MCQ question 1

If a "price taking" firm sells one more unit of a good, then its marginal revenue:

(i)will be less than the price of that good.

(ii)will equal the average revenue obtained from all sales of the good.

(iii)will be the same as the price of the good.

(iv)will be less than the marginal revenue of the previous unit sold.

A.Only (iii) and (iv) are correct.

B.Only (i), (ii) and (iv) are correct.

C.Only (ii), (iii) and (iv) are correct.

D.Only (ii) and (iii) are correct.

E.Only (i) and (iv) are correct.

MCQ question 2

For a firm operating in perfectly competitive market, which of the following are short-run decisions?

(i)Whether to increase or decrease its plant size.

(ii)Whether to produce or temporarily shut down.

(iii)What quantity to produce.

(iv)Whether to remain in an industry or leave it.

(v)How much to spend on advertising.

A.Only (i), (ii) and (iii) are correct.

B.Only (ii) and (iii) are correct.

C.Only (ii), (iii) and (v) are correct.

D.Only (i) and (iv) are correct.

E.Only (iii), (iv) and (v) are correct.

MCQ question 3

Assume that the industry producing sun hats in South Africa is perfectly competitive and that the market for sun hats is currently in equilibrium. As the Ozone layer gets thinner over South Africa, the sun is getting more dangerous. Without international trade, which of the following is likely to happen in market for sun hats in South Africa?

In the short-run, the industry demand curve shifts ____, prices initially ____, firms in the industry face an economic ____ and in the long-run the industry supply curve shifts to the ___.

A.left; drop; loss; right

B.right; rise; profit; left

C.right; drop; loss; left

D.left; rise; loss; left

E.right; rise; profit; right

MCQ question 4

In the long-run, the following adjustments occur in a perfectly competitive industry:

(i)firms enter and exit until the remaining firms earn positive economic profits.

(ii)firms alter their plant sizes in an attempt to increase profits.

(iii)as firms leave the industry, price rises and the remaining firms' profits rise.

(iv)when a firm reaches its minimum efficient scale it will not have an incentive to increase its plant size.

A.(i), (ii), (iii) and (iv) are correct.

B.Only (ii) and (iv) are correct.

C.Only (i) and (iv) are correct.

D.Only (ii) and (iii) are correct.

E.Only (ii), (iii) and (iv) are correct.