Question 1

Sam sells soybeans to a broker in Chicago,Illinois.Because the market for soybeans is generally considered to be competitive,Sam maximizes his profit by choosing

Accepted Answer

in a competitive market, firms will choose to produce the quantity where market price equals their marginal cost of production in order to maximize their profit. This is because in a competitive market, prices are set by supply and demand, so a firm cannot charge a higher price than their competitors. Therefore, the best choice for Sam to maximize his profit is to sell the quantity where the market price is equal to his marginal cost of production.

Question 2

If a competitive firm is selling 1,000 units of its product at a price of $9 per unit and earning a positive profit,then

Accepted Answer

If the competitive firm is selling 1,000 units of its product at a price of $9 per unit and earning a positive profit, it means that the firm's total revenue is greater than its total cost. Therefore, its total cost must be less than $9,000 (1,000 units sold at $9 per unit). Options B and C are incorrect because in a perfectly competitive market, the price and marginal revenue are equal, and the average revenue is also equal to the price. Therefore, both the marginal and average revenue will be equal to $9 in this case. Option D is incorrect because competitive firms can earn positive profits in the short run, although they will be competed away in the long run.

Question 3

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

Accepted Answer

The point at which the marginal revenue curve intersects the marginal cost curve represents the level of output where the firm generates the greatest level of profit. Therefore, the best choice is D, profit is maximized.

Question 4

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue,then

Accepted Answer

If marginal cost exceeds marginal revenue, it means that the firm is producing more than the optimal level where marginal cost equals marginal revenue (i.e. where profit is maximized). So, decreasing output by one unit will reduce total cost and increase total revenue, leading to an increase in profit. Therefore, option B is the best choice.

Question 5

A certain competitive firm sells its output for $20 per unit.The 50th unit of output that the firm produces has a marginal cost of $22.Production of the 50th unit of output does not necessarily

Accepted Answer

The answer of A certain competitive firm sells its output...

Question 6

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost,then

Accepted Answer

If marginal revenue exceeds marginal cost, then the firm can increase its profit by producing an additional unit of output. This is because the additional unit sold will add more to the firm's revenue than it will to its cost, increasing the overall profit. Therefore, a one-unit increase in output will increase the firm's profit.

Question 7

If a competitive firm is selling 1,000 units of its product at a price of $8 per unit and earning a positive profit,then

Accepted Answer

A competitive firm's average revenue equals the price, so it's $8. Marginal revenue also equals the price, so it's $8. Positive profit implies total cost is less than total revenue ($8,000).

Question 8

Suppose that in a competitive market the equilibrium price is $2.50.What is marginal revenue for the last unit sold by the typical firm in this market?

Accepted Answer

In a competitive market, each firm is a price taker and the equilibrium price is also the firm's marginal revenue for each unit sold. Therefore, the marginal revenue for the last unit sold by the typical firm in this market is exactly $2.50.

Question 9

Whenever a perfectly competitive firm chooses to change its level of output,its marginal revenue

Accepted Answer

In perfect competition, the firm is a price taker and the price of the product is given. Therefore, the firm's marginal revenue remains constant regardless of the level of output it produces.

Question 10

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $11.It follows that the

Accepted Answer

Given that the marginal revenue of the 100th unit of output is $10 and the marginal cost is $11. 
For profit maximization, the firm should produce units where marginal revenue (MR) is equal to marginal cost (MC).

Since MR < MC for the 100th unit, producing the 100th unit would result in a decrease in profits. 
Therefore, the firm's profit-maximizing level of output is less than 100 units.

Option A is incorrect because producing the 100th unit reduces profits by $1. 
Option B is incorrect because the average total cost is not given and cannot be concluded from the given information. 
Option D is incorrect because the marginal profit of the 110th unit cannot be determined from the given information.

Question 11

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market,then the individual farmer's elasticity of demand

Accepted Answer

The answer of If the market elasticity of demand for...

Question 12

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $7.It follows that the

Accepted Answer

The marginal revenue of producing the 100th unit is $10, which is greater than the marginal cost of producing that unit, which is $7. Therefore, producing the 100th unit will increase the firm's profit by the difference between the marginal revenue and marginal cost, which is $10 - $7 = $3. Therefore, option A is correct. Option B is incorrect because producing the 100th unit does not affect the firm's average total cost. Option C is incorrect because we do not have enough information to determine the firm's profit-maximizing level of output. Option D is incorrect because we are given information about the 100th unit, not the 99th unit.

Question 13

Comparing marginal revenue to marginal cost
(i)reveals the contribution of the last unit of production to total profit.
(ii)is helpful in making profit-maximizing production decisions.
(iii)tells a firm whether its fixed costs are too high.

