1.If a firm in a perfectly competitive market experiences a technological breakthrough:

A.other firms would find out about it eventually.

B.other firms would find out about it immediately.

C.other firms would not find out about it.

D.some firms would find out about it but others would not.

2.Each firm in perfect competition:

A.sets quantity based on market price.

B.follows the pricing decisions of other firms.

C.follows the output of other firms.

D.follows the reactions of competitors.

3.If the marginal revenue of the last widget the firm produces is $50 and its marginal cost is $35,

a firm should:

A.reconsider past production decisions.

B.decrease production.

C.increase production.

D.hold production constant.

4.Spam (junk e-mail) is a major annoyance for many people who use the internet. However,

spammers sometimes have to send thousands of messages to get even one response that pays

money. Given this information:

A.spamming cannot be profitable because of the low numbers of buyers; its sole purpose is to

annoy others.

B.spamming cannot be profitable because of the low numbers of buyers; it is fraudulently

profitable.

C.spamming can be profitable even with very low numbers of buyers because the marginal cost

of sending spam is virtually zero.

D.as many other activities on the internet, spammers are only profitable because they rely on the

fees from advertising.

5.Suppose a perfectly competitive firm can increase its profits by reducing its output. Then it

must be the case that the firm's:

A.marginal revenue equals its marginal cost.

B.price exceeds its marginal cost.

C.price exceeds its marginal revenue.

D.marginal cost exceeds its marginal revenue.

- If this is the case, selling one more unit of output will increase total cost by less than the increase in total revenue, so profits will rise.