share. Hence, no individual or firm has enough power to affect price prevailing in the market. Therefore, the answer is (d).
Answer 10 : Price represents average revenue in case of perfect competition. And, also AR = MR in perfect competition. Therefore, in perfect comeptiton, marginal revenue equals the market price. Therefore, the answer is (d).
Answer 11 : Since, perfectly competitive firms cannot generate any profits other than normal profits, they keep selling their product until the marginal revenue or marginal benefit is equal to the marginal cost. Hence, the correct answer is (d).
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