Accepted Answer

Comparing marginal revenue to marginal cost is useful in determining the optimal level of output and maximizing profit. It reveals the contribution of the last unit of production to total profit (i) and is helpful in making profit-maximizing production decisions (ii). However, it does not tell a firm whether its fixed costs are too high (iii).

Question 14

At the profit-maximizing level of output,

Accepted Answer

The profit-maximizing level of output occurs where marginal revenue equals marginal cost. At this level, the firm is producing the output where the additional revenue from selling one more unit is equal to the additional cost of producing one more unit. This ensures that the firm is maximizing its profits. Option A is incorrect because it refers to average total cost, not marginal cost. Option B is incorrect because it refers to average variable cost, not marginal cost. Option D is incorrect because it refers to average revenue, not marginal revenue.

Question 15

For a firm operating in a competitive industry,which of the following statements is not correct?

Accepted Answer

In a competitive industry, total revenue is not constant as it is dependent on the quantity of output produced and sold. As the quantity increases, total revenue also increases, but at a decreasing rate due to the downward-sloping nature of the demand curve.

Question 16

For a firm in a perfectly competitive market,the price of the good is always

Accepted Answer

In a perfectly competitive market, the firm is a price taker and has no control over the price of the good. Thus, the price is always equal to the marginal revenue, as each additional unit sold will receive the same price.

Question 17

For an individual firm operating in a competitive market,marginal revenue equals

Accepted Answer

In a competitive market, the price of the product is determined by the market and is constant for each unit sold by the firm. Therefore, the marginal revenue (the revenue from selling one more unit) equals the price of the product, which also equals the average revenue (total revenue divided by the quantity sold). Choices B, C, and D introduce conditions that do not apply to firms in competitive markets.

Question 18

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue,then

Accepted Answer

If marginal cost exceeds marginal revenue, each additional unit of output is costing more to produce than it earns in revenue. This means the firm is operating at an inefficient level of output and could increase its profit by decreasing output until marginal cost equals marginal revenue. Therefore, decreasing output would increase the firm's profit. Average revenue exceeding marginal cost or earning a positive profit are not necessarily true statements in this scenario.

Question 19

Max sells maps.The map industry is competitive.Max hires a business consultant to analyze his company's financial records.The consultant recommends that Max increase his production.The consultant must have concluded that Max's

Accepted Answer

The consultant's recommendation to increase production suggests that Max's marginal revenue exceeds his marginal cost. This is because producing more would result in an increase in total revenue that is greater than the increase in total cost. Therefore, the consultant's analysis must have concluded that Max can increase his profits by producing more, which implies that his marginal revenue exceeds his marginal cost.

Question 20

Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8.00.What would be the firm's total revenue if it instead produced and sold 4 units of output?

Accepted Answer

Since the firm is operating in a competitive market, its marginal revenue is equal to the price of the product. Therefore, the price per unit is $8.00. If the firm produces and sells 4 units of output, its total revenue would be:
Total revenue = Price per unit x Quantity
Total revenue = $8 x 4
Total revenue = $32

Quiz 14: Firms in Competitive Markets.

Sam sells soybeans to a broker in Chicago,Illinois.Because the market for soybeans is generally considered to be competitive,Sam maximizes his profit by choosing

If a competitive firm is selling 1,000 units of its product at a price of $9 per unit and earning a positive profit,then

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue,then

A certain competitive firm sells its output for $20 per unit.The 50th unit of output that the firm produces has a marginal cost of $22.Production of the 50th unit of output does not necessarily

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost,then

If a competitive firm is selling 1,000 units of its product at a price of $8 per unit and earning a positive profit,then

Suppose that in a competitive market the equilibrium price is $2.50.What is marginal revenue for the last unit sold by the typical firm in this market?

Whenever a perfectly competitive firm chooses to change its level of output,its marginal revenue

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $11.It follows that the

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market,then the individual farmer's elasticity of demand

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $7.It follows that the

Comparing marginal revenue to marginal cost (i) reveals the contribution of the last unit of production to total profit. (ii) is helpful in making profit-maximizing production decisions. (iii) tells a firm whether its fixed costs are too high.

At the profit-maximizing level of output,

For a firm operating in a competitive industry,which of the following statements is not correct?

For a firm in a perfectly competitive market,the price of the good is always

For an individual firm operating in a competitive market,marginal revenue equals

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue,then

Max sells maps.The map industry is competitive.Max hires a business consultant to analyze his company's financial records.The consultant recommends that Max increase his production.The consultant must have concluded that Max's

Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8.00.What would be the firm's total revenue if it instead produced and sold 4 units of output?