Deck 9: Competitive Markets

Question 1

Consider the price and quantity data below for a perfectly competitive firm producing mousetraps. $$\begin{array} { | c | c | } \hline \text { Price } ( \$ ) & \text { Quantity } \\\hline 5 & 1000 \\\hline 5 & 1250 \\\hline 5 & 1500 \\\hline 5 & 1750 \\\hline 5 & 2000 \\\hline\end{array}$$ TABLE 9- 1

-Refer to Table 9- 1.Suppose this firm is producing 1500 mousetraps and its average total cost is $5.10 per unit.The firm will be

A)earning profits of $150.
B)earning profits of $7650.
C)breaking even.
D)suffering losses of $7650.
E)suffering losses of $150.

Answer 1

suffering losses of $150.

Question 2

If a firm in a perfectly competitive market were to raise its price,its

A)total costs would increase.
B)revenue would increase only if market demand were inelastic.
C)profits would increase as long as costs remained constant.
D)revenue would decrease only if market demand were elastic.
E)revenue would fall dramatically.

Answer 2

E

Question 3

The perfectly elastic demand curve faced by a competitive firm means that

A)the firm could increase total revenue by increasing the price.
B)it could actually sell an infinite amount of output at the going price.
C)the product's price will be unaffected by any realistic change in the firm's level of output.
D)total revenue is constant regardless of quantity produced.
E)as the firm expands output its marginal revenue will fall.

Answer 3

C

Question 4

Consider the following short- run cost curves for a profit- maximizing firm in a perfectly competitive industry.
FIGURE 9- 2
Refer to Figure 9- 2.If the market price is $2,the firm will

A)shut down and make zero profit.
B)produce 200 units and make a loss equal to its total fixed cost.
C)produce 300 units and make a loss equal to total variable cost.
D)continue operating in the short run and suffer a loss that is less than its fixed cost.
E)shut down and suffer a loss equal to its fixed cost.

Question 5

Consider the following cost curves for Firm X,a perfectly competitive firm.
FIGURE 9- 5
Refer to Figure 9- 5.If Firm X has a capital stock that generates SRATC1,then in the long run Firm X will have to

A)expand its output to Q2 with the existing plant size.
B)either expand its plant size or exit from the industry.
C)set its output at Q1 with an expanded plant size.
D)maintain its output level at Q1,because it is maximizing its short- run profits.
E)set its output at Q1 with the existing plant size.

Question 6

If firms in a competitive industry are earning positive economic profits,in the long run we expect

A)the supply curve for the product will shift to the right as new firms enter the industry,causing industry output to increase and price to fall.
B)the individual firms will lower their price to discourage new firms from entering the industry.
C)the demand curve for the product will shift to the left,so that the price of the product will fall.
D)there would be no change in the industry as long as P = MC for the individual firms.
E)the government would intervene and force the firms to lower prices.

Question 7

A perfectly competitive firm's total revenue is equal to which of the following?

A)the revenue received on the last unit sold.
B)average revenue multiplied by price.
C)price multiplied by marginal revenue.
D)price times quantity of the product sold,divided by quantity of the product sold.
E)marginal revenue times quantity of the product sold.

Question 8

Consider a perfectly competitive firm when its industry is in long- run equilibrium.In this case,

A)price is greater than marginal cost.
B)marginal revenue is greater than marginal cost.
C)average fixed costs are at the maximum.
D)economic profits are greater than zero.
E)price equals minimum short- run and long- run average total cost.

Question 9

Refer to Table 9- 1.Suppose this firm is producing 1250 mousetraps and its average total cost is $4 per unit.The firm will be

A)suffering losses of $1250.
B)suffering losses of $5000.
C)earning profits of $5000.
D)earning profits of $1250.
E)breaking even.

Question 10

Firms have several different concepts of revenue: total revenue,average revenue,marginal revenue,and price.For a profit- maximizing perfectly competitive firm,which statement below is true?

