Deck 7: Pure Competition

Question 1

Total revenue for a perfectly competitive firm producing six units of output is $48. Total revenue for producing eight units of output is $64. Given this information, the:

A) firm should raise its price.
B) average revenue for producing eight units is $16.
C) marginal revenue for producing the eighth unit is $16.
D) marginal revenue for producing the eighth unit is $8.

Answer 1

marginal revenue for producing the eighth unit is $8.

Question 2

Given the table below, what is the short-run profit-maximizing level of output for the firm?

A) 2 units
B) 3 units
C) 4 units
D) 5 units

Answer 2

4 units

Question 3

Refer to the above table. The marginal cost of the third unit of output is:

A) $20.
B) $23.
C) $24.
D) $25.

Answer 3

$23.

Question 4

Refer to the above data. At the profit-maximizing output, the firm's total revenue is:

A) $48.
B) $38.
C) $80.
D) $64.

Question 5

Refer to the above graph. It shows the cost curves for a competitive firm. At output level 20, the marginal cost is:

A) $0.60.
B) $0.90.
C) $1.05.
D) $1.20.

Question 6

The graph above represents a(n):

A) decreasing-cost industry: firms may be paying lower prices for their inputs when the industry expands.
B) increasing-cost industry: firms may be paying higher prices for their inputs when the industry expands.
C) competitive, break-even industry: the long-run supply curve is upward sloping as it must be according to the law of supply.
D) constant-cost industry: prices of the inputs stay the same, and other production costs are constant as the industry expands.