QUESTION 1

1. In perfectly competitive markets, firms are price takers, which means that

A. consumers must take whatever price each of the many different prices sellers set for their products.

B. changes in the market demand do not change the price of the product.

C. individually the firms have no ability to change the price of the product being sold

D. none of these answers are correct.

QUESTION 2

1. Using marginal analysis, what rule maximizes a perfectly competitive firm's profit?

A. Produce the quantity that makes the marginal revenue as large as possible.

B. Produce the quantity that makes the marginal revenue equal to the marginal cost.

C. Produce the quantity that makes the difference between marginal revenue and marginal cost as large as possible.

D. Produce the quantity that makes the marginal revenue equal to zero.

QUESTION 3

1. A perfectly competitive firm's marginal revenue equals $50 and its marginal cost is described by the following equation: MC = -$250 + ($5*Q).The firm's profit-maximizing price equals

A. $5.

B. $50.

C. $60.

D. $250.

QUESTION 4

1. If a firm is making an economic profit, its total revenue must be _____ its total opportunity cost.

Which of the following correctly completes the above sentence?

A. greater than

B. equal to

C. less than

D. None of the above answers are correct because an economic profit has nothing to do with the firm's opportunity cost.

QUESTION 5

1. To maximize its profit (or minimize its loss) a perfectly competitive firm(choose all that are correct)

A. closes if its total revenue is less than its total cost.

B. stays open if its total revenue is less than its variable cost.

C. closes if its total revenue is less than its variable cost.

D. stay open if marginal revenue is greater than average total cost.

QUESTION 6

1. Perfectly competitive markets have either many buyers or many sellers but do not haveboth (many buyers and many sellers).

True OR False

QUESTION 7

1. A perfectly competitive firm does not have a supply curve because the firm has no control over the price of its product.

True ORFalse

QUESTION 8

1. In a perfectly competitive market, the short-run market supply curve shows the quantity supplied by all the firms in the market at all prices in the short run.

True ORFalse