A)Average revenue,marginal revenue,and price are equal.
B)Total revenue,average revenue,marginal revenue,and price are all equal.
C)Only average revenue and price are equal.
D)Only marginal revenue and price are equal.
E)None of these revenues are equal.

Question 11

The short- run supply curve for a perfectly competitive firm is

A)its marginal- cost curve above the average- variable- cost curve.
B)its entire marginal- cost curve.
C)its average- revenue curve.
D)the industry supply curve.
E)its rising portion of the average- variable- cost curve.

Question 12

On a graph showing a firm's TC and TR curves,the profit- maximizing level of output is found where

A)TR and TC intersect.
B)TR is at a maximum
C)TR becomes vertical.
D)TC intersects the vertical axis.
E)TR lies above TC by the greatest amount.

Question 13

Assume the following total cost schedule for a perfectly competitive firm. $$\begin{array} { | c | c | c | } \hline \text { Output } & \text { TVC } ( \$ ) & \text { TFC } ( \$ ) \\\hline 0 & 0 & 100 \\\hline 1 & 40 & 100 \\\hline 2 & 70 & 100 \\\hline 3 & 120 & 100 \\\hline 4 & 180 & 100 \\\hline 5 & 250 & 100 \\\hline 6 & 330 & 100 \\\hline\end{array}$$ TABLE 9- 2

-Refer to Table 9- 2.If the firm is producing at an output level of 2 units,the ATC is _ and the AVC is _ .

A)$140; $40
B)$50; $50
C)$85; $35
D)$100; $70
E)$70; $35

Question 14

The theory of perfect competition is built on several assumptions,including that

A)each firm must earn economic profits to remain in the industry.
B)there are few producers of an identical product.
C)the individual firm can influence demand by advertising.
D)the individual firm can affect the price of the product it sells.
E)any firm can easily enter or leave the industry.

Question 15

Consider the following cost curves for Firm X,a perfectly competitive firm.
FIGURE 9- 5
Refer to Figure 9- 5.If Firm X is producing output Q1 and the market price is P1,
Chapter 34          Trade Policy
B)new firms have a profit incentive to enter the industry,building larger plants.
C)Firm X is producing at its minimum efficient scale.
D)there is no lower- cost scale of plant which could be built by Firm X.
E)there are profits to induce increases in output by Firm X,using its existing plant.

Question 16

Consider a perfectly competitive firm that is producing a level of output such that price equals average total cost and average total cost is less than marginal cost.In order to maximize its profits,the firm should

A)reduce output.
B)expand output.
C)not change output.
D)shut down.
E)increase the market price.

Question 17

Comparing the short- run and long- run profit- maximizing positions of a perfectly competitive firm,which statement is true?

A)Price will equal marginal cost in the short run,but not necessarily in the long run.
B)Price should equal average cost in the long run,but not necessarily in the short run.
C)The firm will produce at minimum average cost in both the short and long run.
D)The firm may have unexploited economies of scale in both the short run and the long run.
E)Economic profit may exist in the short run and in the long run.

Question 18

Consider a perfectly competitive firm in the following position: output = 4000 units,market price = $1,fixed costs = $2000,variable costs = $2000,and marginal cost = $1.To maximize profits the firm should

A)not change its output.
B)reduce its output.
C)increase the market price.
D)shut down.
E)expand its output.

Question 19

Which of the following assumptions about perfectly competitive markets is primarily responsible for the horizontal demand curve facing the individual firm?

A)freedom of entry and exit in the industry
B)strategic behaviour
C)differentiated product
D)each firm is small relative to the size of the industry
E)consumers are aware of all firms' prices

Question 20

If a perfectly competitive firm is faced with average revenue below average variable cost it will shut down so as to reduce its

A)losses to the amount of its marginal costs.
B)costs to below its revenue.
C)costs to zero.
D)losses to the amount of its fixed costs.
E)losses to the amount of its variable costs.

