1.Suppose the equilibrium price in a competitive price taker market is $10 and a firm in the industry charges $9 which of the following is true?
a-the firm will not be able to sell any output
b-the irm will sell less output than its competitors
c-the firm will make more profit that it could at the $10
d-the firm will make less profit than it could at $10
2.the supply curve of a price-taker firm in the short run is the?
Average variable cost curve
Portion of the firms average total cost curve that lies above average variable cost curve
Portion of the firms marginal cost curve that lies above average variable cost curve
Firms marginal revenue curve
3. A price taker market tends toward a state of long-run equilibrium in which firms earn only a normal rate of return because?
Firms will keep their prices low under fear of gov regulation
With firms able to enter and leave the industry freely, competition will drive prices down to the level of production costs
Be definition, production costs always rise to equal the market price
Mismanagement on the part of the owners generally results in the firms equating marginal revenue and marginal costs
4. A firm is a price taker can?
Substantially change the market price of its product by changing its level of production
Sell all of tis output at the market price
Sell some it its output at a market price
Decide what price to charge for its product
5. In the short run, a firm that is a price taker will stay in business as long as?
Price equals average revenue
Marginal revenue is greater than or equal to marginal cost
Price exceeds average variable costs
Price is less than average variable cost
6. Will the long run market supply curve for most products slope upward to the right?
The firms producing the product will be unable to expand the size of their plant and equipment in the long run
Economies of scale are present in most industries
Most products are produced under conditions of constant cost
Resource prices will rise and push costs upward as the output of the industry expands
7. If the demand for a product increases in an increasing cost industry, as the market adjusts in the long run production costs for all firms will?
Rise as new firms enter
Fall as new firs enter
Remain unchanged
8. Competitive price-taker markets are characterized by?
Firms that all produce the same product
S small number of firms in the market
Firms that are large relative to the size of the market
Widespread use of advertising as a competitive weapon
9. Consider a firm operating in a competitive price taker market. The firm is producing 40 units of output has an average cost of production equal to $5 and is earning $240 economic profit in the short run. What is the current market price?
9
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