1) If a firm in a perfectly competitive industry raises price above market price,

• A.total revenue for the firm will increase.
• B.profit will increase.
• C.sales will drop to zero.
• D.demand curves will become downward sloping.

2) A perfectly elastic demand curve implies that, ceteris paribus,

• A.a firm can sell more by lowering its price.
• B.if a firm raises its price above the market price, quantity demanded will equal zero.
• C.the price a firm charges is irrelevant, as it will sell the same amount regardless of the price charged.
• D.a firm can raise its price and not lose all its customers.

3)Free entry implies that

• A.a perfectly competitive firm can never earn a profit.
• B.if firms in an industry are making excessively high profits, new firms are likely to enter the industry.
• C.the government regulates the number of firms that are allowed in an industry.
• D.firms will always earn a profit, as new firms can enter the industry at any time they like.

4)If the marginal product of labor is less than the average product of labor, then the

• A.marginal product must be increasing.
• B.average product must be decreasing.
• C.marginal product must be decreasing.
• D.average product must be decreasing and marginal product must be decreasing.

5)The formula for the marginal product of labor is

• A.L/q.
• B.(change inL)/(change inq).
• C.q/L.
• D.change inq/change inL.