Question 21

A perfectly competitive firm's demand curve

A)is downward sloping.
B)yields constant total revenues.
C)is a horizontal line where P = AR = MR.
D)has unit elasticity.
E)is identical to the market demand curve.

Question 22

For a given market price,a competitive firm's average- revenue curve

A)is a straight line that coincides with the market demand curve.
B)is the same as the firm's TR curve.
C)is a positively sloped straight line,starting from the origin.
D)increases to the right and then declines when MC = MR.
E)is the same as the firm's demand curve.

Question 23

Which of the following producers operate in a market structure closely approximated by perfect competition?

A)the Bank of Montreal
B)a restaurant in your neighbourhood
C)A B.C.peach grower.
D)Air Canada
E)a Safeway grocery store

Question 24

If a perfectly competitive firm produces at an output level where marginal cost equals marginal revenue,then

A)the last unit produced adds the same amount to costs as it does to revenue.
B)the difference between TR and TC is zero.
C)the firm is maximizing its revenue.
D)the firm should shut down.
E)there is no reason to reduce or expand output,as long as AVC is greater than or equal to price.

Question 25

If a perfectly competitive market is in a short- run equilibrium and each firm has P > SRATC,then

A)new firms will enter the market because existing firms are earning economic profits.
B)price will fall in the short run as it is too high and firms are making economic profits.
C)individual firms in the industry will increase their output.
D)the market supply curve will become less elastic.
E)existing firms will continue to earn economic profits in the long run.

Question 26

Long- run equilibrium in a perfectly competitive industry is characterized by

A)an output level at which firms' SRATC curves are tangent to the downward sloping portion of their LRAC curves.
B)internal economies of scale.
C)falling costs.
D)rising costs.
E)each firm producing at the minimum point on its LRAC curve.

Question 27

The term "perfect competition" refers to

A)cutthroat competition only.
B)the most realistic market structure.
C)ideal economic behaviour.
D)a type of market structure.
E)rivalrous behaviour.

Question 28

An example of a product that could most closely satisfy the homogeneous product assumption of perfect competition is

A)barley.
B)cars.
C)personal computers.
D)pizza.
E)shampoo.

Question 29

Consider the following short- run cost curves for a profit- maximizing firm in a perfectly competitive industry.
FIGURE 9- 2
Refer to Figure 9- 2.If the market price is $1,the firm will produce _ _ units of output in the short run.

A)100
B)0
C)400
D)200
E)300

Question 30

Consider the following cost curves for Firm X,a perfectly competitive firm.
FIGURE 9- 5
Refer to Figure 9- 5.At output Q2 and price P2,which of the following is FALSE?

A)There are economic profits to attract new entrants.
B)There are no unexploited internal economies of scale.
C)P = MC = SRATC = LRAC.
D)The firm producing Q2 is at its long- run profit- maximizing position.
E)Firm X is producing at its minimum efficient scale.

Question 31

FIGURE 9- 1
Refer to Figure 9- 1.The diagram shows cost curves for a perfectly competitive firm.If the market price is P4,the profit- maximizing firm in the short run should produce output

A)C.
B)F.
C)H.
D)G.
E)I.

Question 32

The diagram below shows the short- run cost curves for 3 perfectly competitive firms in the same industry.
FIGURE 9- 6
Refer to Figure 9- 6.Which firm or firms is likely to exit this industry?

A)Firm A
B)Firm B
C)Firm C
D)all of Firms A,B,and C
E)none of Firms A,B,and C

Question 33

Assume the following total cost schedule for a perfectly competitive firm. $$\begin{array} { | c | c | c | } \hline \text { Output } & \text { TVC } ( \$ ) & \text { TFC } ( \$ ) \\\hline 0 & 0 & 100 \\\hline 1 & 40 & 100 \\\hline 2 & 70 & 100 \\\hline 3 & 120 & 100 \\\hline 4 & 180 & 100 \\\hline 5 & 250 & 100 \\\hline 6 & 330 & 100 \\\hline\end{array}$$ TABLE 9- 2

-Refer to Table 9- 2.In order to maximize its profits,the firm should continue to produce in the short run even if the market price is less than its ATC as long as the price is greater than or equal to

A)TC
B)AFC.
C)AVC.
D)TVC.
E)MC.

