1) A firm in a perfectly competitive market can a. choose the quantity they will produce and the price at which they will sell b. choose the quantity they will produce, but not the price at which they will sell c. choose the price at which they will sell, but not the quantity will produce d. choose neither the price at which they will sell nor the quantity they will produce 2) Suppose a price-taker faces a market price of $4. In this case, the marginal revenue of the 3 "d unit of output is the marginal revenue 2"d unit of output. a. greater than b. less than c. equal to d. not enough information 3) Suppose a computer firm's marginal revenue of selling a computer is $500 and marginal cost of producing a computer is $400. In this case, producing one more computer will a. increase profit b. decrease profit c. neither increase nor decrease profit d. not enough information 4) Consider the table below illustrating Johnny G's cost schedule for producing gadgets (note: Johnny G is a price-taker). Q (units) FC ($) VC ($) TC ($) AFC ($) AVC ($) ATC ($) MC ($) 0 300 0 300 300 160 460 300.00 160.00 460.00 160 2 300 280 580 150.00 140.00 290.00 120 3 300 420 720 100.00 140.00 240.00 140 4 300 580 880 75.00 145.00 220.00 160 5 300 780 1080 60.00 156.00 216.00 200 300 1020 1320 50.00 170.00 220.00 240 7 300 1300 1600 42.86 185.71 228.57 280 5) Suppose the market price of gadgets is $120. In this case, the firm must produce to maximize profit. a. 0 gadgets b. 1 gadget c. 2 gadgets d. not enough information6) Suppose the market price of gadgets is $120. In this case, the firm's maximum attainable profit is a. -$300 b. -$0 c. $120 d. none of the above 7) Suppose the market price of gadgets is $240. In this case, the firm must produce to maximize profit. a. 0 gadget b. 4 gadget c. 6 gadget d. not enough information 8) Suppose the market price of gadgets is $240. In this case, the firm's maximum attainable profit is a. $0 b. $40 c. $240 d. none of the above Consider the following cost schedule for many firms in perfectly competitive market. P (dollars) 900 9) If the market price is $4, then the firm should to maximize profit and profit will be a. shut-down; negative b. produce 600 units; negative c. produce 600 units; positive d. produce 600 units; zero10) If the market price is $4, then in the long-run firms will_ and the market price will a. enter the market; increase b. enter the market; decrease c. exit the market; increase d. exit the market; decrease 11) Consider a firm that is a price-taker. If the market price is greater than average fixed costs, then profit must be a. positive b. negative c. zer d. not enough information 12) Consider a rational entrepreneur. In the short-run, in the production decision. a. both fixed cost and variable cost matter b. fixed cost matters, but variable cost does not matter c. fixed cost does not matter, but variable cost does matter d. neither fixed cost nor variable cost matters 13) A price-taker can always increase profit by producing and selling more. a. True b. False 14) A monopolist can always increase profit by producing and selling more. a. True b. False 15) Monopolies have market power; thus, they can increase the price and sell more output to increase profit. a. True b. False 16) Consider a monopoly which can sell 300 units of output for $45 per unit or 301 units of output for $44.60 per unit. In this case, the total revenue of selling 301 units of output is the total revenue of selling 300 units of output. a. greater than less than c. equal to d. not enough information 17) Consider a monopoly which can sell 300 units of output for $45 per unit or 301 units of output for $44.60 per unit. In this case, the marginal revenue of selling the 301$ unit of output is a. -$0.40 b. -$75.40C. -$120.40 d. not enough information 18) If a pharmaceutical company patents a new drug, then the firm has a. partial ownership of the right to sell the drug for a limited time period. b. partial ownership of the right to sell the drug for an unlimited time period. c. sole ownership of the right to sell the drug for a limited time period. d. sole ownership of the right to sell the drug for an unlimited time period. 19) Markets for a patented good/service a. always remain a competitive market. b. always remain a monopolistic market. c. switch from competitive to monopolistic once the patent expires. d. switch from monopolistic to competitive once the patent expires. 20) Suppose that Bieber and Rihanna are duopolists in the music industry. In May, they agree to work together as a monopolist, charging the monopoly price for their music and producing the monopoly quantity of songs. By June, each singer is considering breaking the agreement. Assuming Bieber and Rihanna are rational, what would one expect to happen next? a. Bieber and Rihanna will determine that it is in each singer's self interest to maintain the agreement. b. Bieber and Rihanna will each break the agreement. Both singers' profits will decrease. c. Bieber and Rihanna will each break the agreement. Both singers' profits will increase. d. Bieber and Rihanna will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium price also will increase