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110) Suppose that marginal revenue for a perfectly competitive firm is $20 . When the firm produces 110) 10 units, its marginal cost is $20, its average total cost is $22, and its average variable cost is $17. Then to maximize its profit in the short run, the firm A) must decrease its output to increase its profit. B) should shut down. C) must increase its output to increase its profit. D) should not change its production because it is already maximizing its profit and is earning a normal profit. E) should stay open and incur an economic loss of $20. 111) Peter's Pencils is a perfectly competitive company producing pencils. Suppose Peter is 111) producing 1,000 pencils an hour. If the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost is $2, then Peter A) has an economic profit because marginal revenue is equal to marginal cost at this output level. B) should decrease his output to increase his profit. C) is not maximizing his profit but is earning a normal profit anyway. D) should increase his output to increase his profit. E) is maximizing his profit and is earning an economic profit. 24 112) In the short run, a perfectly competitive firm can experience which of the following? 112) i. an economic profit ii. an economic loss but it continues to stay open iii. an economic loss equal to its total fixed cost when it shuts down A) i and ii B) i, ii, and iii C) i and iii D) only i E) ii and iii 113) For a perfectly competitive corn grower in Nebraska, the marginal revenue curve is 113) A) the same as its demand curve. B) upward sloping. C) downward sloping- D) vertical at the profit maximizing quantity of production. E) U-shaped. 114) Suppose a perfectly competitive firm's minimum average variable cost is $3 when it produces 114) 50. If the price is $2 and the firm's marginal cost is $2, the firm should A) continue to produce 50. B) continue to operate, but to determine the amount of production needs more information than is given. C) continue to produce, but produce less than 50. D) shut down. E) continue to produce, but produce more than 50. 115) A perfectly competitive firm will continue to operate in the short run when the market price is 115) below its average total cost if the A) marginal cost is minimized. B) price is at least equal to the minimum average variable cost. C) price is also less than the minimum average variable cost. D) marginal revenue is greater than marginal cost. E) total fixed costs are less than total revenue. 116) A perfectly competitive firm will shutdown when the price is just below the minimum point on 116) the A) marginal revenue curve. B) average fixed cost curve. C) average total cost curve. D) average variable cost curve. E) marginal cost curve.107) The above figure shows a perfectly competitive firm. If the market price is $20 per unit, the firm 107) A) will stay open to produce and will earn a normal profit. B) will definitely shut down to minimize its losses. C) will stay open to produce and will incur an economic loss. D) might shut down but more information is needed about the fixed cost. E) will stay open to produce and will earn an economic profit. 23 Revenue and cost (dollars per unit) 20 15 10 5 10 20 30 40 50 Output (thousands of units per year) 108) The above figure shows a perfectly competitive firm. If the market price is $15, the firm 108) A) is earning an economic profit. B) is incurring an economic loss. C) is earning a normal profit. D) might shut down but more information is needed about the AVC. E) will immediately shut down. 109) A perfectly competitive firm is producing 50 units of output and selling at the market price of 109) $23. The firm's average total cost is $20. What is the firm's total cost? A) $20 B) $150 C) $23 D) $1,000 E) $1,150 110) Suppose that marginal revenue for a perfectly competitive firm is $20 . When the firm produces 110) 10 units, its marginal cost is $20, its average total cost is $22, and its average variable cost is $17. Then to maximize its profit in the short run, the firm A) must decrease its output to increase its profit. B) should shut down. C) must increase its output to increase its profit. D) should not change its production because it is already maximizing its profit and is earning a normal profit. E) should stay open and incur an economic loss of $20. 