Question 34

Which of the following statements about a firm in a perfectly competitive industry is true?

A)The firm will not produce at all if P < ATC.
B)The firm maximizes its profit by producing where P = ATC.
C)The firm maximizes its profit by producing where P = AVC.
D)The firm can improve its competitive position and sell more output by advertising its product.
E)The firm will not produce at all if P < the minimum of AVC.

Question 35

Consider the following total cost schedule for a perfectly competitive firm producing ball- point pens. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Output } \\\text { per period }\end{array} & \text { TVC } ( \$ ) & \text { TFC } ( \$ ) \\\hline 0 & 0 & 5 \\\hline 10 & 2 & 5 \\\hline 20 & 3 & 5 \\\hline 30 & 6 & 5 \\\hline 40 & 10 & 5 \\\hline 50 & 15 & 5 \\\hline\end{array}$$ TABLE 9- 3

-Refer to Table 9- 3.This firm would shut down in the short run if the market price of its output

A)dropped below $0.15.
B)dropped below $0.20.
C)dropped below $0.30.
D)dropped below $2.00.
E)dropped below $3.00.

Question 36

Under perfect competition,the demand curve facing an individual firm is

A)upward sloping.
B)a rectangular hyperbola.
C)downward sloping.
D)infinitely price elastic.
E)the same as the industry's demand curve.

Question 37

Consider a perfectly competitive firm when its industry is in long- run equilibrium.Which of the following statements is correct?

A)The firm has successfully established barriers to entry.
B)The firm has no ability to affect its product's price.
C)The firm is earning positive economic profits.
D)The firm has a strong profit incentive to expand capacity.
E)The firm has successfully differentiated its product.

Question 38

Suppose ABC Corp.is a firm producing newsprint in a perfectly competitive industry.We have the following information about the firm's production: - output (Q)= 1500 tonnes per month
- average total cost (ATC)= $627 per tonne
- average variable cost (AVC)= $614 per tonne
- marginal revenue (MR)= $620 per tonne
- marginal cost (MC)= $620 per tonne In the short run,this firm should

A)maintain production at the current level.
B)shut down because the firm is incurring economic losses.
C)increase output because MR is greater than AVC.
D)reduce output because the price per tonne is less than ATC.
E)Not possible to determine because the price of the product is not known.

Question 39

Consider the textile industry,which we assume to be a competitive industry,and which experiences continuous cost- reducing technological change.Which of the following statements best describes this industry?

A)High- cost textile mills will co- exist with low- cost mills as long as the revenue for the high- cost mills is covering their variable costs.
B)The price of the product is determined by the minimum ATC of the lowest- cost plants.
C)All textile mills in the industry will be earning zero economic profits or losses.
D)Both A and B
E)Both B and C

Question 40

Which of the following statements about a perfectly competitive industry in long- run equilibrium is true?

A)In order to stay in the industry each firm is making an economic profit.
B)Losses are tolerable because of high fixed costs.
C)Firms must exhibit economies of scale.
D)Each firm is producing at the minimum point on its LRAC curve.
E)Individual firms will have no incentive for technological improvement.

Question 41

The supply curve for a perfectly competitive industry is the horizontal summation of the individual firms'

A)MC curves above AFC.
B)AVC curves above MC.
C)MC curves above ATC.
D)short- run average cost curves.
E)MC curves above AVC.

Question 42

Consider the following cost curves for two perfectly competitive firms,A and B.
FIGURE 9- 3
Refer to Figure 9- 3.Firms A and B are in the same industry.Choose the statement that best describes the situation facing the two firms.

