Question 1

In perfect competition:
A.a firm's total revenue is found by multiplying the market price by the firm's quantity of output.
B.the firm's total revenue curve is a downward-sloping line.
C.at any price, the more sold, the higher is a firm's marginal revenue.
D.the firm's total revenue curve is nonlinear.

Accepted Answer

In perfect competition, a firm is a price taker, meaning that it cannot influence the market price and must accept the market price as given. Therefore, a firm's total revenue is equal to the market price multiplied by the quantity of output it produces (TR = P x Q). This is because the firm will sell each unit at the market price and earn that amount of revenue for each unit sold.

Question 2

________ almost always take the market price as given, or are considered , but this
is often not true of _.
A.Consumers; quantity-minimizers; producers
B.Producers; quantity-takers; consumers
C.Consumers and producers; price-takers; firms that produce a differentiated product
D.Producers; price-searchers; consumers

Accepted Answer

The answer of ________ almost always take the market price...

Question 3

In a perfectly competitive industry, the market demand curve is usually:
A.perfectly inelastic.
B.perfectly elastic.
C.downward sloping.
D.relatively elastic.

Accepted Answer

In a perfectly competitive industry, while individual firms face a perfectly elastic demand curve due to the presence of many sellers offering identical products, the market demand curve for the entire industry is downward-sloping. This reflects the overall market behavior, where the quantity demanded increases as the price decreases, and vice versa.

Question 4

Total revenue is a firm's:
A.change in revenue resulting from a unit change in output.
B.ratio of revenue to quantity.
C.difference between revenue and cost.
D.total output times the price at which it sells that output.

Accepted Answer

Total revenue is calculated by multiplying the price at which a firm sells its output by the total quantity of output produced and sold. Therefore, D is the correct choice. A refers to marginal revenue, B refers to average revenue, and C refers to profit.

Question 5

For a perfectly competitive firm, marginal revenue:
A.is less than price.
B.is greater than price.
C.decreases as the firm increases output.
D.is equal to price.

Accepted Answer

In a perfectly competitive market, a firm is a price taker, meaning it has no control over the price of its product. It must accept the market price as given. Therefore, the marginal revenue for a perfectly competitive firm is equal to the market price, as any additional unit sold will increase revenue by exactly the market price.

Question 6

An assumption of the model of perfect competition is:
A.identical goods.
B.difficult entry and exit.
C.few buyers and sellers.
D.cooperation and interdependence between sellers.

Accepted Answer

Identical goods is a fundamental assumption of perfect competition, where all firms in the market offer the same product or service, with no differentiation. This means that consumers can easily switch between different sellers, and the price becomes the main factor in their purchasing decision.

Question 7

A firm's total output times the price at which it sells that output is:
A.net revenue.
B.total revenue.
C.average revenue.
D.marginal revenue.

Accepted Answer

Total revenue is defined as a firm's total output multiplied by the price at which it sells that output.

Question 8

The demand curve for a perfectly competitive firm is:

Accepted Answer

The answer of The demand curve for a perfectly competitive...

Question 9

When perfect competition prevails, which of the following characteristics of firms are we likely to observe?
A.They spend time erecting and maintaining barriers to new firms.
B.There are not many of them.
C.They all try to highlight the substantial product differentiation between producers.
D.They are all price-takers.

Accepted Answer

The answer of When perfect competition prevails, which of the...

Question 10

Marginal revenue is a firm's:
A.ratio of profit to quantity.
B.ratio of average revenue to quantity.
C.price per unit times the number of units sold.
D.increase in total revenue when it sells an additional unit of output.

Accepted Answer

Marginal revenue is the additional revenue gained from selling one more unit of output. So, the correct option is D, which states that marginal revenue is the increase in total revenue when an additional unit of output is sold.

Question 11

Perfectly competitive firms will:
A.maximize total revenue by using the marginal decision rule.
B.increase output up to the point that the marginal benefit of an additional unit of output is greater than the marginal cost.
C.increase output up to the point that the marginal benefit of an additional unit of output is equal to the marginal cost.
D.always attempt to minimize average variable cost.

Accepted Answer

The answer of Perfectly competitive firms will:
A.maximize total revenue by...

Question 12

The competitive model assumes all of the following except:
A.a large number of buyers.
B.easy entry into and easy exit from the market.
C.standardized product.
D.patents and copyrights.

Accepted Answer

The answer of The competitive model assumes all of the...

Question 13

People in the eastern part of Beirut are prevented by border guards from traveling to the western part of Beirut to shop for (or sell) food.This situation violates the perfect competition assumption of:
A.price-setting behavior.
B.a small number of buyers and sellers.
C.differentiated goods.
D.ease of entry and exit.