111) Peter's Pencils is a perfectly competitive company producing pencils. Suppose Peter is 111) producing 1,000 pencils an hour. If the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost is $2, then Peter A) has an economic profit because marginal revenue is equal to marginal cost at this output level. B) should decrease his output to increase his profit. C) is not maximizing his profit but is earning a normal profit anyway. D) should increase his output to increase his profit. E) is maximizing his profit and is earning an economic profit.102) The cranberry market is perfectly competitive. Reports that consuming cranberries can lead to Improved health result in a permanent increase in the demand for cranberries and an immediate upward jump in the price of cranberries. As time passes, the price of cranberries, - and the initial firms' economic_ A) rises still higher, loss will be eliminated B) rises still higher; profit will not change C) falls; profit will not change Di falls; loss will be increased El falls; profit will be eliminated 108) In the long run, a perfectly competitive firm 103) A) makes zero economic profit. B) makes an economic profit. () can make an economic profit, zero economic profit, or incur an economic loss. DJ incurs an economic loss. El can make either an economic profit or a normal profit. 104) Juan's Software Service Company is in a perfectly competitive market. Juan has total fixed cost of 104) $25000, average variable cost for 1, service calls is $15, and marginal revenue is $75. Juan's makes 1,000 service calls a month. What is his economic profit? A) $25000 6)$45000 C$75,000 D) $5,000 E) $507000 22 108) A perfectly competitive firm definitely earns an economic profit in the short run if price is A) equal to average total cost. Bi greater than average total cost. () greater than average variable cost. D) equal to marginal cost. E) greater than marginal cost. 106) In the short run, a perfectly competitive firm A) must make zero economic profit. Bi must make an economic profit. C) None of the above answers is correct. D') must incur an economic loss. E) might make an economic profit, an economic loss, or a normal profit. Revenue and cost (dollars per unit) 50 10 20 Output (units per day)96) When a firm adopts new technology, generally its 96) A) cost curves are unaffected. B) cost curves shift downward. C) production permanently decreases. D) supply curve shifts leftward. E) cost curves shift upward. 97) Suppose a perfectly competitive market is in long-run equilibrium with a price of $12. Then 97) there is a permanent increase in demand. As a result, in the short run the market price and in the long run the number of firms and the price is the price was in the short run. A) falls; decreases; is equal to B) rises; does not change; lower than C) rises; increases; higher than D) rises; increases; lower than E) rises; does not change; is equal to 98) Keith is a perfectly competitive carnation grower. The market price is $2 per dozen carnations. 98) Keith's average total cost to grow carnations is $2.50 per dozen. In the long run, Keith will A) continue to earn an economic profit. B) raise his price to more than $2.50 per dozen carnations. C) raise his price to $2.50 per dozen carnations. D) exit the industry if the price and his costs do not change. E) incur an economic loss. 21 99) In the long run, existing firms exit a perfectly competitive market 99) A) only if economic profits are zero. B) only if they incur an economic loss. C) if they earn a positive economic profit. D) if they either earn only a normal profit or if they incur an economic loss. E) if normal profits are greater than zero. 100) Suppose a perfectly competitive market is in short-run equilibrium. Firms that are incurring a 100) economic loss A) persistent; exit the industry and shift the market supply curve rightward B) temporary; decrease their production but definitely stay open C) persistent; exit the industry and shift the market supply curve leftward D) temporary; exit the industry E) persistent; increase their output to increase their profit 101) Suppose a perfectly competitive market is in long-run equilibrium and then there is a 101) permanent increase in the demand for that product. The new long-run equilibrium will have A) a permanent decrease in supply. B) fewer firms in the market. C) the same number of firms in the market. D) probably a different number of firms, but it is not possible to determine if there will be more or fewer firms. E) more firms in the market. 102) The cranberry market is perfectly competitive. Reports that consuming cranberries can lead to 102) improved health result in a permanent increase in the demand for cranberries and an immediate upward jump in the price of cranberries. As time passes, the price of cranberries _ and the initial firms' economic A) rises still higher; loss will be eliminated B) rises still higher; profit will not change C) falls; profit will not change D) falls; loss will be increased E) falls; profit will be eliminated 103) In the long run, a perfectly competitive firm 103) A) makes zero economic profit. B) makes an economic profit. C) can make an economic profit, zero economic profit, or incur an economic loss. D) incurs an economic loss. E) can make either an economic profit or a normal