A)Firm A and Firm B are both earning positive economic profits; new firms will likely enter the industry.
B)Firm A is suffering losses and will be shut down immediately; Firm B will be shut down if the price falls any further.
C)Firm A is making losses but remains producing as long as price falls no further; Firm B is producing at lower cost and is earning economic profits.
D)Firm A and Firm B are both suffering economic losses and will soon exit the industry.

Question 43

Suppose XYZ Corp.is producing and selling disposable wooden chopsticks in a perfectly competitive market.The market price is $0.04 per unit and the firm is currently producing 1 million units per month.The firm's total revenue is _ _ per month.The firm's marginal revenue is .

A)$40 000; $0.04
B)$15 000; $0.015
C)$40 000; $0.025
D)$25 000; $0.04
E)$40 000; $0.015

Question 44

The demand curve facing a perfectly competitive firm

A)is almost perfectly elastic at the market price.
B)is the same as the industry or market demand curve.
C)depends on the firm's output.
D)depends on the firm's costs of production.
E)depends on the firm's technology.

Question 45

Consider a perfectly competitive firm.Which of the following equalities could hold true in a short- run equilibrium but not in a long- run equilibrium?

A)P = MR
B)P = AVC
C)P = MC
D)TC = TFC + TVC
E)P = AR

Question 46

For any firm operating in any market structure,marginal revenue (MR)equals

A)Oq/Op
B)Op × Oq.
C)(p × q)/q
D)p × q.
E)O(p × q)/Oq

Question 47

The market demand curve for a perfectly competitive industry is typically

A)identical to the competitive firm's demand curve.
B)upward sloping.
C)downward sloping.
D)infinitely elastic.
E)a rectangular hyperbola.

Question 48

Assume the following total cost schedule for a perfectly competitive firm. $$\begin{array} { | c | c | c | } \hline \text { Output } & \text { TVC } ( \$ ) & \text { TFC } ( \$ ) \\\hline 0 & 0 & 100 \\\hline 1 & 40 & 100 \\\hline 2 & 70 & 100 \\\hline 3 & 120 & 100 \\\hline 4 & 180 & 100 \\\hline 5 & 250 & 100 \\\hline 6 & 330 & 100 \\\hline\end{array}$$ TABLE 9- 2

-Refer to Table 9- 2.The total cost of producing 6 units of output is

A)$100.
B)$230.
C)$71.67.
D)$330.
E)$430.

Question 49

A firm in a perfectly competitive market

A)is limited in the amount of product it can sell without affecting the price.
B)has no power to influence the market price.
C)is dependant upon the behaviour of its competitors.
D)is aware of its competitors' costs.
E)competes actively with other sellers in the industry.

Question 50

A perfectly competitive firm maximizes its profits by

A)choosing the optimal level of output.
B)pricing slightly under its competitors.
C)maximizing total sales.
D)maximizing total revenue.
E)choosing the optimal price.

Question 51

Consider the following cost curves for Firm X,a perfectly competitive firm.
FIGURE 9- 5
Refer to Figure 9- 5.In this industry,which one of the following is FALSE?

A)Only one firm can reach the size of output Q2.
B)If the scale of Firm X at output Q2 and price P2 is large enough that Firm X has an appreciable share of the market,Firm X will no longer be a price taker.
C)At output Q2 and price P2,Firm X is maximizing its long- run profits.
D)If the price were to fall below P2,firms would leave the industry.
E)If the price were to rise above P2,new firms would enter the industry.

Question 52

A firm in a perfectly competitive industry will maximize profits by adjusting

A)average total cost until it equals price.
B)output until marginal cost equals marginal revenue.
C)price until marginal revenue equals marginal cost.
D)price until average revenue equals average total cost.
E)output until average revenue equals short- run average total cost.

Question 53

In economics,perfect competition refers to a market structure where

A)all firms are earning profits.
B)firms behave strategically.
C)firms co- operate with each other.
D)firms can set the price of their product.
E)each firm has zero market power.

