Week 11 BusEc Perf. Comp.

Choose the correct statement. A competitive market is where: (i) there are many buyers and sellers in a market (ii) a single firm does not have a significant impact on the market price (iii) the goods offered for sale are largely the same

• (i) and (ii) only
• (ii) and (iii) only
• (i) and (iii) only
• (i), (ii) and (iii)

Refer to Table 14-1. If the farmer chooses to maximise profit, the appropriate output level is where marginal cost is equal to:

• $5
• $10
• $11
• $33

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

• marginal revenue
• average revenue
• equilibrium market price.
• all of the above

Total Revenue for a firm is calculated as:

• total revenue minus total cost
• marginal revenue minus average cost
• market price times quantity sold
• marginal revenue minus marginal cost

In a competitive market, the price line also represents a firm’s:

• marginal revenue curve
• average revenue curve
• marginal profit curve
• both the marginal revenue and average revenue curves

A rice farmer sells rice to an Australian grain broker. Suppose that the market for rice is competitive. This means that the farmer will maximise profit by choosing:

• to produce the quantity at which average fixed cost is minimised
• to sell its wheat at a price where marginal cost is equal to average total cost
• the quantity at which market price is equal to the farm’s marginal cost of production
• the quantity where average revenue is equal to the farm’s average variable cost

Which of the following is not a characteristic of a perfectly competitive market?

• firms are price takers
• there are many sellers in the market
• goods offered for sale are largely the same
• firms have difficulty entering the market

Refer to Graph 14-1. When marginal revenue is equal to MC₃, the profit-maximising firm will produce what level of output?

• Q₁
• Q₂
• Q₃
• Q₄

Refer to Graph 14-1. When market price is at MC₂, a firm producing output level Q₁ would experience:

• profits equal to (MC₂ – MC₁) ´ Q₁
• zero profits
• losses equal to (MC₂ – MC₁) ´ Q₁
• losses because P < ATC

Refer to Graph 14-1. When market price is at MC₄, a profit-maximising firm will produce what level of output?

• Q₁
• Q₂
• Q₃
• Q₄