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Question 1

For a firm in a perfectly competitive market, the price of the good is always
Response: equal to marginal revenue.

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Question 2
In competitive markets, firms that raise their prices are typically rewarded with larger
profits.
Response: False

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Question 3
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
Response: increase its output.

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Question 4
A car dealer that has market power can
Response: influence the market price for the car it sells.

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Question 5
Figure 1
Suppose a firm operating in a competitive market has the following cost curves:

Refer to Figure 1. The firm will earn zero economic profit if the market price is

Response: PhP6

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Question 6
The actions of any single buyer or seller In a competitive market will
Response: have a negligible impact on the market price.

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Question 7
Figure 1
Suppose a firm operating in a competitive market has the following cost curves:

17. Refer to Figure 1. If the market price is PhP10, what is the firms short-run economic profit?

Response: PhP50

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Question 8
A coffee manufacturer raises the price of its coffee by 12%, and the quantity demanded
of its coffee falls by only 5%. This firm has
Response: some market power.

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Question 9
One way that perfect competition and monopoly differ is that in
Response: monopoly, the firm faces the market demand curve.

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Question 10
Entry into a market by new firms will increase the
Response: supply of the good.

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Question 11
Suppose we know that a monopolist is maximizing profits. Which of the following is a
correct inference? The monopolist has
Response: equated marginal revenue and marginal cost.

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Question 12
For a firm operating in a competitive market, both marginal revenue and average
revenue exceed the market price.
Response: False

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Question 13
Figure 1
Suppose a firm operating in a competitive market has the following cost curves:

Refer to Figure 1. If the market price is PhP10, what is the firms total cost?

Response: PhP15

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Question 14
When price is greater than marginal cost for a firm in a competitive market,
Response: there are opportunities to increase profit by increasing production.

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Question 15
When a monopolist incurs a loss in the short run, it will
Response: produce as long as total revenue is sufficient to cover variable costs.

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Question 16
A monopolistically competitive industry has
Response: many firms producing a differentiated product.

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Question 17
The intersection of a firm's marginal revenue and marginal cost curves determines the
level of output at which
Response: profit is maximized.

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Question 18
Table 3
Suppose that a firm in a competitive market faces the following revenues and costs:

Quantity Total Revenue Total Cost

0 $0 $3

1 $7 $5

2 $14 $8

3 $21 $12

4 $28 $17

5 $35 $23

6 $42 $30

7 $49 $38

Refer to Table 3. In order to maximize profits, the firm will produce

Response:
6 units of output because marginal revenue equals marginal cost.

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Question 19
A monopolistic firm faces a(n) ________ demand curve.
Response: downward-sloping

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Question 20
The ________ type of entry barrier allows an electric company to maintain a monopoly
over electricity production.
Response: economies of scale

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Question 21
A profit-maximizing firm in a competitive market will decrease production when
marginal cost exceeds average revenue.
Response: True

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Question 22
Which of the following industries is most likely to exhibit the characteristic of free entry?
Response: dairy farming

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Question 23
A firm that is a pure monopoly is
Response: the only seller of a good for which there are no good substitutes in a market
with high barriers to entry.

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Question 24
For a firm operating in a perfectly competitive industry, marginal revenue and average
revenue are equal.
Response: True

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Question 25
A basic characteristic of a competitive market is that
Response: producers sell nearly identical products.

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Question 26
Products may be homogeneous or differentiated in the ________ market structure.
Response: oligopolistic

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Question 27
Table 1
Suppose that a firm in a competitive market faces the following revenues and costs:

Marginal Marginal

Quantity Cost Revenue

12 $5 $9

13 $6 $9

14 $7 $9

15 $8 $9

16 $9 $9

17 $10 $9

Refer to Table 1. If the firm is currently producing 14 units, what would you advise the owners?

Response:
continue to operate at 14 units

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Question 28
Firms that operate in perfectly competitive markets try to
Response: maximize profits.

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Question 29
Figure 1
Suppose a firm operating in a competitive market has the following cost curves:

Refer to Figure 1. If the market price is PhP10, what is the firms total revenue?

Response: PhP50

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Question 30
By comparing marginal revenue and marginal cost, a firm in a competitive market is
able to adjust production to the level that achieves its objective, which we assume to be
Response: maximizing profit.

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Question 31
The XYZ Computer Company monopolizes the production of a specialized color printer.
The XYZ Computer Company will find it profitable to reduce output as long as marginal
revenue is
Response: greater than marginal cost.

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Question 32
Which of the following best fits the definition of a monopoly?
Response: the local cable company

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Question 33
A profit-maximizing firm in a competitive market will increase production when average
revenue exceeds marginal cost.
Response: True

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Question 34
Because there are many buyers and sellers in a perfectly competitive market, no one
seller can influence the market price.
Response: True

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Question 35
When firms have an incentive to exit a competitive market, their exit will
Response: raise the profits of the firms that remain in the market.

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Question 36
Suppose a firm in a competitive market produces and sells 150 units of output and
earns PhP1,800 in total revenue from the sales. If the firm increases its output to 200
units, total revenue will be
Response: PhP2,400.

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Question 37
A firm operating in a perfectly competitive market may earn positive, negative, or zero
economic profit in the short run.
Response: True

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Question 38
Table 2
Suppose that a firm in a competitive market faces the following revenues and costs:

Quantity Total Revenue Total Cost

0 $0 $3

1 $7 $5

2 $14 $8

3 $21 $12

4 $28 $17
5 $35 $23

6 $42 $30

7 $49 $38

Refer to Table 2. The firm will not produce an output level beyond

Response: 7 units

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Question 39
When firms are said to be price takers, it implies that if a firm raises its price,
Response: buyers will go elsewhere.

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Question 40
When new firms enter a perfectly competitive market,
Response: existing firms may see their costs rise if more firms compete for limited
resources.