Question 54

A price- taking firm in the short run should not produce any level of output unless

A)average revenue equals or exceeds average variable cost.
B)marginal revenue equals average total cost.
C)it is earning positive profits.
D)marginal revenue exceeds marginal cost.
E)average revenue equals or exceeds average total cost.

Question 55

Consider a competitive industry in which firms are facing a continual decrease in demand for their product.In the long run

A)new firms will enter the industry and earn normal profits.
B)firms will begin advertising in order to increase demand for their product.
C)capacity in the industry will gradually shrink as plant and equipment is not replaced.
D)existing firms will modernize plant and equipment in order to increase efficiency.
E)existing firms will expand output as a means of recovering losses.

Question 56

Suppose a typical firm in a competitive industry has the following data in the short run: price = $6; output = 100 units; ATC = $8; AVC = $7.What will likely happen in the long run?

A)The typical firm would shut down,until the remaining firms have a higher price.
B)In the long run the industry will expand because firms are earning economic profits.
C)The size of the industry will remain the same in the long run.
D)In the long run the industry will contract because firms are suffering losses.
E)There is not enough information to formulate an answer.

Question 57

Consider the following short- run cost curves for a profit- maximizing firm in a perfectly competitive industry.
FIGURE 9- 2
Refer to Figure 9- 2.If the current market price is $6,the profit- maximizing output for this firm is

A)300 units.
B)500 units.
C)200 units.
D)100 units.
E)400 units.

Question 58

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

A)the change in total revenue resulting from the sale of an additional unit of the product.
B)the change in price resulting from the sale of an additional unit of the product.
C)price times quantity of the product sold.
D)total revenue divided by the number of units sold.
E)the total amount received by the seller from the sale of a product.

Question 59

When a firm is referred to as a "price taker,"

A)the firm can alter the market price as it changes its rate of production.
B)the demand curve that the firm faces is perfectly inelastic.
C)the firm will be willing to sell an infinite quantity at the market price.
D)the firm initially takes price as given and tries to influence it through advertising.
E)the firm can alter its rate of production and sales without affecting the market price of the product.

Question 60

FIGURE 9- 1
Refer to Figure 9- 1.The diagram shows cost curves for a perfectly competitive firm.The short- run shut down price for the firm is

A)P1.
B)P2.
C)P3.
D)P4.
E)P5.

Question 61

Suppose ABC Corp.is a firm producing newsprint in a perfectly competitive industry.Its output is 1500 tonnes per month,the marginal cost of the last tonne produced is $710,and the average revenue per tonne is $620.In the short run,this firm should

A)definitely shut down.
B)The price of the product is not known,so it is not possible to determine.
C)reduce output.
D)increase output until marginal revenue is equal to marginal cost.
E)increase output until average revenue is equal to marginal cost.

Question 62

A firm is said to have "market power" only when

A)it has the ability to influence the price of its product.
B)it is one of 25 or fewer firms in the industry.
C)it has the ability to choose its own profit- maximizing level of output.
D)its demand curve is the market demand curve.
E)it is one of 10 or fewer firms in the industry.

Question 63

Which of the following terms would best describe the price elasticity of demand facing a perfectly competitive firm?

A)perfectly inelastic
B)elastic
C)inelastic
D)perfectly elastic
E)unit

Question 64

The diagram below shows the short- run cost curves for 3 perfectly competitive firms in the same industry.
FIGURE 9- 6
Refer to Figure 9- 6.Given that Firms A,B and C are in the same industry,is this industry in long- run equilibrium?

A)Yes,because all 3 firms are producing at their minimum average total cost.
B)No,because Firm A is not producing at a profit- maximizing level of output.
C)Yes,because each of the 3 firms is operating at its minimum efficient scale.
D)No,because if the industry were in equilibrium,all 3 firms would be earning zero economic profits.
E)Yes,because P = MC = MR for each of the 3 firms.