Accepted Answer

The perfect competition assumption of ease of entry and exit is violated in this situation, as people are prevented from traveling between the two parts of Beirut for economic purposes. This creates barriers to new firms entering the market and limits competition, leading to potential inefficiencies and higher prices.

Question 14

The marginal revenue received by a firm in a perfectly competitive market:

Accepted Answer

In a perfectly competitive market, the marginal revenue a firm receives for each additional unit sold is equal to the market price, which is also equal to its average revenue. This is because firms in perfect competition are price takers and cannot influence the market price.

Question 15

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 10 units is:
A.$10.
B.$20.
C.$200.
D.$210.

Accepted Answer

Total revenue is calculated by multiplying the price per unit by the number of units sold. For 10 units at $20 each, the total revenue is 10 units * $20/unit = $200.

Question 16

The difference between total revenue and total cost is:
A.economic profit or loss.
B.nominal revenue.
C.average revenue.
D.marginal revenue.

Accepted Answer

The difference between total revenue and total cost is known as economic profit or loss. If total revenue is greater than total cost, it is an economic profit, and if total cost is greater than total revenue, it is an economic loss.

Question 17

If a perfectly competitive gardening shop sells 30 evergreen bushes at a price of $10 per bush, its marginal revenue is:
A.$10.
B.more than $10.
C.less than $10.
D.$300.

Accepted Answer

The answer of If a perfectly competitive gardening shop sells...

Question 18

An assumption of the model of perfect competition is:
A.discrimination.
B.difficult entry and exit.
C.many buyers and sellers.
D.limited information.

Accepted Answer

Perfect competition assumes the existence of many buyers and sellers in a market, with no individual entity possessing enough market power to influence the market price. Discrimination, difficult entry and exit, and limited information are not assumptions of perfect competition.

Question 19

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is:
A.$10.
B.$20.
C.$200.
D.$220.

Accepted Answer

Total revenue for 10 units is:
TR = 10 x $20 = $200
Total revenue for 11 units is:
TR = 11 x $20 = $220
Therefore, the increase in total revenue from producing 11 units instead of 10 units is $220 - $200 = $20.

Question 20

Marginal revenue:
A.is the slope of the average revenue curve.
B.equals the market price in perfect competition.
C.is the change in quantity divided by the change in total revenue.
D.is the price divided by the change in quantity.

Accepted Answer

In perfect competition, the market price is equal to marginal revenue, as each firm is a price taker and cannot influence the market price. Marginal revenue is the change in total revenue that results from producing one additional unit of output, and in perfect competition, this change is equal to the market price. Therefore, choice B is the best answer.

Quiz 12: Perfect Competition and the Supply Curve

In a perfectly competitive industry, the market demand curve is usually: A.perfectly inelastic. B.perfectly elastic. C.downward sloping. D.relatively elastic.

Total revenue is a firm's: A.change in revenue resulting from a unit change in output. B.ratio of revenue to quantity. C.difference between revenue and cost. D.total output times the price at which it sells that output.

For a perfectly competitive firm, marginal revenue: A.is less than price. B.is greater than price. C.decreases as the firm increases output. D.is equal to price.

An assumption of the model of perfect competition is: A.identical goods. B.difficult entry and exit. C.few buyers and sellers. D.cooperation and interdependence between sellers.

A firm's total output times the price at which it sells that output is: A.net revenue. B.total revenue. C.average revenue. D.marginal revenue.

The demand curve for a perfectly competitive firm is:

Marginal revenue is a firm's: A.ratio of profit to quantity. B.ratio of average revenue to quantity. C.price per unit times the number of units sold. D.increase in total revenue when it sells an additional unit of output.

The competitive model assumes all of the following except: A.a large number of buyers. B.easy entry into and easy exit from the market. C.standardized product. D.patents and copyrights.

The marginal revenue received by a firm in a perfectly competitive market:

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 10 units is: A.$10. B.$20. C.$200. D.$210.

The difference between total revenue and total cost is: A.economic profit or loss. B.nominal revenue. C.average revenue. D.marginal revenue.

If a perfectly competitive gardening shop sells 30 evergreen bushes at a price of $10 per bush, its marginal revenue is: A.$10. B.more than $10. C.less than $10. D.$300.

An assumption of the model of perfect competition is: A.discrimination. B.difficult entry and exit. C.many buyers and sellers. D.limited information.

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is: A.$10. B.$20. C.$200. D.$220.

Marginal revenue: A.is the slope of the average revenue curve. B.equals the market price in perfect competition. C.is the change in quantity divided by the change in total revenue. D.is the price divided by the change in quantity.