profit.74) If the Boston Red Sox baseball team is currently charging a ticket price where its demand is 74) inelastic, then the Red Sox's marginal revenue is A) positive. B) zero. C) undefined. D) maximized. E) negative. Quantity Price (units) (dollars per unit) 1 8 2 3 5 6 3 75) The table above gives the demand for a monopolist's output. What is the total revenue in when 3 75) units of output are produced? A) $18 B) $20 C) $21 D) $6 76) The table above gives the demand for a monopolist's output. What is the marginal revenue 76) when output is increased from 5 to 6 units? A) $18 B) -$2 C) $4 D) $3 17 77) The demand curve facing a single-price monopoly is 77) A) the same as only the marginal revenue curve. B) the same as both the marginal revenue curve and the marginal cost curve. C) below the marginal revenue curve. D) above the marginal revenue curve. E) the same as only the marginal cost curve. 78) A single-price monopoly can sell 10 units of its product at a price of $45 each but to sell 11 units, 78) the monopoly must cut the price to $44. What is the marginal revenue of the extra unit sold? A) $484 B) $450 C) $34 D) -$1 E) $44 79) A single-price monopoly faces a linear demand curve. If the marginal revenue for the second 79) unit is $20, then the marginal revenue for the A) third unit is also $20. B) third unit is less than $20. C) first unit is less than $20. D) third unit is more than $20. E) more information is needed to determine if the marginal revenue for the third unit is more than, less than, or equal to $20. 80) For a single-price monopoly, price is 80) A) greater than marginal revenue. B) equal to marginal revenue. C) less than marginal revenue because the firm must lower its price in order to sell another unit of output. D) less than marginal revenue because the firm cannot increase its total revenue when the demand curve is downward sloping. E) equal to zero because the firm is not a price taker. 81) For a monopoly, marginal revenue is equal to 81) A) the price of the product. B) the amount people buy between two prices. C) the amount people buy at a given price. D) the change in total revenue brought about by a one-unit increase in quantity sold. E) the price multiplied by the quantity sold. 82) A single-price monopoly 82) A) is able to raise its price as high as it wants and consumers must still buy from it because it is a monopoly. B) can lower its price for only a few select consumers if it wants to increase its sales. C) must practice price discrimination. D) must lower the price for all customers if it wants to increase its sales. E) will set its price equal to a consumer's willingness to pay.58) With perfect price discrimination, the level of output 58) A) is the same as the amount produced by any monopoly that price discriminates. B) equals the amount produced by a single-price monopoly. C) is the same as the amount produced in a perfectly competitive market. D) exceeds the efficient quantity. E) is unknown. 59) Comparing a perfectly competitive market to a single-price monopoly with the same costs, we 59) see that A) the monopoly market always is more efficient in the use of resources. B) the monopoly market achieves efficiency in resource use while perfectly competitive market does not. C) both markets are equally efficient in their use of resources. D) the perfectly competitive market achieves efficiency in resource use while the monopoly market does not. E) None of the above answers is correct because comparing a perfectly competitive market to a monopoly is impossible. 60) When a perfectly competitive industry is taken over by a monopoly, some consumer surplus is 60) transferred to the monopolist in the form of A) taxes. B) marginal cost. C) deadweight loss. D) economic profit. E) average variable cost. 13 61) With price discrimination, a monopoly 61) A) produces less output than if it does not price discriminate. B) converts consumer surplus into deadweight loss. C) converts producer surplus into economic profit. D) can charge a single price to all customers. E) converts consumer surplus into economic profit. 62) A price-discriminating monopoly 62) A) cannot offer discounts. B) cannot control the price of its product. C) sells a larger quantity than it would if it were a single-price monopoly. D) is illegal. E) makes a smaller economic profit than it would if it were a single-price monopoly. Price and cost (dollars per unit) S=MC b P 3 e d MR Q3 Quantity (units per hour) 63) In the above figure, a perfectly competitive market will have a price of_ and a 63) single-price monopoly will have a price of A) P1 and quantity of Q1; P2 and quantity of Q2 B) P2 and quantity of Q2; P3 and quantity of Q1 C) P2 and quantity of Q1; P] and quantity of @1 D) P2 and quantity of Q2: P1 and quantity of Q1 E) P3 and quantity of Q3; P1 and quantity of @1