Question 65

Suppose a perfectly competitive industry is in long- run equilibrium.A new one- time cost- saving technology is then developed and new plants are built.Eventually,a new long- run equilibrium will be established where

A)the industry supply curve has shifted to the left and price and output are both higher.
B)new plants employ the new technology,but existing plants continue to produce as long as they cover their fixed costs.
C)all plants use the new technology,and market output will be higher.
D)high- cost and low- cost firms exist side by side and market output will be higher.
E)all plants continue to operate until they are physically worn out as long as price is greater than the the firm's average variable cost.

Question 66

Consider the following short- run cost curves for a profit- maximizing firm in a perfectly competitive industry.
FIGURE 9- 2
Refer to Figure 9- 2.The short- run supply curve for this perfectly competitive firm is its

A)ATC curve at and above $3.
B)marginal cost curve at and above $1.50.
C)entire marginal cost curve.
D)marginal cost curve at and above $3.
E)AVC curve at and above $1.50.

Question 67

Assume the following total cost schedule for a perfectly competitive firm. $$\begin{array} { | c | c | c | } \hline \text { Output } & \text { TVC } ( \$ ) & \text { TFC } ( \$ ) \\\hline 0 & 0 & 100 \\\hline 1 & 40 & 100 \\\hline 2 & 70 & 100 \\\hline 3 & 120 & 100 \\\hline 4 & 180 & 100 \\\hline 5 & 250 & 100 \\\hline 6 & 330 & 100 \\\hline\end{array}$$ TABLE 9- 2

-Refer to Table 9- 2.At what price would a profit- maximizing firm earn zero economic profits?

A)$70
B)$220
C)$40
D)$430
E)$145

Question 68

Suppose a paper mill in Quebec is shut down by its owner,even though the plant and equipment are in excellent shape and the paper is of top quality.What could explain this?

A)The paper mill must not have been operating at its profit- maximizing level of output.
B)The price the firm is receiving for the paper is greater than its marginal cost.
C)The price the firm is receiving for the paper is less than its average variable cost.
D)The owner was not minimizing its production costs.
E)The price the firm is receiving is less than the average total cost.

Question 69

Consider the price and quantity data below for a perfectly competitive firm producing mousetraps. $\begin{array}{|l|l|}\hline {\text { Price (\$) }} & \text { Quantity } \\\hline 5 & 1000 \\\hline 5 & 1250 \\\hline 5 & 1500 \\\hline 5 & 1750 \\\hline 5 & 2000 \\\hline\end{array}$ TABLE 9- 1

-Refer to Table 9- 1.If this firm is producing 1250 mousetraps,its total revenue is ,its average revenue is and its marginal revenue is .

A)$1750; $250; $5
B)$6250; $5; $5
C)$6250; $250; $5
D)$5000; $5; $250
E)$5; $5; $5

Question 70

Consider the following short- run cost curves for a profit- maximizing firm in a perfectly competitive industry.
FIGURE 9- 2
Refer to Figure 9- 2.If the price is $6 and the firm is producing at its profit- maximizing output,then total costs for the firm are

A)$300.
B)$1600.
C)$2400.
D)$3500.
E)$100.

Question 71

Which of the following statements is one of the assumptions of the theory of perfect competition?

A)Firms produce a wide variety of versions of the product.
B)Firms compete with each other by varying their price.
C)Firms are price setters.
D)A firm's entry to the market is regulated by the federal Competition Bureau.
E)Consumers know the prices charged by each firm.

Question 72

$$59$$

-Which of the following is NOT a determinant of market structure?

A)The capital- labour ratio of the firm.
B)The ease of entering the industry.
C)The number of sellers.
D)The market share of the sellers.
E)The nature of the product.

Question 73

A perfectly competitive firm's demand curve coincides with

A)the market demand curve.
B)its average- revenue curve and total- revenue curve.
C)both its marginal and total- revenue curves.
D)both its marginal and average- revenue curves.
E)its total- revenue curve.