11. MICRO-CH-14

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

• There are many buyers and sellers in the market.

• The goods offered for sale are largely the same.

• Firms can freely enter or exit the market.

• Firms generate small but positive economic profits in the long run.

• All of these are characteristics of a competitive market.

Which of the following markets would most closely satisfy the requirements for a competitive market?

• gold bullion

• electricity

• cable television

• soda

• All of these represent competitive markets.

If a competitive firm doubles its output, its total revenue

• more than doubles.

• doubles.

• less than doubles.

• cannot be determined because the price of the good may rise or fall.

For a competitive firm, marginal revenue is

• equal to the price of the good sold.

• average revenue divided by the quantity sold.

• total revenue divided by the price.

• equal to the quantity of the good sold.

The competitive firm maximizes profit when it produces output up to the point where

• marginal cost equals total revenue.

• marginal revenue equals average revenue.

• marginal cost equals marginal revenue.

• price equals average variable cost.

If a competitive firm is producing a level of output where marginal revenue exceeds marginal cost, the firm could increase profits if it

• increased production.

• decreased production.

• maintained production at the current level.

• temporarily shut down.

If the price is P4, a competitive firm will maximize profits if it produces

• Q1

• Q2

• Q3

• Q4

• Q5

If the price is P4, the firm will earn profits equal to the area

• (P2 - P1) x Q2

• (P3 - P2) x Q3

• (P4 - P2) x Q4

• (P4 - P3) x Q3

• None of the answers is correct.

In the short run, competitive firms will temporarily shut down production if the price falls below

• P1

• P2

• P3

• P4

In the long run, some competitive firms will exit the market if the price is below

• P1

• P2

• P3

• P4