1.

A basic characteristic of a competitive market is that

PRODUCERS SELL NEARLY IDENTICAL PRODUCTS
2. For a firm in a perfectly competitive market, the price of the good is always
EQUAL TO MARGINAL REVENUE
3. The intersection of a firm’s marginal revenue and marginal cost curves determines the level of
output at which
PROFIT IS MAXIMIZED
4. When price is greater than marginal cost for a firm in a competitive market,
THERE ARE OPPORTUNITIES TO INCREASE PROFIT BY INCREASING PRODUCTION
5. A firm operating in a perfectly competitive market may earn positive, negative, or zero
economic profit in the long run.
FALSE
6. Because there are many buyers and sellers in a perfectly competitive market, no one seller can
influence the market price.
TRUE
7. A firm that is a “pure monopoly” is
THE ONLY SELLER OF A GOOD FOR WHICH THERE ARE NO GOOD SUBSTITUTES IN A MARKET
WITH HIGH BARRIERS TO ENTRY.
8. Suppose that a firm in a competitive market faces the following revenues and costs:
Quantity Marginal Cost Marginal Revenue
12 $5 $9
13 $6 $9
14 $7 $9
15 $8 $9
16 $9 $9
17 $10 $9
INCREASE QUANTITY TO 16 UNITS
9. When firms are said to be price takers, it implies that if a firm raises its price,
BUYERS WILL PAY THE HIGHER PRICE IN THE SHORT RUN
10. A car dealer that has market power can
INFLUENCE THE MARKET PRICE FOR THE CAR IT SELLS
11. Suppose a firm operating in a competitive market has the following cost curves:
Refer to Figure 1. If the market price is $10, what is the firm's total cost?
$35
12. For a firm operating in a perfectly competitive industry, marginal revenue and average revenue
are equal.
TRUE
13. Suppose we know that a monopolist is maximizing its profits. Which is a correct inference? The
monopolist has
EQUATED MARGINAL REVENUE AND MARGINAL COST
14. Which of the following industries is most likely to exhibit the characteristic of free entry?
AIRPORT SECURITY
15. Suppose a firm operating in a competitive market has the following cost curves
16. For a firm operating in a competitive market, both marginal revenue and average revenue
exceed the market price.
FALSE
17. If a profit-maximizing firm in a competitive market discovers that, at its current level of
production, price is greater than marginal cost, it should
INCREASE ITS OUTPUT